What is an Idea Worth?

Applying Philosophy to Business (and vice-versa)

This guest post is by a PhD student in philosophy from the Australian National University.

DEATH AND TAXES, the adage goes, are life’s two certainties. One might add commerce and philosophy to this list, for the trade of goods and services and the trade of ideas also seem to emerge everywhere that people do. Enterprising governments found a way to combine the expiration of citizens with the raising of revenue – and gave us death duties. So let us ask: what is the relationship between business and philosophy?

The fundamental requirement for commerce – or so it seems to me – is that participants and regulators agree that there is some notion of property rights which underlies the doing of business. Only if property rights are acknowledged by participants are the ideas of buying and selling coherent; only if the law protects property rights and regulators enforce them can the system work in practice.

Of course, developing a theory of property rights is something which has occupied philosophers for centuries. Broadly, the concern has been to understand what it is that gives someone a right to possess or control something to the exclusion of all others. Is there some special, intrinsic connection between a person and an object owned? Or is it merely agreed between people that one should not interfere with something owned by another?

Centuries of discussion notwithstanding, there is no consensus as to which, if any, of many theories regarding the above issues is the best. This is not without practical implications. The ideas about property which prevail in the community and in our politics feed directly into the laws and regulations which we have about property ownership and about doing business. Given the failure of philosophers to articulate definitively the nature of property, then, and given the reliance of commerce on property rights, it may be worth pondering exactly what, if anything, an ideal theory of property rights should be worth to a businessperson. A simple thought experiment will help with this.

Imagine that you are in business supplying widgets but that your only competitor in the widget supplying business is performing significantly better than you. Imagine that someone in your community announces that they have access to a perfect and absolutely infallible theory of property rights and that you have reason to believe that this person does in fact have access to such a theory (it does not matter how they got access to this theory – philosophical genius, divine inspiration, accident, whatever). Imagine also that this theory is for sale to either you or your competitor: for appropriate consideration, this (perhaps opportunistic) citizen will give to the buyer (and to the buyer alone) access to the theory.

Why would either of you want access to the theory? Assume that, once in possession of the theory, the buyer will be able to make a decision about the legal situation in the community. If the buyer (and now de facto legislator) wishes, the laws which govern property rights in the community will be made to conform to this (by hypothesis) ideal theory of property rights. Obviously, the buyer would choose this option if doing so would give his or her business an advantage as against the competitor. Otherwise, the buyer could simply leave the legal situation as it is.

What to do? How much would you be prepared to pay for access to the theory? If we had some more information about the extent to which your business is outperformed by its competitor and the expected outcome of altering the legal system, then it would be possible to calculate the best course of action. This, however, is not really the point of the thought experiment. What is striking is that, as a businessperson, you rely on there being a legal regime based on some vague ideas about property. It may or may not be in your interests, however, for this legal regime to reflect the best possible ideas about property – this may or may not give you an advantage. Regardless of how you would be inclined to act, the fact that the thought experiment is intelligible proves this point. We are able to conceive of something as abstract as the sale of access to a theory of property rights even though, on the terms of the thought experiment (and in reality), we are thinking about the matter only with the aid of the imperfect theories of property rights which we do have.

As for one businessperson, so for the business community. In order for business to work, there needs to be a legal regime which gives expression to some vague notion of property. It is not necessarily the case, however, that a legal regime which gives expression to the best possible theory of property would be the best regime for business and for the economy.

This is not a reason to give up thinking about property. Ideas about property are important to individual security, to social welfare and to our interactions with government and we might want to continue exploring the concept because we are concerned about these issues. Alternatively, it may work just as well in these contexts if we proceed on the basis that some undefined notion of property underlies our dealings.

Perhaps the point demonstrated by the thought experiment – that we do not all need to subscribe to the same, let alone the best, theory of property in order to do business – is just common sense. Philosophers spend a lot of time trying to prove results which do seem obvious; for sometimes the proof is much less obvious that the result. If the idea demonstrated by the thought experiment is in any way instructive, it may be because it borrows the currency of business and asks what a particular type of theory would be worth to those to whom it is perhaps most relevant. That is, it investigates the value of a theory. There is a nice symmetry here. Business takes as assumed certain philosophical ideas about property; philosophy can perhaps better illuminate the notion of property by borrowing the method of business.

What is the purpose of a business?

MAINSTREAM economics would have you believe that the purpose of business is to maximise profits.

If a business loses money it will soon go bust, this much is clear. Profit is necessary for any ongoing business operation, however the fact that a business makes a profit does not explain the purpose or raison d’être of the business. The Dalai Lama put it this way:

To state that the role of business is to make a profit makes as much sense as to say that the role of a person is to eat or to breathe. If a company loses money it dies, as does a person without food, but that does not mean that the purpose of life is eating.

Peter Drucker, father of the modern management profession, believed that:

Profitability is not the purpose of, but the limiting factor on, business enterprise. Profit is not the explanation, cause or rationale of business decisions, but a test of their validity.

Profitability allows a business to sustain itself, but it would be dangerous to make profit the most important objective of a business. A corporate culture that values profit above all else may lead to law breaking, excessive risk taking, unnecessary suffering for employees, or damage to society and the environment.

Instead of focusing on profit, a business should aim to satisfy customers while acting responsibly. By satisfying customers the business can occupy itself in a meaningful way. And by acting responsibly, the business can prosper without harming others. If the business can also make a profit then its activity will be self-sustaining.

The 48 Laws of Power

PEOPLE are motivated to succeed in business for different reasons. Some people want to change the world and some just want to make money. If you go to business school or listen to CEOs speak at annual meetings you’ll hear a lot of talk about money: how much money, made by whom, from which activities, and what is the plan to make even more next year.

The drive by individuals and corporations to make more money seems so normal that few people stop to ask the obvious question, why acquire more money?  What is the purpose?  Why go to so much trouble?

To quote Al Pacino’s character Tony Montana from the 1983 film Scarface:

In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women.

If money is merely a means to acquire power then it makes sense to consider power.  Is the acquisition of power a worthwhile goal?  How can power be acquired and maintained?

The 1998 bestselling book written by Robert Greene and Joost Elffers entitled “The 48 Laws of Power” goes a long way towards answering the second question. The 48 Laws of Power are quite telling, if not a little Machiavellian, and provide a good explanation of the principles by which power can be acquired and maintained:

Law 1 – Never Outshine The Master – Always make those above you feel comfortably superior.

Law 2 – Never Put Too Much Trust In Friends, Learn How To Use Enemies

Law 3 – Conceal Your Intentions – Keep people off-balance by never revealing your purpose. Guide them in the wrong direction and by the time they realise what you’re up to, it will be too late.

Law 4 – Always Say Less Than Necessary – When you are trying to impress people with words, say as little as possible. The more you say, the more likely you are to say something foolish.

Law 5 – Reputation – Guard It With Your Life – Reputation is the cornerstone of power because once it slips you are vulnerable to attack. You can attack your enemies by destroying their reputation and allowing public opinion to hang them.

Law 6 – Seek Attention – Never let yourself get lost in the crowd. Stand out and attract attention.

Law 7 – Use the Good Work of Others – Use the good work of others to your advantage. Their assistance will save you time and energy, and give you an aura of godlike efficiency. In the end your helpers will be forgotten and you will be remembered.

Law 8 – Make Other People Come To You – When you force the other person to act, you are the one in control.

Law 9 – Win Through Actions – Any victory gained through argument is a Pyrrhic victory.  People hate to be defeated and victory through argument means nothing because “a man convinced against his will is of the same opinion still”. It is more powerful to win the agreement of others through your actions, without saying a word.

Law 10 – Avoid Infection – Emotional states are infectious. The unfortunate can draw misfortune not only on themselves but also on you. Associate only with happy and fortunate people.

Law 11 – Keep People Dependent On You – If people value you or need what you have then they will be willing to give you more freedom and make exceptions for you.

Law 12 – Use Honesty To Disarm People – One honest action can cover dozens of dishonest ones. You can use selective honesty to bring down people’s guard . Once their defenses are down, you can manipulate them.

Law 13 – Appeal To People’s Self-Interest – If you need help from someone don’t remind the person of your past helpfulness, they will find a way to ignore you. Instead, appeal to the person’s self-interest by finding something in your request that will benefit them.

Law 14 – Pose As A Friend, Work As A Spy – Information is power. Gathering information about rivals allows you to destroy them. Pose as a friend and work as a spy.

Law 15 – Crush Your Enemy Completely – A feared enemy must be crushed completely. If you give your enemy a chance to recover they will seek revenge.

Law 16 – Create Value Through Scarcity – The more you are seen, the more common you appear. If you are already established in a group, temporarily withdraw from it. This will  make you more talked about and even more admired.

Law 17 – Cultivate An Air Of Unpredictability – Humans are creatures of habit with an insatiable need to see familiarity in other people’s actions. Your predictability gives them a sense of control.

Law 18 – Isolation Is Dangerous – The world is dangerous and enemies are everywhere so you need to protect yourself. Isolation exposes you to more dangers than it protects you from. Mingling amongst the people gives you access to information and avoids making you a conspicuous target.

Law 19 – Know Who You’re Dealing With – There are many different kinds of people in the world, and you can never assume that everyone will react to your strategies in the same way. Deceive the wrong person and they will spend the rest of their lives seeking revenge.

Law 20 – Do Not Commit To Anyone – Do not commit to any cause but yourself. By maintaining your independence you become the master of others.

Law 21 – Seem Dumber Than You Are – No one likes to feel stupider than the next person. The trick is to make people feel smart – and not just smart, but smarter than you are. Once convinced of this, they will never suspect that you may have ulterior motives.

Law 22 – Surrender When Weak – When you are weak, choose to surrender. Surrender gives you time to recover, and time to wait for their power to wane. By turning the other cheek you infuriate and unsettle your enemy.

Law 23 – Concentrate Your Forces – Conserve your energies and concentrate them at their strongest point. You gain more by finding one rich client, than by having a dozen poor ones.

Law 24 – Play The Perfect Courtier -The perfect courtier woos people and thrives in a world where everything revolves around power and political dexterity.

Law 25 – Re-Create Yourself – Do not accept the roles that society chooses for you. Create a new identity and be the master of your own image rather than letting others define it for you.

Law 26 – Keep Your Hands Clean – You must not be associated with common actions, inefficiency or mistakes.

Law 27 – Play On People’s Need To Believe – People have an overwhelming desire to believe in something. Become the focal point of such desire by offering them something to follow. Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking.

Law 28 – Act With Boldness – If you are unsure of a course of action, do not attempt it. Your doubts and hesitations will infect your execution. When you act, act with boldness. Any mistakes you commit through audacity are easily corrected with more audacity.

Law 29 – Think Long Term, Plan Carefully – Take a long term view and plan all the way to the end, taking into account all the possible consequences and obstacles. By planning to the end you will not be overwhelmed by circumstances and you will know when to stop. Guide fortune and help determine the future by thinking far ahead.

Law 30 – Make Your Accomplishments Seem Effortless – When you act, act effortlessly, as if you could do much more. Avoid the temptation of revealing how hard you work. Teach no one your tricks or they will be used against you.

Law 31 – Control the Options – The best deceptions are the ones that seem to give the other person a choice. Give people options that come out in your favor whichever one they choose. Force them to make choices between the lesser of two evils, both of which serve your purpose.

Law 32 – Play To People’s Fantasies – Never appeal to truth and reality unless you are prepared for the anger that comes from disenchantment. Life is so harsh and distressing that people are drawn to those who can manufacture romance or fantasy.

Law 33 – Find Each Man’s Achilles Heel – Everyone has a weakness: an insecurity, an uncontrollable emotion or need, or a small secret pleasure. Once found, you can turn it to your advantage.

Law 34 – Beware The Tickets You Put On Yourself – The way you carry yourself will often determine how you are treated.  In the long run, people will treat you at your self-estimation.

Law 35 – Master The Art of Timing – Never seem to be in a hurry – hurrying betrays a lack of control. Always seem patient, as if you know that everything will come to you eventually.

Law 36 – Disdain Things You Cannot Have – If there is something you want but cannot have, show contempt for it. The less interest you reveal, the more superior you seem.

Law 37 – Create Compelling Spectacles – Striking imagery and grand gestures create the aura of power – everyone responds to them. Stage spectacles for those around you.

Law 38 – Behave Like Others – If you make a show of going against the times and flaunting your unconventional ideas, people will find a way to punish you for making them feel inferior. It is far safer to blend in and nurture the common touch. Share your originality only with close and tolerant friends.

Law 39 – Be Calm – Anger and emotion are strategically counterproductive. You must always stay calm and objective but if you can make your enemies angry while staying calm yourself, you gain the advantage.

Law 40 – There Is No Free Lunch – Anything offered for free is dangerous as it usually involves either a trick or hidden obligation. Anything of value is worth paying for and by paying the full price you stay clear of deception, financial indebtedness and moral indebtedness. Be generous with your money, for generosity is a sign of power.

Law 41 – Avoid Stepping Into A Great Man’s Shoes – What happens first always appears better and more original than what comes after. Establish your own name and identity and distinguish yourself as unique from the great men who have come before you.

Law 42 – Strike The Shepherd And The Sheep Will Scatter – Trouble can often be traced to a single strong individual. Do not wait for the trouble to arise, do not try to negotiate with them. Neutralize their influence by isolating or banishing them.

Law 43 – Work On Hearts And Minds – If you use coercion people will eventually react against you. You need to seduce people so that they willingly move in your direction. The way to seduce others is to operate on their individual psychologies and weaknesses.

Law 44 – Disarm Others With The Mirror Effect – The Mirror Effect involves doing exactly as the other person does.  The Mirror Effect can be used to seduce others by making them believe you share their values. It also means they cannot figure out your strategy.

Law 45 – Preach The Need For Change, But Reform Slowly – Everyone understands the need for change, but people are creatures of habit. If you are new to a position of power, show respect for tradition. If change is necessary, make it feel like a gentle improvement.

Law 46 – Never Appear Too Perfect – Appearing better than others is dangerous and envy creates silent enemies. It is smart to occasionally display defects, and admit to harmless vices, in order to deflect envy and appear more human. Only gods and the dead can appear perfect with impunity.

Law 47 – Learn When To Stop – The moment of victory is often the moment of greatest danger. In the heat of victory you risk pushing past your goal. Set a goal, and when you reach it, stop.

Law 48 – Assume Formlessness – By having a predictable plan, you open yourself to attack. Nothing is certain and the best way to protect yourself is to be flexible and change often.

Vinnies CEO Sleepout

THERE are currently more than 105,000 homeless people in Australia.

Census figures from 2006 indicate that each night 54% of homeless people seeking supported accommodation are turned away, which means around 56,000 people are sleeping on the street each night in Australia.

The problem is that in the wake of the financial crisis the number of homeless people has risen much faster than the supply of homeless and housing services required to support the needs of people experiencing disadvantage.

The St Vincent de Paul Society indicates that the new face of homelessness is families: young families; two-parent families; families with no history of domestic violence.  The sub-prime crisis didn’t only hurt corporate Balance Sheets and Profit & Loss statements, it also hurt families in local communities.  Homelessness is no longer a problem isolated merely to the victims of substance abuse, gambling addiction or mental illness.   The market downturn has forced people on the edges of the labour force into positions of serious disadvantage.

On Thursday 17 June 2010, the Vinnies CEO Sleepout will be taking place in capital cities across Australia.  The event aims to raise funds and increase community awareness about homelessness by challenging business and community leaders to experience homelessness first-hand for one night.

There are already 350 CEOs who have risen to the challenge, some of the people taking part include:

Please check out the website, and consider supporting the participants by making a donation or rising to the challenge by taking part yourself!

Pleasure is the goal of life

SEEMS fairly straight forward doesn’t it.

The purpose of life is the pursuit of pleasure, and the quest for those objects and experiences that will make our life more enjoyable.

As I recently discovered while reading “The Consolations of Philosophy” by Alain de Botton, this was exactly the philosophy held by Epicurus, an ancient Greek philosopher born on the island of Samos in 341 BC.

To summarise his philosophy in a single sentence, Epicurus believed that:

Pleasure is the beginning and the goal of a happy life.

What are the first images that spring to mind when you think of pleasure? You might think of a fast car, an opulent villa overlooking the ocean, or limitless money.

Imagine you had all three. Would you be happy? Maybe you would. However, it is possible to imagine that a fast car without a friend to show-it-off to would not make you happy, an opulent villa without the time to enjoy it would not make you happy, and limitless money accompanied by high levels of anxiety and no time to relax or contemplate the good life would also not make you happy.

Not every type of pleasure will lead to happiness (or be sufficient for happiness) in the same way that not every type of medicine will lead to good health.

If we assume that Epicurus is right, and that pleasure is indeed the goal of the happy life, then it would seem important to develop a clear understanding of the types of pleasure that will actually lead to happiness.

In his book, Alain de Botton outlines the three simple pleasures that we need to pursue and acquire if we are to enjoy a life of Epicurean happiness:

  1. Friendship;
  2. Freedom; and
  3. Thought.

Although sometimes difficult to acquire, it turns out that the three essential pleasures of life are goals that we can all afford to pursue.

Sun Tzu on strategies for effective leadership (part 4)

THIS post, part 4, considers the principles developed by Sun Tzu on strategies for effective leadership. It is the 4th and final part in a series looking at how Sun Tzu’s military precepts provide a timeless guide to modern business leadership. Part one looked at the qualities of successful leaders. Part two considered principles for organising your business affairs. Finally, part three considered the principles for dealing with business rivals.

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Organising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

4. Strategies for effective leadership

4.1 Create a common philosophy

Marc Benioff, CEO of salesforce.com says that “to be truly successful, companies need to have a corporate mission that is bigger than making a profit…By integrating philanthropy into [the] business model … employees feel that they do much more than just work at [the] company.

He will win whose army is animated by the same spirit throughout all its ranks.

4.2 Foster co-operation

In order to be successful in business it is important to have many experienced employees working together in co-operation.

Adam Smith was the earliest to report the merits of specialization and cooperation some 230 years ago. He compared the output of a Scottish farmer working alone to make pins for his wife with a French pin factory’s daily production. The factory employed experienced specialists, equipped them with the latest tools and organized them to work cooperatively to produce pins. The factory turned out hundreds of times more pins per specialist per day than the farmer working alone. Moreover, the factory-made pins surpassed the farmer’s pins in terms of quality and consistency.

If two armies will help each other in a time of common peril, how much more should two parts of the same army, bound together as they are by every tie of interest and fellow-feeling. Yet it is notorious that many a campaign has been ruined through lack of co-operation…

4.3 Maintain good communication

Being well informed is the only way to make good decisions. Make sure that you have access to the latest information on who is doing what in your organization.

…the commander whose communications are suddenly threatened finds himself in a false position, and he will be fortunate if he has not to change all his plans, to split up his force into more or less isolated detachments, and to fight with inferior numbers on ground which he has not had time to prepare…

4.4 Pick your men carefully

A leader must use the skills of his employees to best advantage by using the right man in the right place.

The skilful employer of men will employ the wise man, the brave man, the covetous man, and the stupid man. For the wise man delights in establishing his merit, the brave man likes to show his courage in action, the covetous man is quick at seizing advantages, and the stupid man has no fear of death.

4.5 Control your men with kindness and discipline

If [subordinates] are punished before they have grown attached to you, they will not prove submissive; and, unless submissive, they will be practically useless. If, when [your subordinates] have become attached to you, punishments are not enforced, they will still be useless. Therefore [subordinates] must be treated in the first instance with humanity, but kept under control by means of iron discipline.

Bestow rewards without regard to rule, issue orders without regard to previous arrangements; and you will be able to handle a whole army as though you had to deal with but a single man.

4.6 Set up a dependable systems of reward and punishment

People respond to incentives, this is one of the first lessons learnt in Microeconomics 101. As such, it is important to encourage good behaviour and discourage poor behaviour with an appropriate system of reward and punishment.

…that there may be advantage from defeating the enemy they must have their rewards.

4.7 Do not micro-manage your subordinates

The art of giving orders is not to try to rectify the minor blunders and not to be swayed by petty doubts. Vacillation and fussiness are the surest means of sapping the confidence of a [company].

4.8 Foster a spirit of enterprise

Encourage your employees to be industrious and hard working.

Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise for the result is waste of time and general stagnation.

Sun Tzu on the art of leadership – qualities of a successful leader

Background to The Art of War

SUN TZU wrote The Art of War in approximately 490BC in the Kingdom of Wu, China, and became a general for the King of Wu in 512 BC. For the next 39 years his precepts were followed and the Kingdom of Wu was victorious. And then, they forgot … the armies of Wu were defeated and the Kingdom made extinct.

In 1782, The Art of War was first translated into French by a Jesuit, Father Amiot. There is a legend that it was Napoleon’s key to success and his secret weapon and the first English translation was produced by P.F. Calthrop in 1905.

In reading The Art of War I have tried to think about how Sun Tzu’s military principles provide a timeless guide to modern business leadership.

Dr. Foo Check Teck, Asia’s foremost expert on Sun Tzu, says, “I found many more CEO’s and entrepreneurs, especially those who had to compete at the edge, are unconsciously applying Sun Tzu’s ping-fa (Law of Soldiering).”

The essence of business, like war, is to pursue goals and achieve success (Dr. Raymond Yeh). Success, or even your proximity to success, can make you a target to those who oppose that success, however they might choose to fight you. That is why understanding Sun Tzu’s Art of War can prove advantageous to just about anyone (Robert L. Cantrell, consultant and author of Understanding Sun Tzu on the Art of War).

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Oranising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

If you’re interested in The Art of War and want to read more, check out both Sonshi.com and Wikipedia.

1. Qualities of a successful leader

1.1 Discipline

A leader must be disciplined. Having discipline includes maintaining the hierarchy within the organisation; clearly defining the specific roles and responsibilities of members of management; maintaining systems to ensure delivery of services by suppliers and payment from customers; and controlling expenditure.

I fully believe he was a good soldier, but I had him beheaded because he acted without orders.

1.2 Presence of mind

Presence of mind is the ability to stay calm and act sensibly in a crisis. This is a leader’s most important asset.

1.3 Self respect

If you do not respect yourself, your men will not respect you. If your men do not respect you, they will be unresponsive to orders and will delight in undermining your authority and reputation.

1.4 Wisdom, sincerity and good faith

If your decisions are well thought out and you act honestly, your men will trust you. If you are trusted, people will speak their mind freely and openly, which means business problems can be solved more quickly and effectively.

1.5 Prompt decision making

In a competitive business environment time is always of the essence. As such, a successful leader needs to make quick decisions.

…though we have heard of stupid haste in [business], cleverness has never been seen associated with long delays.