Welcome to this new week. As we have seen, organizations are following a logic of action, and this logic of action must be legitimate within the public space. This idea of legitimacy is what we have seen last week. There exist several logics of action in the public space and recently one of them has been gaining momentum relative to the others. This is the logic of the market. The logic of the market stands somewhat apart from other logics present in the public space. Whereas the other logics rely on a strong sense of belonging, that's not so much the case for the logic of the market. For instance, the logic of the family is based on the lineage linking parents, the logic of religion on the acceptance of creed, and dogmas uniting the faithfuls, or the logic of state calls for a sense of belonging to a geography and public good, By contrast, the logic of the market does not imply the existence of blood, moral or territory ties, which, by the way, all separate members from outsiders in the other logics. To function, the logic of the market appeals to what unites all individuals, their inerrant rationality. As such, this logic does not rely on family, religious or territorial attributes, and is very inclusive. According to this logic, the performance of an organization must be measurable, comparable to others and valuable. What legitimizes the logic of the market is its performance test, that is a comparison across individuals, themes, groups and organizations according to certain criteria. This performance test is ubiquitous and the criteria for performance are adaptable to every context. As a result, the performance test has found its way in many organizations. And the logic of the market confronts directly the other logics that do not obey the same performance test. For instance, in many countries around the world, public schools follow the logic of the states, and are deeply shaken by the intrusion of the performance test from the logic of the market. When schools and teachers become subjects of evaluation following various metrics, the result is that there is a shift in demands in favor of the better ranked schools. And competition increases between public and private schooling systems. Discrepancies between the two systems tend to increase, as public establishment budgets are under stress in many countries, and as private schooling system increases its tuition fees. Another example, showing that the logic of the market can both disrupt organization and their logics, and also results in the constitution of huge and famous organizations. When Bernard Arnault, founder of the celebrated LVMH Luxury Group, took a controlling share into Financiere Agache in 1984, a holding owning several entities, he was hunting for one of its activities, the Boussac Group, which owned Christian Dior and Le Bon Marché. At the time, the Boussac Group was in poor shape. And the French government, acting following its logic of state and willing to protect employment, had decided to subsidize the group in order to save jobs. As a result, when Arnault took over the group, 1 billion Francs had been transferred from the state to the group, and this helped Arnault complete his purchase and start the building of LVMH. In the late 80s, when the heirs of Moet and Hennessy families, respectively, in the champagne and cognac industry could not run the business anymore, Arnault acquired them, and implemented new performance tests based on financial measures thebeby passing these entities from a paternalist, or family logic, group to modern corporate capitalism. Again, in 2010, LVMH tried to renew this strategy and acquire Hermes by convincing some heirs of the founders to sell their shares. Yet, this time, the logic of family resisted, and the hostile takeover did not succeed fully. This is a particular case obviously. But if you think of it, there are many similar occurrences where, through the systematic use of measurements and comparisons the logic of the market conflicts with or sometimes undermines other logics of actions. Think of the revelation of scandals about inefficient and sometimes dangerous drugs, pitting the logic of the market, against the logic of the medical professions. The logic of the market magnifies the need for rationality, broadcasts it, and provides measures, instruments, and analytical matrices to distinguish the best from the good, and the good from the mediocre. Although the efficiency of means used varies according to each logic of action, in every organization, it is at the center of the approach approved by the logic of market. Actually, even when organizations propose alternative economic models or embrace new measures, such as, for instance, the energetic efficiency or the collective wellbeing, in an effort to redirect public investment choices, these organizations must pass the performance test. They need to build indicators, measures and compare and analyze their performance relative to what could be attained in another case from the logic of the market. So, they produce tangible results inspired by examples and experience drawn from here and there. And even when these organizations link their reasoning and arguments to another logic, that of the community or of the state for example, they cannot escape the logic of the market and the performance test. The performance test has become so prevalent in modern society that for some it became close to a cult. For example, Lloyd Blankfein Blankfein, the head of Goldman Sachs, famous among other things for having declared just after the crash of 2008 that Goldman Sachs had been doing god's will and could not be held responsible for the subprime and public debt crisis. And on another day, he reported that since Goldman Sachs does not limit the ambition of its employees, it also does not limit their remuneration. In this extreme vision, the financial result is a supreme performance test, and the logic of the market becomes almost a cult. So, why is the logic of the market gaining influence in the public space? -Because it does not ask for any kind of membership and appeals only to rationality, equally shared by everyone. -Because it is supported by the performance test, which can be applied everywhere anytime. -Because the performance test generates adhesion to the logic of the market. Well, actually all three answers are correct and must be taken into account. The performance test, has gained considerable influence in our modern society, and the logic of the market gained prevalence as an explanation and justification for competition. This is why at this point, it is important to understand how competition works, and this we shall see during the next session.
