The Modern Firm - a review

I like to read management books years after they're popular, not least for the unintended humor.

In 2004, for example, John Roberts' ($6 used, including shipping) used Nokia and BP as shining examples of corporate excellence, but mentioned Apple only as a company led astray by a CEO's enthusiam -- for the Newton.

Obviously things look different now. BP's fast moving culture led to the Deepwater Horizon spill and Nokia's pride blinded them to the Doom of Cupertino.

Of course if that's all there was to Roberts' book, I wouldn't be writing about it now. Yes, like all business books from The Prince to the latest fad, there's a healthy helping of CEO sychophancy in addition to the usual misguided analyses of the gem of the moment. Happily though, there's also a solid review of the history of corporate economics.

It's the economic history that's worth the $6. In particular, Chapter 3 on the "Nature and Purpose of the Firm" alone is worth the (used) price of admission. From Smith to Coase to Akerlof and information asymmetry Roberts ties together themes I've been pecking at for years.

Economic models aside, what else is interesting in the book? After a decade years of participant observation of the mysterious Peoples of the Firm I did find a few reasons to read the later chapters. Nokia is a great lesson of a corporation that did a lot of things, maybe most things, right -- and yet still got clobbered. It's worth remembering that sometimes stuff happens. If Steve Jobs had stayed at Disney Nokia might still be great. I recommend reading the chapters on "motivation", exploitation and exploration, and organizational structure to better understand why CEOs follow consulting company recommendations. These chapters can also help you catch the warning signs that you're in a dying division.

It's a good enough book, not least because of the quaint hand drawn diagrams, but there's much more to be told in books to come. 21st century corporations aren't really the kinds of machines Roberts dreams of -- they're more like feudal kingdoms or ecosystems rife with agendas and conspiracies (and now, of course, now they're Persons). Perhaps for reasons of self-preservation, and the timing of the book, Roberts steers clear of corrosive impact of winner-take-all executive compensation (watch for problems to come at Apple). He barely mentions China (2004 is a long time ago) and the role of economic geography and innovation clusters. There's nothing about how corporations use finance as weapon, or about regulatory capture, or the role of talent. Unsurprisingly, he's not interested in the corporation as an ant-hill like emergent entity.

The story of the 21st century corporation is yet to be told. I wonder if we'll have to wait for a (sentient) Corporation to write its own story.

See also:

• Why quality collapsed in the bubble years: Akerlof and the last good toaster (information asymmetry - Akerlof - 3/2012)
• How big should financial firms be? 3/2009
• Why do corporations (firms) exist?
• Ants, corporations and the great stagnation 12/2011
• Emergent computation -- the thinking world (Nature) 1/2004
• Speculation: The corporate ecosystem and American stasis 11/2010
• Self sustaining entities: corporations and the Spanish Inquisition 6/2006
• The Corporation - what next? 8/2010
• Canopy Economics 5/2004
• Beyond the first cause: Deepwater Horizon and the publicly traded company 6/2010
• Troubled capitalism: The corporate entity 8/2010
• The corporation as psychopath 5/2004
• Wanted: examples of publicly traded companies with accounting solutions that support internal collaborative projects 1/2008
• The American corporation and the centrally planned economies of the soviet empire 3/2008 - "Corporation as a Command Economy" DeLong.
• Llamas and my stegosaurus: Artificial Persons