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strategy and business
 / Fall 2003 / Issue 32(originally published by Booz & Company)


John Kay: The Thought Leader Interview

The controversial U.K. economist dismantles four myths about the American business model.

Photograph by Julian Anderson
George Bernard Shaw observed that if all the world’s economists were laid end to end, they still wouldn’t reach a conclusion. Although the line sums up a popular view of the dismal science, an enormous swath of business theory and practice is rooted in economics.

John Kay personifies the bridge between theory and practice. One of the U.K.’s most prominent economists, he is a prolific writer, a business consultant, and a one-time business-school dean whose work encompasses both business strategy and public policy. Mr. Kay is no stranger to conclusions, or to controversy. Management as an academic discipline, he argues, is still in its infancy. In terms of scientific rigor, it is at the same stage of development as medicine was in the Middle Ages.

Mr. Kay’s most recent book, The Truth about Markets: Their Genius, Their Limits, Their Follies (Penguin, 2003), argues forcefully that there is no single economic or corporate blueprint for success. Following the fall of the Berlin Wall, the industrialized West came to believe that the triumph of capitalism was complete. History was over, and the American business model was victorious. That view of the workings of a market economy system is, Mr. Kay contends, a caricature of capitalism, a simplification of the American business model that was based on an ideology of market fundamentalism. Not only was it a false description of how the U.S. economy functions, but its prescriptions have actually damaged business and markets around the world.

Mr. Kay’s arguments do not emerge solely from the cloistered tower; he boasts a proven commercial track record. Elected a fellow of St. John’s College, Oxford, at the age of 21, he went on to hold professorships at both London Business School and Oxford University. He was also the first (and only) professor of management to receive the academic distinction of Fellowship of the British Academy. In 1986, he founded the consulting firm London Economics, and was executive chairman until 1996. During that time, the firm grew into Britain’s largest independent economic consultancy, with annual revenues of $15 million and offices in London, Boston, and Melbourne.

In 1996, Mr. Kay became the first director of Oxford University’s newly created Saïd Business School — an appointment he saw as an opportunity to raise the profile and academic standing of management in the U.K. But just three years later, Mr. Kay resigned in frustration, citing the university’s archaic decision-making processes. “The opportunity to create a business school in Oxford is fabulous,” he says of his move and the ensuing controversy. “But people need to be allowed to get on and do it. It’s very hard to imagine an institution that essentially has no decision-making processes at all. What exists instead is simply a set of vehicles for evading decisions and avoiding choices.”

Since then, Mr. Kay has concentrated on his writing, including a regular column for the Financial Times. In The Truth about Markets, which he began writing around the time he left Oxford, Mr. Kay argues that the strengths of markets are rooted in context — especially a nation’s financial and legal institutions and business infrastructure. The U.S. economy has evolved over more than two centuries and cannot be replicated, he believes. There are no universal blueprints for success for nations or organizations. Neither the U.S. economic model nor the U.S. business model, he says, can be transplanted successfully into other countries.

The implications are profound. What works in the U.S. context, Mr. Kay asserts, will not work in India or China — just as what works at General Electric will not work at IBM.

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