There is now a substantive response to Tariq Fancy from Alex Edmans. Jon Hale of Morningstar had a small one, but Alex’s dives in depth and extends and expands upon Tariq’s own basketball analogy.
“...So there’s much to like about the basketball analogy. But it breaks down in two important ways. First, basketball is a zero-sum game. One team can’t win without the other team losing. But business isn’t zero-sum. Fancy argues the analogy of two basketball teams is two rival companies. Yet the concept of “coopetition” has existed for over a century, where industry competitors can not only compete with each other to grab a greater slice of the pie, but also cooperate to grow the pie, for example by improving industry standards and sharing best practice. And the relevant analogy isn’t to a company and its rivals, but to a company and its stakeholders. Unlike in basketball, where sportsmanship to your opponent can cost you points, “sportsmanship” to your stakeholders can grow the pie for the benefit of both. This isn’t just wishful thinking; it’s based on rigorous evidence. One of my studies showed that, over a 28-year period, companies that treat their employees well outperformed their peers in total shareholder returns by 2.3–3.8% per year — that’s 89–184% compounded….
...The second limitation of the analogy is that regulation is easy in basketball — referees can spot fouls, perhaps aided by video replays. In business, regulation can address measurable issues such as wages and carbon emissions….