Sebastian Mallaby has a great column in this morning’s Washington Post about the unheralded success of America as a business model:
Up until the 1990s, management books were crammed with Japanese buzzwords, and the early Clinton administration was in awe of Germany’s apprenticeship system. But today the United States provides most of the business role models, from Starbucks to Procter & Gamble, from Apple to Cisco. The (British) Financial Times publishes an annual list of the world’s most respected companies. In 2004 and again in 2005, no fewer than 12 of the top 15 slots were occupied by American firms.
At a time when the headlines are full of reports of layoffs at General Motors, or increased competition from overseas, it may be surprising to some, but the United States is truly the leader when it comes to modern business. Mallaby cites several reasons for this success:
The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust.
In other words, the possiblity of failure makes people strive harder to succeed. This isn’t true in other parts of the world, where the idea of a large corporation failing, or even laying worker’s off, simply isn’t acceptable. The other side of the coin, though, is that, even though failure happens, there is always an opportunity to try again.
The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States.
In other words, American business is more of a meritocracy. You become the President of a large corporation based on performance, not on who you know.
American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized “network” businesses is the American era.
And, since the 21st Century is shaping up to be the “knowledge” century, America is much better off than the doomsayers would have you believe.
