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HBS Professor, CEO Co-Author Redouble Call For Systemic Political Change

HBS professor Michael Porter has co-authored a new book: The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy, which was released June 23. James Meinerth photo

America has problems that never seem to get fixed. Why? Maybe the real problem is the country’s political system itself. Did you know:

  • In the 2016 general election, fewer than 10% of U.S. House races and only 28% of Senate races were competitive? The rest were in safe seats, where the winner was decided in the primary.
  • Fewer than 20% of eligible voters participate in most congressional primaries, meaning the influence of more-ideological primary voters is even greater in about half the states, where primaries are closed or semi-closed to non-party-affiliated voters?
  • Direct political spending at the federal level was at least $16 billion during the 2016 election cycle — about 40% of which was election spending by candidates, parties, PACs, super PACs, and other organizations, and another 40% for lobbying of Congress and government agencies by companies, trade associations, unions, and other special interest groups?
  • Because of underreporting, “shadow lobbying” accounts for approximately $6 billion per election cycle, on top of direct political spending — excluding politically active nonprofits and social welfare organizations, such as the National Rifle Association, the Sierra Club, the American Civil Liberties Union, and Americans for Prosperity? If the revenue of all these organizations were included, the politics industry inflates to over $100 billion per election cycle.

Exposing politics as a $100 billion industry — one that is doing what it is designed to do, which is to exclude the vast majority of Americans — has been Michael Porter and Katherine Gehl’s mission for years now. Porter, a long-time Harvard Business School professor, and Gehl, a former food company CEO, teamed up in 2016 to raise awareness of the shortcomings in the U.S. political system, and they have been writing on the subject and talking to audiences around the country ever since.

Now, as the country sinks into recession, grapples with a pandemic, and reckons with its racial demons under the looming shadow of another presidential election, Porter and Gehl have a new book out. The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy was released this month.

“There’s no question that there are divides in the country, in the population, and yet they are led and exacerbated and reinforced by the political system and the way the two parties compete,” Gehl tells Poets&Quants in a phone conversation on the eve of the book’s publication. “In this duopoly, both sides are incentivized to go as far apart as possible, which then creates this distressing partisanship — but even more important than that, it makes Congress unable to come together to work across the aisle, to solve the problems, to negotiate, and to pass needed legislation.”

QUESTIONING WHETHER ‘BUSINESS IS PLAYING THE ROLE IT NEEDS TO PLAY’

In their September 2017 paper, Why Competition in the Politics Industry is Failing America, Gehl and Porter lay out a four-pillar approach to reforming America’s political system. The first pillar: restructure the election process, including the establishment of nonpartisan top-four primaries and ranked-choice voting. Gehl and Porter further call for restructuring the governing process to eliminate partisan control of House and Senate rules and processes. The third pillar is a host of detailed reforms aimed at the influence of money in politics, designed to “shift the incentives for politicians to respond to constituents, instead of responding to donors.” Finally, they call for a series of innovations to open up electoral competition without waiting for structural reforms. “The top two parties,” they write, “should always be operating under a potential threat from competitors that better serve the public interest.”

Last spring the duo came to San Francisco for a presentation to the Commonwealth Club sponsored by the University of San Francisco School of Management. Expounding on their strategy for reinvigorating democracy in the U.S., the “Gehl Porter Politics Industry Theory,” they spoke about reforming a system that seems only to get worse. “We can never forget,” Porter said, “that the political system we have today was designed by our own elected representatives — the people we voted into office. This system was corrupted over time, and most of us did not even notice. We have the power to reinvigorate our democracy, and we must.”

Speaking to Poets&Quants this month, Porter, the Bishop William Lawrence University Professor at Harvard Business School, says business and B-schools can play a vital role in the coming political paradigm shift. It’s a message, he adds, that he shares with his MBA students.

“MBA students are going to be the business leaders of the future,” says Porter, the author of 19 books and more than 125 articles. “They’re the ones who are noticing that the business communities’ trust in America and the support in our society for business is eroding, and there’s quite a lot of evidence of that. The young business school students want companies to do more, and you probably are aware of this movement to move away from pure shareholder value maximization to having a more positive impact on society. More and more companies are adopting what’s called a corporate purpose.

“When our business school students who want to be part of this kind of a future see that and hear that, and then they look at what’s actually going on and the ability of our government to function, I think they’re starting to question whether business is playing a role it needs to play.”

‘MORE THAN JUST A BOOK FOR US’

Most Americans feel that Washington is broken and accept the gridlock that characterizes politics today as normal, Porter and Gehl say. Those who haven’t succumbed to helplessness often double down on their political party, certain that the other side is the problem. Others pin their hopes on that mythical change candidate who will finally fix things, whether through “hope and change” or by “draining the swamp.”

But little changes, because the system is designed to stop wholesale change. Did you know:

  • One obvious sign of the high barrier to entry in American politics: no major new party has emerged since 1854, when antislavery members of the Whig Party split off and formed the Republican Party. The Progressive Party (1912) and the Reform Party (1995) managed to elect only a few candidates and were disbanded within a decade.
  • “Sore loser” laws — laws in 44 states dictate that candidates who run and lose in their party’s primary are not allowed to appear on the general election ballot, even as an independent — can also dramatically change election outcomes.
  • In California, 79% of state and congressional races were deemed “uncompetitive” in 2012. After implementing top-two primaries, the number of races judged competitive across the state immediately doubled and the number of incumbents who began to lose in the general election increased. By 2016, the approval rating for California’s legislature hit 50%, up from a dismal 10% in 2010.
  • Ballot measures in 26 states make it possible for citizens to bypass politicians if they want to bypass legislation from the voting booth. With ballot referenda, a bill is first proposed by a representative in the state legislature and lawmakers can opt to refer the proposal to the ballot box for citizens to decide whether it will become law. With ballot initiatives, citizens themselves draft the proposal and place it on the ballot, most often through a signature collection process.

In their new book, Porter and Gehl state that the system is, in fact, working: the Democratic and Republican duopoly “encourages politicians to prioritize highly engaged constituencies that most dependably vote or give money,” and as a result, “they perpetuate hot-button issues that enable them to be re-elected, instead of finding solutions.” They propose a two-step process called Final Five Voting: first, replace party primaries with a single nonpartisan primary in which the top five finishers, regardless of party, advance to the general election, thus eliminating the “eye of the needle” problem and allowing legislators leeway to deliver results in the public interest without constant fear of getting “primaried,” while also creating competition in the general election with a broader field of candidates. Second, they would replace single-candidate voting in the general election with ranked-choice voting, which allows voters to rank candidates in order of preference. This would eliminate the “spoiler problem,” which is the main barrier to new competition in politics.

The coronavirus pandemic is a real X-factor in this election year, says Gehl, a Northwestern Kellogg MBA and former president and CEO of Gehl Foods, a $250 million, high-tech food manufacturing company in Wisconsin with approximately 350 employees. But it is also a chance to push further in the effort to redefine U.S. politics.

“While much in our world remains uncertain, we’re sure about at least one thing: The need for non-partisan political innovation is even greater today than it was before this pandemic,” Gehl says. “As authors, part of our job to believe in the importance of our work, but we’re also putting our money where our mouth is: Professor Porter and I have agreed that we will donate all the proceeds from this book to the Institute for Political Innovation, the organization I’m founding in parallel to pursue the critical changes to our political system that we prescribe in the book.

“The purpose of the analysis of The Politics Industry and how competition works in politics was to identify the points of leverage where we can act best in reality — not theoretical changes, not aspirational changes, but realistic, achievable changes that would alter the system powerfully enough to change the results the system regularly delivers.”

Click here to learn more about Porter & Gehl’s book, The Politics Industry, for which all proceeds are being donated to charity. See the next page for a Q&A with the authors and Poets&Quants, edited for length and clarity.