Jul 5, 2015

The good, the bad and why it can pay to be a brute

“Do business with people you like” and “Be nice to staff, suppliers and customers” seem obvious rules for success in the 21st century.

But I’m not convinced they really work. I’m afraid many tycoons are ruthless, selfish tyrants — and that’s partly why they get ahead.

One episode taught me that monsters often evade the consequences of horrible behaviour. A man running a business I had an interest in was accused of rape by a member of staff. I believed her and wanted to report the matter to the police. But as she had been taking class A drugs with the individual, a lawyer advised that she would be torn apart by the defence in court, and that a jury would not convict him. He was at least sacked.

Not long afterwards, he popped up running another company. I told the owner everything but was ignored. The villain later stole large sums from the business. I believe he was never prosecuted for either crime.

Steve Jobs served as the great modern example of how bullies can do very well indeed. He led Apple to become the world’s most profitable and cash-rich business. He was also characterised as “a sexist bully, a skinflint and a pathological liar” by the mother of his first child. And his authorised biography tells how the brilliant entrepreneur drove loyal workers into the ground and manipulated those around him.

Meanwhile, Carl Icahn, who is one of Apple’s largest shareholders, is called an “activist investor” by some, but a “bully” by plenty of others. He is worth at least $20bn.

One magnate I’ve met used an ingenious technique to deal with the more difficult aspects of accumulating a large fortune. He is the engaging, charismatic frontman in any negotiations. But if the dealings ever turn nasty, he is completely unavailable. All the tough conversations — sackings, pay cuts, closures and so forth — are carried out by underlings who never compromise and don’t care about their reputations.

Most very rich men do not feel a great need to be liked; they are willing to sacrifice popularity for material gain. Because, of course, high-stakes capitalism is not a walk in the park. It is a ferociously competitive activity where there are relative winners and losers, even if society as a whole benefits from its effects. You can be civil but ultimately if you are ambitious, there will be times when you have to be hard as nails — otherwise you will get steamrollered by someone more cut-throat than you.

A recent article entitled “Why it pays to be a jerk” in The Atlantic magazine quotes the business scholar Adam Grant, who said: “What I’ve become more convinced of is that nice guys and gals really do finish last.” Even so, he is the author of Give and Take: Why Helping Others Drives Our Success. The book suggests that collaborative, generous and modest managers and owners are likely to do better. I’m afraid that has not been my typical experience.

Several prominent businessmen I know are addicted to litigation. It intimidates rivals, partners, staff and even the media. I assume they spend half their time working on legal disputes; I can’t imagine a more miserable existence. But it can clearly be a profitable strategy.

For example, one private equity firm specialises in disreputable techniques: it is renowned for reducing the price it offers for an acquisition at the last minute, for not paying advisers, and for reneging on the deals it agrees with management teams. Yet its dishonour- able tactics work: the firm appears to deliver outstanding returns, and its institutional investors love it.

Inevitably, many entrepreneurs are coarsened by their ascent. Few of those I meet running a start-up can afford a sense of entitlement, but people change — building a big enterprise will expose you to some of the best and worst of humanity. And achievement will encourage those with unscrupulous tendencies; they start to believe they are untouchable. As the 19th-century historian and politician Lord Acton said: “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

Indeed, there are many perils to success. The classic is that confidence turns into hubris, which leads to nemesis.

But, too often, greedy, mean bosses triumph despite their immoral actions. Meanwhile, corporate empires fall prey to many diseases when they grow too fat and proud — bureaucracy, office politics, complacency and management self-indulgence among them.

I’m all for compassionate capitalism, but the nitty-gritty of everyday business can be brutal. Companies go bust, creditors and shareholders lose money, staff are made redundant. Optimistic millennials can sometimes focus perhaps a little too much on their corporate social responsibilities — and forget to watch the cash flow.

I’m sure all bosses think they are ethical. But few countries respect the rule of law and property like here, and in a dog-eat-dog world, the humble are often trounced by narcissists and takers.