Shortly before taking charge of the Institute in September 2012, Cato president John Allison released The Financial Crisis and the Free Market Cure. As the longest-serving CEO of a top-25 financial institution, Allison spent his career spearheading BB&T’s phenomenal success — overseeing the company’s rapid expansion from $4.5 billion to $152 billion in assets by the time he retired in 2008. Based on his experience, the book provided "an integrated insider’s perspective" on how the global meltdown was caused primarily by government actions. Within its first few weeks, it became a New York Times bestseller, eventually hitting #1 on the Wall Street Journal’s hardcover business bestseller list as well.
Now, Allison is back with a new book. The Leadership Crisis and the Free Market Cure offers the key to achieving long-term economic and societal well-being: true leadership. With keen insights into both public policy and business, Allison reveals the fundamental principles he sees as critical to the success of any leader, to all organizations, and to the United States.
The book’s central theme is that there is a set of principles that are consistent with human nature and provide the foundation for individual success. The ultimate goal in life is to achieve happiness — "in the Aristotelian context of a life well-lived," Allison writes — and acting in accordance with these principles will improve one’s chances of reaching that end. These same concepts apply more broadly as well. "This is a book about leadership in the pursuit of happiness, at the individual, organizational, and societal level," he writes.
What are the principles of success? The first is a clearly defined and empowering sense of purpose. "Human beings are goaldirected entities," Allison continues. "We have to know where we are going in order to get there." As such, people need a vision of the future and a purpose consistent with that vision. "The vision and purpose act like a beacon and draw us toward who we want to be."
With this as the foundation, Allison explains the importance of a clear set of values. "They provide us with principles that, if we live by them, improve the probability of staying alive, being successful, and ultimately being happy," he adds. He describes how to develop a strategy for turning a vision and purpose into a reality. Allison ran BB&T according to a strategy that flowed inevitably from its value system and was integrated with its management style. He is using this same concept at the Cato Institute. "Hire fundamentally good people, train them well, give them authority and hold them responsible, expect them to be successful, and reward their performance," Allison writes. Finally, he reveals the processes that, based on feedback mechanisms, allow leaders to incentivize superior performance. At the same time, however, these processes are subject to certain pitfalls. Consider the Sarbanes-Oxley Act of 2002. While the legislation was a response to several large accounting fraud–related failures — including WorldCom and Enron — these were clearly unusual cases, not problems with the system as a whole. But the tendency to redesign processes according to isolated events leads to problems. "Tragically, much of modern regulation is based on this same conceptual error wherein a small number of visible examples drive government regulations, which reduces the overall productivity in an industry," he writes.
In the end, Allison argues that it is these five concepts — vision, purpose, values, strategy, and process — that helped make the United States a global leader. The Founding Fathers realized that freedom was essential for human flourishing. They viewed the role of government as protecting individual rights. Government was therefore to be limited. It was not designed to eliminate all supposed ills. "A society based on the correct ideals will flourish," Allison concludes. "It is critical that we return to the principles that made America great — life, liberty, and the pursuit of happiness."