Did Plato have the answers to Wall Street's problems?

When did you last upgrade your car? Your home? Do you have flat screen TV or the latest Hi-fi, iPod or whatever latest techno-whiz available?

Plato (429BC) in The Republic, wrote about the problems of democracy, leading much of the population to seek unnecessary pleasures and the material goods which make these pleasures possible.

He suggested that this endless quest for pleasure affects the kind of leaders that democracies produce – those that have difficulty mastering their desires. Further, he suggested that the most qualified leaders are unlikely to be chosen nor want to serve. And the leaders that do rise to the top, are unlikely to be motivated by concern for the common good, but rather by self-interest. Finally, he posited that this conflict between private and public interest is likely to be endemic.

Is it drawing too long a bow between what Plato was describing and today's society?

Take the case of Lehamn Brothers where CEO Richard Fuld Jr. kept investing in risky derivatives on the assumption that prices would go up. David Einhorn, hedge fund manager and CEO of Greenlight Capital, on the other hand said back in May that his firm had a short position on Lehman Brothers.

Now here's the interesting bit. Einhorn maintained that he did this not only because Lehman had fudged its numbers, but because its recklessness had put the financial system as we know it at grave risk. At a major financial conference in June, he called on federal regulators to "guide Lehman toward a recapitalization and recognition of its losses - hopefully before federal taxpayer assistance is required".

At the time Einhorn was castigated in certain parts of the press for his comments (this is not the first time he has been so forthright on such issues – see his story on Allied Capital in "Fooling Some Of The People All Of The Time" – Wiley 2008). But he stuck to his position.

Plato would no doubt have been impressed with another insightful quote from Einhorn, "With no one watching, the managements of the investment banks did exactly what they were incentivized to do: maximize employee compensation. Investment banks pay out 50 percent of revenues as compensation. So more leverage means more revenues which means more compensation."

Plato's words might be harsh criticism of today's society (remember he was writing over 2,400 years ago). However, they do have a message for the business, and indeed the wider community. In today's society we need good, no, great leadership if we are to avoid crises such as the current financial meltdown.

In this vein, Rob Goffee and Gareth Jones in "Why Should Anyone Be Led by You?" (Goffee and Gareth 2006) talk about the "triumph of individualism" and as a consequence, the need for authentic leadership.

"If there is one overriding characteristic of the modern era, it is the extension of personal freedom through the march of individualism. At the heart of this, of course, lies a paradox. While few would deny that modern life has increased the scope for human choice, many have cautioned against the rise of excessive individualism; a world characterized not by the authentic expression of self but as simply selfish."

So it seems that we need both authentic leaders and systems to curb our excesses. I believe it's a mixture of balancing self (the need for individualism and the maintenance of freedom) with structure (the glue that holds families, communities, organisations and indeed countries, together).

Firstly, leaders. How do we nurture, encourage and develop the necessary "authentic" leadership? How can we encourage those leaders that Plato described as "most qualified" to take on leadership roles?

Let's start with the tough stuff – the stuff you and I need to do. But first, here's another question. When was the last time you gave of yourself (not financially) for the betterment of your colleagues, community, profession or country?

Authentic leadership starts with everyone who is reading this article – we need to set the example by showing leadership ourselves. My suggestion would be to find someone today that you can mentor as a leader for tomorrow. We have all of the great leadership training and development initiatives available. But to truly jump-start leadership development, it will mean you and I at a personal and local level, taking the time to mentor the new leaders.

Secondly, we need to re-build structure within organisations and government. Over the last 50 years, organisations have vacillated between centralization and decentralization. That is until the last decade when various forms of matrix organisations have encouraged cooperation across and even between, organisations.

I'm not suggesting a return to the tightly structured organisations of the 60s and 70s. However, to guide against the inevitable selfishness that is necessary for survival in today's organisation, we need to have underlying structures that hold the firm together. CEO's have a key role to play here. And at a local level, managers can instigate structures such as cascading performance objectives that link each individual to the team and ultimately, the organisation's mission (not just individual performance).

For better or worse, what gets rewarded, gets done. So let's make it "for better".

At a government level, we need to have regulatory authorities that know the difference between their owners and customers, so that they become truly accountable – as I argued in my article Do You Know Who Your Customers Are?".

And finally, increasing freedom within organisations to make decisions is exactly what has led to the collapse of some of today's financial icons. We've all preached the virtues (and value) of delegation. However, delegation without maintaining accountability is merely abdication.

When next you and I delegate some key decision making, let's make sure that we maintain accountability for the decisions our people make.

Over the past 100 years, we've now had the great depression, the stock market crash of 1987 and the Asian stock market meltdown of 1997. What's been learnt from these experiences?