Monday, July 1, 09:00 - 10:30
Plenary I - Balmoral Hotel

Capabilities and the Wealth of Nations

Speaker: John Kay, Fellow in Economics, St John’s College, Oxford

Adam Smith began The Wealth of Nations with a description of a pin factory. Ten people, he explained, specialists organized in a linear production process, were far more productive than any single individual could be. Today we can manufacture an Airbus, with part of its fuselage produced by one firm in France, part by another in Germany, the wings manufactured in England, and the whole assembled via a complex logistics operation in a factory in Toulouse.

I will organize my explanation of this development around three themes: (i) the rise of collective intelligence, which means that, although no individual knows how to make an Airbus, 10,000 people working together do; (ii) the importance of evolutionary rationality—in which we discover what works—against the axiomatic rationality which continues to dominate the thinking of most economists; and (iii) the roles which markets, networks, and hierarchies together play in economic organization.

  • Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, UC Berkeley

  • Lady Lynn Forester de Rothschild, CEO, Coalition for Inclusive Capitalism and E.L. Rothschild LLC

  • Matthew Slaughter, Paul Danos Dean of Tuck School of Business, Dartmouth University

Monday, July 1, 11:00 - 12:30
Session 1 Panels

Panel 1A - Panmure House, Lecture Room

Other People’s Money: Corporate Governance and the Future of Capitalism

Chair: Arie Lewin: Professor Emeritus in Strategy and International Business, Duke University, Fuqua School of Business

Corporate governance practices are intended to align the interests of shareholders, other relevant stakeholders, and top management. Executives are sometimes motivated to maximize their personal wealth and income during the relatively short time they are on the top management team. How do boards design the incentives facing management, and to what extent do managers themselves influence the process? How do governance structures and practices impact the preferences of managers to embrace bold, long-term initiatives to create and capture value? How does this in turn impact the wealth/income gap between the top and median wage earner? What are the performance consequences of current models of governance in the US and UK versus other countries? Scandinavian countries have had a relatively small pay gap. But the gap has been rising. The gap in Germany has been rapidly rising in recent years. One moderating factor is the globalization of capital, which is perhaps why the social injustice debate has similarities across countries in spite of institutional differences. The panel will address these asymmetric consequences with a focus on several proposals for reforming corporate governance practices.

Panelists

  • Brian Cheffins, S.J. Berwin Professor of Corporate Law, Cambridge University

  • Till Talaulicar, Chaired Professor of Organization and Management, Vice Dean of the Faculty of Economics, Law and Social Sciences, University of Erfurt

  • Sarah Williamson, CEO, FCLTGlobal

Panel 1B - Panmure House, Reading Room

What We’ve Lost from Adam Smith and How the Economy Has Changed

Chair: Mary Morgan, Albert O. Hirschman Professor of History and Philosophy of Economics, London School of Economics

Adam Smith’s The Wealth of Nations may be one of the books that is now more often cited than read. It gives a nuanced view of global commerce and the then-newly emerging industrial sector. But it is too often claimed as a reference point for laissez-faire economic policy and rational-actor economics. Over the past twenty years, the economics discipline has again embraced a broader range of views with the mainstreaming of experimental economics and behavioral economics. But contemporary economics has yet to come to grips with Smith’s views on the motivations of people and groups. And, as a man of his time, Smith neglected the way differences of culture and institutions matter to how economic behaviors are patterned, and he paid relatively little attention to innovation.

Panelists

  • Christopher J. Berry, Honorary Professorial Research Fellow, School of Social & Political Sciences, University of Glasgow

  • John Kay, Fellow in Economics, St John’s College, Oxford

  • Neil Kay, Professorial Fellow at Edinburgh Business School, Heriot-Watt University; Emeritus Professor, Economics, University of Strathclyde, Glasgow

  • Franco Malerba, Professor of Applied Economics, Bocconi University, Milan

Panel 1C - Balmoral Hotel

How and Why Is Globalization Disaggregating in the World? A Look from China and Russia to the US and Europe

Chair: Orville Schell, Arthur Ross Director of the Center on US-China Relations, Asia Society

After several decades of blithely assuming that globalization was a global good, both authoritarian and liberal democratic societies are beginning to question that assumption by re-emphasizing sovereignty; fomenting populist nationalist movements; opposing further blurring of national boundaries; fighting against open emigration; erecting Internet firewalls; engaging in increasingly protectionist trade policies; and eschewing the greater integration of nation states into global organizations at the expense of perceived national interest. What has led to this inflection point? Are parts of this great disaggregation justified? What other parts of the existing global order should be maintained? And finally, is there any way to repair globalization as an acceptable concept by alleviating some of the inequities and contradictions that it ended up creating?

Panelists

  • Ann Harrison, Dean, Haas School of Business, UC Berkeley

  • Jeffrey A. Rosen, Deputy Chairman, Lazard

  • Peter Schwartz, Senior Vice President Strategic Planning, Salesforce, Inc.

  • Matthew Slaughter, Paul Danos Dean of the Tuck School of Business, Dartmouth University

Monday, July 1, 14:30 - 16:00
Session 2 Panels

Panel 2A - Panmure House, Lecture Room

Financialization of Corporate Resource Allocation and the Erosion of "Moral Sentiments"

Chair: William Lazonick, Emeritus Professor of Economics, University of Massachusetts; President, Academic-Industry Research Network; and Open Society Fellow

Business corporations are complex social organizations that invest in productive capabilities for the purpose of generating high-quality, low-cost (i.e., competitive) products. To achieve this innovative outcome, the corporation must engage employees in collective and cumulative learning processes, while mobilizing finance to sustain these processes. When innovation occurs, the business corporation should share the gains with its value-creating employees. In recent decades, however, in the name of maximizing shareholder value, business corporations have been distributing their profits almost entirely to shareholders, undermining their innovative capabilities while contributing to employment instability and income inequity. This panel will discuss why and how corporate financialization occurs and the transformation of social mores needed to restore innovative enterprise.

Panelists

  • Antonio Andreoni, Senior Lecturer in Economics, SOAS, University of London

  • Marie Carpenter, Professor of Strategy, Institut Mines-Télécom Business School

  • Steve Denning, Senior Contributor, Forbes; Author of The Age of Agile

  • Mathilde Mesnard, Deputy Director for Financial and Enterprise Affairs, OECD

Panel 2B - Panmure House, Reading Room

Open Society, Technology Misappropriation, and the Absence of "Impartial (Global) Spectators"

Chair: Bruce Guile, President, New Advisory Group

For Adam Smith, an Impartial Spectator can fully appreciate others' circumstances and approve or disapprove of their actions without basing it on the identities of the people involved. Can moral assessments be made across divergent forms of capitalism? An open society can encourage growth, but it also makes its intellectual property easier for others to “steal.” But is it stealing for a developing country to use technology perfected elsewhere, as the fledgling US did with British technology in the eighteenth century? Should other non-economic issues of privacy, control, and human rights be addressed as part of international commerce?

Panelists

  • Thomas Hazlett, Hugh H. Macaulay Endowed Professor of Economics, Clemson University

  • Adam Mossoff, Professor of Law, Antonin Scalia Law School, George Mason University

  • Christopher Yoo, John H. Chestnut Professor of Law, Communication, and Computer and Information Science; Director, Center for Technology, Innovation and Competition, University of Pennsylvania

Panel 2C - Balmoral Hotel

Productivity, Enterprise Development, and Dynamic Capabilities

Chair: Lord David Sainsbury, Former UK Minister of Science and Innovation

Adam Smith, in The Wealth of Nations, was one of the pioneers of what became the conventional theory of economic growth, focused on capital accumulation and efficiency. A more qualitative theory based on the productive capabilities of firms that takes innovation and competitive advantage as the foundation of growth may be more useful for explaining differences in growth among countries. For policymakers, the levers in standard growth theory are mostly limited to the tax system. By contrast, a capability/market opportunity approach opens additional avenues for government support for research, education, and training, and the reform of the governance of firms. In this panel, we explore some of the opportunities and challenges for growth-promoting policies as new technologies contribute to disruption on a global scale, and what implications such an approach has for WTO trade rules.

Panelists

  • Gordon Brown, Prime Minister of the United Kingdom, 2007-2010

  • Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, UC Berkeley

  • David Teece, Professor in Global Business, and Director, Tusher Center for the Management of Intellectual Capital, UC Berkeley

Monday, July 1, 16:15 - 17:15
Special Event – Panmure House, Reading Room

Author Talk: “Out of the Gobi: My Story of China and America,” by Weijian Shan, Group Chairman and CEO, PAG Asia Capital

Shan is a former hard laborer who became one of Asia's best-known financiers. His life is a microcosm of modern China and its cross-fertilization with America. This insider's account marries the immediacy of Shan's experiences with the informed analysis of a US-trained economist and accomplished investor to shed light on China's rise and its relationship with the US.

Born and raised in Beijing, Shan only finished elementary school when Mao Zedong's Cultural Revolution tore his country apart. He was a witness to the brutality and absurdity of Mao's policies during one of the most tumultuous eras in China's history. Exiled to the Gobi Desert at age fifteen, he spent his formative years doing hard labor. He returned to Beijing six years later, in time to witness Mao Zedong's death and the start of economic reforms that would transform China. Riding this new wave of openness, Shan became one of the first Chinese students in the US in the early 1980s. He went on to become a PhD candidate at the University of California, Berkeley, a professor at the Wharton School, and ultimately one of Asia's most respected investors.

Tuesday, July 2, 09:00 - 10:30
Plenary II - Balmoral Hotel

Capitalism, Socialism, and Democracy: Old Questions in a New Setting

Speaker: Niall Ferguson, Senior fellow, Hoover Institution, Stanford, and the Center for European Studies, Harvard

By the middle of the twentieth century, the demolition of Adam Smith's ideas seemed complete. In the wake of two world wars and a depression, free trade had ceased to exist. Markets were largely under state control. The Enlightenment vision of a harmonious relationship between the invisible hand of the market and the moral sentiments of the individual had been replaced by various models of centralized state control. In 1942, it seemed even to the conservative Joseph Schumpeter that capitalism was doomed and socialism likely to replace it. It took many decades of intellectual and political labor to prove him wrong. And yet, in the wake of the 2008-2009 financial crisis, we are witnessing another revival of socialism as a doctrine. Drawing on insights from his recent book The Square and the Tower, Niall Ferguson asks if the different circumstances created by advances in information technology have altered the landscape in favor of collectivist ideas. Or is a networked world best understood with the conceptual framework Adam Smith bequeathed us?

  • Harold James, Professor of History and International Affairs, and Claude and Lore Kelly Professor of European Studies, Princeton University

  • Orville Schell, Arthur Ross Director of the Center on US-China Relations, Asia Society

  • Peter Schwartz, Senior Vice President Strategic Planning, Salesforce, Inc.

Tuesday, July 2, 11:00 - 12:30
Session 3 Panels

Panel 3A - Panmure House, Lecture Room

What Do Business Interests Want in a New Global System?

Chair: Harry Broadman, Senior Fellow, International Economics, Johns Hopkins University

The world economy is beset by states who don’t “play well with others.” The successful formulation and execution of new rules for improved global economic governance will be a function of how well the constituencies to whom the rules apply—particularly businesses—see the rules as being consistent with their own objectives. Getting early buy-in from businesses (as well as labor and NGOs) has proved invaluable in negotiating sovereign trade agreements and investment treaties. Businesses in turn can play a critical role in encouraging recalcitrant states to agree to new rules. But businesses may increasingly have “divided loyalties.” Average real GDP growth in emerging markets has been consistently twice the rate in developed countries, leading developed-country multinationals in search of new growth opportunities to become embedded in emerging markets. Much more than in the last century, their interests lie in their host as well as in their home countries.

Panelists

  • Colin C. Blaydon, William and Josephine Buchanan Professor of Management, Emeritus, Tuck School of Business, Dartmouth University

  • Jeffrey A. Rosen, Deputy Chairman, Lazard

  • Don Rosenberg, General Counsel, Qualcomm

  • Joanna Shelton, Faculty Affiliate, Department of Economics, University of Montana; Former Deputy Secretary General, OECD

Panel 3B - Panmure House, Reading Room

Entrepreneurship and Innovation in an Age of Uncertainty

Chair: Peter G. Klein, W. W. Caruth Endowed Chair and Professor of Entrepreneurship, Baylor University

For a long time, the innovation value chain was becoming increasingly dispersed as multinational corporations placed R&D at offshore locations, and innovation alliances and markets for technology were booming. Simultaneously, many countries were investing heavily in national entrepreneurship and innovation initiatives. Can the push for a more dynamic global economy be maintained in an era of increasing regulation, economic nationalism, and turbulent international relations?

Panelists

  • Benito Arruñada, Professor of Business Organization, Pompeu Fabra University

  • Jay Barney, Presidential Professor of Strategic Management; Lassonde Chair of Social Entrepreneurship, David Eccles School of Business, University of Utah

  • Gary Pisano, Harry E. Figgie Professor of Business Administration and Senior Associate Dean for Faculty Development, Harvard Business School

  • Todd Zenger, N. Eldon Tanner Presidential Professor in Strategy and Strategic Leadership; Chair of Department of Entrepreneurship and Strategy, David Eccles School of Business, University of Utah

Panel 3C - Balmoral Hotel

Capital Markets, Managerial Behavior, and Short-Term Incentives

Chair: Sarah Williamson, CEO, FCLTGlobal

The finance sector has transformed itself from its traditional role connecting investors with productive activity to encompass trading and other activities that generate short-term gains and fees. The challenge of maximizing long-term shareholder value for pension and mutual funds is significant when investment firms that control these large pools of capital play only a passive role as company "owners." While this system generated enormous wealth in the finance sector, it has created problems in the productive economy which is seeing greater concentration of firm size and fewer listings by startups. Brilliant minds are drawn into the expanding financial sector and away from real-economy jobs. Managers in real-economy firms are rewarded extravagantly for meeting a series of short-term targets even if the long-term health of a company is impaired. Cuts in research spending are too often rewarded as evidence of efficiency, and innovation activities are increasingly geared toward short-term applications. The system has created dangerous imbalances that are contributing to political upheaval among western democracies, which now must also contend with new firms emerging from China's social market economy. Can capitalism be saved from itself?

Panelists

  • Brad Cornell, Emeritus Professor of Finance, UCLA Anderson School of Management

  • George Feiger, Executive Dean, Aston Business School, Birmingham (UK)

  • Lady Lynn Forester de Rothschild, CEO, Coalition for Inclusive Capitalism and E.L. Rothschild LLC

  • Weijian Shan, Group Chairman and CEO, PAG Asia Capital

Tuesday, July 2, 14:30 – 16:15
Closing Plenary – Balmoral Hotel

Reflections on the Conference and Actions Needed Now

Chair: David Teece, Professor in Global Business and Director, Tusher Center for the Management of Intellectual Capital, UC Berkeley

  • Jay Barney, Presidential Professor of Strategic Management; Lassonde Chair of Social Entrepreneurship, David Eccles School of Business, University of Utah

  • Niall Ferguson, Senior Fellow, Hoover Institution, Stanford, and Center for European Studies, Harvard

  • Ann Harrison, Dean, Haas School of Business, UC Berkeley

  • Harold James, Professor of History and International Affairs, and Claude and Lore Kelly Professor of European Studies, Princeton University

  • John Kay, Fellow in Economics, St John’s College, Oxford

  • Heather McGregor, Executive Dean, Edinburgh Business School

  • Orville Schell, Arthur Ross Director of the Center on US-China Relations, Asia Society

  • Weijian Shan, Group Chairman and CEO, PAG Asia Capital