Seth's Blog : The Drucker drift

The Drucker drift

Peter Drucker argued that the purpose of a corporation is to serve the customer. It turns out that organizations that focus on this do well.

Milton Friedman argued (mistakenly, in my view) that the corporation doesn’t need to care about customers, unless this helps increase the value of the company to shareholders.

Corporations are a cultural fiction, something we created and permit to exist because it serves the community. In exchange for leverage and insulation, the corporations are expected to be of use and to improve conditions for those they serve–not to be a tool to enrich a few shareholders.

As power becomes more concentrated and money becomes more leveraged, it’s easy to see how attractive it is to sell Friedman’s idea to people seeking a short-term profit.

As we drift away from Drucker’s point, though, we all suffer.

Financial engineering rarely builds value for the long run.