Kimberlee Josephson is an associate professor of business at Lebanon Valley College, and an insightful and energetic promoter of entrepreneurship and free markets at The American Institute For Economic Research. 

Resources: 

Connect with Kimberlee Josephson on LinkedIn 

Read Kimberlee Josephson’s articles at AIER

Connect with Hunter Hastings on LinkedIn

Learn Entrepreneurial Value Creation with our Value Creators Online Course 

Show Notes:

0:00 | Intro
2:02 | Kimberlee Josephson’s Background
3:53 | Big Picture of Capitalism
8:16 | What was the Problem?
11:34 | How Kimberlee Teaches Power Structure and Other Programs
17:19 | Companies Prioritizing Morals Over Profi.
19:55 | Maximizing Shareholder Value: Research Perspective
23:04 | Antitrust: Government’s Role in Business Scrutiny
28:15 | Monopoly as a Business Goal: Darker Motives
33:15 | Critics of Capitalism: Distorted View of Competition
37:21 | Focus on Positive Business Dynamics, Not the Destruction Part
39:44 | Value Creators Online Course
40:57 | Business Education 
44:23 | Redefining Entrepreneurship 
46:44 | Academia Being Non-Dynamic: Where to Get Business Education? 
51:38 | Wrap-Up

Knowledge Capsule:

Critics of capitalism and of business are misdirecting us with their concerns about business morality and resource allocation:

• It’s a mistake to put companies in the role of becoming moral arbiters and shifting focus from profit-oriented to purpose-oriented strategies.
• Kimberlee raised caution against organizations diverting resources towards social causes, potentially at the expense of core competencies and shareholder interests.

CSR and the Stakeholder Mindset are detrimental to the true role of business:

• Kimberlee discusses her skepticism about corporate social responsibility (CSR) and the stakeholder mindset.
• She expresses concerns about the effectiveness of CSR and its potential for harm, such as dependency-based relationships and rent-seeking behavior.

• CSR became even worse when it evolved to Environmental, Social, and Governance (ESG) initiatives – a more specific set of interventions in the conduct of business.
• Measuring and implementing imposed ESG standards are problematic, and there are great concerns about regulatory power.

The true role of Business in Society:

• Kimberlee explores the multifaceted role of business in society, including addressing negative externalities and creating positive externalities.
• Reference is made to Archie Carroll’s CSR pyramid, emphasizing economic, legal, ethical, and philanthropic responsibilities of businesses.
• Business increases well-being for customers, and therefore for society.

Criticism of Government Intervention and Antitrust Measures:

• Kimberlee expresses frustration with government intervention in business, particularly regarding antitrust measures and criticisms of large-scale companies.
• Antitrust regulations hinder businesses’ ability to compete and innovate freely.

Differentiation is strategic, high market share is not a problem: 

• Through excellence in differentiation, it’s possible to create a market space with little to no competition (Blue Ocean strategy).
• Regulators express concerns about such market activity, as evidenced by the concerns raised by Lina Khan about excessive market share.
• Large firms achieve dominance through profitability, attractiveness, and scalability, which reflects consumer choices. High market share simply means more customers are happy.

Government Intervention in Mergers and Acquisitions: 

• Anti-trust legislation and actions are examples of government interference in business transactions, in this particular case,  mergers and acquisitions.
• Kimberlee is an advocate for the separation of politics and economics: The marketplace will sort out whether mergers and acquisitions are good for customers.
• It can be inefficient to have multiple providers. Kimberless discusses Milton Friedman’s perspective on the inefficiency of having multiple providers for essential services like telephone poles.

Monopoly Power and Innovation: 

• Monopolies seldom last long in the market. Kimberlee reflects on past concerns about monopolies such as Netflix and the rapid emergence of numerous competitors and customer options..
• Competition drives businesses to innovate and improve efficiency; Kimberlee cited case studies such as Dyson’s disruptive innovations in the vacuum cleaner industry.

We can change attitudes through business education at every point in the education pipeline:

• From High School to community college to university undergraduate and graduate streams to executive and entrepreneurial education, it’s the task of business education to re-establish principle-based understanding of the role of business.
• Kimberlee Josephson is an active leader in this space.
• Value Creators is trying to help: https://thevaluecreators.mykajabi.com/value-creators

Entrepreneurship can be learned via philosophy and principles: cultivating an entrepreneurial mindset, fostering adaptability, and problem-solving skills, and embracing dynamic market processes.

Mark Packard, Professor Of Business And Entrepreneurship at Florida Atlantic University and Director of the Madden Center for Value Creation, contrasts entrepreneurial business education with traditional business paradigms. An entrepreneurial curriculum focuses on dynamic market processes and the pivotal role of the entrepreneur in the capitalist market system. Mark proposes experiential learning, where students engage with real-world challenges, fostering adaptability and problem-solving abilities crucial in today’s rapidly changing business landscape.

Mark emphasizes the broader impact of entrepreneurial thinking, spanning industries such as healthcare, where innovative models like direct primary care challenge established norms. By integrating philosophical insights and subjectivism, entrepreneurial education can cultivate a mindset of continuous learning and value creation. Mark underscores the importance of introspection and experimentation in breaking free from conventional thinking patterns. Ultimately, the conversation highlights the transformative potential of entrepreneurial education in fostering innovation, adaptability, and societal change across all sectors.

Resources:

Connect with Hunter Hastings on LinkedIn: 

Connect with Mark Packard on LinkedIn: 

Check out The Value Creators Online Course by clicking here.

FREE PDF: 26 Ways To Think Better about Business.

Mark Packard: Entrepreneurial Valuation: An Entrepreneur’s Guide To Getting Into the Mind of Customers

Knowledge Capsule

Current Challenges in Business Education:

• Traditional business education relies on methods and processes from the industrial era, which may not align with the needs of the digital age.
• Educational institutions exhibit reluctance to adopt new approaches due to institutional inertia and established norms.
• There are inefficiencies in both teaching methods and organizational structures within educational institutions, leading to suboptimal outcomes.
• Business education often fails to foster entrepreneurial mindsets and skills, which are increasingly essential in today’s business landscape.

Importance of Subjectivism in Business:

• Subjectivism is a strange-sounding concept for business – but understanding it is essential for creating value, which is the purpose of all business.
• Subjectivism highlights the significance of individual intentions, values, and perceptions in shaping economic behavior.
• Emphasizing subjectivism encourages businesses to prioritize understanding customers and meeting their diverse needs and preferences as individuals, in both B2B and B2C..
• Subjectivist thinking challenges the traditional focus on processes and methods in management, enabling a more creative, more adaptive, more innovative, and therefore more customer-oriented approach.

Entrepreneurship as the core strategy for all businesses::

• Entrepreneurship involves creating innovative value propositions that address emerging customer needs or desires.
• Entrepreneurial organizations are better positioned to adapt to market changes and to bring innovative new solutions to market quickly, leading to sustained competitive advantage.
• Businesses that embrace entrepreneurship as their core strategy are more likely to achieve long-term success and resilience in dynamic market environments.

Focus on Customer Experience:

• Prioritizing the customer experience involves designing products, services, and interactions around customer preferences and desires.
• Companies like Amazon and Apple exemplify the benefits of focusing on delivering exceptional value experiences, leading to customer loyalty and market dominance.
• Customer-centric businesses continuously seek feedback and iterate on their offerings to ensure they remain aligned with evolving customer expectations.

Ambidextrous Organizations:

• Ambidextrous organizations effectively balance the need for innovation (entrepreneurship) with operational efficiency (management).
• Achieving ambidexterity often requires structuring teams or departments dedicated to innovation alongside those focused on day-to-day operations.
• In today’s fast-paced business environment, ambidexterity is critical for organizations to navigate uncertainty and drive sustainable growth.

Influence of Austrian Economics:

• The only real economics for business: traditional economics thinks top-down in aggregates like GDP, the output of an economic machine that can be manipulated and managed. The brand of economics for business is bottom up, thinking about value for individual customers and the entrepreneurial processes to deliver value.
• Subjective Value: Austrian economics emphasizes the subjective nature of value, highlighting that value is determined by individual preferences rather than objective measures.
• Dynamic Market Processes: Austrian economics offers a more realistic understanding of market dynamics, emphasizing the role of entrepreneurship and spontaneous order in economic outcomes.
• Implications for Business: Businesses informed by Austrian economics are more attuned to customer preferences, market uncertainties, and the importance of innovation in driving economic growth.

Alternative Curriculum Proposal:

• The proposed curriculum seeks to integrate entrepreneurial principles, customer-centricity, and complex thinking into business education.
• The program may include courses on entrepreneurial mindset development, customer experience design, complexity theory, and innovation management.
• Students would engage in real-world projects and experiential learning opportunities to apply theoretical concepts in entrepreneurial contexts, fostering a holistic understanding of business dynamics.

Importance of Entrepreneurship-Centered Education:

• Emphasis on understanding the dynamic nature of the economy, influenced by Austrian economics principles.
• Highlights the pivotal role of the entrepreneur in navigating market complexities and driving innovation.
• Prioritizes teaching how ideas are generated, developed, and translated into innovative products or services.

Curriculum Design:

• Entrepreneurial Mindset Development: Focuses on cultivating an entrepreneurial mindset, which includes creativity, adaptability, and problem-solving skills.
• Practical Skills: Includes essential operational knowledge such as accounting, finance, and organizational structure, but with a secondary emphasis.
• Real-World Learning: Incorporates experiential learning opportunities where students tackle real challenges faced by partner businesses, fostering practical application of entrepreneurial principles.

Learning Experience Approach:

• Integrates a practicum or capstone experience where students work on real challenges brought by partner businesses, resembling an internship or consultancy.
• Contrasts with traditional business school capstones, which often rely on simulation games and lack real-world applicability.
• Provides students with opportunities to apply entrepreneurial thinking to real-world business problems, enhancing their problem-solving abilities.

AI’s can’t be entrepreneurs::

• Professor Packard acknowledges AI’s inability to think entrepreneurially due to its reliance on historical data and lack of creativity.
• Emphasizes the unique ability of humans to engage in counterfactual thinking and true entrepreneurial creativity.
• Recognizes AI’s potential as a tool for prompting ideas but underscores the irreplaceable role of human creativity in entrepreneurship.

Impact on Hiring and Company Culture:

• Highlights the difficulty companies face in identifying candidates with an entrepreneurial mindset and problem-solving skills.
• Emphasizes the need for employees who can adapt to changing environments and proactively solve problems.
• Discusses the potential for new hires with entrepreneurial mindsets to influence and improve company cultures, fostering adaptability and innovation.

Entrepreneurial Mindset Beyond Business School:

• Recognizes the value of philosophical thinking in fostering open-mindedness and innovative insights.
• Encourages individuals from diverse backgrounds to embrace entrepreneurship, emphasizing that anyone can develop entrepreneurial skills with the right mindset and learning.

Potential Impact Beyond Business Education:

• Discusses the potential for entrepreneurial thinking to revolutionize industries beyond business, such as healthcare, through initiatives like direct primary care.
• Highlights the relevance of subjectivist thinking and value creation principles in various fields, enabling individuals to identify innovative solutions to complex problems.
• Foresees entrepreneurship as a driving force for positive change in all sectors,and at all scales and business stages, fueled by individuals equipped with entrepreneurial mindsets and skills.

Cultivating Entrepreneurial Thinking:

• Encourages introspection to challenge existing assumptions and explore alternative approaches to problem-solving.
• Advocates for learning from diverse perspectives and experiences to broaden one’s understanding and stimulate entrepreneurial thinking.
• Stresses the importance of ongoing learning and experimentation in fostering an entrepreneurial mindset and adapting to evolving challenges and opportunities.

Capitalism fosters widespread prosperity. But we must acknowledge a set of emerging hazards associated with corporate management practices, and take proactive measures to mitigate such risks.

The hazards that have transformed capitalism over time are vividly described in Aberrant Capitalism: The Decline and Revival of Customer Capitalism, authored by Hunter Hastings and Steve Denning and published by Cambridge University Press. In this episode of The Value Creators podcast, Hunter shares capitalism’s journey from an external orientation, where customers and their needs were the focus of business activity, to a more internalized orientation, where management processes, methods and measures became the focus. The customer-centric approach of the first great corporations of the nineteenth century reflected the vision and purposes of owner-entrepreneurs using their own capital. But over time, these entrepreneurs left, and a debt and equity finance model took over in the twentieth century. Success became synonymous not with happy and satisfied customers but with stock market performance and shareholder value. This shift represents an undermining of the original animating spirit of capitalism. However, Hunter expresses guarded optimism about the emergence of new business models in the twenty-first century, embodied by companies like Apple and Amazon, which prioritize direct customer engagement and long-term growth over short-term financial gains. 

Despite this optimism, the conversation acknowledges the challenges and risks associated with contemporary capitalism, including dehumanization of labor, data privacy concerns, social media’s impact on mental health, and the rise of monopoly power. Hunter emphasizes the importance of preserving the positive aspects of capitalism while addressing these issues, calling for a reassertion of the values that underpin the system. 

Hunter concludes with a call to action for readers to engage with the ideas presented in the book and work towards a capitalism that prioritizes customer value, innovation, and societal well-being while remaining vigilant against its potential pitfalls.

Resources: 

Connect with Hunter Hastings on LinkedIn.

Check out the book Aberrant Capitalism.

Buy the Book on Amazon: Aberrant Capitalism (Elements in Reinventing Capitalism)

Aberrant Capitalism on the Cambridge University Press

Shownotes:

0:00 | Intro

02:40 | Why Hunter Hastings Wrote Aberrant Capitalism?

5:35 | Journey: Customer Capitalism to a Distorted Managerial and Financialized Capitalism

08:06 | Mass production: What was the Breakthrough?

09:35 | Beginning of Customer Capitalism

11:25 |  Myth: Robber Barons as Exploiters and Unethical Businessmen

14:32 | Value Creating Companies: Nineteenth Century Set Stage for Economic Boom

17:38 | How the Objectives of Entrepreneurship and Management Different

19:07 | Dominance of Management Over Entrepreneurship.

21:39 | Transition: Central Planning to Private Industry Planning

24:21 | Post-War American Companies Success

26:01 | Big Twist: Financialization 

30:08 | Current Corporate Landscape: Is There Any Hope for Future Change?

33:29 | Conclusion: Hopeful OR Fearful about Corporate Capitalism

35:56 | Wrap-Up: Warning

Knowledge Capsule:

Overview of “Aberrant Capitalism”:

• Hunter Hastings explains the book’s title: the capitalism we know today, characterized by dominant corporations whose behavior is often questioned for its ethics and benefit to society as a whole, is an aberration of the original system.
• A major concern that results from this aberration is the decline in young people’s confidence in capitalism.
• Analysis indicates that the real target of young people’s criticism is not capitalism itself, but today’s corporations.

Evolution of Capitalism:

• Historical journey from “customer capitalism” to “managerial and financialized capitalism.”
• Examination of capitalism in the eighteenth century focused on companies like Wedgwood and Bentley.
• Introduction of limited liability corporations and their role in scaling up businesses.

Customer Capitalism in the Nineteenth Century:

• Hunter shares characteristics of customer capitalism, focusing on innovation, customer orientation, and individual entrepreneurs with examples of successful entrepreneurs and their contributions to improving customer lives.

Misconceptions about Nineteenth-Century Entrepreneurs:

• Debunking myths of “Robber Barons” as exploiters and unethical businessmen.
• Hunter shares examples of entrepreneurs like John D. Rockefeller and Henry Crowell who contributed positively to society.
• Their purpose was to improve lives for as many customers as possible.

Contributions of Nineteenth-Century Capitalism:

• Discussion on how nineteenth-century capitalism led to economic growth, improved lives, and lowered prices.
• Transition from entrepreneurship to management and its impact on capitalism.

Shift to Managerial Capitalism:

• Explanation of the shift from entrepreneurial orientation to management control and managerial efficiency.
• Introduction of central planning techniques during wartime and their direct migration to corporations after the war.
• Negative consequences of central planning on customer orientation and market responsiveness.

 Success and Decline of Post-War American Corporations:

• Hunter shares how the initial success of post-war American corporations was due to central planning and capital investment.
• Challenges faced by these corporations include competition from Japan and failure to adapt.

Financialization:

• The rise and eventual dominance of the financial sector and the emphasis on maximizing shareholder value further shifted focus away from customer capitalism towards short-term financial gains, leading to concerns about the impact on long-term value creation and societal well-being.
• Corporations now work to serve the financial sector not the customer sector.

Hope for Change:

• Despite the challenges, the discussion points to the emergence of new business models driven by digital companies like Amazon, and Tesla, which have a direct connection to customers and the potential to revive customer capitalism.
• Hunter Hastings warns about the continued dangers of bureaucratic management, accelerating financialization, and government entanglement.
• There’s a need to resist forces that distort the true purpose of capitalism, by reasserting the customer value focus that brings societal well-being.