Rethinking Pension Fund Investing: The Journey Continues

“A central thesis of this book is that business has evolved, but that the language that is widely used to describe it, has not.”

“The modern business environment is characterized by ‘radical uncertainty’. It can be navigated only by assembling the collective knowledge of many individuals and by developing collective intelligence…a problem-solving capability which distinguishes firms that get this, from their competitors that do not.”

“What we call ‘profit’ is no longer primarily a return on capital, but is ‘economic rent’. It describes the earnings that arise because some people, places, and institutions have commercially valuable talents and attributes which others struggle to emulate. It arises from many sources, including from the ability to do things better than other organizations.”

“The success of modern business does not depend on transactional skills, but on strong social relationships between and among stakeholders. A modern business is more a community than a collection of offices and factories.”

John Kay

The Key Message of John Kay’s New Book

Our Letters have been referencing Sir John Kay’s research and writings for decades. He is an influential British economist, Founding Dean of Oxford University’s Said Business School, and winner of many excellence awards for his research and writings on economics and business topics. The quotes above come from his 2024 book “The Corporation in the 21st Century”, with the subtitle “Why (almost) everything we are told about business is wrong.” 

The four Kay quotes above all point to the key message of his book. We must shelve the ‘old’ academic business models based on physical capital, contracts, principals, agents, earnings calls, share price maximization, and move to a new, more integrated stakeholder theory of the firm based on co-operation, win-win outcomes, and long horizon value creation.