‘Capitalism is like a wild river’

Jinoy Jose P | Updated on November 24, 2014 Published on November 23, 2014

Jagdish N Sheth

It needs to be tamed by the spirit of creating value for society, says thinker Jagdish N Sheth

In an academic career spanning over five decades, Jagdish N Sheth has written more than 40 books that have transformed the way companies, governments and consumers have gone about their affairs. In his most recent work — The Accidental Scholar (Sage India), his autobiography — Sheth recalls his extraordinary journey as a thought leader. In an e-interview with Business Line, he talks about life, work and business. Edited excerpts:

In his foreword to your autobiography, Philip Kotler tells us that you never wanted to be a pure theorist. Why?

All theories are contextual. For example, why do people in some countries drink as few as 64 bottles of Coca Cola per year while (in) other countries (they) drink as much as 400 bottles of the beverage? Two factors explain all the differences. They are climate and age. Thus, the lowest consumption is in Sweden and the highest is in Mexico. When the context changes, so do theories. For example, through space explorations, we are redefining the cosmos and revising the theory of relativity. Similarly, with new archaeological discoveries, we are revising our theories about human evolution. Finally, we are now experiencing the impact of the smartphones on several marketing theories related to advertising and communication.

Yes, and that seemed to have influenced how consumers behave as well — an area you have observed for decades.

It has become more and more personalised. Today, more families live as if they are roommates. I call it a Roommate Family. Nobody has time to do things together. Each one eats at different times and in the evening, each person is engaged in their own world whether it is television, social media or the internet. In short, the household as a unit of analysis is replaced with the individual consumer as a unit of analysis.

Second, today the focus has shifted from the buyer and the payer to the user. Therefore, customer experience matters most. As users, consumers are providing feedback in real time utilising the social media. The power has shifted from the marketer to the consumer. It is the consumer who is in charge of a company’s brand.

Consumers are becoming marketers and producers. Finally, consumers of today are more aware of global trends in fashion, foods and fun. There is increasing interest in the fusion of the East with the West in foods, music, arts, culture and spirituality. In India, the generation gap is now down to less than ten years. Today, the older sister is unable to relate to the younger sister.

How is technology disrupting marketing today?

Technology has always played a significant role in transforming the marketing function. Railroads and automobiles transformed the distribution function. Also, modern packaging and design transformed the brands and products.

However, nothing compares to the disruptive and transformative role played by smartphones and the internet. It is simply amazing to see how e-commerce companies such as Flipkart and Amazon have become much bigger, much faster than traditional retailers.

In fact, all four Ps of marketing (product, price, place and promotion) are radically impacted by the internet and mobile phones. The urban-rural divide in marketing is disappearing faster than we had imagined.

You end your autobiography by saying “making ordinary people extraordinary is the greatest purpose of life”. Do ordinary people have the opportunities?

They do have more opportunities today than ever before. The Grameen Bank in Bangladesh has proven that. With the mobile phones, the fisherman is able to disintermediate the middleman and is becoming a smart supplier.

Also, today’s youth are aspiring to become entrepreneurs and create ‘unprecedential’ wealth instead of settling for a corporate career with incremental promotion and seniority.

The real difference is not lack of opportunity. It is lack of initiative or entrepreneurship. Fortunately, in India we are blessed with entrepreneurs. In fact, most successful entrepreneurs are usually college dropouts and they are not suited to a corporate career.

But inequality is rising faster. Is there something inherently wrong about capitalism?

Inequality has increased dramatically because capitalism has been unbounded and is without checks and balances. We have generated more millionaires in the last two decades than in the last two centuries.

At the same time, the safety net for the working class is disappearing with budget cuts and reduction in social benefits such as healthcare and education. Raw capitalism has always resulted in market failures because it invariably results in economic bubbles whether it is for corn or real estate or stock markets.

Capitalism is like a wild river and can destroy the habitat if it is not tamed. It needs to be guided by something else such as purpose and giving back.

The old adage of “doing well by doing good” is never more appropriate than today. It is, therefore, not surprising to see influential economists such as Michael Porter advocating ‘shared value’ as a better purpose of capitalism than just shareholder value.

The US, to many, is the land of opportunities. Can India can become one?

It will require three things. First, we must encourage dignity of labour. It means as much respect for manual labour as for intellectual excellence. This will require social reform more than government policy.

Second, we must ignite entrepreneurship by creating the ecosystem in which entrepreneurs can survive and thrive. It means scaling the business through largescale science and technology parks. And, to some extent, we have done this in software services, cut diamonds and Bollywood films. We can do a lot more, however. Entrepreneurship is the real competitive advantage of a nation. It is highly valued and nurtured in the US in contrast with Japan and Korea.

Finally, we need to replace seniority with merit and nurture individual creativity and excellence by reducing bureaucracy and red tape, not just in the Government but also in educational institutions and public as well as private corporations.

The best way to flatten bureaucracy is computerisation and automation of processes and procedures.

Should the state invest more in education, or can the private sector do that?

In India, we have more theoretical education in science, technology, engineering and math (STEM). This has resulted in the employability gap between the graduates and the employers.

Therefore, the state must invest in technical and vocational education to become a global centre of excellence in manufacturing.We must encourage experimentation with diverse models of investing in education.

Fortunately, India has experimented more than most countries in higher education over the past six decades.

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Published on November 23, 2014
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