June 23, 2014

1375 words 7 mins read

How Crony Capitalism Spreads Bureaucracy

St. Louisan Eric Greitens did more before graduating from college than most people do in a lifetime. And, as if to insult us all, after college, Eric became a Navy SEAL.

In his remarkable book, The Heart and the Fist: The education of a humanitarian, the making of a Navy SEAL

, Greitens tells the story of a man who seems too good to be true. Seriously. And the book left me with two big impressions–probably the wrong ones, but that’s how I am.

What Is a Humanitarian Warrior?

Before fighting in Afghanistan and Iraq, Greitens (like “brightens” with a “g”) performed humanitarian work in Bosnia, Rwanda, and Bolivia. He boxed at Duke University and won boxing championships for Oxford during his time as a Rhodes scholar.

By age 25, Greitens built a resume that puts most people’s to shame. Then he really got to work.

In his humanitarian work, which continued during his years at Oxford, Greitens recognized that handing out food after human barbarism isn’t enough.

Nations are not parents to the world’s people . Yet the basic fact remains: we live in a world marked by violence, and if we want to protect others, we sometimes have to be willing to fight. We all understand at the most basic level that caring requires strength as well as compassion.

Today, Greitens runs The Mission Continues, a non-profit that helps post-911 veterans adjust to civilian life by demanding more of the veterans, not less.

Like Viktor Frankl, Greitens recognizes the need for purpose in life.

In addition to “Thank you,” they also had to hear , “We still need you.” They had to know that we viewed them not as problems, but as assets; that we saw them not as weak, but as strong . They had to know that we were glad they were home , that we needed their strength here at home, that we needed them to continue to serve here at home.

It’s no wonder that Time Magazine picked Eric Greitens as one of the 100 Most Influential people on earth.

How Do You Bureaucratize Business?

I’ve been out of the Navy since 1994. Or 1997, if you count my reserve time. I’d almost forgotten how infuriatingly cautious and wasteful the Department of Defense can be. Greitens reminded me.

Many great people and great warriors work in the Department of Defense, but too often, men and women dressed in camouflage sit at computers alongside civilian contractors and send e-mails and reports and briefs in circles around what is the largest and often one of the most risk-averse, uncreative, inefficient bureaucracies in the world.

Of course, Greitens never worked for a big corporation. Or a small one that wanted to look big.

In my 20 years working the private sector, I’ve noticed that small and midsize companies that sell mostly to other companies come to resemble their largest customers. I noticed this at a small software company in the late 1990s. After we landed a deal with SBC, then the country’s second largest local phone company, we reorganized into a mini version of that behemoth. We complicated our organization chart and added new layers of management. We instilled inefficiencies and risk-aversion to impress the client.

It didn’t work.

After we reorganized to look like SBC, we lost the SBC business. We had become as slow and awkward and unresponsive as the SBC division we were supposed to replace. Before we reorganized to look like SBC, that small software company had been the fastest-growing company in its field. Only four years later, it folded.

I’ve seen a similar pattern in other companies, both as an employee and as a consultant. And I’ve seen the consequences.

The more a vendor resembles the client, the less value the vendor delivers. Companies outsource certain products and services for a reason: client companies recognize that smaller companies can run circles around larger companies in particular areas. A small ad agency can produce and launch a great new campaign in less time than it takes a big company to call a meeting to plan its meetings.

Greitens described the frustration of working for a bureaucracy:

I knew that we weren’t going to change the world buying a few bags of fruit, but the risk-averse mindset of much of the military bureaucracy can often prevent leaders from taking even small commonsense steps.

Pay attention to Greitens' use of the word “leaders.”

As a Navy SEAL, Greitens learned that you can’t always wait for orders. You can’t wait for some desk jockey to substitute his guess for yours. Leadership means taking appropriate action.

In The Heart and the Fist

, Greitens describes how he watched the US destroy its credibility with the people and local government in Kenya because no one from the President on down had the guts to order the removal of a forklift the Navy got stuck on a boat ramp. The ramp was critical for launching and recovering small boats. Kenyans in the area depended on those boats for essential goods and services, but a screw-up by a Navy contractor put the ramp out of service for months. Everyone knew how to fix the problem, but no one wanted to take responsibility.

It became clear that no one had actually ordered us to leave the forklift in the bay. Instead, what had happened was that people had started asking for permission to move the forklift, and then a few dozen e-mails bounced from Manda Bay to Nairobi, to Bahrain to D.C. to San Diego to Djibouti, and back to Manda Bay, but everyone was waiting for permission from someone else.

I drove back to see the captain again. “Sir, this forklift has been an issue for you for far too long. So let’s get it out of your port.”

“So, we can move it?”

“Yes sir, feel free to move it as you see best, and of course my men and I will help you to move it, if you’d like for us to do so. And this, sir, is for you.”

That’s leadership.

When I complain about lack of decision-making among today’s MBA business executives, my wise boss points to the turning point: when the World War II guys retired.

In a major war, the troops-to-bureaucrat ratio skyrockets compared to peace time. And troops at war have one goal: get home. They learn to make decisions and act on those decisions. They prepare best they can, then act.

I agree that the military (outside the Pentagon) prepares leaders for decisive action, but I think there’s something larger at play here–something learned from the Zelig-like behavior of some small and medium companies.

What If Government Is The Only Customer?

If I’m right about companies morphing into miniature versions of the bureaucratic, risk-averse customers they sell to, then it makes sense that companies of all sizes would begin to resemble government–the most risk-averse, inefficient, wasteful entity on earth.

In healthcare, for instance, government is now the only customer. Private healthcare companies will quickly reorganize themselves to mimic the Veterans' Administration–with predictably deadly results.

In the fascist states of the 20th century, the line between government and corporations wore remarkably thin. Pharmaceutical giant Bayer, for example, used concentration camp victims for human drug experiments.

As crony capitalism infects more of the US economy, companies large and small will continue to become less efficient, more regulated, more afraid of change, more resistant to innovation, and more willing to let government dictate its practices.

One reason I left the Navy was because I was tired of the bureaucratic nonsense that thwarts innovation. That’s why I spend so much time warning about crony capitalism. No one wants bureaucracy to become the national pastime.

Except the government.

More about Eric Greitens

The Manhattan Institute for Social Entrepreneurship recognized him as one of the five leading social entrepreneurs in America. Major League Baseball and PEOPLE Magazine named Eric an “All-Star Among Us”, and the National Conference on Citizenship named him its “Citizen Soldier of the Year”. In 2008 the President personally presented Eric with the President’s Volunteer Service Award, and in 2012 Eric was awarded the Charles Bronfman Prize, recognizing his inspiring national and global leadership.

Read all about Eric at The Mission Continues.