Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL
American capitalism is in dire straits, caught in a perilous pattern of increasing volatility, decreasing investor returns, and ongoing bad behavior by executives. And it’s getting worse. Since the turn of the twenty-first century, we’ve seen two massive value-destroying market meltdowns and a string of ethics breaches, including accounting scandals, options-backdating schemes, and the subprime mortgage debacle.
Just what is going on here? Is it the inevitable decline of the American economy? Is it the new normal in a technology-enabled global marketplace? Or is it possible that the very theories we’ve embraced to underpin our capital markets are actually producing these crises?
In Fixing the Game, Roger Martin reveals the culprit behind the sorry state of American capitalism: our deep and abiding commitment to the idea that the purpose of the firm is to maximize shareholder value. This theory has led to a massive growth in stock-based compensation for executives and, through this, to a naive and wrongheaded linking of the real marketthe business of designing, making, and selling products and serviceswith the expectations marketthe business of trading stocks, options, and complex derivatives. Martin shows how this tight coupling has been engineered and lays out its results: a single-minded focus on the expectations market that will continue driving us from crisis to crisisunless we act now.
Using the National Football League as his primary example, Martin illustrates that it is possible to take a much more thoughtful and effective approach than we now do to the intersection of the real and the expectations markets and to governance in general in the capital markets. Martin shows how we can act to end the destructive cycle, including:
Restructuring executive compensation to focus entirely on the real market, not the expectations market Rethinking the meaning of board governance and role of board members Reining in the power of hedge funds and monopoly pension funds
Concise, hard-hitting, and entertaining, Fixing the Game advocates seizing American capitalism from the jaws of the expectations market and planting it firmly in the real marketand it presents the steps we must take now to do so.
Finally - An Intelligent Business Book
By Salvatore Babones - August 26, 2011
Most business books are excruciatingly boring for anyone with even a rudimentary social science background. Business authors value clever turns of phrase over deep argumentation; platitudes masquerade as insights; there are lists, lists, lists everywhere. Read against the background noise of recent business books, Martin's "Fixing the Game" is a welcome departure that harkens back to Peter Drucker's classic works. Most importantly (to me at least) Martin sticks close to the data. Ideas are great; we need ideas, and everyone should have at least one. Martin puts his and other people's ideas to the test using real data on the performance of US companies and the US economy over the past half-century, and Martin's ideas come out on top -- and no, not because he fixes the game!
Martin's title, "Fixing the Game," is a double-entendre: he wants to fix the game of the American economy by making it work better for shareholders, employees, and communities, and he shows how CEOs... read more
Why and how the core of business and capitalism must be restored
By Robert Morris - May 7, 2011
Many years ago, Oliver Wendell Holmes is reported to have observed, "I wouldn't give a fig for simplicity on this side of complexity but I would give my life for simplicity on the other side of complexity." I recalled that observation as I began to read Roger Martin's latest book. With consummate skill, he enables an economics neophyte such as I to complete a journey that began in almost total ignorance and eventually reached a point at which a sound (albeit basic) understanding of key economic issues has been developed. The "game" to which the book's title refers is an economic system that based on theories that assume that "focusing on shareholder value maximization using stock-based compensation" will give shareholders a better deal when, in fact, these theories "have the ability to destroy our economy and rot out the core of American capitalism."
The repairs that are urgently needed (i.e. the "fixing" of that system), Martin asserts, require that the "expectations... read more
2011 Best Business Book
By Strategy And Business Magazine "strategy+busi... - December 6, 2011
Roger L. Martin, dean of the Rotman School of Business at the University of Toronto, is fighting to change the way we think about and teach management. His newest book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL, has its origins in a fine, prescient article he wrote for Barron's in 2003 and is one of the very few business books that is better for the expanded treatment.
Martin sets out to show why capitalism in America has gotten into trouble over the past few decades. He argues that agency theory, derived from neoclassical economics, together with the gospel of shareholder value, has led to managers being compensated for doing the wrong things. Stock-based compensation, for example, focuses executives on expectations markets rather than real markets, where customer value is created. It is this focus on maximizing what should be an ancillary goal that has led to the marginalizing of customers as "marks" to be exploited.
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