Authoritarianism, Business Strategy, and Leadership

When starting a board call last week, a colleague asked, “How are things down there in DC?” 

I paused and glanced to the side, not sure how to answer. She quickly added, “I know that’s a complex question.” We exchanged knowing looks.

Then she asked, “Have you read the book On Tyranny?”

“Yes,” I said. “Have you read The Rise and Fall of the Third Reich?”

She nodded, and then we stared at each other for 10 seconds, knowing we were thinking the same thing, but unsure whether to discuss politics or proceed to the meeting agenda. 

Of course, this past week has provided several examples of the U.S. drift from liberal democracy—threats to revoke media licenses based on disfavored speech, media platforms purchased by loyalists, attempts to fire officials at the independent central bank, and demands to prosecute political enemies. It seems like every time I visit a news website, there are multiple stories signaling the democratic backsliding. 

But Monday Musings isn’t a space for politics, so why bring it up? 

First, government structure is always tied up with business. Our Declaration of Independence includes a lot of flowery language, but some of the most specific charges are that King George restricted trade and imposed taxes. 

And whenever political systems lack freedom, there are usually groups on the other side making money from that structure. For example, last year’s winners of the Nobel Prize in economics, Daron Acemoglu and James Robinson, describe why the southern states in the US instituted Jim Crow laws after the Civil War in Why Nations Fail: The Origins of Power, Prosperity, and Poverty. “After the end of the war, the elite planters controlling the land were able to reexert their control over the labor force. Though the economic institution of slavery was abolished, the evidence shows a clear line of persistence in the economic system of the South based on plantation-type agriculture with cheap labor.”

When most of us learned about that history in school, the emphasis was likely on the unfairness of racial prejudice and the lack of political rights. But the Black Codes directly served the demand for cheap labor by compelling people to work (vagrancy laws) while limiting access to tools like asset ownership, social safety net programs, education, and the ability to organize that would have helped people escape that system. 

In The Narrow Corridor: States, Societies, and the Fate of Liberty, Acemoglu and Robinson make a similar point about apartheid in South Africa. If there weren’t valuable farmland and mines, there probably wouldn’t have been a system designed to create low-cost labor for asset owners. Of course, if there weren’t attractive assets to control, colonizers would not have stayed in the first place. 

(If you’re a nerd like me and have a spare 30 minutes, Acemoglu’s Nobel Prize lecture on economic structures and development, including points on whether artificial intelligence will have an inclusive or extractive effect on economic systems, is worth watching.)

Similarly, in The Rise and Fall of the Third Reich, William Shirer tells of how business leaders went along with the Nazi regime because they thought it would be good for them. “The big businessmen, pleased with the new government that was going to put the organized workers in their place and leave management to run its businesses as it wished, were asked to cough up [funds to support the Nazi party].”

Once business leaders realized they unwittingly enabled government control of their enterprises—“Buried under mountains of red tape, directed by the State as to what they could produce, how much and at what price, burdened by increasing taxation and milked by steep and never ending ‘special contributions’ to the party”—many came to regret their support. Shirer writes of one such businessman, Fritz Thyssen. “Fleeing Germany at the outbreak of the war, he recognized that the ‘Nazi regime has ruined German industry.’ And to all he met abroad he proclaimed, ‘What a fool [Dummkopf] I was!’”

The second reason I decided to write about this is that if the national political debate is about the system itself and political systems are tied to economic systems, politics are coming to our workplaces, whether we like it or not. And I have a hunch that most organizations and leaders aren’t ready for what that might mean for them.

That hunch is driven by having multiple business leaders tell me that when they’ve shared their view that the U.S. government could easily slide into authoritarianism, the response from others was typically, “You’re overreacting.” I’ve heard that response as well. 

In his book, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail, Ray Dalio argues that it’s hard for many people to imagine a different type of government and economic system, both because they are preoccupied with their daily existence and because we’ve had our current system so long that it feels almost natural and inevitable. If you were born after 1965, you’ve lived your entire life in a full democracy and within the US-led global economic order.

But a broader perspective does not support the inevitability of this state. Dalio writes, “Anyone who studies history can see that no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.”

If leaders are overly focused on the near term and unimaginative about what the medium and long term could bring, they may not be adequately prepared for the kind of decisions they need to make.

For example, both the Republican and Democratic parties are considering holding conventions ahead of next year’s midterm elections. When the parties come calling for corporate donations, will it be enough to simply utilize the existing government relations strategy—often involving attempts to cultivate friendships with as many officials as possible—or will the moment require them to take sides under the threat of retaliation? I would bet that very few companies have even considered how they would make a decision in that higher-stakes scenario.

Similarly, in the last week, many companies fired employees who made public comments that appeared to have celebrated, or weren’t sufficiently mournful about, the murder of Charlie Kirk. But do companies have a policy or PR plan that governs when they’re asked to respond to an employee’s “controversial” statement, such as, “I don’t support the government’s latest policy”? Do they know where they would draw a line? Again, I doubt that many have considered that.

Even regular managers might have to decide how they’ll respond to a team member’s request to complete a major report a day late because they want to join a protest, or request to work from home because they believe it’s unsafe to travel across town (which happened in DC the last few weeks). All of us would be called to have a stance on issues like that—not just those in policy-making and strategy positions.

We may have views on policy questions, but very few of us have coherent views on democracy itself. 

***

One day, a couple of years ago, I looked out the window before leaving to pick up my kids from after-school care. When I saw the dark sky and the trees blowing in the wind, I knew it was about to rain. I didn’t even have to check the weather report.

My kids, however, had no clue. They could obviously see the same signals, but because they lacked the experience to sense the danger, they were ready to take the same playful and leisurely stroll home they always did. 

That’s how I’ve felt whenever hearing anyone who comes from an illiberal country (or whose family does) comment about what they’re seeing in the U.S. They see the rain immediately. 

I think the first implication is that leaders shouldn’t discount potential outcomes just because they seem far-fetched—since it may only be far-fetched based on our limited knowledge and first-hand experience. 

After November’s election, I shared stories of how my grandmother and grandfather’s families had to flee their Alabama towns because they couldn’t trust the rule of law in the 1920s and ’30s. When I first heard the story, it was a realization that my cursory understanding of the history was completely different from having the emotional experience of living through it. And even then, it required more reading of history to complete the picture. (I’ve included links to some of that reading through this post in case you’re interested.)

A related implication is that leaders probably shouldn’t be naively confident in U.S. institutions to maintain the current order. After all, we’ve only been a full democracy for 60 years, and there have been strands of illiberalism throughout. As Steven Hahn documents in Illiberal America, “Illiberalism’s history is America’s history.”

Finally, leaders should think imaginatively about the future. While I can draw parallels between recent events and those in other countries, my predictions about the future of our government are no more accurate than others. But purely as a matter of effective scenario planning and strategy, having an expansive view of what is possible is prudent. Leaders who are short-sighted are the ones who are more likely to be flat-footed when it really matters.