Financial tomes

Illustration: Lloyd Thatcher; photograph: Rosie Hallam

Jack Covert remembers the moment he became aware of a publishing phenomenon. It was in the early 1980s, at the downtown Milwaukee branch of a bookstore chain for which he worked. “I’d see someone come in and spend three hours going through [fiction titles]. Eventually he’d pick one, pay for it and walk out. And then, one lunch hour, I saw some guy in a suit come in, grab five copies of In Search of Excellence, go straight to the desk and pay, and I thought, ‘Whoa – there’s my market.’ ”

Covert, now 68, is founder of 800-CEO-READ, which reviews, recommends and sells business and technical books. Meanwhile, In Search of Excellence (1982) – an analysis of what sets successful companies apart by two McKinsey consultants, Tom Peters and Robert Waterman – helped transform bookshops’ business sections from a corner piled with dusty academic and historical works into a place filled with accessible and, above all, up to date books. Their titles shout out their usefulness to actual and would-be chief executives: Why Some Firms Thrive While Others Fail, Profit from the Core, Collaborate Or Perish!. Their most successful authors forge reputations in their own right: Peters is now one of the world’s best-known management speakers.

Yet the trick he and Waterman pulled off – to write a memorable and, above all, durable business classic – has proved remarkably hard to repeat.

It is not for want of trying. The number of business books published in the US, the world’s biggest market for such books, tops 10,000 annually. One reason why the Financial Times set up the Business Book of the Year Award in 2005, backed by Goldman Sachs, was to filter that wave of print. The official mission of the judges, who will decide the 2012 winner on Thursday in New York, is to identify the book that provides the “most compelling and enjoyable insight into modern business issues, including management, finance and economics”.

But when the first jury convened by phone to discuss the purpose of the prize, in spring 2005, they rallied round a refinement offered by one judge, Jeff Garten, former dean of the Yale School of Management: that they should try to identify titles that would stand the test of time. One of the current prize judges, Lynda Gratton, professor of management practice at London Business School and author of The Shift, a recent book on changing work habits, echoes Garten when she says business writers ought “to transcend not only their time, but their location”.

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Jim Collins, author of the 2001 bestseller Good to Great: Why Some Companies Make the Leap ... and Others Don’t (4m copies sold), may come closest to having discovered how to reproduce a successful business book. “I’d love to say there is a kind of formula or recipe for this – as far as I know there isn’t,” he tells me over the phone from his “management laboratory” in Boulder, Colorado. But he then goes on to describe a kind of formula: how he starts with a question – such as, how can good companies achieve greatness? – translates it into rigorous research and then looks for ways to make it memorable with metaphors and tags that he compares to the icons on an early Apple computer. “If you don’t have a great user interface, nobody can access the power of what’s behind the screen,” he says. “You can have a chapter called ‘organisational mission’ or you can have a chapter called ‘BHAGS’ – for ‘big, hairy audacious goals’ ” – one of the once-read-never-forgotten phrases from Built to Last, the breakthrough book about the secret of enduring companies, which he co-wrote with Jerry Porras in 1994.

It is a recipe Collins has successfully cooked, albeit with different ingredients, several times already, including with last year’s Great by Choice, written with Morten Hansen. However, the problem with basing a business book on company success stories is that individual examples are vulnerable to the rapidly churning business cycle, which can turn today’s corporate champion into tomorrow’s chump. Even In Search of Excellence has been in and out of print since publication and there is a whole subgenre of academic and journalistic work that enjoys debunking bestsellers, such as Built to Last, by pointing out how many of their examples of greatness have disintegrated or declined since publication. (Collins’ riposte is that he is not “studying companies, [but] great dynastic eras ... and what it takes to build them.”)

Perhaps, then, business classics are more likely to be found among books that uncover an important and widely applicable business truth, such as the late CK Prahalad’s The Fortune at the Bottom of the Pyramid (2004), which pointed out the untapped purchasing power of the very poor, or Clayton Christensen’s The Innovator’s Dilemma (1997), which alerted companies to the idea of “disruptive innovation”, unexpected improvements that can radically reshape a market. Or maybe they are books that identify timeless principles of business, such as some of the works of Peter Drucker, the Austrian-born management writer, who died in 2005, aged 95, or Charles Handy, his nearest British equivalent and author of The Age of Unreason (1989).

Drucker’s early work, such as The Practice of Management (1954), apart from being written in a lucid prose style from which many modern business authors could learn, is notable for its relative lack of concrete business examples. As Richard Straub, president of the Peter Drucker Society Europe, puts it, modern business books “are trying to prescribe what you should do to be a successful leader; Drucker was asking questions, providing a wider view and giving you a way to think about the problem and find solutions.”

Gratton calls writers such as Drucker and Handy “business philosophers” (Handy describes himself as a “social philosopher”), but she laments that they are now rare. Indeed, the shortlist for the FT’s business book of the year award has usually come from a different shelf. It contains economic analyses such as Raghuram Rajan’s Fault Lines (which won in 2010), histories, like the 2009 winner Lords of Finance, Liaquat Ahamed’s unexpectedly gripping account of how central bankers of the 1920s helped plunge the world into Depression, and journalistic investigations, such as Too Big to Fail, Andrew Ross Sorkin’s story of the financial crisis, shortlisted two years ago.

Most shortlisted authors have been professional writers, mainly journalists or economics and business professors secure enough to want to write for a general audience. But there are exceptions. Lords of Finance was Ahamed’s first book following a career as an investment manager. The 2008 winner When Markets Collide, a timely explanation of the credit crunch and how to survive it, was written by Mohamed El-Erian, chief executive of Pimco, the big fixed income investment house. Stephen Green, now Lord Green, then chairman of the bank HSBC, made the shortlist in 2009 with Good Value, his thoughtful book on putting the purpose back into business.

But when it comes to their own reading, rather than writing, habits, executives are divided about what constitutes a classic title. In 2007, the FT sought business leaders’ recommendation of a favourite book but only Good to Great received more than one nomination. In Search of Excellence got none and nobody picked Tom Friedman’s The World is Flat, The New York Times columnist’s frequently cited hymn of praise to globalisation that was the inaugural business book of the year in 2005.

Last year, a similar exercise yielded an equally wide range of recommendations from chief executives. Cynthia Carroll of Anglo American, the miner, picked On Competition, a collection of the Harvard Business School academic Michael Porter’s landmark ideas on the competitiveness of companies and countries; Thomas Fanning, who heads Southern Company, the US utility, plumped for the racier narrative of Barbarians at the Gate (1990), by Bryan Burrough and John Helyar, which set the standard for investigative storytelling with its account of the buy-out of RJR Nabisco. On the other hand, Severin Schwan, chief executive of Swiss pharmaceuticals group Roche, responded with a flat “No” to the question of whether any book had inspired him.

Time-poor chief executives cannot be the only audience for such books, however. The absolute numbers sold in the US have dropped slightly in the past five years, according to Nielsen BookScan, but 19m copies of business and economics books were still sold last year – perhaps helped by continued interest in the causes and consequences of the financial crisis. The 19m figure even excludes electronic versions and business biographies and autobiographies, which last year included the bestselling account of Steve Jobs’ life and work by Walter Isaacson, another finalist for this year’s business book of the year.

Jack Covert, who has also co-authored a guide to The 100 Best Business Books of All Time (2009), says most business titles “in their core and their soul, are self-help books, where people go to make their company better, to make their job better”. The bestseller lists back this up. With a few exceptions, such as the Jobs book, they are dominated not by weighty biographies, histories or business philosophies, but by how-to guides to management success or parables such as Who Moved My Cheese? (1998), Spencer Johnson’s irritating but much-imitated tale of two mice adapting to change, which has sold more than 23m copies, making it probably the bestselling business book. Take Nielsen’s list of the UK’s topselling titles for 2011: Michael Lewis’s wonderful The Big Short, about the few investors who saw the financial crisis coming, was knocked into second by a health and safety manual aimed at getting readers through a mandatory test for building site workers.

In short, business books find a ready market in executives and employees looking to improve themselves, and in that respect they may constitute a self-perpetuating subsector of the non-fiction list. As long as new potential leaders are born, some of them will want to learn how to reach the top, by comparing themselves with those who have already succeeded. No wonder many business writers find they are able to go on updating and reworking ideas first spawned decades ago.

This year I talked to James Kouzes and Barry Posner, who were in London to promote the “25th anniversary” fifth edition of their book The Leadership Challenge (1987). The book has been accused of oversimplification. In The End of Leadership (2012), Barbara Kellerman points out that Kouzes and Posner’s “five practices of exemplary leadership” are only one of many easily digestible lists available to aspiring chief executives.

With the quiet patience of a man who has had to defend his work before, Posner says: “Leadership isn’t easy. So for those who say, ‘You wrote this book 25 years ago, why do you need to go on writing it?’, I say, ‘People mature and change. Being healthy isn’t something you do for a short time, you do it for your whole life – most of us don’t do it as well as we should. Maybe leadership is the same.’ ”

The continuing economic crisis is likely to reinforce many executives’ need for guidance. Mohamed El-Erian tells me he thinks executives have “a strong appetite for insights on how best to lead, navigate and manage”.

Meanwhile, the same digital revolution that, in 2009, forced the closure of the Milwaukee bookshop where Jack Covert experienced his business book epiphany is giving writers more opportunities to add to, improve and promote their work through ebooks, apps and complementary online material.

It is doubtful, however, that such digital accessories will guarantee “classic” status for any of the current crop of business titles. Even the 30 years since In Search of Excellence was first published is not long enough to judge the durability of important, insightful business ideas – and readers seem to recognise that.

Five years ago, asked to select the best business book of all time from a shortlist that included titles by Burrough and Helyar, Christensen, Drucker, and Collins, FT readers voted by a large margin for a work written more than 200 years earlier: the foundation stone of free-market economics, Adam Smith’s The Wealth of Nations.

Andrew Hill is the FT’s management editor

FT and Goldman Sachs Business Book of the Year Award 2012

And the nominees are ...

What FT reviewers said about this year’s shortlisted titles:

The Hour Between Dog And Wolf by John Coates

This brilliant book shows how human biology contributes to the alternating cycles of irrational exuberance and pessimism that destabilise banks and the global economy – and how the system could be calmed down by applying biological principles.

Private Empire by Steve Coll

If there was ever a company that deserved a proper corporate biography, it is ExxonMobil ... It has been at the heart of many of the central issues of our time, from the debate over climate change to the war on terror. Meticulously researched and elegantly written, [Private Empire] is likely to be the definitive work on its subject for many years to come.

Steve Jobs by Walter Isaacson

Isaacson’s exhaustive account deserves the wide readership it will undoubtedly get ... If there is a message from [the] book, it is that Jobs the dictator was saved by his bigger purpose. His tyranny was, ultimately, all in the service of “magical” products ... Even profits took a back seat.

Volcker by William Silber

This fine new biography [is] especially timely. Silber’s theme is the tension between monetary and fiscal policy, between the ascetic central bankers and the wilful politicians, and how one must check the other.

What Money Can’t Buy by Michael Sandel

Sandel has no quarrel with growth; what worries him is commercialisation. As market norms encroach upon ever more extensive fields of human activity, more and more things are valued as if they were items to be priced ... Sandel has a genius for showing why such changes are deeply important.

Why Nations Fail by Daron Acemoglu and James Robinson

Why are some societies democratic, prosperous and stable and others autocratic, poor and unstable? These are perhaps the most important questions in social science. The authors of this thought-provoking book are certain the answer lies in politics.

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