I am an avid watcher of The Apprentice. The competitors are undoubtedly high powered and innovative at things beyond my understanding. That doesn’t explain my fascination. I am not a wilful celebrant of their journey towards a house purchase in Chelsea. Neither does it provide me with a constructive learning experience.When I watch it, I derive no entrepreneurial inspiration to revitalise my module ‘The Economics of Business Decision Making’. I don’t wander down the staircase of my Ivory Tower to observe the messy business of the real world and take notes. Instead, like many people, I watch it for the calamity and the moments of utter vaudeville. The current crop of candidates, I am happy to report, have not disappointed. Their dexterity and ingenuity is on full display for the doughnut challenge. I would never have thought to create a bespoke cake that looked like a giant puss pimple erupting off ‘The Thing’. I also appreciated the clever editing highlighting the latent irony in the ‘create a comic’ challenge. How best to advertise forward-thinking decision-making? Start from a worthy position, celebrating the learning of a second language. Overlook the fact that none involved in the team have any fluency in that second language. I did cross my fingers in the hope they would lapse into gibberish – ‘je suis un pommes de terre’. Humour is indeed a jolly thing and ‘The Apprentice’ is pure gold. However, despite the entertainment value, it would be amiss to ignore that there is something more insidious at play in ‘The Apprentice’. There are just too many questionable moments for the programme to go unchallenged. At first glance, it is just a littering of behaviour gone astray. The CV full of fibs, with no come back. A firing for someone telling the truth. An attack for listening, rather than dictating. It advertises poor behaviour as the key traits of the successful. Killer instinct no less. There’s no blame for the broadcaster. The greatest star from the American version once stated, “I’m the first to admit that I am very competitive and that I’ll do nearly anything within legal bounds to win. Sometimes, part of making a deal is denigrating your competition”. He went on to become the President of the USA. Indeed, ‘The Apprentice’ just advertises a much deeper problem. We celebrate flaws in management, ultimately allowing poor methods to proliferate, and thus ensure failure.
Now let’s evaluate Lord Sugar and those business plans that I’m desperate to see demolished in the semi-final interviews. There is undoubtedly something special about their entrepreneurial behaviour. A brief sortie into the teaching of entrepreneurship in business schools supports that proposition. The teacher, no matter their effectiveness, is forced into the art of redefinition. For me, the entrepreneur is someone who achieves success by exploiting their own tacit knowledge. It makes standard statistical tools redundant; there is no reference to a better understanding of the probability of success and failure. It cannot be formally expressed. Indeed, it directs us to our own ignorance. The entrepreneur’s magic lies in using their know-how to discover a lucrative opportunity by shooting holes in that ignorance. For Joe Public, “why didn’t I think of that simple idea?” becomes the clichéd response to the unveiling of another new business multimillionaire success story. It is that unknown quantity that forces the teaching of entrepreneurship to the more mundane: the development of generic business skills. It becomes akin to leadership training, where horrors such as role play becomes the order of the day. One day you are asked to pretend to be your favourite tree. The next and you enter full embarrassment territory. You are asked to work together to write and record a song fit for Justin Bieber. It is such leadership training approach that has stained my very soul. It does not, mind you, inform us over why someone is successful. We can’t codify the entrepreneur after all. There are innate attributes that you either have or you do not. To think otherwise would be an attempt to coach a Colchester United football player into a Barcelona one. It is this reality that makes Lord Sugar exceptional. It is through his endeavour, and the tacit knowledge involved, that economic success flowers.
I did find the previous paragraph difficult to write. I accept that I come across somewhat like a cheerleader for Lord Sugar. This is not my intention. Instead, by referring to the different means to describe what ‘knowledge’ entails, I’m moving us towards murkier waters. I can illustrate the point by referring to a hero of free market economics: Friedrich August von Hayek. His legacy is crystal clear. I am not referring to how he became a hero of Thatcher here. No, I am accepting that he won gold in the socialist calculation debate. Through the complexities of knowledge, he demonstrated the folly of suggesting the socialist planner can mimic the wonders of the market. The important aspect is how he managed to win that medal. He mapped out how knowledge has a key component; it is distributed. Let’s take a coffee weevil example. I’m not a botanist. I know nothing about weevils. However, if one blighter is found to be decimating the coffee crop, I don’t have to rush down to my local agricultural college to enrol. I can save on any botanist tuition fee. I can simply react to the signals provided by the price mechanism. As the price of coffee rises, I will use coffee more sparingly. Indeed, very sparingly. The last time I drank coffee was in a force 10 gale in the Highlands fishing for wild trout with my brother. However, despite my ramble, the point holds. The price mechanism is an information surrogate. I can react as if I indeed had full understanding of that disagreeable weevil. To fully demonstrate the point, we could add Boolean Operators to make my understanding look fancier. However, I prefer to express through characters from nursery rhyme. Jack knows p is the case. Jill knows p implies y. However, we only put Humpy Dumpy back together when Jack and Jill sit down together for a cup of Earl Grey over a short and stout teapot. Their knowledge is distributed. It is that complexity which makes socialist planning so difficult. The planner, without the price mechanism feeding him/her with the correct signals, will be prone to misconception and assuredly make erroneous decisions. You simply cannot mimic the efficiency of the market. But what does this have to do with Lord Sugar? Those planning issues are not just restricted to the economy and socialism. It is as relevant to the firm. Companies are often hierarchical. There are gains from such hierarchy. There can be, for example, efficiency joy from division of labour. As the worker specialises in a task, they become more effective at it. Managers are then tasked to organise between the specialised workers. They oil the machine; they engineer organisational knowledge which is required for efficient production. There is a downside though; Hierarchy impairs decision-making in the firm. It generates the same conditions for the manager as for the socialist planner. Expect ‘The Apprentice’ decisions, such as thinking the ‘unisex wolf fleece’ is a solid seller, to be surprisingly normal behaviour.
In support of this argument we can refer to the evidence by Logue and Yates, experts in the field and authors of the book ‘The Real World of Employee Ownership’. A subsequent review of the available empirical evidence confirms that worker ownership can yield higher productivity than their conventionally owned counterparts. Could it be that distributed knowledge also explains these empirical findings? See it as follows. The classic book, The Ragged Trousers Philanthropists, paints a picture of worker exploitation generating profit for the worker’s masters. Could we adjust that picture to something more positive? Let us call it knowledge exploitation. The hierarchical firm is the old storyline. Absence of democracy within the workplace means that ‘know your place’ is the order of the day. However, although fitting for a world characterised by wage underpayment, it is an unstable environment. Information flows within the company are decimated. Top-down management risks stagnancy. Boots on the ground, workers understand company error. Managers listening to their wisdom, however, is a holiday to cloud cuckoo land. There is necessarily increased risk as errors go unchecked. The consequence can be as spectacularly messy as the doughnuts mentioned earlier: Death of the company. So, what is the new storyline? That is one of democracy in the workplace, where knowledge flows unhindered upwards to the managerial team. An environment where planning error, generated by distributed knowledge, is minimised.
All of this leads to a conclusion which might get Lord Sugar a little hot under the collar. Previously an Enterprise Tsar for New Labour and a big donor to the Party’s coffers, he now condemns it for shifting to a left-wing anti-business position. There are multiple debates within that accusation. What, for example, denotes an optimal corporation tax? However, there are elements within Labour’s policy innovations which he should read more carefully. Take John McDonnell’s proposals for an Inclusive Ownership Fund. Adapted from the New Economics Foundation, it requires companies to transfer equity to workers. Workers would receive a share of dividends. The fund also impresses on the company’s governance. Akin to shareholders, the workers are provided with a route to the decision-making processes within the company. Are we perhaps shifting towards a better exploitation of knowledge? Question marks over the proposals do remain. Is it overtly conservative, ultimately failing to fully liberate the gains from true worker ownership? Alternatively, could it be just the first step towards a true economic transformation? I am unsure. However, we can conclude one thing; Labour has placed workplace democracy on the electoral battlefield. Lord Sugar can learn from that, following suit with The Apprentice’s boardroom. The next time that the Project Manager is clearly ignoring the advice from their team members? Lord Sugar can do us all a favour. Unfurling his finger and pointing it in the right direction, he should unleash those necessary words: “you’re fired”.
