What broader challenges does management have to deal with at this point in time?

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read chapter 1 of pirson‘s book and chapter 1-4 of winston‘s book to answer the question with an essay

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HUMANISTIC MANAGEMENT In a world facing multiple crises, our foundational institutions are failing to offer effective solutions. Drawing on the emerging consilience of knowledge, Michael Pirson debunks the fundamental yet outdated assumptions of human nature that guide twentieth-century management theory and practice – as captured in the “economistic” paradigm – and instead provides an urgently needed conceptual and practical “humanistic” framework, based on the protection of human dignity and the promotion of well-being. By outlining the science-based pillars of this innovative system, Pirson provides a new model for the responsible twenty-firstcentury leader seeking sustainable ways to organize in a world of crisis. Highlighting relevant applications for research, practice, teaching, and policy, this book is ideal for graduate students and professionals seeking to develop their understanding of responsible business, business ethics, and corporate responsibility. MICHAEL PIRSON is Associate Professor of Management, Global Sustainability, and Social Entrepreneurship, and Director of the Center for Humanistic Management at Fordham University. He cofounded the Humanistic Management Network and serves as Editor of the Humanistic Management Journal. He has won numerous awards, including from the Academy of Management, and has published extensively on humanistic management, philosophy, and business ethics. 2 Advance Praise This book is an absolute must read to any business school student and leader of any type of organization, from profit to non-profit, small to large, business to political! Christopher Arbet Engels, Chief Medical Officer Poxelpharma, former VP at Biogen, Boston Massachusetts In Humanistic Management, Michael Pirson argues for a significant shift in how we all – companies and individuals alike – need to conceive the practice of managing today and most importantly tomorrow, putting the old “economistic” paradigm behind us and moving rapidly towards a more humanistic paradigm for managing organizations and our economic institutions. Read this important, accessible, and beautifully-developed book. You will be glad you did! Sandra Waddock, Boston College As a 30-year veteran of Wall Street, I lived through many of the examples cited by Dr. Michael Pirson in exposing the shortcomings of Economistic leadership. His is a well-researched and compelling case for the critical importance of empathy, dignity and collaboration in the success of 21st century enterprises. Ron D. Cordes, Co-founder of AssetMark and the Cordes Foundation Humankind looks over the edge of a precipitous cliff, reflected in business scandals and public mistrust. The path we have taken stops at the edge. In Humanistic Management Michael Pirson points to another path, one away from the cliff, toward a future where dignity counts as much as maximization. Thomas Donaldson, The Wharton School University of Pennsylvania 3 Finally! Here is a book that explains what “humanistic management” is all about. Pirson’s work is an important step towards a change of paradigm in the way we think, teach, practice business. Claus Dierksmeier, Director of the Weltethos-Institut This is an important book. It explains how the narrative of business is changing, and why we should adopt this more human understanding of business. Read it more than once. We can and should make business better. R. Edward Freeman, University of Virginia, The Darden School This book is a revelation! So many people in senior management positions today feel a huge disconnect between their personal values and those of their businesses and the wider economy. They long for a new story-a new way of doing business. This brilliant book not only explains why they feel as they do but shows how to construct an economy that reflects who we truly are as people. Stewart Wallis, Visiting Professor, Lancaster University and previously Director, New Economics Foundation Michael Pirson provides a sterling upgrade to the inadequate business economic theories that currently shape democratic capitalism. With this brilliant book, Pirson helps readers see a path toward better theory, which has the potential of spurring better practice and a more meritorious future for us all. Roger Martin, Institute Director of the Martin Prosperity Institute and the Michael Lee-Chin Family Institute for Corporate Citizenship, Rotman School of Management Michael Pirson re-introduces humanity into problems of economic organizing. His book is both a masterpiece of interdisciplinary scholarship and an easy-toread appeal to common sense in how we live and work. If you are struggling to find purpose and meaning in these turbulent times, read Humanistic 4 Management. It offers a clear, accessible, dignity-centered bridge to an economy in service to life. Chris Laszlo, Weatherhead School of Management and Case Western Reserve University An important book, it provides critical foundations for a new narrative of an economy in service to life. L. Hunter Lovins, President, Natural Capitalism Solutions Managers and policy makers who want to improve business and society of tomorrow should read Pirson’s thoughtful analysis. Shifting business strategy towards dignity and wellbeing can benefit not only employees but society at large. Douglas Frantz, Pulitzer Prize winner and Deputy Secretary General, OECD This is an excellent book which expounds on the basics for stakeholder responsibility: protection of dignity and contribution to wellbeing. Klaus Schwab, Executive Chairman of the World Economic Forum Michael Pirson provides a much needed humanistic perspective on management given the pervasive mindlessness of current business practices. Ellen J. Langer, Harvard University In Humanistic Management, Michael Pirson questions decades of teachings about what motivates people and makes them happy. We humans are complicated beings, seeking not only stuff and security, but also connection and meaning. Pirson makes the case that with a deeper understanding of human motivation, we can design better economies and companies, which of course are made up of people. Backed by deep academic research and credibility, Pirson takes us on an important and highly readable trip toward a new theory of management. Andrew Winston, bestselling author, Green to Gold and The Big Pivot 5 Very few people have the intellectual breadth to accomplish what Michael Pirson did in this remarkable book. Weaving together insights from a variety of disciplines, he has shown us what lies at the core of our shared humanity –our desire to be treated with dignity– and how crucial it is to develop a paradigm for business that recognizes his fundamental truth. Donna Hicks, Harvard University Humanistic Management is a much needed and timely articulation of humanistic perspectives on organizations. For researchers, managers, policy makers and teachers alike this book is a wakeup call to take humanistic perspectives seriously. However, beyond waking us up through research, examples, and arguments, the book provides direction and inspiration about how to move down the pathways toward greater well-being and human dignity. Jane E. Dutton, Robert L. Kahn Distinguished University Professor of Business Administration and Psychology Pirson’s Humanistic Management frames key questions, and provides good tools, for cultivating businesses that affirm rather than violate human dignity and further rather than thwart the advance of well-being for our own species and for nature as a whole. Vincent Stanley, Yale University, Visiting Fellow at INSEAD, and coauthor of The Responsible Company with Yvon Chouinard Michael Pirson provides the long overdue reembedding of economic theory and managerial practice into its scientific and real-life contexts: from ethics to democracy, from psychology to ecology. Something that got completely separated and fragmented is being healed and becoming whole again. Humanistic Management transforms an impoverished chrematistic ideology back into what it ought and originally was thought to be: an economy serving the common good. Christian Felber, Vienna University of Economics and Business, initiator of the international Economy for the Common Good movement 6 We are living in a time where old understandings of politics, economic organization and management are collapsing under their own weight. The pernicious idea that corporations exist to create shareholder value has reached the end of its useful life. What would organizations look like in an economy organized around the creation of well-being? Humanistic Management provides a solid and grounded framework for creating these new ways of management. Jerry Davis, Michigan Ross School of Business, and author of The Vanishing American Corporation An insightful book for the 99% – and the 1% who think that they run the world should take a close look, too. John Elkington, Chairman & Chief Pollinator, Volans; co-founder of Environmental Data Services (ENDS) and SustainAbility; and co-author with Jochen Zeitz of The Breakthrough Challenge We are facing a crisis decades in the making; a crisis created by the belief that economic growth would –on its own– deliver human dignity. With a powerful combination of age-old wisdom and modern scientific evidence, Michael Pirson shows why this was not and what can we do to find our way out. Camilo A. Azcarate, Manager, The World Bank Group In this book Michael Pirson takes us on an intriguing journey of tracing the sources and foundations of an emerging paradigm that can inspire the next generation of management research, management practice, and leadership capacity building. Otto Scharmer, MIT Sloan School of Management; Founder, Presencing Institute; Author, Theory U Michael Pirson draws upon a wide-ranging and rich set of inputs –from economics, psychology, sociology, management theory, neuroscience, sociobiology, history– to craft nothing short of a compelling and inclusive new narrative for human activity. In this relatively short book, given the breadth of 7 its agenda, Pirson manages to define and defend just the sort of “new story” that our world so desperately needs and in so doing, he provides the “scripts” and arguments required for us to voice its case. Mary C. Gentile, PhD, Creator/Director of Giving Voice To Values and Professor of Practice, University of Virginia Darden School of Business This is a critically important book in a time where the world is confronted daily with the limitations of the current economic system. It’s a comprehensive, well-researched and practical guide to an inclusive and sustainable global economy. Patrick Struebi, Founder and CEO, Fairtrasa Group, Ashoka Global fellow and Schwab Foundation fellow In Humanistic Management: Protecting Dignity and Promoting Well-Being, Michael Pirson provides a much-needed update of flawed assumptions about human motivations that have distorted policies and practices, showing how caring and humane organizations are essential for better lives, businesses, and societies. This excellent book is an important contribution to the growing leadership and management literature paving the way for a more partnershiporiented way of living and making a living. Riane Eisler, author of The Real Wealth of Nations: Creating a Caring Economics and President, Center for Partnership Studies The influence of business and how business is done is now pervasive in our lives. Unfortunately, most of business has become dehumanized – people are treated as merely functions or objects in the pursuit of maximum profits. Michael Pirson shows us how we can restore human beings to the center, where they rightly belong. This book is a landmark contribution to our understanding of how to make this happen in practice and in our research and teaching. Raj Sisodia, Babson College; Co-founder & Chairman Emeritus, Conscious Capitalism Inc. 8 HUMANISTIC MANAGEMENT Protecting Dignity and Promoting Well-Being Michael Pirson Fordham University, New York 9 University Printing House, Cambridge CB2 8BS, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 4843/24, 2nd Floor, Ansari Road, Daryaganj, Delhi – 110002, India 79 Anson Road, #06–04/06, Singapore 079906 Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107160729 DOI: 10.1017/9781316675946 © Michael Pirson 2017 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2017 Printed in the United Kingdom by Clays, St Ives plc A catalogue record for this publication is available from the British Library. Library of Congress Cataloging-in-Publication Data 10 Names: Pirson, Michael, author. Title: Humanistic management : protecting dignity and promoting wellbeing / Michael Pirson, Fordham University, New York. Description: Cambridge ; New York, NY : Cambridge University Press, 2017. Identifiers: LCCN 2017008344| ISBN 9781107160729 (hardback) | ISBN 9781316613719 (pbk.) Subjects: LCSH: Management–Social aspects. | Organizational sociology. Classification: LCC HD30.19 .P57 2017 | DDC 658.4/08–dc23 LC record available at https://lccn.loc.gov/2017008344 ISBN 978-1-107-16072-9 Hardback ISBN 978-1-316-61371-9 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. 11 Dedicated to Marina, Maximilian, Leonard, and Lucas with appreciation, gratitude, and love. 12 Contents Preface Introduction Part I Foundations of Humanistic Management 1 Two Narratives for Business 2 Understanding Human Nature 3 A New Humanistic Model 4 Economistic and Humanistic Perspectives on Organizing 5 Dignity and Well-Being as Cornerstones of Humanistic Management 6 Economistic and Humanistic Archetypes of Management Part II Applications of Humanistic Management 7 Developing Humanistic Management Research 8 Developing Humanistic Management Practice 9 Developing Humanistic Management Pedagogy 10 Developing Humanistic Management Policies 13 Concluding Remarks Index 14 Preface Dear Reader, While traveling the world to talk about the concept of Humanistic Management, I have frequently been asked to recommend books providing a short overview. My answer has always been: “There are none.” Then I would slowly add: “Yet.” This book is the result of various efforts, including numerous collaborations within the Humanistic Management Network. Together with Shiban Khan, Ernst von Kimakowitz, Heiko Spitzeck, Wolfgang Amann, Claus Dierksmeier, Consuelo Garcia de la Torre, Osmar Arandia, and many others, I was one of the cofounders of the Humanistic Management Network some twelve years ago. Since then, more than twenty national interest groups and chapters of the network have been established across the globe. We have organized numerous global conferences and events to discuss the role of management in a world fraught with problems. In addition, we have published more than fifteen books and several special issues in academic peer-reviewed journals. This book is one of the first attempts to provide an overview of Humanistic Management as an alternative paradigm for Management. It cannot, of course, be definitive in any way – the field is still emerging. The point of this book is thus to introduce the basic paradigmatic ideas that have emerged from the collaborations of different groups from various academic disciplines, including practice and public policy, over a little more than a decade. 15 The main purpose of this overview is therefore to inform and stimulate further discussions around the two questions that I consider fundamental: Who are we as people? And how can we organize to create a world that works for all, or as we say, a life-conducive economic system? There may be a plurality of approaches toward more humanistic management. In the following pages, I will present one approach. It is intended to be broad and inclusive, yet naturally limited by my personal perspective. I want to thank Christian Felber, Donna Hicks, Hunter Lovins, Roger Martin, Paula Parish, and Sandra Waddock for their helpful comments on prior versions of the book. I acknowledge the remaining limitations and am responsible for all persisting errors. This rather massive undertaking would not have been possible without the wonderful partnerships with my colleagues within the Humanistic Management Network across the globe; the rich collaboration with the Global Ethic (Weltethos) Institute in Tuebingen, Germany, the inspiring partners at the Leading for Well-Being consortium, especially Hunter Lovins, Chris Laszlo, David Levine, James Stoner, and Andrew Winston; as well as my colleagues at the Academy of Management. I am equally appreciative of the support I have received from Fordham University and its Center for Humanistic Management in New York. Finally, my heartfelt thanks to my wife Marina and my kids Max, Leo, and Lucas, who would have preferred their daddy play soccer with them rather than write a book. 16 Introduction ◈ The Need for a New Paradigm in Management As you can witness almost daily, we live in tumultuous times. We face an array of global crises, ranging from increasing inequality and poverty, to fundamentalist terrorism and war, to mass migration and environmental destruction, all of them amplified by climate change. These crises require a fundamental rethinking of how we organize at the global political level, the societal level, the economic level, and the organizational level. The economic system has become increasingly dominant, and the current roadblocks toward progress challenge the way we organize, think about, and do “business.” Einstein famously stated: “We can't solve problems by using the same kind of thinking we used when we created them.”1 Nevertheless, mainstream business practitioners, as well as business school educators, seem to lack an alternative way of thinking. William Allen, the former chancellor of the Delaware Court of Chancery, notes that “[o]ne of the marks of a truly dominant intellectual paradigm is the difficulty people have in even imagining an alternative view.”2 The Humanistic Management Network has worked on conceptualizing this much-needed alternative paradigm for business – a 17 humanistic paradigm, one based on the protection of dignity and the promotion of well-being rather than mere wealth. This book starts by describing the dominant narrative of the current worldview – an economistic paradigm focused on wealth acquisition. The basic argument is that our understanding of “who we are as people” fundamentally influences the way we organize individually, in groups, in organizations, and in society. In the following pages, I present both narratives in business: the dominant model representing “homo economicus,” which accurately describes only about 1 percent of the population; and the alternative “homo sapiens” model, which represents the remaining 99 percent of us. While there is scientific evidence to support the latter perspective, the economics and management disciplines have memetically adopted an understanding based on inaccurate, axiomatic assumptions. This homo economicus worldview of human beings as uncaring and narrowly selfinterested has influenced the way business structures are set up (limited liability, focus on profit maximization). The homo sapiens perspective allows us to understand the importance of care, the notion of human dignity, and the evolutionary reasons for humans only surviving when organizing for the common good. By adopting this perspective we can envision organizations as caring communities that converge to produce for the benefit of the common good. In collaboration with the Humanistic Management Network and beyond, scholars have chronicled numerous organizations that follow the humanistic paradigm, which succeed because they focus on the protection of human dignity and the promotion of societal well-being. Some of these organizations are highlighted in Chapter 8. The fact that many such organizations are run successfully, and often more profitably over time, 18 proves that there are alternatives to the current economistic understanding of how best to organize human endeavors. Humanistic management scholars focus on human dignity, described by Kant as that which escapes all price mechanism and which is valued intrinsically (freedom, love, care, responsibility, character, ethics). This, they argue, has superior theoretical accuracy to the current paradigm. In addition, if the end goal of organizing were expanded to include wellbeing or common good, scholars can demonstrate how business might play an active role in solving current global problems. In the first part of the book, the basic conceptual foundations of humanistic management are presented.3 In the second part of the book, the applications of the humanistic management perspective are outlined for research, practice, pedagogy, and policy. In the first chapters, the notion of humanistic management as an organizing principle for the protection of human dignity and the promotion of human flourishing within the carrying capacity of the planet are introduced. This notion is becoming increasingly relevant given the multitude of problems humanity faces. In addition, the dysfunctionality of the existing, dominant paradigm is demonstrated by showing that it violates human dignity and undermines human flourishing, while constantly disregarding the planetary boundaries. A humanistic perspective of human nature is presented, outlining the consequences of this perspective for groups, organizations, and society. The basic pillars of the humanistic management paradigm present a framework for differing organizing archetypes. The book suggests that these archetypes can help guide a transition toward more humanistic management practice, pedagogy, and management-related public policy. It examines the research implications and specific applications by means of selected examples. Moreover, the book suggests that a humanistic paradigm is critical for 19 academic thought leaders, business leaders, civic leaders, political leaders, as well as anybody concerned with the future of humanity. Chapter 1 outlines the basic concept of humanistic management and contrasts it with the mainstream view of business. Chapter 2 examines the differing assumptions about and insights into human nature. Chapter 3 presents a humanistic understanding of human nature, which can serve as a cornerstone of management research, practice, pedagogy, and policy. Chapter 4 presents the consequences of such a humanistic perspective on organizing, providing examples, among others, for business strategy, governance, leadership, and motivation. In Chapter 5, the basic pillars of humanistic management, human dignity, and human well-being are outlined in greater depth. Based on these pillars, Chapter 6 suggests different archetypes for thinking about management, which inform research, teaching, practice, and policy making.4 Chapter 7 explores how these archetypes can support a transition toward more humanistic management research.5 Conversely, Chapter 8 investigates how these archetypes can support a transition toward more humanistic management practice. Thereafter, Chapter 9 explores how these archetypes can support a transition toward more humanistic management pedagogy, and Chapter 10 how they can support a transition toward more humanistic management policy. The concluding chapter presents a summary and outlines pathways toward a collaborative approach to a more human-centered economy. The book is meant to be a stepping-stone to facilitate further, rich conversation and collaboration. Notes 1 Albert Einstein. BrainyQuote.com, Xplore Inc, 2016. www.brainyquote.com/quotes/quotes/a/alberteins121993.html, accessed 20 June 27, 2016. 2 Allen, W. T. (1993). “Contracts and communities in corporation law.” Washington & Lee Law Review, 50, 1395–1407. (Cited from Page 1401). 3 Readers interested in a more thorough philosophical treatment of the humanistic management paradigm should check out Claus Dierksmeier’s book: Reframing Economic Ethics- Philosophical Foundations of Humanistic Management. www.springer.com/us/book/9783319322995 4 Some readers may want to skim or skip Chapter 6, as it may be too conceptual for them. The following chapters build on the framework presented in Chapter 6 yet present mostly case studies that can be understood without the conceptual framework. 5 Friendly reviewers also suggested that those readers who are not members of the Academy of Management might do better skimming the research chapter, as it might distract from the more digestible chapters that follow. 21 Part I ◈ Foundations of Humanistic Management 22 1 Two Narratives for Business ◈ A Failing Narrative Meet Elisabeth, my neighbor. Elisabeth did all she was told to succeed in life. After earning an MBA at a reputable school, she chose to work for a hospital. She wanted to stay true to her desire to serve others and thought the health care industry would allow her to do so. One afternoon, we run into each other as she is walking her dog. I ask her how she likes her work and she confesses, “It is awful – so stressful … I never really wanted to be in a competitive, business type of environment, but it seems the hospital is just as corporate and mean-spirited as everything else.” Meet Richard, formerly a successful Wall Street banker. He joined the world of banking because he admired its service orientation, but quit the industry in what he later described as a midlife crisis. The more he thought about the type of work his bank was doing and the people with whom it was working, the more depressed he became. He had an especially hard time reconciling what he heard in church on Sunday with the values that surrounded him in the financial industry. The banking and 23 service culture that he admired had turned into something of which he wanted no part. He decided to get out. Meet Tiffany, a former student, who never wanted to be in business, which she believed was an arid field, devoid of human touch and care. She did not feel attracted to the private sector and wanted to be a “good person.” She chose a low-paying public policy career and worked for nongovernmental entities to stay true to her personal philosophy. Elisabeth, Richard, and Tiffany have the luxury of many choices. In many ways they are privileged. These real-life stories highlight a shared unhappiness about business despite privilege. While one could easily dismiss such unhappiness as a minority view, research shows that, despite unprecedented levels of material wealth, people are increasingly alienated from their work1 and want to redefine the meaning of success.2 On the flipside, an increasing number of people wish to engage in more meaningful activities at work and beyond, and long to be part of the solutions to the many problems that humanity faces (climate change, terrorism, social inequality, poverty).3 Mainstream thinking about the business world has become associated with the fictional character Gordon Gekko and his motto: “Greed is good.” Money and power are portrayed as the ultimate motives of human ambition, and disagreeing with this is sheer naivety. The dominant narrative is that people are greedy, money-hungry maximizers, or homo economicus. Nevertheless, there seems to be something wrong with the larger cultural narrative about what human beings value first and foremost. The economist Richard Layard has mentioned that there is something wrong when we have unprecedented material wealth and economic growth but stagnating levels of human well-being.4 The famous Easterlin Paradox5 24 states that happiness is not significantly associated with income. As such, the dominant narrative is failing.6 At the core of the three life stories above lies a narrative about business that has failed to deliver the “good life,” as many people perceive it. The wish to change the narrative is the crux of a concerted effort to rethink how people have come to understand life and their role within the economic system. The position advocated here is that a change in the narrative can contribute to a better life and a better economy. Crisis Signals – Three Challenges to the Current System Our current societal setup is largely driven by an understanding of the economic system as the central driver of progress. This notion is arguably more relevant in developed regions of the world. However, some observers, including Nobel Laureate Joseph Stiglitz, bemoan the increasing spread of the “Washington Consensus” around the globe.7 As a consequence, the economistic logic, according to which markets provide the ultimate rationale for what is valuable, is increasingly a globally shared cultural narrative. This narrative is, however, increasingly challenged.8 We are experiencing what scientific historian Thomas Kuhn called a paradigmatic crisis.9 Individual-Level Challenges On the individual level, scholars observe an interesting anomaly.10 While the current system is credited with creating more wealth for many, the average life satisfaction level has not increased.11 Gross domestic product (GDP) growth and growth in well-being have decoupled.12 Factors that 25 contribute to well-being have a relatively low correlation with material wealth once a certain wealth level has been achieved.13 From a systemic perspective, a government’s quality in terms of democratic and human rights, the level of corruption, the system’s stability, high social capital, and a strong economy with low rates of unemployment and inflation all contribute to subjective well-being. On an individual level, the quality of social relationships, good physical and mental health, and a generally positive attitude toward life are central drivers of well-being.14 As an attitude, materialism, for example, is toxic for well-being.15 Many studies show that a personal quest for more money or consumer goods decreases people’s sense of personal well-being.16 George Monbiot highlights that: This is the dreadful mistake we are making: allowing ourselves to believe that having more money and more stuff enhances our wellbeing, a belief possessed not only by those poor deluded people in the pictures, but by almost every member of almost every government. Worldly ambition, material aspiration, perpetual growth: these are a formula for mass unhappiness.17 The current system is built on increases in consumption that may lead to economic growth, yet make many people less happy with their lives. The advertising industry, for example, exists to create artificial material wants and is considered successful when more people try to feed their wants with more consumption, which drives up raw material use and creates many related environmental and social problems. For societies that pride themselves on freedom of choice and democratic values, such unreflected practices undermine their very essence.18 Organizational-Level Challenges 26 Business practices are increasingly being challenged at the organizational level. The recent collapse of the factory building at Rana Plaza in Bangladesh, which highlighted the working conditions of textile workers; the corruption and cheating at Volkswagen; and the usage of legal loopholes to evade taxes (e.g., Google, Facebook, Pfizer) challenge the legitimacy of business as a societal institution. Over the past decades, corporations have lost their reputations and stakeholder trust has declined.19 Trust is, however, commonly viewed as the key enabler of cooperation, motivation, and innovation, all of which organizations require for peak performance and success.20 Surveys indicate that stakeholder trust in businesses is decreasing dramatically, specifically trust in large global companies bent on shareholder value maximization. Research finds that the decline in trust is strongly correlated with a lack of value congruency between the stakeholders and the organization.21 People perceive profit maximization goals as inherently opportunistic, making it ever more difficult for the business community to reestablish trust.22 Observers have long noted that many organizations (especially corporations) face a decreasing level of employee commitment, which is indicative of the increasing lack of mutual commitment. The Hay Group, for example, finds that 43 percent of American employees are either neutral or negative toward their workplace.23 According to several Gallup studies, around 70 percent of US employees are either not engaged or actively disengaged, showing an alarming inner withdrawal rate.24 Management scholar Michael Jensen argues that the goal of profit maximization is partially responsible. He posits as self-evident that: Creating value takes more than acceptance of value maximization as the organizational objective. As a statement of corporate purpose or vision, value maximization is not likely to tap into the energy and enthusiasm of employees and managers to create value.25 27 Hence, shareholder value-maximizing organizations are under-utilizing their employees’ potential.26 Systemic Challenges Environmental destruction is one of the most obvious problems of our current economic system. Humanity is using the productive capacity of more than 1.5 planets to satisfy its desires.27 If everybody on this planet were to consume natural resources at the rate of an average American, five planets would be required.28 The current economy uses more resources than can be replenished, leading to unsustainable growth and even more economic bubbles. In financial terms, humanity is living off its planetary capital and not off the interest it generates, which is very poor management of resources. However, the logic of our current system supports this lack of sustainability. Shareholder capitalism is short-termoriented and, when applied rigorously, rewards plundering rather than preserving.29According to ecological economist Robert Costanza, economics does not value the future.30 The current levels of poverty and inequality had pricked the conscience of many people long before the publication of Thomas Piketty’s Capital in the Twenty-First Century in 2015.31 The Occupy Wall Street protests and their global spinoffs, together with various political movements (Syriza in Greece, Podemos in Spain, the Brexit movement in the United Kingdom, the electoral campaigns of Bernie Sanders and Donald Trump in the United States), showcase the widespread dissatisfaction with current levels of inequality. Such dissatisfaction is a threat to the political system’s stability, which the growing fundamentalist terrorism also suggests. One-sixth of the world’s population lives in extreme poverty. Current globalization trends have led to a world in which the rich get richer and the poor get disproportionately poorer.32 Absolute 28 poverty may have decreased in recent years, but relative poverty has increased significantly. Inequalities feed political unrest, collectivization, and terrorism, which in turn require significant investments to preserve the status quo (e.g., through higher defense spending). Research increasingly shows the deleterious effects of inequality on human well-being, especially health.33 Shareholder capitalism is mostly blind to these consequences and has not yet provided satisfactory answers to deal with these issues.34 Sustainability scholars Paul Hawken, Amory Lovins, and Hunter Lovins have argued that economics does not value social relationships.35 Challenges to Theory, Practice, Pedagogy, and Policy Economic and business theory is under attack in fundamental ways. The basic assumption that material wealth will lead to better lives is, in many parts of the world, no longer true. A lot of research shows that the assumptions that human beings are greedy and narrowly self-interested are problematic and function like self-fulfilling prophecies.36 The genesis and development of this narrative are discussed in more detail in Chapter 2. From a theoretical perspective, these assumptions lead scholars to understand only a very small part of human organizing practice. Just like the drunken man who lost his key in the middle of the street but is searching for them at the end of the street where the streetlight is, many academics misplace their scholarly attention. Despite the richness of the material (discussed in Chapter 2), findings that challenge the assumptions of homo economicus have been assigned to marginal “boxes” and labeled as deviant. The reductionist approach to economic and management theory is legitimate to a degree but has become a paradigmatic prison. 29 Many scholars have suggested that the current paradigm is not only problematic for theoretical and scholarly purposes, but leads to bad management practice.37 W. Edwards Deming, the father of quality management and a contributor to Japan’s postwar resurgence, observed that many successful business owners rarely hire MBAs because they believe they lack the mindset required for successful organizing.38 Studies on business teaching’s current effects reveal that many socially undesired traits are perpetuated when business teaching is based on purely economistic assumptions.39 Scholars find that the rate of cheating increases, care for others is reduced, and egotistical behavior is rewarded. In fact, during the 2008 crises, leading business schools were singled out as having contributed to the global financial crisis with their teaching.40 In addition, the assumption model of homo economicus increases policy support for GDP growth at the societal level, income growth at the individual level, and profit maximization at the organizational level – all measures that aim to deliver material wealth, not well-being. As such, in the US context, the Securities and Exchange Commission (SEC) guidelines make it harder for organizations that propose providing equitable returns and not maximizing shareholder value to enter public financial markets. The founders of AES, a US energy company, recall that their investment bankers had refused to support a “caring approach” toward employees, claiming that this would violate SEC standards.41 Scholars argue that we need another Enlightenment to challenge the hegemony of homo economicus. The Enlightenment, a European movement in the late seventeenth and eighteenth centuries, challenged the dominance of religious orthodoxy. It shifted fundamental assumptions about human nature by focusing on reason, not religious dogma, as the primary source of authority and legitimacy. As a result, it empowered people to start thinking for themselves and to advance ideals such as 30 liberty, progress, tolerance, fraternity, constitutional government, and the separation of church and state.42 Currently, the Enlightenment needs to empower people like Elisabeth, Richard, and Tiffany to forge pathways that lead to a better life. Biologist Andreas Weber calls it Enlivenment.43 The Economistic Paradigm The experiences of Elisabeth, Richard, and Tiffany showcase the reality that the background narrative we label “economistic” causes. Because the economistic narrative is based on axiomatic notions of who we are as people, it is worth exploring if those assumptions are correct. In fact, it turns out that this narrative is not based on scientific insights, but on assumptions most often reflected in fictional characters, such as Ebenezer Scrooge or Gordon Gekko, and some real-life characters portrayed by The Wolf of Wall Street or villains such as Bernie Madoff. The narrative holds that people are fundamentally self-serving and looking for material wealth as an indicator of success. The narrative is therefore amoral in the sense that any behavior is acceptable as long as it helps create more money. Other people are treated as a means to personal gain, and trickster behavior is considered sly, smart, and legitimate. These assumptions are simple, and therefore very powerful. In more scientific terms, these assumptions refer to humans as individuals driven by rational interests aimed at maximizing utility (homo economicus). As measurable entities or preferences, wealth and income have, however, gradually supplanted utility as a broad concept of what brings happiness. Rational interests are those that can be negotiated in an exchange setting: More of x utility should therefore trump less of the same. The quantity of options supersedes the quality of options. There is now a vast literature both criticizing and defending homo economicus, yet 31 the main argument here is that beyond legitimate reductions for theoretical purposes in economics, homo economicus assumptions have become performative in ways beyond mere theoretical prescriptions, especially in the domain of business and management. The simplicity of homo economicus assumptions follows what is also known as Occam’s razor, or the law of parsimony. This law states that the hypothesis with the fewest assumptions should be selected from all the competing hypotheses. Although other, more complicated solutions may ultimately prove correct, in the absence of certainty, the fewer assumptions made, the better.44 Applied to market-based behavior questions, these assumptions seem to accurately describe common motivations. However, when uncoupled from their original purpose, they become misguided. When studying how most people will behave in a market setting where the price mechanism regulates the supply of and demand for a product, the homo economicus model is useful. When human relationships are, however, studied in organizational contexts, such a lens will fail to capture human complexity. Whereas parsimony in itself is valuable for theoretical purposes, it had an additional effect on economics by making it more mathematicsbased. Outsiders started viewing economics as scientifically more rigorous. Rakesh Khurana, a former Harvard Business School professor turned Harvard College dean, suggests that, in general, management research and business schools adopted the methodological tool box of economics, along with its underlying assumptions, to turn a practice-based trade school into what would be seen as a science-based university school.45 This shift was undertaken to enhance the visibility and reputational status of a newly emerging class of businessmen and professional managers, who could not otherwise compete in terms of societal status with doctors, lawyers, and priests. 32 Khurana argues that in order to acquire a reputational status, business and management had to become a profession that would require a university degree. Until the late 1800s, there was almost no business education, while trade schools would teach accounting, bakery, butchery, etc. Business and management research turned to the axiomatic notion of people as homo economicus to justify itself as scientific and rigorous. This enabled business schools to claim to be legitimate professional schools with affiliation to a “serious, reputable” university. Rather than seeing the irony of its unscientific basis, management theory has used “economic man” as its ticket to become a respected “science.”46 This argument is not novel: Karl Marx and John Maynard Keynes also used it. Keynes states: “Economists, like other scientists, have chosen the hypothesis from which they set out, and which they offer to beginners because it is the simplest, and not because it is the nearest to the facts.”47 In his essay on the Church of Economism, Richard Norgaard suggests that leading economists are aware of the quasi-religious nature of economics: Economists themselves have acknowledged the ultimately religious nature of their discipline. In 1932, Frank Knight, the most scholarly and broad-thinking of the founders of the influential market-oriented Chicago School of Economics, literally argued that economics, at a fundamental level, had to be a religion, the basic tenets of which must be hidden from all but a few: The point is that the “principles” – by which a society or a group lives in tolerable harmony are essentially religious. The essential nature of a religious principle is that not merely is it immoral to oppose it, but to ask what it is, is morally identical with denial and attack. There must be ultimates, and they must be religious, in economics as anywhere else, if one has anything to say touching conduct or social 33 policy in a practical way. Man is a believing animal and to few, if any, is it given to criticize the foundations of belief ‘intelligently.’ To inquire into the ultimates behind accepted group values is obscene and sacrilegious: objective inquiry is an attempt to uncover the nakedness of man, his soul as well as his body, his deeds, his culture, and his very gods. Certainly the large general [economics] courses should be prevented from raising any question about objectivity, but should assume the objectivity of the slogans they inculcate, as a sacred feature of the system.48 The argument is that business theory and management “science” have unconsciously, memetically, uncritically, and unreflectedly adopted the precepts of the Church of Economism (for a number of reasons, including status orientation, “physics envy,” or the authentic quest for scientific rigor).49 One of the core foundations of this quasi-religious business theory is the assumption that profit maximization is a signal of effectiveness, and that the main concern of organizing should be related to efficiency.50 Such unquestioned concerns for efficiency are mostly presented in the “objective” form. Management scientists, for example, study quantitative decision-making based on utilitarian cost/benefit assessments. Within this framework, people become resources as in “human resources” or “human capital.” To be seen as objective, researchers’ moral concerns have to be eliminated, and qualitative judgments replaced with fact-based evidence. The evidence, for which management science is looking, is the rational behavior that leads to an organization’s greater profitability. Frederic Taylor heralded such a perspective, and Henry Ford most famously adopted it. Their successes practically legitimized what seemed theoretically expedient. The perceived connection of economics with the theory of all theories, Darwinian evolution, was another cultural force that helped establish economics-based management theory. Many observers have 34 noted that the Herbert Spencer’s popularization of Darwin’s insights gave scientific backing to an amoral kind of behavior that would favor the strongest over the weak. According to Spencer’s Social Darwinism, natural selection favored the ruthless over the caring, the competitive over the collaborative, and, as an extension of this, the unethical over the ethical. While a careful reading of Darwin would immediately refute such a perspective, at the time, such Spencerian accounts lent credibility to homo economicus assumptions about human nature. These assumptions resonated with Adam Smith’s perspective of humans as driven by selfinterest, while ignoring his observations that what people really desire is to be beloved and to belong.51 Keynes argues that the confluence of these two perspectives took the individualist perspective of the modern era to a logical extreme: The parallelism between economic laissez-faire and Darwinianism, … is now seen, as Herbert Spencer was foremost to recognise, to be very close indeed. Darwin invoked sexual love, acting through sexual selection, as an adjutant to natural selection by competition, to direct evolution along lines which should be desirable as well as effective, so the individualist invokes the love of money, acting through the pursuit of profit, as an adjutant to natural selection, to bring about the production on the greatest possible scale of what is most strongly desired as measured by exchange value. The beauty and the simplicity of such a theory are so great that it is easy to forget that it follows not from the actual facts, but from an incomplete hypothesis introduced for the sake of simplicity. Apart from other objections to be mentioned later, the conclusion that individuals acting independently for their own advantage will produce the greatest aggregate of wealth, depends on a variety of unreal assumptions to the effect that the processes of production and consumption are in no way organic, that there exists a sufficient foreknowledge of conditions and 35 requirements, and that there are adequate opportunities of obtaining this foreknowledge. For economists generally reserve for a later stage of their argument the complications which arise - (1) when the efficient units of production are large relatively to the units of consumption, (2) when overhead costs or joint costs are present, (3) when internal economies tend to the aggregation of production, (4) when the time required for adjustments is long, (5) when ignorance prevails over knowledge and (6) when monopolies and combinations interfere with equality in bargaining - they reserve, that is to say, for a later stage their analysis of the actual facts. Moreover, many of those who recognise that the simplified hypothesis does not accurately correspond to fact conclude nevertheless that it does represent what is “natural” and therefore ideal. They regard the simplified hypothesis as health, and the further complications as disease.52 The economistic narrative has led to problems on multiple levels, because the misrepresentation of individuals has logical consequences for groups, organizations, and society. The current perspective has led to many negative consequences (diseases, as Keynes states above), yet, owing to its dominance, a majority of educated observers consider the “quasireligious” narrative of economics and management to be scientific and healthy. The American sociologist Paul Lawrence suggests that the Spencerian version of social Darwinism perverted the meaning of survival of the fittest to mean the survival of the toughest, strongest, and most ruthless species, not the survival of the most adaptive species.53 Lawrence argues that true Darwinian theory could indeed provide vital insights into human nature. He suggests that an accurate scientific understanding can help overcome quasi-religious assumptions that hinder the quest for better organizing practices. He, along with other researchers, argues that evolutionary theory can provide a truly scientific basis for economics and 36 for management. Researchers such as E.O. Wilson, as well as David Sloan Wilson, claim that evolutionary insights can help bridge cultural divides and provide a deeper understanding of humanities’ shared ambitions.54 The Humanistic Paradigm E.O. Wilson, the great biologist, argues that a renewed convergence of the humanities and sciences is helping us better understand human beings as social animals endowed with reason, which Aristotle stated so succinctly several thousand years ago. From the philosophical work of Aristotle to Adam Smith to Darwin, to the newly emerging fields of evolutionary psychology, neuroscience, and sociobiology, evidence is mounting that humans are hard-wired for empathy and collaboration, and that that sociality is fundamental to survival. The human tendency to be social, kind, and moral is no longer seen as a deviation and a bug, but as a feature. Wilson suggests that the humanities and social sciences can draw on the latest findings in natural science to project a better story for humanity – a humanistic paradigm. Evolutionary theory concludes that humans are fundamentally caring and social, and that they are fundamentally moral. One can make more sense of this by looking at daily experience in which humans find that they care about each other (in family, work, and friendship circles) and about society at large (reading the news, checking in with “friends” on social media, etc.). A life devoid of care leads to misery in many ways. Humans have long determined that isolation is the most cruel punishment, whether physical isolation on a remote island (exiled like Napoleon), in a solitary confinement cell, or psychologically isolated through feelings of shame. Being alone is considered a tragedy and leads many to depression, dysfunction, or even suicide, rendering isolation crueller than death. 37 Expanding on the social nature of human beings, Darwin suggests that morality must have developed to manage the manifold social relations.55 This insight into the relevance of morality, values, and care for our common good is normally buried by a story of business propagating greed, a psychopathic lack of care, and destruction of life. The alternative, humanistic narrative acknowledges human beings as highly social and moral. Humans become humane when they are involved in dynamic, relational communities that supersede the mere coordination of markets. To capture this insight, the humanistic narrative employs the term dignity, which serves as a philosophical category for things that escape the market mechanism: those things and events that do not have a price and cannot be exchanged. To see how relevant dignity-related, non-market concerns are to human life, consider one of the most successful advertising campaigns of the early twenty-first century. For more than seventeen years, MasterCard’s slogan was: “There are things in life that are priceless, for everything else there is MasterCard.” The campaign was successful because it spoke to an authentic human experience. It demonstrated that while markets are important, the most important things in life transcend the market logic. The humanistic paradigm captures this essential truth about human nature and suggests that human beings require dignity to flourish. Elisabeth, Richard, and Tiffany longed for qualities in life that cannot be bought, such as integrity, love, community, and respect. Such qualities, along with empathy, compassion, and care, are key enablers of human flourishing. In the humanistic perspective, then, humans not only desire autonomy and independence but crave for affiliation and one-ness. They are thus not independent, but interdependent. While the market is a useful coordination mechanism, it cannot fully meet our human and organizational needs. Social groups and communities are critical elements for a functioning 38 society, and only those communities that help human beings protect their dignity can support human flourishing. Practices that allow for the protection of dignity and the promotion of well-being are part and parcel of humanistic management. Concluding Remarks There is a clear need for a better story of who we are as human beings. Many people experience cognitive dissonance between what they think business is and what life should be about.56 The stories of Elisabeth, Richard, and Tiffany highlight the intense wish to flourish beyond material wealth. To achieve parsimony, economics-based management “science” has adopted a flawed paradigmatic set of assumptions about human nature. Increasing evidence from across the sciences highlights the downsides of the economistic perspective. The emerging consilience of knowledge is a starting point for more accurate theorizing and better management practice – a humanistic paradigm. Notes 1 www.gallup.com/poll/188144/employee-engagement-stagnant-2015.aspx 2 www.gallup.com/businessjournal/188033/worldwide-employeeengagement-crisis.aspx 3 www.forbes.com/sites/karlmoore/2014/10/02/millennials-work-forpurpose-not-paycheck/#47348b35a225 4 Layard, R. (2005). Happiness – Lessons From a New Science, London, Penguin Press. 39 5 The Easterlin Paradox describes that despite GDP growth in developed nations, happiness levels have largely remained constant since World War II. 6 It may be worth noting that more recent empirical research by Nobel Laureates Daniel Kahneman and Angus Deaton have shown a slight correlation of wealth with health and happiness, putting the overall claim of Easterlin in perspective. Nevertheless, the mere focus on GDP growth as political goal is questioned by them as well. See, e.g., Deaton, A. (2013). The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton University Press. 7 Stiglitz, J. (2013). The Price of Inequality. New York, W.W. Norton. 8 I use the words “paradigm” and “narrative” interchangeably here; to be more precise, the paradigm is the base example on which thinking is based (such as homo economicus), and the narrative is the story that extends that example to make it culturally appealing. 9 Kuhn, T. (1996). The Structure of Scientific Revolutions. University of Chicago Press. 10 Pirson, M., et al. (2009). “Introduction to humanism in business.” Humanism in Business. The Humanistic Management Network. Cambridge, Cambridge University Press. 11 Easterlin, R. (2001). “Income and happiness: towards a unified theory.” Economic Journal, 111(July), 465–484. 12 Costanza, R., I. Kubiszewski, E. Giovannini, H. Lovins, J. McGlade, K. E. Pickett, K. V. Ragnarsdóttir, D. Roberts, R. De Vogli, and R. Wilkinson. (2014). “Development.” Nature, 505(7483), 283–285. 13 Diener, E. and M. E. P. Seligman (2004). “Beyond money: toward and economy of well-being.” Psychological Science in the Public Interest, 5, 1–31. 40 14 Diener and Seligman. “Beyond money,” 1–31. 15 Kasser, T. and A. C. Ahuvia (2002). “Materialistic values and well-being in business students.” European Journal of Social Psychology, 32, 137–146. 16 www.theguardian.com/commentisfree/2013/dec/09/materialism-systemeats-us-from-inside-out 17 Ibid. 18 Pirson. “Introduction to humanism in business.” 19 www.theguardian.com/sustainable-business/2015/jan/21/public-trustglobal-business-government-low-decline 20 Pirson, M. and D. Malhotra (2011). “Foundations of organizational trust: what matters to different stakeholders?” Organization Science, 22(4), 1087–1104. 21 Pirson, M. (2007). Facing the Trust Gap: How Organizations Can Measure and Manage Stakeholder Trust. St. Gallen, University of St. Gallen. 22 Pirson, M., et al. (2012). “Public trust in business and its determinants.” Public Trust, eds. E. Freeman and A. C. Wicks. Simons, T. (2002). “The high cost of lost trust.” Harvard Business Review, September, 1–3. 23 The Hay Group (2002). Engage Employees and Boost Performance. www.haygroup.com/us/downloads/details.aspx?id=7343 (accessed June 21, 2016) 24 For example: www.gallup.com/poll/188144/employee-engagementstagnant-2015.aspx www.gallup.com/businessjournal/188033/worldwide-employeeengagement-crisis.aspx (accessed June 22, 2016) 25 Jensen, M. C. (2001). “Value maximisation, stakeholder theory, and the corporate objective function.” European Financial Management, 7(3), 297 41 (citation from page 278) 26 Pirson et al., “Introduction to humanism in business.” 27 www.bbc.com/news/magazine-33133712 (accessed June 21, 2016) 28 Boyle, D., et al. (2006). Are you happy? new economics past, present and future. NEF. 29 Pirson et al., “Introduction to humanism in business.” 30 Costanza, R. (1992). Ecological Economics: The Science and Management of Sustainability. Columbia University Press. See also Chichilnisky, G. (1996). “An axiomatic approach to sustainable development.” Social Choice and Welfare, 13(2), 231–257. 31 Piketty, T. (2014). Capital in the 21st century. Cambridge, MA, Harvard University Press. 32 Sachs, J. (2005). The End of Poverty: Economic Possibilities for Our Time. New York, Penguin Group. 33 Wilkinson, R. G., and K. E. Pickett. (2009) “Income Inequality and Social Dysfunction.” Annual Review of Sociology, 35, 493–511. 34 Pirson et al., “Introduction to humanism in business.” 35 Hawken, P., Lovins, A. B., and Lovins, L. H. (2013). Natural Capitalism: The Next Industrial Revolution. New York, Routledge. See also Chichilnisky, G. (1996). “An axiomatic approach to sustainable development.” Social Choice and Welfare, 13(2), 231–257. 36 Argyris, C. (1973). “Organization man: Rational and self-actualizing.” Public Administration Review, 33(July/August), 354–357; Ghoshal, S. (2005). “Bad management theories are destroying good management practices.” Academy of Management Learning and Education, 4(1), 75–91; Ferraro, F., J. Pfeffer and R. I. Sutton (2005). “Economics language and 42 assumptions: How theories can become self-fulfilling.” Academy of Management Review, 30(1), 8–24. 37 Ibid. 38 Gabor, A. (2010), remarks delivered at Deming Memorial Conference on the future of business and business education, at Fordham University, May 11. 39 Dierksmeier, C. (2011). “Reorienting management education: from homo oeconomicus to human dignity.” Business Schools under Fire. H. M. Network. New York, Palgrave McMillan. 40 Holland, K. (2009). Is it Time to Retrain Business Schools? New York Times. March 12. 41 Bakke, D. (2005). Joy at Work. Seattle, WA, PVG. 42 Zafirovski, M. (2010), The Enlightenment and Its Effects on Modern Society. New York, Springer. 144. 43 Weber, A. (2013) Enlivenment. Towards A Fundamental Shift In The Concepts Of Nature, Culture And Politics. Berlin, Heinrich-Böll-Stiftung. 44 http://radiopaedia.org/articles/occams-razor (last accessed May 23, 2016) 45 Khurana, R. (2007). From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and The Unfulfilled Promise of Management As a Profession. Princeton University Press. 46 Khurana. From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession. 47 www.panarchy.org/keynes/laissezfaire.1926.html (last accessed April 12, 2016) 43 48 www.countercurrents.org/norgaard301215.htm (last accessed March 28, 2016) 49 For example: Dierksmeier, C. (2011). “The freedom-responsibility nexus in management philosophy and business ethics.” Journal of Business Ethics, 101(2), 263–283, or Khurana, From Higher Aims To Hired Hands. 50 Nadeau, R. (2012). Rebirth of the Sacred: Science, Religion, and the New Environmental Ethos. Oxford University Press. 51 Smith, A. (2010). The Theory of Moral Sentiments. New York, Penguin. Or Hansen, M (www.natcapsolutions.org/Presidio/Articles/Globalization/Note_on_Adam_ Smith_as_Theorist_of_Sustainability_MHANSEN.pdf) Relevant Quotes: “Human happiness depends primarily upon “composure and tranquility of mind” which is based on feelings of “gratitude and love” (TMS49). Or “the chief part of happiness arises from the consciousness of being beloved…” (TMS56). 52 www.panarchy.org/keynes/laissezfaire.1926.html 53 Lawrence, P. (2007). Being Human – A Renewed Darwinian Theory of Human Behavior. www.prlawrence.com. Cambridge, MA and Lawrence, P. R., and M. Pirson (2015). “Economistic and humanistic narratives of leadership in the age of globality: Toward a renewed Darwinian theory of leadership.” Journal of Business Ethics, 128(2), 383–394. 54 Wilson, E. O. (2012). On Human Nature. Cambridge, MA, Harvard University Press. Wilson, E. O. (2012). The Social Conquest of Earth. New York, W. W. Norton & Company; Wilson, D. S. (2015). Does Altruism Exist?: Culture, Genes, and the Welfare of Others. New Haven, CT, Yale University Press. 55 Darwin, C. (1909). The Descent of Man and Selection in Relation to Sex. New York, Appleton and Company. 44 56 Tetlock, P., et al. (2000). “The psychology of the unthinkable: taboo trade-offs, forbidden base rates, and heretical counterfactuals.” Journal of Personality and Social Psychology, 78(5), 853–870; Baron, J. and M. Spranca (1997). “Protected values.” Organizational Behavior and Human Decision Processes, 70(1), 1–16. 45 2 Understanding Human Nature ◈ One of the critical stepping-stones to better management theory and practice is a better and more accurate understanding of who we are as people. The economistic narrative is based on assumptions that lead to a reductionist model, which, in many ways, only describes deficient human beings, such as psychopaths, sociopaths, or free-riders – men and women without morals. In this chapter, the economistic understanding of human nature will be analyzed in greater depth and compared to current scientific insights. The chapter draws on several sources of knowledge and insight to provide a more accurate understanding and to build a humanistic perspective of human nature. In the following pages, insights from the natural sciences, the humanities, and the social sciences are presented. While one could draw on many other sources, the hope is to showcase the increasing consilience of knowledge, the convergence of our understanding across disciplines of who we are as human beings. The REM Model The most prominent articulation of human nature according to the economistic paradigm is that set forth by Michael Jensen and William 46 Meckling, two of the most prominent and oft-cited management scholars. Whereas many researchers have memetically and unreflectedly adopted an economistic perspective, these scholars specified their understanding of human nature. In their 1994 paper titled “The Nature of Man,” they presented a novel take on homo economicus.1 They both largely agree that, in the traditional economistic sense, homo economicus is a useless vehicle for good science. In their words, In [t]he economic model … the individual is an evaluator and maximizer, but has only one want: money income. He or she is a short-run money maximizer who does not care for others, art, morality, love, respect, honesty, etc. In its simplest form, the economic model characterizes people as unwilling to trade current money income for future money income, no matter what return they could earn. The economic model is, of course, not very interesting as a model of human behavior. People do not behave this way. In most cases use of this model reflects economists’ desire for simplicity in modeling; the exclusive pursuit of wealth or money income is easier to model than the complexity of the actual preferences of individuals. As a consequence, however, non-economists often use this model as a foil to discredit economics – that is, to argue that economics is of limited use because economists focus only on a single characteristic of behavior – and one of the least attractive at that, the selfish desire for money. They also postulate that understanding human behavior is fundamental to understanding how organizations function, whether they are profit-making firms, nonprofit enterprises, or government agencies. They argue that their model, REMM – the Resourceful, Evaluative, Maximizing Model – is superior. They suggest that REMM describes actual human behavior better than does any other existing model of human behavior, including homo 47 economicus. The REMM specification of human nature is the foundation of agency theory. Jensen and Meckling state that [REMM] serves as the foundation for the agency model of financial, organizational, and governance structure of firms. The growing body of social science research on human behavior has a common message: Whether they are politicians, managers, academics, professionals, philanthropists, or factory workers, individuals are resourceful, evaluative maximizers.2 In turn, agency theory is hailed as a grand theory in the social sciences, influencing economics, management, sociology, and political science.3 As such, REMM holds sway over a much larger part of social science than its design intended. The famed economist Harold Demsetz4 argued that economistic theoretical models should be used to study human behavior in the marketplace.5 They are therefore useful to help us understand the possibility of spontaneous order in the marketplace, but should not be seen as prescriptive tools with regard to other institutions, such as organizations or societies.6 Nevertheless, Jensen and Meckling improved upon homo economicus by proposing REMM and had an enormous impact not only on management theory but also on management practice. Based on their research on the theory of the firm, corporate governance was redesigned, motivational schemes were developed, and stock options created. Harvard University’s Rakesh Khurana describes an event in the early 1980s, in which corporate raiders linked to T. Boone Pickens provided regulators with copies of Jensen and Meckling’s papers when they had to convince them that his proposed takeovers would be the best way to deliver shareholder value maximization.7 As such, REMM thinking took a firm hold on practice. REMM also became a cultural phenomenon when movie director Oliver Stone portrayed corporate raiders in his movie Wall Street, 48 and his main character Gordon Gekko uttered the famous line: “Greed, for lack of a better word, is good.” It is therefore difficult to understate the impact of Jensen and Meckling’s perspective on human nature, as it percolates tacitly throughout the social sciences and business culture. REMM Revisited It may be helpful to examine REMM and its intellectual arguments more closely. Jensen and Meckling suggested that REMM was the product of more than 200 years of research and debate in economics, the other social sciences, and philosophy. They provided a number of postulates that served as a “bare bones summary of the concept.” Examining these postulates more closely is enlightening. Postulate I Every individual cares; he or she is an evaluator. (a) The individual cares about almost everything: knowledge, independence, the plight of others, the environment, honor, interpersonal relationships, status, peer approval, group norms, culture, wealth, rules of conduct, the weather, music, art, and so on. (b) REMM is always willing to make trade-offs and substitutions. Each individual is always willing to give up some sufficiently small amount of any particular good (oranges, water, air, housing, honesty, or safety) for some sufficiently large quantity of other goods. Furthermore, valuation is relative in the sense that the value of a unit of any particular good decreases as the individual enjoys more of it relative to other goods. (c) Individual preferences are transitive—that is, if A is preferred to B, and B is preferred to C, then A is preferred to C.8 While it is arguably true that everyone cares, it does not necessarily logically follow that humans are inevitably evaluators. To be an evaluator, you need to have an inherent ability to judge and assess, which a computer does routinely, but human beings less often. Psychological research 49 suggests that we cannot process all the information required to constantly evaluate.9 Therefore, many occurrences in life happen without evaluation, often as a result of unevaluated routines or traditions. Evaluation is essential if we are to make trade-offs, but some things in life escape quantitative evaluation. For example, most parents refuse to evaluate their love for one child over another. Similarly, psychologists find that constant evaluation is a source of stress, and most people avoid it if they can.10 Indeed, much of mindfulness practice teaches people to NOT evaluate. While REMM is based on an assumption that people are in constant evaluation, other people practice meditation to become nonjudgmental. Increasing research indicates that when humans behave in nonjudgmental ways, they – unlike what REMM believes – are happier.11 In addition, some – and perhaps many – of the most important elements of life have an intrinsic value and cannot be evaluated quantitatively to allow for (b): trade-offs and substitutions. Kant offers dignity as a category to describe all the life elements that cannot be exchanged. The assumption that we are always willing to make trade-offs is thus false. To argue that we are always willing to make substitutions only makes sense in the context of markets in which substitutions are desired. Postulate I does not allow for commitments, such as marriage vows, relationships, or friendships, whose nature is not subject to barter or quid pro quo; while healthy community life, in which people support each other without taking potential payback into account (e.g., care for children, the elderly, and even dead ancestors), is unimaginable. Jensen and Meckling extend Postulate I by adding I(b): there are no human needs as such, which cannot be exchanged, but only wants which can be exchanged: REMM implies that there is no such thing as a need, a proposition that arouses considerable resistance. The fallacy of the notion of need follows 50 from Postulate I-b, the proposition that the individual is always willing to make trade-offs. That proposition means individuals are always willing to substitute—that is, they are always willing to give up a sufficiently small amount of any good for a sufficiently large amount of other goods. Failure to take account of substitution is one of the most frequent mistakes in the analysis of human behavior. George Bernard Shaw, the famous playwright and social thinker, reportedly once claimed that while on an ocean voyage he asked a celebrated actress on deck one evening whether she would be willing to sleep with him for a million dollars. She was agreeable. He followed with a counterproposal: “What about ten dollars?” “What do you think I am?” she responded indignantly. He replied, “We’ve already established that – now we’re just haggling over price.” Like it or not, individuals are willing to sacrifice a little of almost anything we care to name, even reputation or morality, for a sufficiently large quantity of other desired things; and these things do not have to be money or even material goods.12 Clearly, in the example provided above, the authors imply, as Henry Mintzberg paraphrases, that humans are “whores,” selling anything and everything and honoring nothing.13 This is factually inaccurate, even though it may arise in certain situations.14 Research increasingly finds that moral judgments and value-based commitments are intrinsic elements of human sociality.15 While the above postulate is certainly entertaining, the mere claim that humans have no needs does not make it so. From an evolutionary perspective, humans have developed basic needs that they cannot trade off if they are to survive. Needs exist to the degree that they must be fulfilled, like eating or drinking, because without these, survival is impossible. According to REMM assumptions, small babies would trade off their need for food to gain fame, for example. While eating is a need, fame is a want, and it is hard to credit that babies would prefer fame over food. While there are clearly extreme situations, for example, when people 51 trade off their personal integrity for personal survival by prostituting themselves, those situations do not represent normal human behavior. Jensen and Meckling build on this notion of wants in Postulate II: Postulate II Each individual’s wants are unlimited. (a) If we designate those things that REMM values positively as “goods,” then he or she prefers more goods to less. Goods can be anything from art objects to ethical norms. (b) REMM cannot be satiated. He or she always wants more of some things, be they material goods such as art, sculpture, castles, and pyramids; or non-material goods such as solitude, companionship, honesty, respect, love, fame, and immortality.16 In this postulate, REMM shows its deep connection with the homo economicus model. REMM must have unlimited wants, otherwise the maximization of utility cannot make sense. While Jensen and Meckling attempt to broaden the realm of “goods” from the purely material to the ideal, REMM is simply homo economicus reborn and attempting to maximize. Psychology and neuroscience research challenges the belief that the human urge to satisfy wants is unlimited.17 Increasing evidence shows that wanting less can be healthy,18 and that an increasing number of young people reject the notion that more is better.19 Pursuing unlimited wants may be burdening and troublesome. “Affluenza,” the description of the consistent pursuit of more, is considered a modern disease.20 According to REMM, affluenza should not exist; given that humans inherently want more, there can be no satiation. Not only does recent psychological evidence contradict this assumption, but the global religious traditions have long suggested that wisdom starts with the recognition that there is such a thing as “enough.”21 52 Similarly, psychology finds that people are happiest if they commit to a limited number of choices.22 For example, people with one spouse and who are able to grow in that relationship are happier than those who are promiscuous. Evolutionary biology, which finds that most humans desire to have a nuclear family, supports the finding. While not always practically possible, a stable relationship increases the survival chances of healthy offspring.23 If people acted according to REMM, they would always desire an unlimited number of partners. Jensen and Meckling build on the notion of unlimited wants with Postulate III. Postulate III Each individual is a maximizer. He or she acts so as to enjoy the highest level of value possible. Individuals are always constrained in satisfying their wants. Wealth, time, and the physical laws of nature are examples of important constraints that affect the opportunities available to any individual. Individuals are also constrained by the limits of their own knowledge about various goods and opportunities; their choices of goods or courses of action will reflect the costs of acquiring the knowledge or information necessary to evaluate those choices. The notion of an opportunity set provides the limit on the level of value attainable by any individual. The opportunity set is usually regarded as something that is given and when one takes into account information costs, much behavior that appears to be suboptimal “satisficing” can be explained as attempts to maximize subject to such costs external to the individual. Economists usually represent it as a wealth or income constraint and a set of prices at which the individual can buy goods. But the notion of an individual’s opportunity set can be generalized to include the set of activities he or she can perform during a 24-hour day – or in a lifetime.24 In this attempt to refurbish homo economicus, constraints are accepted, but the old maximization assumption still holds sway. 53 Optimization and satisfaction of wants certainly occur in the real world. But research has shown that it is almost impossible for real humans to accurately predict a 24-hour day of constraints, let alone a lifetime set of constraints, or satisfaction opportunities. People are bad at predicting the future.25 While there may be some individuals who routinely try to maximize choice options, they are hardly representative. Research finds that most people tend to reduce choice options and decide to choose what is “good enough,” rather than the best, simply because their brain forces them to do so.26 Psychologists routinely find that people who balance choice options and satisfice are happier. In contrast, psychologist Barry Schwartz and colleagues report that “maximizers” are less optimistic, have less self-esteem, experience less life satisfaction, are more susceptible to social pressure, and are often more depressed.27 Jensen and Meckling seemingly try to solve two problems with the notion of opportunity sets. The first problem is that of theoretical accuracy, and the second that of parsimony. As they stated before, the simple linear utility maximization assumption that homo economicus represents is inaccurate and, in their opinion, reflects the economist’s desire for simplicity in modeling. By contrast, the opportunity sets notion suggests that humans engage a wider spectrum of options, within which they maximize, for example, honor, knowledge, independence, or culture. This makes REMM more realistic. On the other hand, opportunity sets can still be parsimonious enough to be modeled using higher forms of mathematics supported by computing power, which should render REMM appealing to those who want to keep modeling. While some researchers agree that opportunity sets are helpful, others suggest that if anything can become part of an opportunity set, the theory becomes vacuous and modeling impossible.28 If Postulate III were true, it would be reasonable, for example, to assume that, for some people, 54 character development, personal integrity, and mindful consumption are part of an opportunity set. Still, it is difficult to understand how a human being would maximize these opportunities. For example, the mindful reduction of consumption cannot logically be maximized without starvation. It is equally difficult to fathom the maximization of personal integrity or character development. If some of human beings’ aspirations cannot be maximized, but only satisfied or balanced, Postulate III cannot hold. Jensen and Meckling not only posit general static opportunity sets but also suggest that people can learn and change these opportunity sets. In Postulate IV, they state: The individual is resourceful. Individuals are creative. They are able to conceive of changes in their environment, foresee the consequences thereof, and respond by creating new opportunities. Although an individual’s opportunity set is limited at any instant in time by his or her knowledge and the state of the world, that limitation is not immutable. Human beings are not only capable of learning about new opportunities, they also engage in resourceful, creative activities that expand their opportunities in various ways. The kind of highly mechanical behavior posited by economists – that is, assigning probabilities and expected values to various actions and choosing the action with the highest expected value – is formally consistent with the evaluating, maximizing model defined in Postulates I through III. But such behavior falls short of the human capabilities posited by REMM; it says nothing about the individual’s ingenuity and creativity.29 Postulate IV presents an important insight that will be critical for a humanistic perspective on human development and flourishing. However, the mechanical perspective Jensen and Meckling criticize appears in their rather mechanical postulates I–III. It is conceivable, for example, that human creativity could be employed to maximize insatiable wants, but 55 they ignore the possibility that the same human creativity could be used to mindfully balance basic human needs. To take their perspective to its logical conclusion, let’s consider the example of Elisabeth, who was introduced in Chapter 1. Elisabeth is a mother of two kids, married to a man who travels often for his work. She works in hospital administration and also needs to take care of her mother who lives in the area. Her wish to be successful at her job, have a good relationship with her spouse, provide a good education for her kids, and take care of her mother’s needs defines her opportunity set. The REMM-type Elisabeth could use her ingenuity to create a life situation in which she decides to maximize all of these ambitions. Wanting to be successful at her job, she would need to spend more time and energy at the hospital. Because she hardly sees her husband, she decides (knowing no commitments and willing to substitute anything) to divorce her husband and marry her boss. At the hospital, they can spend more time together, while increasing her income. The additional income could be used to pay a tutor for her kids, allowing her to outsource their education. Spending that much time at work, she ingeniously suggests to her mother that she should (pretend to) become ill, which will mean that she too can be at the hospital. While such behavior may be ingenious and creative, it is also rather absurd. It is far more likely that Elisabeth will simply decide to spend just enough time at the hospital to ensure she does not lose her job, spend quality time with her current husband and not get divorced, take care of her kids when she can in order to personally provide educational experiences, and look after her mother in her home when she is able to. In the latter case, Elisabeth is balancing creatively rather than ingeniously maximizing options within her opportunity set. It is important to note that Jensen and Meckling never strive for an accurate model, but simply for a better model than that of homo economicus. Many of their assumptions are partially true, and they spend 56 much energy in demonstrating their postulations’ validity in and beyond economics and management literature. The philosopher Karl Popper would, however, call many of these efforts “verificationism,” which he describes as the tendency to explain reality with the set of assumptions we create.30 Consequently, when studying human organizing practices, researchers tend to make reality fit their assumptions, rather than the inverse. Alternative Perspectives on Human Nature It is important to acknowledge that every model of human behavior will have to trade off parsimony for accuracy. REMM loosens many restrictive assumptions about homo economicus to gain accuracy, but it was never designed to be perfect. Given this, there may be alternative ways to better conceptualize human nature that provide superior accuracy. Others endeavoring to understand human nature provide a counterpoint to REMM. The famed biologist E.O. Wilson suggests that there seems to be a consilience of knowledge in which core insights from the sciences overlap with those of the humanities.31 These insights can help us understand human nature better. This increasing consilience of knowledge can serve as a stepping-stone to better theorizing and, it is hoped, better practice. Human Nature: The View of the Sciences A growing number of scholars criticize the current overemphasis on methodological individualism in the social sciences and management studies.32 Stemming from the individualist traditions of the Enlightenment, which emerged in opposition to the pervasive collectivism of the times, 57 individualism had the unintended consequence of misinterpreting human nature as isolationist, needing no social embeddedness, and driven by exchangeable wants. Marx ridiculed this intellectual tendency in the nineteenth century’s liberal economics domain as “Robinsonades.”33 Keynes similarly criticized the atomistic perspective of human nature as dangerous.34 The critics of mainstream economics increasingly advocate the use of evolutionary theory to help put economics (and management) on a sounder footing.35 E.O. Wilson argues that perspectives from the natural sciences, and especially biology, shed light on human nature.36 Biology, and in particular evolutionary biology, labels human beings as “eusocial” – truly social. In The Social Conquest of Earth (2012), Wilson writes that this true sociality, the interconnectedness of human beings, has been the key to survival.37 He and many other scholars argue that the dominant species that inhabited our planet prior to the emergence of the human species were eusocial. He draws comparisons between vertebrates’ and invertebrates’ two different ways of achieving conquest of the earth, arguing that both came about through eusociality’s main feature: collaboration. According to this theory, group and tribe formation is a fundamental human trait and is based on basic emotions that are hard-wired decision-making tools. As a consequence of this sociality, human beings have developed emotions that drive basic decision-making, allowing us to guide our emotions toward cooperative outcomes (called morality) and to behave in a genuinely altruistic way in order to benefit the group (as a result of group selection mechanisms). These insights and propositions largely contradict the REMM propositions that underpin mainstream economics and business theorizing. Sociality 58 E.O Wilson makes a bold statement: Perhaps most people, including many scholars, would like to keep human nature at least partly in the dark. It is the monster in the fever swamp of public discourse. Its perception is distorted by idiosyncratic personal selfregard and expectation. Economists have by and large steered around it, while philosophers bold enough to search for it always lost their way. Theologians tend to give up, attributing different parts to God and the devil. Political ideologues ranging from anarchists to fascists have defined it to their selfish advantage.38 Referring to biology and evolutionary theory, Wilson argues that inherited regularities in the mental development common to our species define human nature. Nevertheless, he suggests that our “epigenetic rules,” which have evolved through the interaction of individual and group selection mechanisms, define us. Homo sapiens is therefore a result of an interplay between a genetic and a cultural evolution that occurred over a long period and started in deep prehistory. Wilson specifies that the hard-wired epigenetic rules are the core of human nature. These epigenetic rules create the resulting behaviors common to Homo sapiens. That means that the behaviors are “prepared” and ready to be developed, but need to be learned. That is why education and socialization are critical for human survival.39 Supporting this proposition, George Murdock (1945) combed through human behaviors that many hundreds of societies, which anthropologists studied in the past, share.40 Murdock attempted to highlight cultural practices that are almost universal. A selection of these practices featuring human nature’s eusocial character includes community organization, cooperative labor, courtship, dancing, decorative art, division of labor, education, ethics, faith healing, family feasting, food taboos, funeral rites, games, gift giving, government, hospitality, incest taboos, inheritance 59 rules, joking, kin groups, kin nomenclature, marriage, mealtimes, postnatal care, property rights, religious ritual, sexual restriction, soul concepts, status differentiation, and the list goes on. Other thought games also bear witness to our eusocial nature. Why would inventions like the internet, cell phones, or Facebook make any sense, or have any commercial value, if we were not fundamentally social? The fundamental need – Paul Lawrence calls it the “drive to bond” – is hard-wired; it serves an evolutionary purpose, which is the survival of the species rather than individual utility maximization.41 Morality If we are fundamentally social, this may mean that we are also fundamentally moral. Charles Darwin observed that any animal whatever, endowed with well-marked social instincts, the parental and filial affections being here included, would inevitably acquire a moral sense or conscience, as soon as its intellectual powers had become as well, or nearly as well developed, as in man. For, firstly, the social instincts lead an animal to take pleasure in the society of its fellows, to feel a certain amount of sympathy with them, and to perform various services for them.42 Joshua Greene, a noted scholar whose work bridges various disciplines in a true humanist fashion, writes: “Under ordinary circumstances, we shudder at the thought of behaving violently toward innocent people, even total strangers, and this most likely is a crucial feature of our moral brains.”43 Greene says that, in sum, we are a caring species, albeit in a limited way, and we probably inherited at least some of our caring capacity from our primate ancestors, if not our more distant ancestors. We 60 care most of all about our relatives and friends, but we also care about acquaintances and strangers. Robert Wright argues in the same vein and suggests that humans are moral animals. Both Wright and Greene suggest that we have a moral machinery in our brain originating from our hypersocial nature.44 Joshua Greene writes: From simple cells to supersocial animals like us, the story of life on Earth is the story of increasingly complex cooperation. Cooperation is why we are here, and yet at the same time, maintaining cooperation is our greatest challenge. Morality is the human brain’s answer to this challenge. Such morality is derived from emotional baseline responses, and Greene argues that for each cooperative strategy, our moral brains have a corresponding set of emotional dispositions that execute this strategy. Such strategies include concern for others, direct and indirect reciprocity, commitment to threats and promises, and reputation.45 All of this psychological machinery is perfectly designed to promote cooperation among otherwise selfish individuals, implementing strategies that can be formalized in abstract mathematical terms. The additional insight that Greene and his collaborators present is that human morality and, as a result, cooperation are typically intuitive, not calculated or rational. They conducted experiments in which they timed responses that required moral decision-making and cooperation choices. Their results demonstrated that cooperative choices were made so fast that they had to be intuitive. E.O. Wilson writes that morality, conformity, religious fervor, and fighting ability, combined with imagination and memory, produced Homo sapiens as a winner in terms of survival.46 Empathy and Emotionality 61 Frans de Waal, a leading primatologist, writes that empathy is hard-wired, and that the emotional basis of empathy is critical for our sociality. We cannot live peacefully in families, communities, and tribes without having the tools to do so.47 Contrary to the Hobbesian, Spencerian, and Randian notion of human nature, Homo sapiens is alive today because we care. De Waal and others find that empathy is, in many ways, a key lever to collaboration and can turn self-interest into mutual interest. In fact, Eric Liu and Nick Hanauer state that, through empathy, humans experience “true self-interest as mutual interest.”48 De Waal and others argue that humans are not even that special in terms of empathetic abilities, but that animals of all kinds are capable of empathy and collaboration. Charles Darwin early on suggested that hardwired emotions representing the core of human nature drive such empathy. In The Expression of the Emotions in Man and Animals, Darwin suggests that empathetic instincts must have evolved from natural selection.49 E.O. Wilson argues that humans are fundamentally emotional beings, because these emotions aided survival and reproduction.50 David Matsumoto writes that emotions humans experience today emerged (or were naturally selected) in our evolutionary history as rapid information processing systems that helped us deal with the environment and events that occurred. That is, emotions evolved to help us cope with events and situations that had consequences for our immediate welfare. If humans didn’t have emotions, we wouldn’t know when to attack, defend, flee, care for others, reject food, or approach something useful, all of which were helpful in our evolutionary histories (as they are today). If we didn’t feel disgusted at spoilt food, we would eat it. If we weren’t outraged when rivals stole our food, resources, or mates, we wouldn’t defend them strongly. If we didn’t feel the joy in caring for a child, or the compassion in caring for a 62 loved one, we wouldn’t enjoy the social bonds that make human cultures and relationships unique.51 Joshua Greene and others suggest that empathy and our collaborative tendencies are instinctive and emotion based. Frans de Waal calls it the “feeling brain,”52 arguing that the basis of our emotional sensors is hardcoded in our brains. As observed before about the human tendency to be social, kind, and moral, emotions are a feature, not a bug. Emotions help us deal with the complexity of our eusocial life. Basic emotions that can be witnessed across different cultures, and thus hint at their universality, include anger, contempt, disgust, fear, enjoyment, sadness, and surprise. These emotions are called basic, because they are shared across a number of species, including our primate ancestors. This fundamental emotionality questions the uniquely rational focus of Jensen and Meckling’s REMM propositions. Emotions also call theories of human behavior that are purely based on rationality, such as rational choice and decision-making, into questions. Altruism Eusociality and its derivatives – morality and baseline empathy supported by emotions – lead to human behavior that further questions REMM’s basic assumptions regarding the maximization of self-interest. The role of fairness and the development of altruistic punishment to uphold the tribe’s moral rules have been documented in various studies.53 Altruism has been actively studied in fields as varied as biology, economics, sociology, and game theory. It differs from cooperation, as altruism requires no direct benefit or reciprocity. Emerging research suggests that altruism is a behavior common to the human species, because group selection favored those groups with altruists over those without.54 63 Altruism can be understood as an individual’s behavior that benefits other individuals, even though these actions may negatively impact the individual’s chances of survival. A well-known example is that of individuals who watch out for a predator and signal danger to the group, thus potentially drawing the predator’s attention to themselves.55 Studies show that without the emergence of altruism, populations go extinct.56 David Sloan Wilson summarizes the research as: “Selfishness beats altruism within groups. Altruistic groups beat selfish groups. Everything else is commentary.”57 Selfish behavior is found to undermine communities and leads to trouble for the group. For communities that survive, E.O. Wilson argues, the countervailing forces of altruism evolve through group selection, not just through individual selection.58 It appears that a group-based selection mechanism screens for altruism. As such, altruism is now viewed as a key feature of functioning human groups.59 Taken together, the findings from the natural sciences concerning human nature provide a clearer perspective on who we are as human beings. A number of elements long considered bugs in our system have now been identified as features, including sociality, morality, emotionality, and altruism. These insights challenge REMM’s claims about the nature of man that underlie a larger, dominant theoretical framework in management sciences. H...
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