Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFLby Roger L. Martin
American capitalism is in dire straits, caught in a perilous pattern of increasing volatility, decreasing investor returns, and ongoing bad behavior by executives. And it’s getting worse. Since the turn of the twenty-first century, we’ve seen two massive value-destroying market meltdowns and a string of ethics breaches, including accounting scandals,… See more details below
American capitalism is in dire straits, caught in a perilous pattern of increasing volatility, decreasing investor returns, and ongoing bad behavior by executives. And it’s getting worse. Since the turn of the twenty-first century, we’ve seen two massive value-destroying market meltdowns and a string of ethics breaches, including accounting scandals, options-backdating schemes, and the subprime mortgage debacle.
Just what is going on here? Is it the inevitable decline of the American economy? Is it the new normal in a technology-enabled global marketplace? Or is it possible that the very theories we’ve embraced to underpin our capital markets are actually producing these crises?
In Fixing the Game, Roger Martin reveals the culprit behind the sorry state of American capitalism: our deep and abiding commitment to the idea that the purpose of the firm is to maximize shareholder value. This theory has led to a massive growth in stock-based compensation for executives and, through this, to a naive and wrongheaded linking of the real marketthe business of designing, making, and selling products and serviceswith the expectations marketthe business of trading stocks, options, and complex derivatives. Martin shows how this tight coupling has been engineered and lays out its results: a single-minded focus on the expectations market that will continue driving us from crisis to crisisunless we act now.
Using the National Football League as his primary example, Martin illustrates that it is possible to take a much more thoughtful and effective approach than we now do to the intersection of the real and the expectations markets and to governance in general in the capital markets. Martin shows how we can act to end the destructive cycle, including:
Restructuring executive compensation to focus entirely on the real market, not the expectations market
Rethinking the meaning of board governance and role of board members
Reining in the power of hedge funds and monopoly pension funds
Concise, hard-hitting, and entertaining, Fixing the Game advocates seizing American capitalism from the jaws of the expectations market and planting it firmly in the real marketand it presents the steps we must take now to do so.
“excellent book” The Guardian
“All business leaders, not just the one who wants to be chief executive of the “American company” should take notice.” “Professor Martin makes the point particularly vividly, observing that the way we currently reward corporate C.E.O.’s is roughly equivalent to rewarding football teams for exceeding expectations rather than winning games.” The New York Times Economix blog
"As Roger Martin details in his brilliant, Fixing the Game: Bubbles, Crashes, and What Capitalism can Learn From the NFL, CEO pay exploded when companies adopted reward systems based upon maximizing shareholder value.” Huffington Post
“what the reader gets in Fixing the Game is deeply thoughtful business commentary with an excellent marketing case study to boot, namely the NFL” Graziadio Business Review
“One of the few business school leaders to confront the disgrace of business leadership through the economic crisis, Martin is also a big football fan, and draws provocative lessons from his enthusiasm for the sport.” - CBS News
Named the Best Management Book of 2011 by strategy+business magazine
“Fixing the Game is a passionate, timely, and incisive look at how today’s capitalist system, with its commitment to shareholder value, is leading to bubbles and crashes. He presents some tough-minded solutions.” The Globe and Mail
“American capitalism hangs in the balance, writes Martin. His book gives a clear explanation as to why this is so and what should be done to save it.” “Brilliant new book ” - Forbes.com
“His conclusions have a global relevance” Financial Times
“recommend Roger Martin's new book, Fixing the Game, which explores the demands of Wall Street vs. the common sense decisions of Main Street Martin is clear where successful CEOs and their Boards need to focus -- and that's on the actual game on the real field, not the one played by the bookies.” Huffington Post
“very accessible text with suggestions for reform that will improve both authenticity and the bottom line.” - Publisher’s Weekly
“a lively, intricate but accessible argument, neatly stitched together with references to the NFL and other sports when analogies are helpful.” - Globe & Mail
“it often offers the additional feel-good fillip of a practical path toward improvement. It is a universe of engaging stories and ultimately uncontentious outcomes -- think the wildly popular oeuvre of Malcolm Gladwell.” - Reuters
“Roger Martin has written a book that is at once original, insightful, and inspirational. With his ‘tell-it-as-it-is’ bluntness, he chronicles the failures of modern-day capitalism and offers clear and realistic policy recommendations for ‘fixing the game’ and building a better world for investors. If you enjoy wit and seek wisdom, this is the book for you.”
John C. Bogle, founder and former chief, The Vanguard Group
“We’ve gone from an economy based on making things to one based on making things up. Wall Street has been remodeled as a casino in which the expectations market, reflected in stock prices, has become more important than the real market in which real factories are built, real products are developed and sold, and real dollars show up on the bottom line. Roger Martin offers a riveting account of how the expectations game is beginning to destroy the real game, threatening the future of American capitalism. Through his brilliant analysis of the NFL (which will entrance even those who don’t follow the market), he shows us how we can get back to the real game of building for the present and the future. Fixing the Game is a must-read for all who care about business being a positive agent for change in the world. And that should be all of us.”
Arianna Huffington, cofounder and Editor-in-Chief, The Huffington Post
“Fixing the Game is an essential book, one that should be read by leaders in the business community and financial regulators worldwide. Martin identifies the insidious trap that can so easily seduce entrepreneurs and CEOsthe temptation to simply trade value rather than create itand provides clear, compelling advice on how to keep focused on the real gameof creating and satisfying customers, running a business legally and ethically, and staying true to a well-thought-out ‘real-world’ strategy.”
Nandan Nilekani, Chairman, Unique Identification Authority of India, and former CEO, Infosys Technologies Limited
“Fixing the Game artfully links theory and practice, and reminds us that getting both right is important if we are going to fix capitalism. Roger Martin asks provocative questions about what constitutes good management, and forces the reader to consider the ways in which elegant logic or a compelling theory actually undermines commonsense business practice. And along the way he identifies changesin regulation, business, and governancethat will realign private incentives with the public good.”
Judith Samuelson, Executive Director, Business and Society Program, the Aspen Institute
- Harvard Business Review Press
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Meet the Author
Roger Martin is dean of the Rotman School of Management at the University of Toronto and a professor of strategic management at the school. He authored The Responsibility Virus, The Opposable Mind, The Design of Business and many articles in leading business publications including Harvard Business Review, BusinessWeek, Fast Company, and Barron's.
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Roger Martin (Dean, Rotman School of Management, The University of Toronto) has written an insightful and easily understood description of the problems with contemporary American capitalism. Martin's book is a must read for anyone who cares about the well-being of the American economic system and how Wall Street/hedge funds have virtually corrupted true American capitalism. Using management of the National Football League as a paradigm, Dean Martin describes the Agency Theory problems and suggest how the problems could be corrected. The central theme wending through the book is the notion of American companies not being focused on the real market of producing goods and services to satisfy customer needs and wants, but concentrating their energy on the expectation market of Wall Street/hedge funds and "maximizing" shareholder value. Martin, highlighting the threat to American capitalism from the expectation market, states: "... a real market orientation creates individual and societal good, while an expectations orientation creates a downward spiral that threatens both individual well-being and the health of our economy. American capitalism is in danger, and the danger stems directly from the way we have linked the real world to the expectations world [i.e., Wall Street and hedge fund casinos], amplifying the influence of the expectations market on the real market."
Roger L. Martin, dean of the University of Toronto’s Rotman School of Management and a life-long sports enthusiast, believes the 2008 mortgage meltdown was only the most recent crisis in the chronically ill US economy and that another setback is inevitable unless American business leaders change their approach. He traces the US economy’s problems to the mid-1970s, when corporate philosophy shifted from serving consumers to placating shareholders. He calls for a return to the old business model of paying executives based on real achievement not on meeting or missing projections. He cites the US National Football League (pre-referee strike) as the perfect illustration of how well a real-rewards model can work if executives put their customers first. “It isn’t about how profitable a company wants to be,” Martin says, “It is about in what way the company becomes profitable.” getAbstract believes that his playbook can help corporations get back in the game.
If you ever wondered exactly what seemed wrong with capitalism these days, why so many companies made so much money without actually making anything, this is the book for you.