Management

Capitalism with a heart

/ Sayee Challapally / 3 Comments

Over the past few decades, it has been a globally well established fact that free market capitalism and globalization have given the world many benefits in terms of driving innovation and entrepreneurship, bringing new products and services to the market, fostering global competition, lifting millions of people from poverty and into the middle class, and generating wealth all around.

Yet, possibly as an unintended consequence and side-effect, we are undeniably seeing unprecedented levels of income and wealth inequality and also a growing trend of protectionism and nationalism worldwide, with many now, even questioning if free market capitalism can ever bridge the gap caused by rising inequality. What is more telling, is that this view is not just coming from the socialists or the so-called left, but even from those that have touted capitalism for long and have benefited from it.

 

 

I recently came across the views of three eminent people who have addressed this issue and I briefly list them below:

  1. Philip Kotler the renowned marketing and management guru wrote a book “Confronting Capitalism” in which he lists 14 shortcomings of capitalism as he sees them, and suggests several remedial strategies. He believes that “capitalism is better than any other system”, but advocates that we fix its shortcomings, to balance things up. I read this book and found it to be insightful to say the least. ( http://www.confrontingcapitalism.com )
  2. Raghuram Rajan, the Economics Professor at University of Chicago, former Chief Economist of IMF, and former Governor of the Reserve Bank of India, has recently published a book called “The Third Pillar – How Markets and the State Leave the Community Behind” in which he essentially says that capitalism may have done great things for the Markets and the State, but may have left out the third pillar the Community. From the sleeve notes on the book – “As markets scale up, the state scales up with it, concentrating economic and political power in flourishing central hubs and leaving the periphery to decompose, figuratively and even literally. Instead, Rajan offers a way to rethink the relationship between the market and civil society and argues for a return to strengthening and empowering local communities as an antidote to growing despair and unrest.” (https://www.penguinrandomhouse.com/books/566369/the-third-pillar-by-raghuram-rajan/9780525558316/ )
  3. Ray Dalio, the Founder and Chairman of Bridgewater Associates, one of the largest hedge funds in the world, and a man whose net worth is $16 Billion, wrote a two-part article recently titled “Why and How Capitalism Needs to be Reformed.” He too believes that “capitalism is a fundamentally sound system that is now not working well for the majority of people, so it must be reformed to provide many more equal opportunities and to be more productive.” I read this article and would suggest that those interested in this topic definitely read up his views. (https://economicprinciples.org/Why-and-How-Capitalism-Needs-To-Be-Reformed/?utm_medium=adwords&utm_source=GS&utm_content=341819909261&utm_campaign=60minutes-search) 

Whether one agrees with them or not, these three luminaries do make us pause and ponder over the issue. I guess there may be many more who concur with them in principle, even though they may differ on the details. To be clear, they are not advocating that capitalism be abandoned. They have just highlighted the flip side of it, and have voiced their educated opinions on how it may be addressed and reformed.

Perhaps just as everything in life is cyclical, a prolonged trend might invariably give rise to a diametrically opposite trend over time.  Perhaps it is time to not dwell only on one-sided views of capitalism, but to consider a balanced approach to chalk out a good path forward that consistently produces equitable growth to more people across the world. Perhaps it is time for capitalism with a heart.

 

 

Tennis – Player Compensation – Men Vs Women

/ Sayee Challapally / Leave a comment

On the eve of the men’s final at the French Open in Paris, where the reigning 10-time champion Rafael Nadal is slated to meet with Dominic Thiem, an interview that apparently Rafa gave to an Italian magazine, made news for a different reason.

When asked if men and women players should get equal pay, he replied: “It’s a comparison we shouldn’t even make. Female models earn more than male models and nobody says anything. Why? Because they have a larger following. In tennis too, who gathers a larger audience earns more,”

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This once again has triggered a longstanding debate in the tennis world, that has not yet found a way to solve this sticky conundrum. John McEnroe said something similar in the 80s, and so did Novak Djokovic last year.

At this issue’s core, are two important factors, one being the principle of “equal work, equal pay” and the other being the business model, where prize money is presumably being determined based on whether men or women players, are attracting larger crowds and revenues.

Some argue that since men play 5-set matches that are longer in duration (compared to the 3-set matches that women play), they are giving the fans, more tennis for their money, and therefore they invoke the ‘equal work, equal pay’ principle and insist that men should get paid more. “Let the women play 5-set matches and earn equal pay” goes their argument. Additionally, they also argue that since men’s tennis draws more fans, ticket sales, sponsors, and merchandise sales, they should naturally earn more. In their view, there is no gender discrimination, and they feel that this compensation model is the result of simple logic and math.

This debate nose-dived last year when Raymond Moore, the CEO of the BNP Paribas Open at Indian Wells in California, said that the women tennis players ride on the “coattails of the men” adding a comment saying “If I was a lady player, I’d go down every night on my knees and thank God that Roger Federer and Rafa Nadal were born, because they have carried this sport. They really have.” Needless to say, these controversial remarks caused quite an uproar and Raymond Moore apologized later. While many agree that the statement may have been in poor taste, some of them also feel that it probably reveals the harsh reality of the flow of money in the sport, which is perhaps directly responsible for the manner in which the players’ compensation is structured.

However, those who believe that women players should get equal pay, claim as they did in this Time magazine article, that women work just as hard as men, contest some myths about viewership and even claim that the women’s matches get more viewership than the men’s matches, compare the pay in Tennis with other sports that apparently pay men and women equally, and lament about the vicious cycle of various factors, that affect women’s sport in general, and make their case for equal pay in Tennis.

This issue has been a tough one to resolve for quite some time now. Men and women are equal and should be treated equally. There is also the hard reality of business, where money commands its own logic and dictates its own flow.

Tennis fans are hoping that players, sponsors, administrators and governing bodies, sit down together to discuss equitable compensation models and arrive at a win-win solution, that resolves this issue in the best possible manner.