Month: July 2009

Categories
Books

Explaining Corporate Decline

corporate-declineJim Collins writes excellent business books, and his latest effort How the Mighty Fall and Why Some Companies Never Give In is no exception. This short book sets out to explain what causes companies which were once great to collapse, and he describes a five-step process: hubris born of success, undisciplined pursuit of more, denial of risk and peril, grasping for salvation, and finally capitulation to irrelevance or death.

Collins describes a research project in which his team set out to discover whether it is possible to detect and reverse the early stages of decline in a major corporation. However, Appendix 1 of the book, which sets out the selection criteria for companies covered by the research, reveals that only a small set of companies was studied. In my view this makes the findings vulnerable to statistical aberrations.

The book is very helpful in the way it explains many of the symptoms of decline. However, it conveys the message that the biggest cause of corporate decline is change, and not complacency. Collins says that a major contributor to the collapse of the companies studied was too much change. While this may be correct for the limited sample studied, I cannot see how it can be true as a general principle. The book seems to contradict the message of John Kotter’s A Sense of Urgency, and in my view on this issue Kotter’s advice is to be preferred.

Categories
Poverty

Why are some countries rich?

roman-princeChapter 10 of Gregory Clark’s A Farewell to Alms contains some interesting observations about economic growth since the Industrial Revolution. Since 1800, wealth per capita has grown enormously in some countries, whereas it has not in others. Thus the gap in income between people who live in wealthy countries and those who live in poor countries has grown enormously. Prior to 1800 wealthy countries had an income per person of around 3 to 4 times that of poor countries. The ratio is now closer to 40:1.

Ordinary people in the West now live like princes did in ancient Egypt or ancient Rome. As people become wealthier their consumption of food does not increase proportionately – there is only so much food one person can eat – but their preferences switch to more expensive calorie sources. The proportion of people engaged in food production declines dramatically as a country becomes richer, and the vast majority of the population relocates to urban centres.

According to Clark’s analysis, there has been only one source of economic growth, and that is efficiency improvement brought about by innovation. Thus the remarkable growth in wealth that some countries have experienced since the Industrial Revolution is attributable to enhanced production of knowledge capital. Something must have happened around the year 1800 that resulted for the first time in a process of continuous expansion of useful knowledge.

Categories
Future

The movement from villages to cities

cityThe rise of the West, dramatic as it was, is over, according to Stewart Brand in a TED talk given last month at the US State Department. Referring to projected population statistics for 2015, Brand points out that only two of the 10 largest cities in the world are in the West, just as only two of the ten largest cities were in the West 1000 years ago. 1.3 million people each week are moving into cities around the world; villages are emptying and subsistence farming is drying up.

Many of those who move from villages to cities become squatters, living in slums. Slums do not undermine prosperity, according to Brand; they help create prosperity. People who move into them gradually gentrify. The squatters who live in slums tend to care more about security of tenure, water, sanitation, electricity and protection from crime than about housing, unemployment, starvation or access to medical care.

Birth rates decrease when people move into cities, because children become liabilities rather than assets. Continued population growth comes from having more old people, not from having more babies. Urbanisation is the dominant demographic force of our time, and by mid century the world will be about 80% urban.

Categories
Present

Truth, Justice and Reconciliation

truth-and-justiceLast week, Bethuel Kiplagat, a Kenyan diplomat and peace negotiator, was appointed chairman of the new Kenyan Truth, Justice and Reconciliation Commission. The Commission has been set up to probe abductions, assassinations, unlawful detentions, ethnic violence, extra-judicial executions, torture, injustices, corruption, and other gross violations of human rights which have occurred in the country since 1963.

Mr Kiplagat’s job has been described as the most difficult in the country, as many of the perpetrators of the injustices remain in powerful positions and have a vested interest in ensuring that the truth does not get revealed. Further, although the Commission has a mandate to investigation the wrongs, it does not have any authority to try or convict anyone. The aim is to use truth and confessions to promote healing, justice and national reconciliation.

A number of critics argue that the Commission is likely to be ineffective because the current government and judiciary are deeply infiltrated by corruption. While Truth and Justice commissions have been successful in some countries, in other countries they have been used for political purposes, rather than impartially. Moreover, it is claimed that Mr Kiplagat has a conflict of interest, given his involvement in some of the events the Commission is due to investigate.

Categories
Past

Catholic Mission to Japan

dangerous-journeyOn this day 460 years ago, the ship carrying Francis Xavier reached Japan. This was a remarkable achievement in itself, given that Japan had only just been “discovered” by Portuguese traders, and most of the North Pacific Ocean remained unexplored by Europeans. Upon arrival in Japan, Xavier discovered that the culture and language were unlike any that European missionaries had previously encountered.

Xavier had been inspired to visit Japan after encountering a Japanese man, Anjiro, in Malaysia some 18 months previously. Anjiro acted as translator, and Xavier stayed in Japan for more than two years teaching about Christianity, with a moderate level of success. Three small congregations survived when he left, and a number of Jesuit missionaries succeeded him. The number of Japanese believers grew, and large numbers of people including members of the ruling classes became Christians.

The Japanese political climate turned against Christianity about 50 years later, and Christianity was banned. Some decades of persecution ensued, and a number of missionaries and Christians were executed. Christianity was completely extinguished in Japan by 1638. It was not until 1861, more than 300 years after Xavier, that the first Protestant missionary reached Japan, and freedom of religion was finally decreed in 1873.

Categories
Faith

Taking it on faith

doubting-thomasIn chapter 20 of John’s account of the good news, Thomas is quoted as saying, “Unless I see the marks of the nails on his hands, and put my hand into his side, I will not believe.” Many atheists have taken a cue from Thomas and proclaimed that they have no intention of believing in the existence of God unless they see conclusive proof. They say that it is irrational to take things on faith, and we should only believe things that have been proved.

However, this argument neglects the reality that nothing in life has been proved, and everything has to be taken on faith. When you drive your car, you almost certainly have not checked that all the wheel nuts are tightly fastened, but you have faith that the wheels will not fly off, and you trust your life to that belief. Whenever you eat food you have faith that it does not contain poison; whenever you cross a bridge you have faith that it will not collapse. Every day you trust your life again and again to your unproven beliefs.

It is only irrational to have faith in something when the available evidence indicates that it is not true. The vast majority of people who believe in the existence of God do so based on the evidence that they have observed. If the creation of a wonderful world by a God who loves us and wants us to be reconciled to him makes more sense to you than the accidental occurrence of a purposeless universe, then it is irrational not to believe in God.

Categories
Books

How to solve the biggest organisational problem

sense-of-urgencyWhat is the single biggest mistake that organisations make when trying to undergo a change process? According to John P Kotter in his new book A Sense of Urgency, the biggest mistake is the failure to create a high enough sense of urgency among enough people to create sufficient momentum to bring about the change. The biggest enemies to creating a sense of urgency are complacency and false urgency, which happens when people act frenetically without being productive.

True urgency involves creating “action that is exceptionally alert, externally oriented, relentlessly aimed at winning, making some progress each and every day, and constantly purging low value-added activities.” To achieve true urgency, it is necessary to appeal to the hearts of people and not just to their minds. This can be done by bringing in emotionally compelling external data and influences, behaving with urgency by way of example, finding opportunities in crisis, and removing or neutralising opponents of change.

The book is quite short, but like Kotter’s earlier book Leading Change it addresses an exceptionally important aspect of organisational management in a concise and helpful way. Nearly all organisations suffer to some extent from the complacency bug, and this book provides excellent advice for overcoming it. I highly recommend the book for anyone – whether in a formal leadership position or not – who wants to be an agent of positive change within an organisation.

Categories
Poverty

The causes of modern wealth

modern-wealthIn chapter 9 of Gregory Clark’s book A Farewell to Alms, Clark identifies four changes that happened in the basic economy in England to give rise to the explosion in economic growth which has occurred in the West over the past 200 years. These were: the fall of interest rates to close to modern levels; the increase in literacy and numeracy rates to close to 100%; the increase of working hours to modern levels; and the decline in interpersonal violence.

While I agree that these changes would have created conditions more conducive to prosperity, I do not think that they are the only necessary conditions. If a person’s wealth is to increase, that person must be able to accumulate property as a result of productive endeavour which benefits society, and that person must be able to retain the property with a reasonable degree of security. Thus property rights must exist, as must access to justice to enable enforcement of those property rights.

Although no society is entirely free of corruption, if economic growth is to occur the level of corruption must be sufficiently low that the economic incentives to engage in productive endeavours outweigh the incentives to engage in corrupt behaviour for most citizens. Further, because prosperity and productive innovation go hand in hand, there must be at least a reasonable expectation on the part of innovators that they will gain a reward for their creative work.

Categories
Future

Are we mishandling the financial crisis?

more-vodka“Treating struggling economies with huge stimulus packages… is about as effective as treating alcoholics by giving them more vodka,” according to Dr Gennadi Kazakevitch, deputy head of the Monash University Department of Economics. The stimulus packages simply encourage more borrowing, which increases debts. The problem arises because we are not taking into account all of the causes of the current crisis.

One cause was the large number of subprime mortgage defaults in the US. Another cause was inadequate regulation of financial systems which encouraged major financial institutions to engage recklessly in high-risk transactions. But a third cause, which has generally been ignored by governments, was the rapidly increasing debt of Western nations, arising as a result of imbalances in the division of labour between countries.

Dr Kazakevitch says that there is nothing wrong with the division of labour between countries, provided that each country continues to master its competitive advantage and provided that countries continue to live within their means. If a country spends more than it earns, and fails to achieve adequate productivity increases, its economic future must necessarily be a bleak one.

Categories
Present

Kenya’s tribunal dilemma

arm-wrestleFor more than a year Kenya’s government has been struggling to reach a decision on how to create accountability for the post-election violence which occurred in the first half of last year. Some want a local tribunal, because local administration of justice is best. Others want the International Criminal Court to control the proceedings because of fears of political interference with a local tribunal. Many of the members of the government do not want any accountability at all because they fear being prosecuted.

It is significant that there was very little recourse to the courts last year for resolution of the disputed election results. The battles were fought in the media and in the streets. This is indicative at the very least of a lack of confidence in the independence of the courts. It is not possible to have a stable democracy if members of the public do not have faith in the integrity and independence of the judicial system.

In my view, the current arguments over the most appropriate forum for trials are largely hot air. Ultimately only a small number of those who have committed very clear and serious crimes are likely to be punished, as the experience of the Rwanda trials has indicated. The vastly more important issue is: How is Kenya going to re-establish confidence in the integrity of the administration of justice, and ensure that powerful people are subject to the same laws as everyone else?