Goodbye to capitalism. Hello, people power

From a speech delivered by the chairman of Reed Executive, Alec Reed, to Royal Holloway College, in London

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It is people, not capital, that is the most important factor of production. It has been my experience of management that a new leadership style is launched every week, with consultants generously donating copies of their "revolutionary" book to business clients in order that it appear a bestseller. I have been in the business of management for over four decades, and my only business mantra is: "What the hell's going on?"

It is people, not capital, that is the most important factor of production. It has been my experience of management that a new leadership style is launched every week, with consultants generously donating copies of their "revolutionary" book to business clients in order that it appear a bestseller. I have been in the business of management for over four decades, and my only business mantra is: "What the hell's going on?"

I ask myself this several times a day. No gimmicks required, just an awareness of what the hell is happening. So what the hell is going on? The world has gone mad. Michael Jordan makes more money from Nike annually than the 30,000 Nike workers in Indonesia, Singapore has a higher average income than the UK, and seemingly unshakeable institutions such as Marks & Spencer are falling apart before our eyes.

There is over-supply of just about everything, with practically all goods and services available in abundance. Over-supply leads to commoditisation, and in a commoditised market, the only determinant is price. Where there is surplus supply, prices must be reduced to woo demand, diminishing margins. The only long-term defence against the erosion of margins is to try to impress consumers with innovative products and services, or by offering "added value". This means employing creative people. Creative people are expensive. Margins are further reduced. You have only to look at the results of brand names such as Coca-Cola, Disney and Unilever to see evidence of this.

It's all about creativity, and creativity kills brands. As consumers are able to access increasing amounts of information, brands have to forfeit massive margins to retain market share, pumping vast amounts into aggressive advertising campaigns to tempt an increasingly aware, and resilient, market.

Capital is not creative. People are. At least, some people are. And these people are the determining factor of success. Look at Natwest and Marks & Spencer - plenty of capital, good market share and instantly recognisable brands, but without creative people at the helm they have suffered disastrous results.

I believe that "peopleism" is the third economic revolution. The first was the agricultural revolution, where land was of prime importance, capital was of some importance, and labour was easily replaceable. Then came the Industrial Revolution, where land became less important, capital was extremely important and labour was gaining in significance.

Now, we have the peopleist revolution. Land is almost irrelevant; you can make millions conducting business from a mobile phone in Starbucks. Capital is less important, as it is readily available and therefore offers little competitive advantage. It is people who determine the success of any business or venture. One consequence of this is that traditional accounting reporting methods have been rendered obsolete. In our fast-moving, innovative economy, they are both painfully slow and ridiculously rigid, unable to represent the crucial value of people or recognise the value of investment in intangibles. Hold the celebrations: peopleism does have its drawbacks. It is fast, loose and fancy-free. We work where we want, for whom we want, when we want.

Capitalism tolerated a discriminatory recruitment pecking-order that descended from the white male middle-class to the disabled and ethnic minorities. In the new society, however, individuals are so fundamental to the success of business that the only determinant for an employer is their economic talent. In reality, peopleism will be no kinder than capitalism. While it eliminates traditional discriminatory prejudices, it still discriminates none the less against those who cannot transfer their talent between jobs, or who have little economic talent to begin with. Peopleism is set to change the economic landscape.

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