A caffeine revolution stimulates ideas on ownership
Where beans were once counted, now they are ground and brewed. Mary Ellen and I were making our way through what had once been a bank but was now a gourmet coffee shop. We found a table and sat down.
'I have to write a paper on the relationship between owners and managers in modern corporations,' she said in response to my enquiry as to what she was up to. Mary Ellen was majoring in economics and business.
'And..?' I asked, not really expecting any new insights.
'And so far I've been researching the history. Now, as far as I see it, with the industrial revolution owners of businesses could no longer afford to finance investment in the new technologies from their own pockets. So they turned to the stock market and got the money they needed by inviting the public to become shareholders in their companies. Right?'
'Right.' I said, wondering from which textbook she had unearthed this gem of classical economic theory.
'And to diversify their risks, investors bought shares in lots of businesses, the result being that it was hard for them to become actively involved in the running of any one of them.'
'As technologies and corporate structures became more complex, so there was a need for more specialist managers, putting the running of the business increasingly beyond the understanding of the shareholders who owned it,' I added, wanting to bring this dissertation rapidly to an end. I had already stood through a lecture on the superiority of arabica over robusta from the young woman working the coffee machine. Having two doses of such wisdom regurgitated in the space of two minutes was proving too much.
'How's your coffee?' I asked with genuine interest. I had not previously had the pleasure of witnessing someone order a 'tall regular hazelnut macchiato'. The helpful leaflet available at the counter pointed you towards the correct pronunciation of 'mock-e-ah-to', if you were in any doubt.
'Great,' said Mary Ellen, taking a sip. 'How's yours?'
'Fine,' I said, having tasted my small espresso - or, I should say, 'espresso solo'. The young woman at the counter had politely, yet firmly, corrected me when I placed my order. 'In fact, it deserves rather better than a paper cup.'
At that point my diversionary tactic failed miserably and Mary Ellen went back to her main theme. 'So it was inevitable that the modern corporation should evolve with a large and dispersed group of owners who would have little or no control over the people managing the business,' she declared.
'Well, it wasn't exactly inevitable,' I said. 'What you call evolution was to a large extent shaped by legislation - for instance, the bar on banks holding shares in industrial companies. In other countries - Germany and Japan, for instance - where there is no such law, the way companies are financed, owned and controlled is different.'
'You're not saying their way is better, are you?'
'Not better, just different. And they've still managed to build some fairly successful global businesses.'
'But the free market is the best way to organise things in a liberal democracy. That's why the whole world is moving our way.' Mary Ellen must have been reading Francis Fukuyama.
'It's not free if public opinion forces politicians to intervene. The hostile takeover boom in the 1980s was partly an attempt by shareholders to confront the entrenched power of managers. But public opinion pushed politicians to pass laws which protected the managers.'
There was a sullen silence from across the table. 'Look,' I said, 'all I'm suggesting is that corporations should be free to choose the ownership structure which suits them best. Countries around the world can learn from America but America can learn from other countries, too.'
'But we do learn from other countries,' came the immediate response. 'Why else are we drinking gourmet coffee in an Italian style coffee house instead of the garbage they serve in your average deli?'
I wondered whether your average Italians would feel at home in the earnest air which pervaded the marbled splendours of this place. Might they not find a deli more authentic - even though the coffee was garbage and the only choice was between regular and decaf?
But I also wondered how well traditional bars would stand up to the competition when the gourmet coffee concept reached Milan. It was, after all, a brilliant package - an illusion of infinite choice created by a limited range of pre-programmed combinations served by pre- programmed employees. It was something which only America could have conceived and which - like McDonalds - could conquer the world.