From the Editor: Book Review – Makers and Takers

By December 27, 2016 Articles

For those of you that have followed my articles in the EA Practice Advisor section of the website, you’ll know that I’m an ardent supporter of life-long learning. For Enterprise Architects, or those that aspire to become one, this is an important part of the discipline. With that in mind, I’m hoping to share with you some thoughts on books I’ve read, or have been recommended, that I believe will help you on your path in the Enterprise Architecture space.

Many of these books will be focused on the practice of EA, or examples of where EA-based approaches have helped transform organisations. Whilst that is important, the work of an Enterprise Architect requires a broader awareness than the discipline itself. With that in mind, some of the books we will review will be from other areas such as:

  • Personal development
  • Business environments, practices and trends
  • New technologies
  • Managing change

Today’s book review falls into the second category. It investigates some of the fundamental issues with today’s business practices, particularly as it relates to finance, and financial management.

Makers and Takers: The Rise of Finance and the Fall of American Business

Author: Rana Foroohar         Released: 2016

The book poses the question: “Is Wall Street bad for American business?”. In answering this question, the author, who is an Economic Columnist for TIME™ and CNN™ Global Economic Analyst, gives a detailed and thoroughly researched account of how the business practices, and even the language we use in our society, has been influenced by the finance industry. Phrases such as “Human Capital”, and the tendency to focus on quarterly results rather than long-term benefits have become commonplace.

It is a fascinating, and often sobering account of the world we live in, told through the lens of a series of crises that have impacted everyone on the planet in one form or another. The boom and bust cycles that have plagued modern society for more than 100 years, and the often subtle changes in the rules and regulations that govern finance, which have been manipulated to suit the interests of the 1% at the expense of the average citizen. The result of this, writes the author, is an industry that employs only 4% of the workforce, whilst generating 25% of corporate profits. A situation made worse by the fact that only around 15% of the money in the market system is being used to drive the “real economy”, which is a term used to by the author represent world that the majority of us work in.

What becomes even more disturbing as one reads through the book, is the extent to which manipulation of markets occur, including the effect on commodities that, in turn, affects everyone. This includes all manner of things, from food to the vast stockpiles of aluminum that were hoarded by a specific company (through its subsidiaries) in order to control supply (and as a consequence, price) in the soft-drink industry. It’s a fascinating account of the practices being employed, and the way in which regulators (or legislation) is manipulated or circumvented to maximize profits.

On the topic of regulation, it also looks at the recent phenomena of off-shoring corporate profits, which is a trend that is now even being employed by the largest technology companies. Arrangements such as a “Double-Irish” or a “Dutch-Sandwich” have become commonplace, and has a particularly detrimental impact on governments that are facing increasing difficulties in the cost of supporting larger, and ageing, populations, many of whom are finding themselves unable to get full-time work. It is somewhat of a vicious cycle, which traps money inside of the finance industry, preventing it from benefiting society more broadly. This situation is blended with a fascinating look at the leading names in both Management Consulting space, and the educational institutions that have shaped the minds and attitudes of successive generations of business leaders. That aspect of the material covers numerous topics, from Taylorism to the pros and cons of modern MBA teaching.

Unsurprisingly, given the nature of the 2008 Global Financial Crisis, the housing market gets a fair amount of attention in this book as well. Disproportionately powerful organizations that own large amounts of residential housing, have become a new problem in the post-GFC world. Many of the areas hardest-hit by the sub-prime mortgage fiasco have been subsumed by organizations keen to make a high-yield return. Sadly, many of these practices have involved charging excessive rents for properties snapped-up after foreclosures, which have had devastating impacts on some of these communities.

Worryingly, some of these undesirable business practices appear to have also found their way into industries such as Pharmaceuticals, resulting in a situation where short term financial gains are prioritized over decisions involving research and development of new, potentially life-saving, drugs. This tendency isn’t just confined to “Big Pharma” however, with many other examples given where financial outcomes are the driver of decisions rather than other areas that many people may think would be a higher priority. A great example cited in the book is the “ignition switch” debacle that beset General Motors™ in 2013. This involved a series of shortcomings in GM management practices that ultimately resulted in a product safety issue that cost more than $1B in fines and settlements, but more importantly, over 100 people lost their lives.

Whilst this sounds like a one-sided “beat-up” of the finance industry, the author highlights several examples of where a more positive approach is being taken by thought-leading executives that understand the need for finance to be put back in the service of Main Street, where more people can benefit and value can be more evenly distributed throughout society. It’s a significant issue, and growing more urgent by the day, but one that appears to be fixable with enough awareness, and a genuine desire to create a more equitable and robust economic system.


An EA’s Perspective

When looking at this from an EA’s point of view, it provides a perspective of the areas of focus, and the pressures faced by the CxO roles of medium to large organizations (where many Enterprise Architects are employed). One area of particular interest is the tendency to favor short-term returns over more strategic outcomes, including a reduction in the R&D activities of many organizations. In a time of significant change, including considerable amounts of technology-led innovation, this can place an EA in a crucial position of influence. Developing that “trusted adviser” role with the executives in an organization has become essential, and much of that is dependent on the ability to understand the needs and concerns of senior management.

Once solid relationships with the C-suite have been established, opportunities exist to show the value of longer-term strategies, that can allow organizations to prepare for a future with a 3-5 year time horizon, rather than the next earnings release or financial report. As Enterprise Architects, we are aware of the nature of technological change (often needing to cut through the hype associated with new technologies), and the varying rates of adoption. We also understand the mechanisms by which these changes can be introduced into an organization, and the complexity of that task. This process requires longer-term thinking, and must take into account both the financial realities of the current environment, and the financial impacts of the potential disruption that awaits any company that chooses to focus too heavily on itself or on delivering bonuses to its highest paid employees.


Conclusion

There are many other areas covered in this book that are worth the reader’s time, but perhaps too many to discuss in this forum. If you are interested knowing more, or in understanding the financial pressures that apply to organizations, and how that affects strategic planning processes or internal capabilities, then I highly recommend you have a read.

Rating: 9/10

Have you read this book? Did you find it useful in your journey to becoming a better Enterprise Architect? Let me know your thoughts in the comments section. If you have other books that you feel our readers would benefit from, please feel free to mention them below as well!

I look forward to hearing from you.

Darryl Carr,
Editor, Enterprise Architecture Professional Journal

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