So who does own Amazon or Apple? The answer is that no one does, any more than anyone ‘owns’ the Mississippi River, the Theory of Relativity, the Royal Economic Society or the air we breathe. A thing or – in Lord Millett’s erudite terminology – a res can exist without being owned by anyone. There are many different kinds of claims, contracts and obligations in modern economies, and only occasionally are these well described by the term ‘ownership’. The differences between the modern corporation and my umbrella are so wide-ranging that it is hardly likely that my relationship with them could usefully be described in the same way.

German law is clear and adopts a stakeholder perspective. American law on corporate obligations is not at all clear; scholarly debate is extensive and continuing, but veers towards shareholder primacy. Britain is, as on so many issues, somewhere in between. But clarification of the legal issue is much less important than it may appear to be at first sight. All three jurisdictions have sensibly framed their law, and the practice of their courts, to make it hard to challenge honestly made business decisions. As a result, managers are left with considerable discretion in practice in balancing the claims of different stake-holders. The manner in which they resolve these questions owes far more to the business climate and the expectations of society than to the precise definition of legal duties. Businesses are social organisations and operate within a particular society.

The focus on the firm as a collection of capabilities gives a different and more illuminating perspective for understanding the extraordinary diversity of business organisations and of businesspeople over geographies and over time. The core ideas in this book – collective intelligence, radical uncertainty, disciplined pluralism, relational contracts and the mediating hierarchy – have been extensively developed and discussed by earlier writers, though much of that work has been outside the context of business organisation. The relevance of each to the argument of this book arises from a belief that in the modern world successful commercial relationships are not simply instrumental and transactional; they are social and are embedded in a wider framework of communities and teams. That transactional view was both incorrect and unattractive. This book is written in the hope that a better account of how business and its stakeholders flourish will point the way not just to a better understanding of business but to the better conduct of business itself. In a successor volume I will try to explain some of the implications of that understanding for both business policy and public

Policy.

The Friedman doctrine forestalls this cacophony of complexity by substituting an abstract ‘representative shareholder’. Rather than thinking about actual human beings working in association, we’re invited to replace them with a black box that only cares about profits, the pretend that we can enter into the same sorts of relationships with that black box as we could with the individuals.

This is what makes the Friedman doctrine, as far as I can see, a lie; it’s an exhortation to executives to reverse the truth. They are meant to ignore the reality of the company and act as if they are directly employed by human beings, but then ignore the reality of human beings, and act as if they are employed by a theoretical construct.

It’s an attractive lie, though, thanks to the combination of the accountability sink with the shift in perspective. The great anxiety of the managerial class was that they were losing their individuality as corporations became more complex, but that they were still subject to criticism. The Friedman doctrine invited them to disassociate themselves from their roles; to attribute all the bad consequences and all the frustrating lack of independence to a separate work-self, which was under an obligation to a simple principle.

From a cybernetic point of view, it’s interesting as an example of how the systems and structures mattered so much more than the individuals involved. The development of the Friedman doctrine into the intellectual backing for the leveraged buyout boom and the private equity industry are best seen as a conflict between two comprehensive systems of interest, both of which might have regarded the other as a threat. The great unremarked class struggle that happened in the 1970s and 1980s was that between capitalism and managerialism.

The managers lost this struggle, pretty comprehensively. And as we’ve seen, the combination of the blind spots in management and the blind spots in economics came together to produce an ideology which was bound to remove management capacity. And that created further blind spots, and further reduced the system’s ability to cope with shocks. The story of how we got to where we are is a story of the attempts of the system to cope with this, and to search for short-term equilibrium.