Death by Haggling.

We should be way past this! It is simply unacceptable that labour negotiations routinely end up in strikes and work stoppages. What this is telling us is that apart from the highly destructive simmering conflict between employer and organised labour in this country, the negotiation process itself is broken.

Labour experts will argue that strikes are to be expected in free societies but only as a last resort, and they do not occur before an intense period of conciliation and due legal process. The fact remains that the country has been subjected to highly costly and burdensome industrial action since long before the devastating public service strike in the second half of last year. The litany of action has been well documented on Moneyweb and other media; with other big storms such as Mine workers, Municipal employees, civil service and Cosatu’s Living Wage campaign gathering on the horizon. We have, according to Reuters, become a “nation of strikers”. We have also, perhaps too cynically, accepted this period as “strike season” – as if it is an inevitable part of democracy and an environmental hazard in living, working, investing, and doing business with South Africa.

Commentators rush to spread sheets and crunch numbers on the cost in Rand terms. Most of these suffer from one or other form of double accounting and are often in dispute. In addition, the outcome of strikes is couched in terms of winners or losers according to the demands, offers and settlements. This obscene haggling starts at the outset with Unions demanding outrageous highs and employers offering equally outrageous lows. The childish posturing can drag on for weeks with each claiming to be “negotiating in good faith.” When this breaks down, all concessions achieved are wiped off the board and the parties revert to their original demands. One wonders whether this is not the outcome of the highly sophisticated and complex structures with their vested interests that have developed around industrial relations and centralised bargaining.

While they fiddle, Rome burns with the real cost hidden and incalculable. We simply cannot measure the cost in loss of trust, inflation, unemployment, consumer and business confidence, public frustration, foreign and domestic investment, and foreign trade competitiveness. These are subtleties that far more than the metrics, cause lasting, if not permanent damage. They deserve a lot more analysis, recognition, understanding and attention before being accepted cynically as collateral damage in the killing fields of raw material self-interest. They cannot be excluded as a backdrop to the conflict theatre.

I have always championed the nobility of work and by implication the contribution labour makes to the creation of wealth in this country. At the same time, I have argued that the near exclusive focus of organised labour on reward rather than contribution is self-defeating and destructive. Regurgitating this argument in the midst of the current unrest will be pointless. One learns very quickly to shut one’s mouth when partners in a marriage are having a go at each other, even though they may be disturbing the peace.

The fact that some or other settlement is reached after a strike action, raises the simple question whether the strike was necessary in the first place.

Could one or other party, or both, not have reached the same conclusion before the strike action? Logic tells us that the frequency and intensity of strikes in this country points to a far too facile reverting to them. Then perhaps the parties are less to blame than the circumstances that allow it.

Many of the causes are obvious and seemingly overwhelming.

Perhaps the most important is that the workplace is still viewed as an arena of an on-going but severely out-dated ideological revolution in which the power of labour must be repeatedly demonstrated. An unhealthy alliance between government and labour simply exacerbates the problem. An “injury to one” whether in job-losses, inflation, or even a business failure or two, becomes an acceptable sacrifice for the grand ideal. It makes the Cosatu slogan blatant hypocrisy.

The ideological opponent in “capital” is equally to blame in clinging to out-dated metrics, concepts and behaviours such as short term profit maximisation, defining labour as a cost and the singular focus on shareholder value. Since about the seventies the workplace from top to bottom, here and abroad, has been converted into a place nearly exclusively for self-enrichment – a place of means rather than meaning. Most are simply responding to this twisted perception.

For the negotiation process to be more meaningful there must clearly be some absolutes. The one is the full realisation that all wealth, whether it’s in a slice called wages, profit or tax, is a function of having added value to other’s lives: it is as a result of a collective contribution to society, NOT of collective bargaining. The common purpose of a partnership intent on creating value and reaping rewards from it is inescapably linked to service. This is a simple and powerfully unifying message that should not be negotiable and supressed. Sadly, it mostly is. Companies can go a long way in refocusing business strategy and executive behaviour on service and customer care and involving employees in this.

Linked to the common purpose is common fate. Employee pay as the biggest single cause of labour unrest has to be managed if not neutered. Fortune sharing, based on wealth creation is the only way to do this. All rewards are ultimately determined by the size of the pie (value added or wealth created) and individual rewards should be linked. Without such a link, an increase in the slice of one merely squeezes out another, setting off destructive rivalry that eventually ends up in marches on the street, a stomping on the pie, erosion of profit and loss of jobs. As Cees Bruggemans pointed out this week, this applies at a national, government and company level.

There are a number of other aspects of the current wave of unrest that are puzzling. One is the quibbling around inflation benchmarking that should not be part of negotiations, but rather settled in previous engagements. Many have a problem with the credibility of national price measurements as it affects them as individuals. But it has become an important feature of wage negotiations and to have a ruler in dispute reflects an inexcusable lack of establishing basic ground rules before reverting to strike action.

This raises the thorny issue of employee reporting and information sharing that I dealt with in an earlier article and which Felicity Duncan also touched on this week. There is undoubtedly an appalling lack of contextual information, particularly regarding company performance and earnings among a large group of employee representatives. We should be beyond this in today’s communication age.

Rumour flourishes in a vacuum, and issues such as executive pay become a single and distracting focus. In the absence of credible market force benchmarking on pay levels throughout, perhaps it is time to define acceptable pay differences in a kind of Gini measurement in individual companies. At least it will reveal averages and norms, and highlight those with extraordinary gaps. At present it is simply adding a fuel of assumptions to the fire. Shareholders can no longer avoid some serious soul searching on the impact of pay disparities on employee trust, labour unrest and longer term share value sustainability.

Our liberal labour laws and enlightened work practices are highly praiseworthy. I would argue simply that they are dysfunctional if the price we have to pay is constant strike action and accompanying intimidation and violence.

It is like driving a Rolls Royce on appalling roads.

Truth be told: The hidden cost of transparency.

I don’t know how she did it, but someone I was having lunch with for our first meeting, returned from the ladies with a short length of toilet paper hanging from the back of her pants. It took me a while to pluck up the courage to inform her. After that our discussion was rather uncomfortable and muted.

We’ve all experienced them – those awful moments when you are caught between telling somebody something, and keeping quiet to avoid embarrassment or even pain. It could be as trivial as a bit of spinach on their teeth, a trail of toilet paper or as serious as a moment of infidelity in an otherwise very happy marriage. Often, especially with the more serious acts, we try to put some context before full disclosure – such as “It’s not what you think!” That must be one of the most predictable lines ever for a movie scene of infidelity! The real dilemma of course is whether to confess in the interests of honesty, or whether to keep quiet to avoid hurting the other.

It shows that even universal values are not always cut and dried. More often than not one has to choose between one value and another -- invariably in circumstances where there is little time for reflection. In the marriage example, there is a clear conflict between the value of honesty and the value of caring even though good intention exists in both. One’s own character makeup and value orientation will determine the response, and either could be credibly defended – a further indication of how many permutations of behaviour exist in each human being and how inappropriate a single and generic definition of “human nature” is. The philosophical elite may argue that there is a hierarchy of values that should inform our behaviour. They may argue too that the more demanding and tougher values of justice, integrity and honesty rank higher than the softer values such as empathy, courtesy, care and love. Then, I must confess, I am a sissy. It is better to err on the side of compassion than on the side righteousness.

In my reporting days, I vehemently championed the “right to know” as the ultimate code of the profession. It was a difficult task at a time when the SABC was strongly influenced by its political masters. Still, we at the Economics department found more room than most to manoeuvre, and we consoled ourselves to some degree that there were few other media, if any that could claim complete independence from outside influences including commercial interests. Not much has really changed. Later as an employee communications consultant, I quickly learned the need for context before blurting out facile attention-grabbing headlines. But the real dilemma of the conflict between care and honesty was brought home to me when I had to inform a loved one of her pending death within a fortnight, while she was still clinging to the hope of a recovery. The most laudable intentions can be seriously challenged when consequences can be devastating to others.

I do not want to delve into a discourse on media, but the heightened competition and the plethora of channels all scrambling for their chunk of flesh from the market carcase have at the very least led to a questioning of the values driving the profession. For example, not all will lament Rupert Murdoch’s closure of the “News of the World” as an attack on freedom of the press. Of course, if the British government had decided to close down the paper, there would have been a huge outcry, even though they could have used the same reasons of despicable information gathering techniques and some dodgy editorial.

What should be of concern to anyone who has the interest of the media at heart is the degree to which the term “the media” is as likely to be used by the public at large in a derogatory context as in an admiring one. The media certainly cannot be blamed for all social ills. They could argue that their norms have been informed by society itself; that while they may help shape society, they are also merely a reflector of that society and market demand. A doyen of South African broadcasting, the late Bryan Chilvers used to say: “We can’t tell people what to think. We can only tell them what to think about.” With the avalanche of information from a variety of sources society is finding it more difficult to avoid entrenching drawing biases and digesting the information in full and true context. Having more information does not necessarily mean being better informed.

The public media may have an excuse for their less than missionary driven approach to their audience. The same cannot be said for employee communications which today faces far more challenges than before. Escalating labour discord and unrest are evidence that these challenges are not being met and organised labour is finding the vacuum very useful for its own agenda. Employee reporting has many dimensions and I hope to share my decade or so of experience and research as a consultant in the field in the next few articles. I have always believed that the most promising arena for enhancing economic literacy is in employee reporting. Indeed, this was my main motive for leaving a well-established broadcasting career for a rather unknown field of employee developmental communications. It is in the workplace where people rub shoulders with the economic environment on a day to day basis.

Employee reporting has to be unashamedly developmental and educational in its approach. New rules on transparency and disclosure have created many pitfalls which can only be avoided if information is shared within a context fully endorsed and understood by all. It may have been easy in the past to hide “sensitive” information such as pay scales or executive remuneration. Today that is no longer so. NUMSA and other current strikers have quickly added the level of pay hikes for directors to their strike slogans. If context is not forthcoming from company leadership it will come from other sources with a different spin. Of course the problem is that you cannot defend the indefensible. Pay disparity remains highly contentious, with the “executive skills” argument the most hackneyed and challengeable.

Like in a marriage it is extremely difficult to be honest and transparent if fidelity is cherished but regularly flouted. Ultimately, trustworthy employee communication has to be underpinned by and coincide with appropriate company behaviour.

The ultimate criterion in sharing information with staff is simply that it is done in their interest and not your own; that it is empowering and enabling and not defensive. If a thorough scrutiny of intention shows this to be so, you can be forgiven for being a tad paternalistic.

Transparency and disclosure are coming at a high cost. It remains to be seen whether we will reap the benefits of a change in behaviour.

Being the change and keeping your cool while things fall apart.

We can be forgiven for being a bit overwhelmed by it all. The world is going bankrupt; there’s crime and corruption everywhere; columnists are warning us of another economic collapse; some are talking of revolution while Julius Malema has been arguing that the fist never ended; labour leaders are talking about a ticking time bomb and scientists and environmentalists are postulating about the coming of nature’s wrath.

What is even more disturbing is the exasperating helplessness in which all of this babbling is happening. When and if, solutions are offered they are mostly done from some armchair position that always has a phrase such as “they must” or “they should”. Even the occasional “we should” is within the context of the collective “we” as a species, country, society or nation…not the royal plural that implies some form of self-accountability. In one swoop we have handed our destiny over to “them”.

We know what everyone else must do. We’re just not too sure of what we must do ourselves. Most of us have little option but to carry on as if we were not warned; to put on a happy face and be optimists rather than sourpusses spreading negativity until even our nearest and dearest stop visiting or cross the street when they see us coming. After all, we have been told by the sages of the past and present not to get thrown by things that are out of our control – to “accept them” as the serenity prayer suggests. Those with assets tinker hesitantly in response to the investment advice or disaster hedge of the week. Those with billions may feel more comfortable but not totally immune to conditions that could affect all of humanity. After all, “no man is an island”.

I was reminded of the dilemma facing us in a discussion with an acquaintance this week. We were talking about an article I had written more than a year ago, in which I had mooted the possibility of massive sovereign insolvencies and how little things had changed. There was a clear expectation from my friend of investment advice or a tip that would create some or other magical immunity: something I am not remotely qualified to do.

But it also reminded me of how narrow perspectives have become and how the only solutions being sought are in the preservation or accumulation of material wealth – the very motives that have arguably created our problems in the first place. Today, more than ever before, societies and most individuals define themselves by what they physically possess: by what they have, not by what they do. Small wonder that we have created a modern world that can more easily than before, fall apart at the prospect of losing those possessions, or having that material wealth eroded.

The primary intention behind all endeavours for most human beings must surely be inner peace and serenity. The belief that this can be achieved largely by material possessions has been challenged by leading experts in psychology and in human studies for centuries. Research findings and experimental data suggest the opposite: that the pursuit of material wealth detracts from contentment and that possessions are just as likely to create discontent as alleviating it. It’s not an easy message to accept, so I won’t dwell on it again.

But there is much we as individuals can do to enhance our emotional immunity. Letting go of things beyond one’s control, does not mean letting go of how one can respond to them. Ultimately, systems have to succumb to human behaviour; they are nothing more than an extrapolation of our behaviour. If our behaviour has got us into the mess we are in now, then logically a change in that behaviour will get us out of it. That behaviour has to start somewhere and there really is no sense in being part of a stressed out herd even if that herd is carrying all of us to a precipice.

There are many techniques for serenity at an individual level. They have filled many pages of self-help and modern motivational paraphernalia. Most of my readers will be aware of them and will be able to add quite a number to the following few. The most overriding one to my mind is to draw up a balance sheet of one’s expectations and aspirations. Expectations are those things we believe we are “entitled to”, or that should happen as a natural outcome of being a member of a society. (I would not suggest using the Constitution as a guide). Aspirations are those things that we know we have to work at to achieve and that we hold ourselves accountable for. Reducing the former and increasing the latter is a powerful method of regaining control on one’s life. As a nation, of course, it will unleash the best we can be. It literally swings collective behaviour from get to give.

This relates to another aphorism and perhaps a trite “Oprahism” that nevertheless is incredibly powerful as a technique for mental health: we are seldom in control of what we get out of life. We are far more in control of what we give. Giving is not about charity, but about giving the best of oneself in all circumstances, and being prepared to make a contribution to the world around one. It is that giving which enables receiving and makes getting possible. To insist on getting as a condition for giving actually impedes the process. We have created a constraining wall of self-interest. Making material self-interest a condition for action is seldom an enabler. It is more likely to disenable. Of course this applies less to normal transactions in which getting and giving are predetermined. Although even here, I would suggest that there is far more room for generous behaviour than we may think. But the most important decisions we make in life are seldom about transaction.

Combining outgoing and externally focused behaviour with minimum expectations is the only real security we have while the world falls apart around us. It is the one way of keeping that happy face without being part of the cadre where ignorance is bliss.

After all, if you lose yourself when you lose your possessions, you did not have much to begin with.

And proving the point of this whole article, I know that most of the responses will be “tell it to them”!

Real heroes.

A salute to those who teach us that not everything in life is about transaction.

Somewhere on a private nature reserve in the Little Karoo near Ladismith, Carl is building his dream home. Carl is a bare-foot self confessed social drop out from the psychology profession in Pretoria. He dabbled a bit in organic wine farming before being inspired, divinely or otherwise, by the idea of replicating a 300 year old cottage in a remote and serene part of the country that would cement his seclusion.

It’s not just any cottage, mind. Carl is copying the home of Wolraad Woltemade, that iconic 18^th century South African hero. He is following every detail down to the manure floors and chicken house. The project is already some years in the making and difficulty in obtaining authentic materials frustrates progress. The original home still stands as a national monument as Little Zoar in Milnerton, and is the subject of a book written by its current owner.

I’m not surprised that someone like Carl could take the Woltemade legend to some excess. It is probably the most inspiring tale of selfless courage that this country has. But it would also not be surprising if it has been expunged from South African school history as part of our exaggerated need for historic cleansing. Yet it lives on in the minds of many and reminders exist everywhere: in school, suburb and street names, and legendary tug boats. Until 2002, South Africa’s highest award for civilian bravery still bore his name.

Anyone who has spent some time in the Cape between May and August, and has witnessed the Atlantic’s fury either from Seapoint or Blouberg will understand why the VOC or Dutch East India trading company, who governed the Cape in the 18^th century, forbade ships to anchor in Table Bay in those months. By then, the Peninsula had already earned the name “Cape of Storms”. If you have seen the weather and seas at their worst, then you may get some inkling of Woltemade’s extraordinary feat.

Greedy ship captains pressed for time would often ignore the ban on anchoring in the Bay. So it was that De Jonge Thomas with some 200 passengers and crew on board found itself near the mouth of the Salt River on that stormy early morning of June the 1^st, 1773. It broke anchor and started to break up after being driven onto a sand bar. A number of sailors and passengers perished in the cold and turbulent waters, some strong swimmers made it ashore, but others were left clinging to the hull. Wolraad’s son Christiaan was one of a detachment of guards sent to prevent spectators from looting cargo washed ashore. That was the scene confronting Wolraad, the local dairy farm manager for the Compagnie, when he arrived on horseback with provisions for his son.

Carl tells the story a bit differently from the history books. He believes Wolraad was close to 70 years old at the time, and his horse was not the magnificent steed that the legend portrays, but rather something of a poor man’s Seabiscuit.

Be that as it may, Woltemade had no hesitation in spurring the animal into the sea to rescue those in distress. When he approached, he urged two to jump into the water and grab hold of the horse’s tail. He did that 7 times, saving 14 people. By all accounts an exhausted Woltemade was advised against the 8^th attempt and he himself saw the need for the horse to rest. But the hull started to break up further and the old man went into the sea for the last time. Sensing their last chance of being rescued too many of the panic struck victims grabbed hold of the horse and pulled it and rider under.

There is something very special about the Woltemade legend. There are others that have the same texture, perhaps not as dramatic and as legendary, but a distinct ingredient that sets them apart from other acts of courage and bravery. Like Raymond van Staden sacrificing his life to save a boy off Warner Beach, and Donald Mboto doing the same off St Michael’s beach. Then there’s John Cerqueira, who helped a disabled woman down 68 flights of stairs when the World Trade centre was collapsing around them. But the same ingredient can be found in the not so dramatic acts – like former Broadcast colleague Conrad Burke, who witnessed a miscreant carry three packs of energy drink past a helpless till lady without paying for them. Conrad confronted the petty thief on the street, forced him to hand over the goods and returned them to the store.

We tend to think of heroes in a much broader context, from admiration for talent and success in various fields, to political and military leaders and martyrs. Apart from the worship so facilely expressed for “celebrities”, some of whom have made little or no real contribution to our lives, heroism should imply some act of sacrifice, fortitude and courage. It tends to come more easily to those impassioned with some mission, religion or ideology – like martyrs. It also has some supporting ingredient for people whose job it is to defend, protect and serve: like soldiers, police and fire-fighters. Love, companionship and family are also powerful motives behind many acts of selflessness and heroism.

These may not be less deserving of our acclaim, but the acts of Woltemade and the others I mentioned are very special in one key regard: they were unconditional. They may have displayed different levels of courage, but they share one element in their magnificence. They were random acts of selflessness not inspired by ideology or any other motive, but simply by our humanity. They had no expectation of self-gratification, recognition, acclaim or material reward. Unlike many of the others, they attract unanimous celebration.

As such they go much further than the good they achieved at the time. They confirm our basic instinct and ability of caring for others and that this attribute enables us to confront even death with fearlessness, fortitude and dignity. They show us the power of being unconditional and where our true strength lies. They teach us the value of looking beyond the constraining walls of immediate self-interest and gratification. They teach us that not everything in life is about transaction. Indeed the most uplifting and character building acts seldom are.

We go through life with cynicism and a “what’s-in-it-for-me” mantle, haggling at every turn and stifling, if not destroying our true majesty. We are constantly disappointed and distressed when the conditions we set are not met, only to discover later that our expectations were unrealistic in the first place.

We are all capable of heroism. It does not have to be the ultimate sacrifice, but every act of selflessness builds on the other until we blossom into the full giving human beings we can be. This is the real role modelling we should adopt. This is the ultimate life skill we should teach in our homes and in our schools. It is also a skill that should be taught in business schools, for the business of the future is going to be based more solidly on the strategic foundations of generosity and caring for others.

It is an attribute that should be the distinguishing feature of all leaders in society, including business. It is one that clearly cannot be bought, only rewarded. The real tragedy of excessive pay levels is that they have tarnished the process of identifying the real leaders in our midst. By their very nature they contradict selfless intent and those who insist on and can only be bought with excessive material rewards are most likely the least qualified to lead. The essence of true leadership is to serve rather than to rule.

The benefits for us as individuals, society and mankind of heroic behaviour from the most modest to the grandest are beyond our wildest speculation.

I suspect that in the age we live in it could become the most important attribute for survival.

The capital conundrum.

Is the gap between rich and poor an inevitable outcome of free societies?

If the current political rhetoric in South Africa shows anything it is how easy it is to become so locked in the past as to forget about the future. It is one thing to learn from the past. It is another to be stuck in it.

This is especially true when past perceptions were nurtured in highly emotive circumstances supported by fear and insecurity. None has been more powerful in shaping our destiny than the conflict over economic and political systems. With it have come biased dogma, emotive rhetoric and populist slogans that convert into automatic responses. Nothing could be less appropriate in the times we live in. Nothing threatens our search for balanced solutions more. Slogans such as “imperialism”, “working class”, “capitalist class”, “communism”, and “capitalism” do little to enhance our evolution. They merely lock us into preconceived prejudices.

One of the concepts within the debate is the efficient allocation of capital. It goes without saying that this plays a critical role in growth and prosperity.

I was reminded of this in reflecting on Moneyweb’s stated key intention of promoting “the efficient allocation of capital, which translates into the promotion of free enterprise and Nation Building”. There is nothing wrong with the concept. It is indeed a highly laudable ideal and is a natural component of the very basic definition of economics which is the allocation of all resources to where they are most needed and can best serve society as a whole. This raises the question in the times we live in, whether efficient as we have come to understand it is the same as appropriate.

So the argument is not about the concept itself, but rather how best to achieve it. This again throws us back to the baggage of the past. When you question self interest and the profit motive as being the best driver, you stand a good chance of being given some or other rhetorical label. If you question regulation and controls that aim to influence capital allocation, you are just as likely to be labelled in the opposite camp. And that’s where useful discussion gets stuck.

It really is time to ask whether indeed, in any system or past concept, capital has been allocated efficiently or appropriately in serving social needs. All of these past dogmas have been tried in some form or another or in some country or another. Yet, in most places you look, you will find huge imbalances that arguably relate back to capital allocation or dispersion. They include the availability of natural resources and economic growth; the unsustainable pressure on the planet and climate change and the massive disconnect between wealth and real value creation. Surely, it is time for a new theory based on a different mindset and promoting a different value system?

The greatest criticism of the allocation of capital in today’s economy is the massive disparity in wealth – the gap between rich and poor. It is also the most controversial because it automatically divides us into two vehement camps – those who believe that it is a tolerable outcome of a free society and those who believe that it is proof that economies have to be more regulated. It seems to present an inherent conflict between mankind’s most prized ideals – liberty and equality.

Whatever one’s view on causes, it is the biggest challenge of our time. An interesting conclusion reached in the book “Fault Lines” by Raghuram G Rajan, a former chief economist at the IMF, is that growing inequality particularly in the U.S., Europe and Asia was a direct contributor to the financial crash because governments responded to the disparities by creating easier credit. He called the response: “Let them eat Credit.”

This underscores a simple but very sad reality. The biggest cause of social ferment is comparisons. It creates envy and when this is added to democratic expressions you have a toxic mix in societies where disparities are huge. Rational arguments lose their effect in emotive conditions and then feed all kind of discontent, real or imagined.

Wealth disparity has always been with us and is as much written about as any other topic on humanity. It is a complex subject at many levels – political, economic, social, geographic, anthropological, and even psychological. But I do not believe it can be extrapolated as an automatic outcome of free enterprise. A friend of mine reminded me of this in forwarding me an Adam Smith quote: "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable". More often than not, the disparities are caused not by markets being free but by interference and manipulation in them.

Let me isolate only a few of many important, if not overriding causes for the current crisis as it relates to the efficient allocation of capital.

An important one is clearly the different levels of remuneration, particularly in the “executive” category. After writing about this before, I am still to be convinced that the price of these skills truly reflects unencumbered supply and demand and whether this market is not, as Warren Buffet once put it, “broken”.

Another is the changing role of financial speculation from being a desirable instrument of equilibrium in the trading of financial instruments to being a dominant force in the creation of liquidity and allocation of capital. This has been severely exacerbated by the presence of very large financial conglomerates and banking institutions whose behaviour has often been manipulated to the advantage of an elite corps.

A third critical one is the role of capital in the creation of tangible wealth, in business and private ventures. The explosion of speculation in the allocation of capital has brought with it a need to review the concept of the supremacy of equity capital over all other resources. This has to be done without ideological baggage and seeing it as a threat to free enterprise. Capital is a resource and the cost of its use is either interest or profit. Labour is a resource and the cost of its use is wages. To have the cost of capital skewed by speculative returns is as inappropriate as having the cost of labour skewed by legislative inflexibility or inordinate trade union collusion.

What is really counterproductive is the ongoing assumption that the two are in competitive conflict with labour being the “underdog”.

Sitting in on a basic business awareness training session some years ago, I heard the trainer tell his group that the first thing you need to start a business was money. I was appalled as I watched the awestruck faces of his barely literate, minimum wage participants. Destroyed in their minds forever was the vague possibility of becoming a self supporting entrepreneur, even in the informal sector. It’s a view still prevalent today: that capital creates jobs, not an idea, making a difference, doing something meaningful for others and having a market. The latter will attract money, manpower and all the other “M’s” that that specific programme taught as the key ingredients for business.

The allocation of capital in creating tangible wealth and not singularly and purely to maximise its returns will ensure a narrowing of the distressful wealth gap. Yet the view that the market is a “resource to be exploited” still lingers. It is obscene, arrogant and inappropriate. It is the difference between being “profit-driven” and being “market driven.” It makes customers angry…like I was to discover an unannounced increase in my banking fees while having just read of the mind-boggling bonuses given to banking executives.

In “Value through Values”, I dedicated many pages to this crucial difference and how paradigms can be changed by simply changing perceptions. At the risk of sounding unashamedly boastful, it was a work that Raymond Ackerman described as “… the way of the future; the whisper of tomorrow.”

It’s actually nothing new. The creators and builders in business have known this all along and have intuitively behaved in this way.

Sacred cows and holy grails.

Whatever happened to that business catchphrase “the customer is king”? Or the “customer is always right”?

Has it been consigned to useless rhetoric as many of our aphorisms and universal truths tend to be? Has it become nothing more than a bit of “rah-rah” to fit into some advertising campaign or to get unwilling staff a bit fired up in improving service?

It is such a pity…because customer focus and the pursuit of service excellence are the essence of economics. It is much more than rhetoric. It is much more than sloganeering. It is indeed the holy grail of a market driven economy. Seeing customer service as the ultimate super-ordinate goal of business brings to life the axiomatic truth that supply exists to serve demand. It is not the other way around. It is an obscene thought that markets or the customer collective is an exploitable entity that exists to generate profits, create shareholder value, pay executive and other salaries, create jobs, pay taxes et al. This has arguably been the cause of many of our economic ills, particularly in the past few decades.

The whole debacle over the Walmart entry into the South African market is an important case in point. Very little of the public discussion and popular media coverage centred on what it would mean for South African consumers. One would have thought that the Competition Tribunal’s main concern would have been those benefits rather than prescribing conditions for entry. Perhaps it did take a balanced view in the end, but the fact that it had to spend so much time and debate on paying homage to other sacred cows is a worrying reflection of how far we have moved from the holy grail of customer sovereignty. Indeed, one can also ask whether it is at all appropriate to compromise customer interests in achieving a “balanced” solution.

From a purely consumer point of view, one should celebrate the entry of the world’s biggest retail group into the country. It will certainly shake-up competitiveness in retail which, not so long ago, was being questioned by the unions in the wake of bread price collusion. The deal represents some R16bn in investment, the promise of 50 new stores and some 6000 new jobs. This is only the “beast in the bush” as the Economist called it, if we fear disturbing growing protectionism, labour inflexibility and inefficiencies that have already tumbled us down to number 54 in the Global Competitiveness Index. That same article made the point that in the United States, Walmart was instrumental in reducing inflation.

In the big metros and abundant shopping mall areas one can sometimes lose sight of the benefit of competition. Swellendam has been abuzz recently with the opening of a new mall, and the coming to town of a Checkers store to compete against Spar, OK Bazaars, Shoprite, and a local discounter, Check-in. For some weeks now, there’s been much animated talk about prices, specials, parking areas and service comparisons. All agree that each store has upped its game quite a bit.

Competition in retail is only one thread of a much bigger economic tapestry. Customer sovereignty is not just a slogan. It recognises the important axiom that ultimately our true value lies in our capacity to make a contribution to others. Business is an important conduit for achieving this. In a market orientated economy all other considerations are secondary to this one overriding principle. You cannot create jobs by throwing tax payers money at it. You also should not preserve jobs by protecting gross inefficiencies. Jobs are created by serving the needs and wants of others. Jobs are preserved by competing effectively against all comers. The foundation of creating wealth is in adding value for others and indeed in accounting, wealth is measured by measuring value added. This again underscores the problem of our time of froth liquidity based on wealth creation without tangible value having been added.

In much of my consulting I would encourage companies to approach any problem, from major strategic issues to minor employee disputes from the perspective of what would be in the best interests of the customer. It is virtually infallible as a beacon and cuts through petty and narrow interest like a hot knife through butter. It invariably leads to a solution that few can challenge as being biased.

We have deviated quite severely from the purist market driven path in which the customer is king in all things. We have created many sacred cows that stand in the way of that holy grail. These include trade protectionism, executive remuneration driven by share value, profit maximisation at any cost; narrow labour interests, rigid pay demands and burgeoning taxes. To this one can add the more shady activities such as corruption, nepotism, cronyism, and collusion. The thought comes to mind whether one would not have a valid case in challenging these practices, both “legitimate” and shady under the new Consumer Protection Act. They are more invidious and damaging to longer term consumer interests than occasional malpractices.

There are some very eloquent arguments in defence of market interventions. Most of them are legitimately based on the misbehaviour of interests devoid of sound human values. The only question that we need to ask ourselves is whether the customer should be knocked so far off the pedestal as we have done. Should we not brandish the butcher’s knife at some of the sacred cows?

From an global perspective, the principle of providing humankind with the best products at the best price should be an overriding guide. But, as the Doha trade talks keep on revealing, narrow national interests continue to bedevil this process.

From a national perspective, trade liberalisation and competitiveness are by far the most essential ingredients for a successful economy in the longer term, underpinning the prescription discovered some years ago by World Bank researchers, that successful economies are those with an external focus and strong domestic people development policies. Yet, inflated popular expectations keep on driving national policies in the opposite direction.

From a company perspective, the most sustainable are those whose primary measurements of success are customer satisfaction, market share and innovation, a contented workforce and healthy profitability.

From an individual perspective, the most empowered and arguably the most content are those who seek meaning by adding value to the lives of their fellow human beings.

Many countries, businesses and individuals today are market led. The really great ones are sincerely market driven.

The customer is indeed king.

Sam the dairy man.

Sam was desperate. He had just taken over the family dairy in a town in KwaZulu-Natal. It was one of the few remaining independent dairies in the district in the aftermath of that volatile period when labour unions were vying for membership. Despite being fluent in Zulu, he simply did not have the means and experience to deal with the demands of a fledgling union that threatened to send the business down the tubes.

I, on the other hand, had just started my employee communications company when Sam called. At the time I too had little more than a passionate mission to enhance economic awareness in the workplace and promote the concept of fortune sharing based on wealth creation in companies. There was no instrumentation, no training programmes and no established process on how to do this.

By then I had learned that the fees for employee communications consulting could only be a fraction of those charged by my elite colleagues in Public Relations. But Sam baulked at paying even that, so after a bit of haggling and an assurance that he would pay my travel costs, I found myself boarding a twice weekly flight on a fully booked six-seat Cessna “something”. As I made my way to my seat, there was a distinct whispering by some of the passengers. Although never comfortable with recognition, I had become used to this puerile habit of a celebrity conscious public. But it was a bit of a let down when I turned and saw that the attention was aimed at fellow passenger and former tennis star Kevin Curren who had done so well at Wimbledon some time before.

Light aircraft are made for little people. Their seats are made for midgets. The seatbelts are made for Lilliputians. I tried in vain to disguise my inability to fasten the belt by hiding the ends in a non existent lap. The response from the pilot who did the checking was to brandish an extension in full view of all the passengers. My cover was truly blown.

Sam had arranged a two day interaction with his staff. I spent the first morning going through his figures and what I intended to share with them. The only discomfort he had was in revealing his own earnings from both the profit that he and some family members were getting from the dairy, and the salary that he paid himself and another manager. On the strength of a number of employee interactions I had had by then, I could assure him that the pay differential was rather modest.

Something else that I had long before settled in my own mind was the myth that workers by nature are full blown communists who vehemently subscribe to the concept of “from each according to means and to each according to needs.” It simply is not true.

Most workers fully subscribe to the concept of differentiated pay and have a fair understanding of the impact on wages of supply and demand for skills and qualifications. Inexplicable multiples of thousands are a different issue. But I also assured him that I would spend some time on this in my talk with them. As far as the profit was concerned, his dividend, when split with the family, was also very modest. My regular approach of comparing the dividend with what his family could be earning in interest if they sold the business and invested the money in a bank would more than satisfy the most belligerent that he was not profiting from their toil.

Sam had a healthy 2:1 dividend cover and the presentation of retained earnings as a commitment to the future of the business is one that is simply not emphasised enough in communicating profits to staff.

Satisfied that I would not unleash more labour unrest, we discussed logistics. Sam had nothing – no flipcharts, no coloured marking pens and no venue! On top of that he informed me than none of his staff had a working knowledge of English. All were Zulu speaking. I knew a few words of Xhosa and a smattering of the polecat Fanagolo. It was not a good idea to use Sam in the interaction and the only translator we could use was a combative shop-steward. It was risky, but we decided to give it a go as long as Sam sat in and monitored the translation. The venue, we decided, would be Sam’s massive cold storage warehouse. My “teaching aids” would be bottles of milk, slices of cheese and bricks of butter.

We had barely progressed beyond a few opening remarks when fidgeting and murmurs among the group of about twenty started getting to me. I feared some or other rebellion, but soon my own built-in duvet failed, and I realised that we were all starting to get frostbite. We had to switch off the freezer compressors.

Guided by the dairy’s value-added statement, I used a number of bottles of milk to reflect income from customers and removed most as “outside costs” to supplies from farmers and others. The milk left represented wealth creation. This I poured into glasses for employees, tax, retained income and then the owners’ dividend. It followed the pattern I had become used to. More than half went to employees, about a quarter to tax, 20% to savings and less than 5% to Sam and his family. The second day, I used a block of cheese and repeated the exercise.

We then went back to the slice that represented wealth creation and had one of the most productive discussions about how this slice could be increased. Most of the suggestions came from the staff themselves. Then something happened that caught both Sam and I flatfooted! The translator and previously belligerent shop steward asked Sam whether he would share any of the extra wealth if the staff helped him in creating more!

There was little hesitation on Sam’s part and I left them with a handshake on the agreement of a principle and a promise to discuss the detail of how it would be done.

Secured again by an extended seatbelt, I endured the flight back with warm thoughts of Sam the dairy man, his dedication to his customers, his community and his group of openhearted employees.

Months later I received a letter from Sam confirming the difference the interaction had made; the implementation of a modest gain sharing programme, a structured regular communications effort, and a rather hefty bill he faced for the loss of stock in a warm warehouse.

But there was a nagging disquiet that in the not too distant future, the dairy would be swallowed up by a “corporate”, the battle lines between “labour and capital” would be redrawn and a humble group of dedicated workers would join the ranks of an agitated and angry mob with inflated expectations.