As large manufacturers pull back from China, is their economy in for a world of hurt? Are ESG and DEI efforts just viewed as PR efforts? And how does Adi Ignatius, Editor in Chief of The Harvard Business Review Group, handle extreme pressure to run politically divisive and extreme opinion articles?
In his role at Harvard Business Review Group, Ignatius oversees the magazine, book publishing, website, and all media efforts. It’s the most respected business publication, arguably in the world.
Will manufacturing reduction out of China crush their economy?
“A real decoupling will be difficult for everybody,” Ignatius said. “Remember, Apple is moving some of its manufacturing out of China. Not that long ago, I spoke with someone at Microsoft about the VR headsets they produce, and they said we couldn’t pull it out of China. There’s nowhere else we could make it.” Smart companies are looking for options and it will hurt the Chinese economy, but it will hurt the US economy too, so Ignatius says it’s still important for both countries to find a middle ground. He’s hopeful. He does believe China wants to move away from uncomfortable relations with the US.
“My theory is, every action has an equal and opposite reaction. The more Xi Jinping tries to control things, at some point it’s going to blow up,” he said. “Remember that there is a whole China out there, and a whole Chinese economy, and Chinese businesses and Chinese people to engage with who aren’t just Xi Jinping and we should watch how they respond to some of the pressures.” At the end of the day, however, Ignatius does signal that American and European companies should diversify “If they’re not looking at alternatives. If they’re not looking to diversify their markets and their supply chain, they’re reckless at this point.”
Is it even possible to manufacture close to the markets companies are in? Ignatius says it’s certainly a trend, but not all industries can pull this off. For now, at least not 100%. There are alternatives, companies like Thailand and Vietnam. India and Indonesia are catching up, but the Chinese market is really good at luxury goods.
Capitalism: Fixing the system
There’s an internal term at HBR called “fixing the system” that came out of the 2008 recession. “That was, I think, a turning point moment where, even those of us who are committed capitalists and believed in market solutions really felt the system was severely broken and that it was time to start thinking about alternatives. Not alternative to capitalism, but alternative approaches to capitalism.” Ignatius said.
There’s a big divergence Ignatius is seeing in the generations. Older generations have an attitude of obvious acceptance, but younger generations are questioning capitalism on a deeper level. “I do think there are debates coming, that people of my generation might not be prepared for. There could be more broad questioning.”
Ignatius is primarily interested in watching the disruption of shareholder capitalism and has been watching the trend of stakeholder capitalism. Instead of pleasing just shareholders, customers, and employees are also thrown into the mix. “I think we’re at a period now where few people are satisfied with that. That can’t be the answer, just maximize short-term shareholder wealth, and everything else will take care of itself. We’ve seen it. It hasn’t.” He said. “So we’re in this period where we’re sort of trying to redefine what the next 50 years will be.”
He says we are in a major tectonic shift of capitalism. But is this a new shift? Howard Schultz previously spoke of stakeholder capitalism and fighting for health coverage for part-time workers before “stakeholder capitalism” was a thing. Perhaps capitalism isn’t broken, but many of us have fallen for a cheap knockoff.
Adi Ignatius, The Harvard Business Review Group
Adi Ignatius, Editor in also spoke about the following.
- The role of Government in supporting capitalism.
- How the SEC may need to be fixed.
- The pressure he faces on extremely partisan topics.
- How accounting negatively impacts investment in people.
- The ESG system is a mess right now.
- Companies using DEI as a PR tool, but not doing anything.
- Challenges with the new hybrid work environment.
- SDG Failure