Fast Company, November 2009

happen that will have nothing to do with the past. We have to admit we cannot know everything. Otherwise you’re not dealing with the real world, which is messy and complicated.”

Last November, when a multibillion-dollar U.S. food company contacted Hertz in crisis mode, she discovered it was suffering from this syndrome. Its team of forecasters were “number crunchers”—as Hertz describes them—neglecting to factor in real-world variables, from the potential trade war brewing in Latin America to the banning of trans fats in U.S. cities, from postrecession food riots in developing countries to imminent emissions regulations to potential lands-rights issues in Mozambique, where the company has operations. Those factors may sound pretty obvious, but when Hertz asked senior executives what information their predictive models were based on, “no one had a clue,” she says. Just like the black box in the banking sector, “it was like, ‘Our forecasting department gives them to us and we just work off of that.’”

Hertz is now helping the company create an internal think tank that will feed micro and macro trends to the forecasting team. To start addressing sustainability issues—which previously had been dismissed, she says, as something that “doesn’t affect our business”—the company recently adopted a new type of cattle feed to help reduce its massive methane emissions. Hertz’s last piece of advice was to the CEO himself. She told him if the company maintained its CEO-centric culture, in which voices from below couldn’t make themselves heard, it would continue to operate with blinders on. “Companies have a choice at this moment as to which side of the fence they’re on,” says Hertz.

Co-op Capitalism, Hertz says, will rise from the ashes of Gucci Capitalism. These days she is taking notes of best practices around the world to help identify new ways of operating. She singles out the billion-dollar open-source Linux model and the field of biotechnology, where collaboration between academic institutions and companies is the norm. She points to the Emilia-Romagna region in Italy, where much of the economy is based on a cooperative model. There, co-ops work within a market-economy framework and are profit oriented, but because workers all own shares in the companies they work for, a long-term focus and a desire for col-

lective success are built into the system. “It sounds like a charming story,” says Hertz. “But when you realize that this is the seventh-most-successful economic region in Europe, you think they’ve got to be doing something right.”

Hertz says that even though many necessary shifts—like caps on banker pay— haven’t happened yet, there are already indications that challenges to laissez-faire capitalism are taking shape. Anglo-American market dominance, she says, will be contested by emerging economies like those of Brazil, China, and India, whose votes are likely to be given greater weight by the World Bank and the IMF. At the same time, some countries are starting to question the notion that mere GDP defines success. France, based on recommendations from Nobel Prize economists Joseph Stiglitz and Amartya Sen, recently announced it would de-emphasize GDP in favor of other factors such as quality of life and the environment. (Hertz points out that a country’s “health” most often correlates with its levels of inequality, now at an all-time high in the United States.) To shake up the old boys’ networks, countries such as Norway and Spain have passed legislation that will require company boards to have 40% women. Hertz, too, is helping to drive these developments: She’s working with banks like ING to unite investors, environmental NGOs, and other groups in a dialogue about the thorniest global problems.

She’s also hoping to help shape the next generation of bankers. “I am shocked at how little reexamination is going on within traditional business schools,” says Barnard president Spar. “It’s scandalous.” This fall, Hertz will jump-start that process as the new chair of globalization, sustainability, and finance at the Duisenberg School of Finance, a new advanced-degree school in Amsterdam that has put ethics and critical and long-term thinking at its core—a radical departure for the dismal science. Holland’s finance minister, Wouter Bos, has also recruited her to ensure that the Dutch government doesn’t resort to quick fixes in dealing with the financial market. “All of us are living beyond our means,” says Bos. “We’re not managing our societies in a sustainable manner.”

Hertz’s optimism for co-op capitalism isn’t blind. “There are lots of vested interests for whom retaining the status quo would be the best thing,” she warns. Plus, she adds—reiterating the certainty of uncertainty—there’s always the 9/11 scenario.

“There could be a strike on Iran, dirty-bomb repercussion, everything could get thrown out.” Then there is good old human inertia: “In Silicon Valley, we really only care about new technology and IPOs—that’s our psychosis,” says Salesforce.com’s Benioff. “The groundswell isn’t going to happen as fast here.”

Even some of Hertz’s natural allies— folks who have long been in the trenches, such as CSR International founder and CEO Wayne Visser—say her ideas don’t address systemic problems. “Financial markets are geared around the short-termism of shareholder-driven capitalism,” he says. “How do you change that?”

By pointing to the costs that short-termism entails, Hertz answers. She offers the auto industry as an example: In the late ’60s, she says, when the Clean Air Act was being deliberated in the United States, American carmakers spent millions lobbying against it, while Honda decided to develop more energy-efficient cars. “Honda’s cost was on innovation and thinking about how the future might be, and making a product that might fit the future better,” says Hertz. “The other companies were spending their money on stopping the future from happening. In that case, Honda won.” Likewise in Holland, where, Hertz says, after the financial crash, “there was a huge flight of money from all the normal banks” into Triodos and Rabobank, both known for being ethical and sustainable. Those who resist, she says, will be left behind.

Every day now, Hertz sees bits of Gucci Capitalism falling away. She arrives breathless at her flat, hot pink BlackBerry in hand, just back from a meeting with a hedge-fund manager. She can’t resist spilling— vaguely—about the confidential deal they just made. “This is somebody who thinks of himself as right wing economically—on the right of economic capitalism,” she gushes. “But what’s incredible is that we’re 100% on the same page. Then, at the end of the conversation, he says, ‘The key question is— and it all rests on this—are you up for the fight?’” Hertz’s girlish smile turns a shade sweeter as her mind returns to her very public brawl with the FT’s Wolf, who’d attacked everything from her methodology to her author photo. In a couple of months, she and Wolf would speak at the same conference—sharing equa l billing. “Am I up for the fight?” she grins. “I love the fight.” FC