The Year's Best Business Books
The image of a light bulb switching on over someone's head is synonymous with a good thing. But these days, a smart idea could mean the birth of a disruptive technology -- and possibly the end of your job. Whether for good or ill, ideas and innovation are key themes in most of the top 10 business books of 2003 as selected by BusinessWeek reviewers.
In his 1997 The Innovator's Dilemma, Clayton M. Christensen described how innovation in the hands of an upstart can roil an entire industry and doom venerable companies. Now, however, Christensen and Michael E. Raynor of Deloitte Consulting have penned a defensive strategy for the Establishment. The Innovator's Solution: Creating and Sustaining Successful Growth (Harvard Business School) makes a case that the big guys can defy the odds provided they offer disruptive new products of their own. This is less a how-to book than a how-to-think book, noted reviewer Robert D. Hof: The authors offer approaches for treating innovations in a new way -- transforming ideas or technologies into products that completely change the game, capturing customers, and yielding higher growth. "Its clear-eyed advice comes at just the right moment for an economy still struggling to recover," Hof observed.
Was there ever a more disruptive innovator than Henry Ford? Douglas Brinkley's Wheels for the World: Henry Ford, His Company, and a Century of Progress (Viking) offers "a comprehensive and briskly paced account of the man, the machines, and the company that dramatically influenced the course of 20th century America," reflected Detroit Bureau Chief Kathleen Kerwin. Brinkley, author of many biographies and editor of American History magazine, devotes roughly 500 of this book's 858 pages to the company's contradictory patriarch -- the pacifist who waged war on unions, the anti-Semite who treated African American workers better than did many other employers. The volume also chronicles Henry Ford II's efforts to revive the carmaker from its mid-century doldrums and describes such automotive successes and flops as the Thunderbird, the Mustang, and the Edsel. Talks with contemporary players, including current Ford Motor Co. (F ) CEO William C. Ford Jr., enliven the later chapters.
Another pioneer of capitalism is profiled in The Maverick and His Machine: Thomas Watson, Sr., and the Making of IBM (Wiley) by USA Today reporter Kevin Maney. The author is the first to gain access to the voluminous Watson papers in IBM's (IBM ) archives. Using these, said reviewer Spencer E. Ante, Maney has crafted "a timely and authoritative biography" of the industrialist who transformed a nearly bankrupt seller of scales and time clocks, Computing-Tabulating-Recording Co., into an institution that changed the world. Key to IBM's success was its creation and acquisition of patents on tabulating systems. However, Maney argues that Watson's greatest achievement was discovering the power of corporate culture -- a culture, in this case, that motivated employees and inspired lifelong loyalty. The Maverick and His Machine also recounts the rise of Thomas Watson Jr., who led IBM to create the powerful 702 computer.
A "quirky Victorian invention that changed the world" is the subject of The Company: A Short History of a Revolutionary Idea (Modern Library) by John Micklethwait and Adrian Wooldridge, both of The Economist. The authors trace the emergence of this institution from precursors in ancient Greece and Rome, through Britain's essential Joint Stock Companies Act of 1862, and on to today's multinational behemoths. They consider speculative stock busts in early 18th century Europe, America's Robber Baron era, the rise of Organization Man, and Japan Inc. They describe foes from centuries back, such as English jurist Sir Edward Coke, who in 1612 complained that corporations "have no souls." And they cover all this territory in little more than 200 pages of often-humorous prose. "If The Company has a shortcoming, it is that it is too short," said reviewer Michael Arndt.
Daniel Okrent's Great Fortune: The Epic of Rockefeller Center (Viking) considers a capitalist success story from the darkest years of the Great Depression. The 15-building complex in the heart of Manhattan was the pet project of John D. Rockefeller Jr., the mild-mannered son of the creator of Standard Oil. Initially, it seemed a folly: It was launched on the eve of the 1929 stock market crash and was at first derided by architectural critics. However, by 1939 the partially completed development had won wide acclaim and become New York's biggest tourist attraction. It also proved a business triumph, as its 1989 sale for $846 million attested. Okrent's volume is peopled with many fascinating personalities, and even familiar parts of the tale are rendered with precision and style. "As narrative history, Great Fortune is compelling," concluded reviewer Anthony Bianco.
Corporate skulduggery is the subject of The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio) by Bethany McLean and Peter Elkind, both of Fortune. Drawing upon hundreds of interviews and details from personal calendars, performance reviews, e-mails, and other documents, the authors liken Enron Corp.'s (ENRNQ ) rapacious traders to "a powerful high school clique that terrorizes even the principal." But McLean and Elkind make it clear that CEO Jeffrey K. Skilling and Chairman Kenneth L. Lay are hardly exempt from blame. Of particular note are the authors' explanations of Enron's accounting sleights of hand, including the "prepays" that obscured the company's true cash flow and the "special purpose entities" used to mask its deteriorating finances. It's "the best book about the Enron debacle to date," found reviewer Wendy Zellner.
The boom years were far from all bad, though. Among positive developments was the extension of stock options to a broader pool of workers, say authors Joseph Blasi, Douglas Kruse, and Aaron Bernstein, a BusinessWeek senior writer. In The Company of Owners: The Truth About Stock Options (and Why Every Employee Should Have Them) (Basic Books) argues that executive option packages are bloated and that "there's little proof that companies perform better as a result." On the other hand, they say, when stock options are widely distributed, a company's productivity rises on average by four percentage points, and total shareholder returns go up by two percentage points. The authors base these assertions on their own in-depth research of practices in Silicon Valley and on evidence from numerous economic studies done on the subject over the past two decades.
In an Uncertain World: Tough Choices from Wall Street to Washington (Random House) recounts the life of former Treasury Secretary Robert Rubin, from his New York childhood through Ivy League schooling, years at Goldman, Sachs & Co., and tenure in Washington. The volume considers a number of highly topical issues -- notably the management of global economic crises and of ballooning federal budget deficits. Rubin and co-author Jacob Weisberg tell how freshly elected President Bill Clinton inherited "an unsound and worsening fiscal situation." The challenge was how to halve the government deficit, as Clinton had pledged, while implementing numerous costly programs. The authors describe the policy discussions that made a priority of deficit reduction, which had the effect of lowering interest rates -- a combination that was key to "the sustained, robust recovery of the 1990s," says Rubin. The book also weighs current developments, including President Bush's tax cuts and the projected 10-year deficit of $5.5 trillion.
Is the middle class imperiled? In The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (Basic Books), Harvard Law School professor Elizabeth Warren and former McKinsey & Co. consultant Amelia Warren Tyagi observe that personal bankruptcies are hitting record highs -- 1.5 million people this year -- and that 90% of those who now file qualify as middle class. What's going on -- too much shopping? No, say the duo: The culprit is the decline of public education, which has raised the price of housing in good school districts, prompting parents to overstretch on mortgages. Reviewer Michelle Conlin called the volume "a grenade of a book exquisitely lobbed at the overconsumption theory."
Finally, Yale University economist Robert J. Shiller offers a blueprint to remedy a range of potential economic ills. The New Financial Order: Risk in the 21st Century (Princeton) proposes nothing less than "a redesign of the world financial system," found reviewer Peter Coy. The book suggests that people today have no defense against some of the biggest dangers they face: One might, for example, choose a profession that is made obsolete by technological change. Needed, says Shiller, are new risk-sharing mechanisms that will save people from "gratuitous, random, and painful inequality" while giving them the confidence to take chances that could benefit society. Among his solutions is "livelihood insurance," or policies that pay off if a bet on a pioneering career fails to work out. And countries might strike risk-sharing pacts under which nations that fare better than expected pay those that do worse. Bold ideas, to be sure -- and maybe just the thing to stimulate that gray matter during the New Year.
Compiled by Hardy Green