Greed and fear have shaped the design of the modern Anglo American company. Belief in the potency of greed drove the trend to tighter links between wages and performance. Belief in the potency of fear drove the subjection of managers to the takeover threat, policed by the capital market. The economics profession took pride in this bleak realism, gleefully extending the model to the family and smugly contrasting itself with the gentler communitarian values of the softer social sciences. Uncomfortably, perhaps reflecting the internalisation of these values, psychology tests revealed that economics graduate students were unusually selfish.

While undoubtedly bleak, this paradigm no longer looks realistic. In practice, high-powered incentives and marking to market led not to enhanced value but to Enron and Lehman Brothers. It is at last under challenge intellectually. George Akerlof, the Nobel laureate, argues that the most effective way of motivating people is to persuade them to internalise the objectives of the organisation. Performance usually depends upon behaviour such as teamwork that cannot be well observed. High-powered incentives are not just a waste of money: the monitoring they require unavoidably signals a lack of trust and so undermines self-motivation. For workers to trust the company, the company must trust its workers. Some of the most successful companies select people predisposed to loyalty: one Silicon Valley success weeds out those not so predisposed by offering recruits $10,000 to quit.

Companies benefit not only from loyal workers but from loyal capital. Loyal capital enables a company to take a long view by investing in innovation. The discipline of the equity market generates exactly the opposite: high returns to quick, short term information. Inevitably, such returns induce insider trading: hence Raj Rajaratnam. But even when legitimate, the returns to being first with information are enormous: the smartest people can earn more by anticipating a rise in the reported profits of a major company than by working to achieve it. Yet these high private returns do not correspond to their real contribution. In America and Britain, where the market model is most pervasive, the financial sector has been capturing nearly a third of the profits of the corporate sector. Not only is it incredible that finance commensurately enhances the profits of other sectors, a new Bank of England study shows that equity markets seriously overplay short-term news. Companies subject to this “discipline” are forced to distort their decisions to their long-term detriment. According to the market fundamentalist model, the ideal company – one whose shares all changed hands each day – would be outcompeted by its antithesis, the family owned firm.