Modern business & ancient wisdom: We think WE’RE smart…

…just look around to find out where reckless pursuit of personal wealth and power, aided and abetted by an abandonment of governance, has got us! Surely it is time for us to focus our individual and collective efforts to work with “old” values and new tools to bring about cultural change!?

Tao Zhu-gong, also known as Fan Li, reputedly was the right hand man to the Yuh Emperor in circa 500 B.C. After a career as political/military advisor, he went into business

Tao Zhu gong/Fan Li was unusual among tycoons for his view of money. He believed that one who understood money would be willing to abandon it if it became a burden. It is only a means to an end and should not be taken too seriously. Nonetheless, it must be handled and acquired according to principles. Fan Li also urged a somewhat loose construction of these principles, encouraging broad and flexible utilisation in various situations.

The Twelve Golden Rules are as follows:

  • Ability to know people’s character. You must perceive evidence of characteristics from experience.
  • Ability to handle people. Never prejudge a prospect.
  • Ability to stay focused on the business. Have a definite focus in life and business and avoid jumping around.
  • Ability to be organised. A disorganised presentation is unappealing.
  • Ability to be adaptable. Make sure you are organised enough to respond quickly.
  • Ability to control credit. Do not allow non-payment. Make sure you collect what is owed.
  • Ability to use and deploy people. Use employees in ways which bring out their potential(s).
  • Ability to articulate and market. You must be able to educate customers on the value of goods.
  • Ability to excel in purchasing. Use your best judgement in acquiring stock.
  • Ability to analyze market opportunities and threats. Know what is selling according to areas and trends.
  • Ability to lead by example. Have definite rules and standards. Make sure they are followed to ensure good relations.
  • Ability to have business foresight. Know market trends and cycles.

The Twelve Golden Safeguards are:

  • Don’t be stingy. Never confuse efficiency with inhumanity.
  • Don’t be wishy-washy. Be confident in pursuing opportunities. Time is of the essence.
  • Don’t be ostentatious. Do not overspend in order to make an impression.
  • Don’t be dishonest. Truth is the only basis for business. Without it someone will get hurt.
  • Don’t be slow in debt collection. Without collections, liquidity is affected.
  • Don’t slash prices arbitrarily. This will only trigger a price war in which everyone will lose.
  • Don’t give in to herd instinct. Make sure the opportunities are real and not part of a craze.
  • Don’t work against the business cycle. When things fall in price, they will then rise and vice versa.
  • Don’t be a stick-in-the-mud. Keep up with things and make progress. Examine new things objectively.
  • Don’t overbuy on credit. Credit is not license to spend wildly.
  • Don’t under-save (keep reserve funds strong). When business is slow, one with money can expand while others close.
  • Don’t blindly endorse a product. Make sure your vendors are stiil following standard operating procedure.

Insurance industry humour (blame Geoff Campbell!)

A woman in a hot air balloon realized she was lost. She lowered her altitude and spotted a man in a boat below. She shouted to him, "Excuse me, can you help me? I promised a friend I would meet him an hour ago, but I don’t know where I am."

The man consulted his portable GPS and replied, "You’re in a hot air balloon, approximately 30 feet above a ground elevation of 2346 feet above sea level. You are at 31 degrees, 14.97 minutes north latitude and 100 degrees, 49.09 minutes west longitude."

She rolled her eyes and said, "You must be an Underwriter."

"I am," replied the man, "how did you know?"

Well," answered the balloonist, "everything you told me is technically correct, but I have no idea what to do with your information, and I’m still lost. Your answer is totally impractical, and frankly, you’ve not been much help to me."

The man smiled and responded, "Then you must be a Broker."

"I am," replied the balloonist. "How did you know?"

"Well," said the man, "you don’t know where you are or where you’re going.  You’ve risen to where you are due to a large quantity of hot air. You made a promise that you have no idea how to keep, and you expect me to solve your problem. You’re in exactly the same position you were in before we met, but, somehow, now it’s my fault."

RBS: A UKGI company

So Mr Hester says we aren’t borrowing the money they are so desperately keen to lend!?

That’s not the word that I’m getting from business…or, in fact, from within RBS itself. Lots of bullshit about working toward delivering a “world class service”. How are they going to achieve this?

Well this is the laughable bit. By re-visiting the kind of sound governance and business management that their clients have had to master by “crash course” (sic) in a bid for mere survival. Survival without the support of the “dealers” who got them hooked on credit (more appropriately – debt). Thanks guys for your support and for the timely reminder that you are not to be trusted.

SO, as these bankers sit back and wait for us to swallow this latest lie. The extent of their efforts is to try to dupe us with more “talking the talk”. Whether the words are formed and uttered by a banker or politician is irrelevant as, to all intents and purposes, they are one in the same. Until such time as there is consistent evidence that they have any intention to “walk the talk” this will, understandably, be perceived as yet more “smoke and mirrors”.

They have presented ‘evidence’ that they are moving forward in the form of reducing the scale of their losses – down to a poxy £2.2bn quarterly loss.

I love it when, even the BBC, think nothing of reporting in a matter of fact way, that, at least “the UK retail activities are profitable”.

Wait a minute! How happy should business and personal customers be to know that the same bankers who so efficiently lost the bulk of the money they got from us first time around…bear I’m mind it wasn’t all “lost” it was only the leveraged amount net of obscene and unjustified amounts in commissions, fees, expenses and bonus (by blindly following their American brothers into uncharted and murky waters)…are now beginning to turn a profit from the money that we gave them to replace the original amounts that were gambled away!!?

Unfortunately our wannabe banking superstars were so caught up by the smell of blood in the water that they gorged upon the bountiful (US) leftovers that were just too tasty to resist. No need to ask questions just get stuck in and feed. Even if you aren’t hungry or don’t need it, feed to ensure that others (less worthy) cannot.

I MAY be slightly OTT with the analogy but only in the eyes of some. The question remains. How happy can it be that the initial bailout has failed to provide help (does anyone actually believe Stephen Hester?) where it is most needed?

Let alone another £40bn of our money is committed at a time when Audit Scotland alone are warning of the possibility of a £3bn shortfall, infrastructure projects are being sidetracked or binned altogether, services are being cut and funding for Third sector will dry up. Not really what you need at a time when the country and, in particular the social underclass, that is growing daily, (thanks to the greed culture within banks) need these services more than they may need the services of a debt-peddler whose sole aim is to profit from the misery they have created!?

So, what a waste aiming for service improvements. Attempt to rebuild some shred of credibility by re-capitalising the economy rather than the corporate entity. Show you have some humanity, savvy, commonsense and focus upon providing customer value. Sustainable value not a quick fix which will, inevitably lead to a win/lose scenario…yet again. Once that is done working on service may be a worthwhile exercise.

Fair to say that the economy is really the domain of politicians. And, if they are anything more than pawns of the financial sector, we can surely expect that UKFI utilise public networks like Business Gateway and similar local enterprise organisations to ensure that support goes into the economy via the businesses that are perhaps the only hope to avoid a genuine threat or civil unrest, in the short term, and a terminal slide down the league table of global economic powers.

Ironic isn’t it. When you consider that it was the thirst for money and power that lead to such moral corruption?

No wonder then that conspiracy theorists are having a field day with everything from both 9/11 & 7/7 being government orchestrated events to justify a war on terror. Fighting an unwinnable war in Afghanistan and supporting a corrupt regime essentially to build an oil pipeline. Tampering with the US constitution and stripping rights from individuals when the main focus is upon survival feeding into Illuminati plans for a new world order. The timing of Obama’s election and various 2012 (2112) prophecies. End of time forecasts, etc.

I have probably missed something out so apologies if I haven’t covered your own pet theory. Please feel free to let me know or if you would like some help with a theory you are currently forming please let me know. I’m sure, with a bit of collaboration, we could come up with something that could get some traction…maybe even a book deal!

All very tongue-in-cheek I’m sure bit I do sometimes wonder whether collaboration amongst like-minded individuals and groups may not be a values-based antidote to the morally corrupt culture at the highest levels within our financial, political and religious institutions.

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Risk: Seeing around the corners

Risk-assessment processes typically expose only the most direct threats facing a company and neglect indirect ones that can have an equal or greater impact.

Source: McKinsey Risk Practice

Risk, Corporate Risk article, Risk Seeing around the corners

In This Article
  • Exhibit 1: Companies are susceptible to interconnected cascades of risk.
  • Exhibit 2: Carbon regulation would reshuffle the aluminium industry’s cost curve.

The financial crisis has reminded us of the valuable lesson that risks gone bad in one part of the economy can set off chain reactions in areas that may seem completely unrelated. In fact, risk managers and other executives fail to anticipate the effects, both negative and positive, of events that occur routinely throughout the business cycle. Their impact can be substantial—often, much more substantial than it seems initially.

At first glance, for instance, a thunderstorm in a distant place wouldn’t seem like cause for alarm. Yet in 2000, when a lightning strike from such a storm set off a fire at a microchip plant in New Mexico, it damaged millions of chips slated for use in mobile phones from a number of manufacturers. Some of them quickly shifted their sourcing to different US and Japanese suppliers, but others couldn’t and lost hundreds of millions of dollars in sales. More recently, though few companies felt threatened by severe acute respiratory syndrome (SARS), its combined effects are reported to have decreased the GDPs of East Asian nations by 2 percent in the second quarter of 2003. And in early 2009, the expansion of a European public-transport system temporarily ground to a halt when crucial component providers faced unexpected difficulties as a result of credit exposure to ailing North American automotive OEMs….Unfortunately you will only be able to read the full article if you are a McKinsey premium member.

I wanted to reference this (brief) introduction to emphasise that, whilst risk management and insurance can provide a high level of protection, RISK manifests itself in all kinds of forms. Some that you can insure against assuming, that you can afford the premiums…but still rely upon an element of luck!

“You can’t manage what you “can’t” measure”

This statement is as true as it ever was but, with an understanding of the nature and impact of “complexity” upon a business…WHICH IS SOMETHING THAT THE INSURANCE INDUSTRY NEEDS TO WAKEN UP TO…in the near future the statement should read “You cant’ manage what you DON’T measure”. Confused!? Perhaps some clarity from Donald Rumsfeld might help:

Fortunately the answer(s) are more straightforward and they lie with the business owner. YOU are (or should be) THE world-renowned expert on the subject of your business! You need to invest time and resource to ensure that your business is fit enough to withstand the unexpected. You need a means to perform a detailed analysis of the interdependent functions of your business: finances; activities; processes; operational efficiency; etc. Having done this assess and manage the key functions as part of a risk prevention strategy. But modern business is already complex and is becoming moreso.

Managing the total cost of risk: Reducing fragility

Reducing the reliance of a business upon external factors…particularly (in these trying times) financial and political institutions…and, in the future, the changing climate, are the most practical and affordable steps that can be taken.

The alternative is to accept that your business MAY become increasingly vulnerable. Of course you may have an in-house or external resource of professionals ready to react at the first signs of trouble but, as the article highlights, risk comes in many forms.

I would welcome an opportunity to discuss HOW you create an early warning system for your business. Feel free to get in touch.

Business awakening

Before I start, “NO” I haven’t read the book. But I thought I should recycle the words of someone who I have found to be very insightful, particularly in the social media arena. Jeremiah Owyang is a Partner at Altimeter Group in California.

Good For Business

Jeremiah’s Review: Good For Business

The Good: A Convincing Argument
The book Good for Business sets the stage that the world has changed and companies need to change too. It also gives some juicy data points and dozens of anecdotes of companies that have made the leap. It’s well-written, and can be consumed in a few hours.

The Bad: Leaves More Questions Than Answers
The book falls short in a two ways. While stories are entertaining for a long flight I find myself asking more questions that were unanswered, like: 1) What were the challenges these companies went through during this metamorphosis? What was the common barrier  2) Although there’s a loose framework towards the end of the book, how do I get started? How do I do this?  Although a nitpick, while the cover art is catchy, yet the smiley faced button is reminiscent of Walmart (was that intentional?) or the comic book movie The Watchman, which has no relation to this topic.


The Verdict:  Addresses Right Questions, But Doesn’t Tell You How
Good for Business asks the right questions, get you thinking, but seems it’s missing a few chapters. The thesis convinces you that changes need to be made, but feels empty, as it never tells you how to do it. I recommend you put Good For Business on your reading list, but read the more important books that give a pragmatic approach. To summarize, I give this book a grade of a “B” or “Four out of Five Stars”. If anything, this book is calling for a sequel to answer these questions.