The Creation of Modern Capitalism Essay Example | Topics and Well Written Essays - 3750 words

The Creation of Modern Capitalism - Essay Example We are now in the early stages of such a revolution, the transformation toward sustainable development. Most large corporations developed in an era of abundant raw materials, cheap energy, and limitless sinks for waste disposal. While successful in reestablishing the legitimacy of an industry under tremendous public pressure, Responsible Care has failed to address the fundamental underlying problems associated with the chemical industry; many of its products and processes are highly toxic, resource intensive, and continue to place enormous pressures on air and water resources. (Abernathy, 1978, 41) As the corporation ages, the bureaucracy begins to settle in. Passions cool and are replaced by "rational decision making," often simply the codification of what has worked in the past. Data are gathered, analysis is performed, alternatives are postulated, and scenarios are developed. Attempts are made to avoid the game of information sculpting. Only when rational decision making is in vogue does all the relevant information flow to the right decision maker, at the right time, and in the right form to be easily analyzed and interpreted. Rational decision making is triumphant, at least for a while. This stage is often pictured as the normal state of the corporation, although in our experience, particularly as the pace of change increases, rarely does this ideal state accurately describe how the company actually operates. Eventually, rational decision making reveals that the future potential of the business is limited. Often, at this point, threatened by the prospect of a bleak future, the corporation falls back on defensive routines to protect the organization from its fate, just as defensive emotions emerge in our lives when we sense impending trauma. Management now sees the future filled more with trouble than with promise. Decisions are made to protect existing businesses. The fear of discarding the old for the new (product cannibalization), the fear of channel conflict, and the fear of earnings dilution through acquisition paralyze acts of creative destruction and often effectively shield the corporation from the perception of future trouble--as well as the need to act--for a long time. Cultural lock-in is established, thwarting the emergence of a leader or team that might save the day. The causes of cultural lock-in Why does cultural lock-in occur The heart of the problem is the formation of hidden sets of rules, or mental models, that once formed are extremely difficult to change. Mental models are the core concepts of the corporation, the beliefs and assumptions, the cause-and-effect relationships, the guidelines for interpreting language and signals, the stories repeated within the corporate walls. Charlie Munger, a longtime friend of and co-investor with Warren Buffett and vice chairman of Berkshire Hathaway, calls mental models the "theoretical frameworks that help investors better understand the world." Mental models are invisible in the corporation. They are neither explicit nor