Bureaucratic organizations are inertial, incremental, and dispiriting. In a bureaucracy, the power to initiate change is vested in a few senior leaders. When those at the top fall prey to denial, arrogance, and nostalgia, as they often do, the organization falters. That’s why deep change in a bureaucracy is usually belated and convulsive. Bureaucracies are also innovation-phobic. They are congenitally risk averse, and offer few incentives to those inclined to challenge the status quo. In a bureaucracy, being a maverick is a high-risk occupation. Worst of all, bureaucracies are soul crushing. Deprived of any real influence, employees disconnect emotionally from work. Initiative, creativity, and daring—requisites for success in the creative economy—often get left at home.

In our survey of ten thousand Harvard Business Review readers, 61 percent of large-company respondents said it’s “very difficult” for frontline employees to try something new. Corroborating this, Gallup’s 2019 Great Jobs survey revealed that in the United States only 9 percent of nonmanagerial employees strongly agreed that they are free to take risks to improve products and services or solutions. Managers also feel hemmed in. In the Boston Consulting Group’s long-running annual poll of senior managers, a “risk averse culture” and “overly lengthy development times” consistently rank as the biggest barriers to innovation.

By definition, humanocracy is a radical departure from the status quo. Yet in building it, we have to be careful not to throw a giant wrench into the clanking machinery of bureaucracy. What’s required is an approach that is both revolutionary and evolutionary; that’s radical in its aspirations yet pragmatic in its approach. In practice, this means running lots of experiments—this is how human beings test whacky ideas without blowing things up. Before sending an astronaut into space, we launch a monkey or two. Before putting a new drug on the market, we test it on rats. Luckily, in the case of humanocracy, no animal testing is required— unless, of course, you count us.

The Industrial Revolution has powered most of the world’s successful economies for the past three hundred years. So it’s only natural that the management paradigms from high-volume, low-error manufacturing have come to dominate business organizational practices. In a manufacturing environment, you are trying to eliminate variation, and most management approaches have been designed with this in mind. It really is a sign of excellence when a company manages to produce a million doses of penicillin or ten thousand identical automobiles with no errors.

This is an important and underappreciated point: there is no shortage of ‘patient capital’ – institutions such as pension funds and university endowments are naturally looking for investments that may only pay off in the long term – but there is a shortage of patient individuals working in the finance sector, an industry remunerated almost entirely by transactions. The result is a constant flurry of financial activity engaging senior executives, investment professionals and advisers which rarely adds to, and often detracts from, the effectiveness and success of the underlying business. The financial pressures that motivated strategy at Merck and Valeant not only damaged the standing of the businesses and their products but also diminished the returns to their shareholders in the long run. In later chapters I will show that these are far from exceptional cases. The history of pharmaceuticals illustrates much that is right and wrong in the relationship between business and society. I have described four problem areas: the motivation and standards of behaviour of leaders of the industry; the interface between business and finance; the difficulty of constructing a regulatory regime that is relevant and effective; and the sometimes too tenuous relationships between prices, costs and values. None of these issues is unique to the pharmaceutical sector: similar questions arise in every kind of business, and the answers are necessarily specific to industry, time and place. But in this book – and another that will follow – I will illustrate principles and directions of travel.