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“Business Does Better With Love”
By Shlomo Maital
So let’s be clear. Friendships do better with love. Marriage does better with love. Religion does better with love. Love does better with love. Obvious, right?
Everything does better with love. Even war. Respect your enemy and retain your humanity even when fighting for your life.
But – business?? After several decades of teaching MBA classes, in business schools that preach hard-core bottom-line business warfare, I am reading Moshe Engelberg’s new book, first of a series, The Amare Wave, with a combination of delight and perhaps, amusement – at how those who preach fierce capitalism will respond to it. * (Amare means ‘love’ in Latin).
Engelberg is a successful business consultant, founder of ResearchWorks; he has a Ph.D. degree from Stanford University.
Business does better with love, Engelberg shows. Love for whom? Love for your stakeholders – your workers, managers, clients, shareholders… all those who have a stake in your success. It’s a mystery why so many businesses purposely exploit and squeeze their workers, when long-term, respectful love given to them drives long-term loyalty and motivation. If everything does better with love – why then have economists sold the idea that business is the exception – and business does well only with knife-in-the-teeth competition, perhaps the only human endeavor that is a no-love zone?
How is company success measured? By short-term operating profits? How about, Engelberg writes, how well people are treated? By how much real value is created for clients? Imagine, Engelberg writes, that love is not only “the new necessity in business, it is simply how business is done in the 21st C and beyond”. And guess what? Because business is done better with love, it is also, in the end, more profitable. Engelberg knows; he has long years of experience as a consultant.
Imagine — business acts to become kind, green, socially responsible, philanthropic and good for society. Imagine. All business.
I eagerly await Engelberg’s second book in the series – a set of stories about love in business. I kind of wish Engelberg had started the series with the stories – narratives are, I think, far more powerful than polemics.
Show us, Moshe, how business really does work better. You have a tough road ahead – Amazon, Facebook, Google are not exactly Mother Teresa. Google’s “do no harm” has done loads of harm, and Facebook doesn’t even pretend to do good, while Amazon ruins many small retail businesses and squeezes workers.
Here are today’s market cap figures for these three companies: Google $894 b., Amazon $869 b., Facebook $551 b. In contrast: Exxon’s market cap is only $67 b.
Could Google, Facebook and Amazon have even bigger long-term market caps, if they practiced Engelberg-style love? Well, I believe they could – but right now, very few agree.
Alas.
= = = = =
- Moshe Engelberg, with Stacey Aaronson. The Amare Wave: Uplifting Business by Putting Love to Work. Angel Mountain Press, 2019. 359 pages.
Disruption – It’s Personal!
By Shlomo Maital
In the musical Hair, there is a song, The Age of Aquarius. Today, we might sing, The Age of Disruption. Technology is disrupting virtually everything – and everyone needs to be keenly aware of how to live under continual disruption.
A short and very partial list: Amazon disrupted bookstores, then all retail stores; Tesla’s electric vehicles disrupts GM, Ford and big dinosaur car firms; Blockbuster disrupted movies by renting DVD’s, then Netflix disrupted (bankrupted) Blockbuster by mailing DVD’s, then disrupted cable and networks with streamed creative content; Uber disrupts taxis, Coursera, EdX etc. disrupt traditional colleges, Sprite and Verizon disrupted copper phone lines, Skype disrupted phone companies, Facebook and Google disrupted advertising, especially print and TV, Internet disrupts everything, especially print magazines and newspapers.. and AI disrupts all routine tasks (e.g. airport check in, without seeing a human being before security).
Notice — virtually always, it’s small upstarts that disrupt the big giants — dinosaurs too slow and too dumb to innovate. Often though they use their size and muscle to catch up. Microsoft seems to have caught up to Amazon in Cloud services, despite being way way behind at first.
It’s a good news/bad news joke. The good news is, all this disruption does create value for people, otherwise it would not be disruptive. The bad news is, disruption ruins big dinosaur companies who are also big employers. So far, however, these massive shifts (e.g. from assembly lines manned by human hands to ones without any at all) seem to create lots of jobs while destroying many – but that’s little comfort if your own personal skill suddenly becomes valueless.
Disruption is highly personal. Be prepared to be disrupted. It will happen to everyone. Think about how, why and when. Think about what to do to prepare. Think about your personal skills and passions that fulfill two conditions: You love doing them, and are good at it; and they create value for many people, in ways that machines and algorithms cannot.
As an educator, I feel disrupted because young people today can learn things on their own that I used to teach them. Solution: Embrace the disruption and try hard to partner with it, so that a human element is needed and creates value.
How are you being disrupted? And how are you adapting?
How We Economists Missed the Boat
By Shlomo Maital
As an economics student, many years ago, I was taught that production (both industrial and agricultural) was ruled by a Law. The Law of Diminishing Returns. (See diagram). The more effort you invest in something, the less and less additional output you get. This law originated in agriculture. For a given plot of land, the output of food it produces rises by less than the labor and resources invested in it. Here is the proof: If there WERE increasing returns, you could grow all the world’s wheat in a flowerpot. The same “law” translated as well into industrial production.
Some 23 years ago, in 1996, a brilliant and convention-breaking economists named W. Brian Arthur published an article in Harvard Business Review. The title: Increasing Returns and the New World of Business. I wish I had paid closer attention to it. Here in his words is why the ‘law’ of diminishing returns has been repealed forever.
The powers of mind are everywhere ascendant over the brute force of things. As the economy shifts steadily away from the brute force of things into the powers of mind, from resource-based bulk processing into knowledge-based design and reproduction, so it is hsifting from a base of diminishing returns to one of increasing returns. A new economics – one very different from that in the textbooks – now applies, and nowhere is this more true than in high technology. Success will strongly favor those who understand this new way of thinking.
What does this mean for us ordinary people, in simple language? Mainly, this. If you live in a world of increasing returns, then follow what a brilliant Israeli manager once decreed: first to imagine, first to move, first to scale. Think of a great idea. Get it rolling. And then scale it up fast! Because – winner takes all. The farther ahead you are of competitors, the more efficient and more profitable you become. And in the end, you, the winner, rule the market and can eliminate or buy up all your competitors. And basically, do whatever you want to make piles of profit. Including — hire armies of lobbyists.
Does this sound familiar? Apple? Google? Facebook? Amazon?
Problem is, our political and regulatory systems still do not fully understand this. Only now are government bodies beginning to investigate the monopolistic practices of Facebook and Google. These huge winner-take-all operations operate globally, so checking their power locally, in individual countries, is very difficult.
The dominant economic idea of free markets and open competition does not hold when the law of diminishing returns has been repealed and replaced by increasing returns. In this new world, little fish grow bigger, swallow the smaller fish and become predatory whales. Despite Arthur’s seminar article written in 1996, I believe it has not fully dawned on us that the old economics is gone forever.
We need to rethink how we regulate economies dominated by predatory whales rather than vigorous little minnows.
Strategizing the Value Chain
By Shlomo Maital
Amazon just announced it will create its own package delivery service, to compete with Fedex and UPS.
Amazon stock fell on the announcement – but this has happened before, each time Jeff Bezos has a new and costly idea, which usually prove correct.
This strategic move suggests a key principle for startups: How to strategic the value chain.
For on-line retailing, a significant chunk of the total profits in the whole ecosystem accrues to those who deliver the packages, not just those who make the products or sell them. Amazon is greedy for these profits, accruing to Fedex UPS and DHL and wants to swallow them.
Every product or service is part of a complex value chain ecosystem. Each startup, pushing an innovation or creative idea, must ask:
Where is my product or service aiming, in the existing value chain?
The key is: Do NOT necessarily aim at where the money (big profit margins) are at the moment. Aim where they will be in 2-3 or 5 years. And second: Maybe, just maybe, aim at an entry point that the other players do NOT find that attractive (e.g. Teva Pharmaceuticals long ago aimed at generic drugs, when Big Pharma was scorning this industry). Use this to get your foot into the door. Once you are there, have cash flow, revenue, profit – and name recognition — consider migrating, to another spot in the value chain, as Amazon is doing and has done constantly — books to other products to all products, to cloud to original TV content….
So to sum up: Startup entrepreneurs – analyze CAREFULLY the existing value chain. Draw it, picture it, analyze it. Where are you aiming at with your product? Is this an ideal entry point? Why? Where will you migrate AFTER you make a successful entry?
This is a bit like an uninvited guest knocking on the door and sticking their foot into the door to prevent it from being closed. Once you get in – look around, carefully, and figure out which room you will visit next.
This value chain analysis is crucial and is based on a long-range plan and vision. Many startups don’t bother, or are not even aware they have to do this right from the start.
IBM thought the true value in computers was in hardware. Microsoft’s WINDOWS saw the value was in software and operating systems. The rest is history.
How to Solve US Political Gridlock: Dual Survival
By Shlomo Maital
Senators Flake and Heinrich
An Amazon Reality show, Dual Survival, shown as well on Discovery Channel, features two sitting U.S. Senators, Jeff Flake (Republican, Arizona) and Martin Heinrich (Democrat, New Mexico), dumped on a deserted island in the Marshall Islands, and required to survive for 7 days. They have to find water, make shelter, find food, and in general work closely together.
They do succeed, and together build a raft that takes them beyond the surf and the coral reef to their extraction ship.
While on the island, they commiserate about Americans’ low opinion of the Senate, about who is to blame (“Americans blame both parties”, they say), and note that Republicans and Democrats simply do not meet and talk together, but rather, within each party, talk only to each other.
They vow to have lunch together once a week.
So here we have a solution to the toxic political atmosphere in the US, which allows a leading Republican senator (Senate Majority Leader Mitch McConnell) to say, we will do everything to make Obama a one-term president, rather than we will do everything to improve the wellbeing of ordinary Americans. (He failed – but apparently, aggressive partisanship beats legislative productivity).
Send the 52 Republican senators off to desert islands, with the 48 Democrat senators, in pairs. Give them knives and an (empty) water bottle. Work together, or starve and dehydrate. Come back and tell us if you can work together.
Hey, it worked for Flack and Heinrich. And as for the catastrophic McConnell Health Bill — Republicans barely talked about it with Republicans, let alone with Democrats. One of the strongest arguments Republicans put forward, for the Bill: If we don’t pass it, we will (horrors!!) have to talk to the Democrats on a compromise. Talk to Democrats????!!!!! Only on a desert island….
Jeff Bezos Follows the Money
By Shlomo Maital
Have you been following Jeff Bezos’ remarkable reinvention of Amazon? Ignore his purchase of a new toy, The Washington Post – that isn’t part of the reinvention.
Bezos is doing what many successful companies fail to do. As Peter Drucker explained decades ago, companies fail not because they do things wrong, but because they do the wrong things… they do the right things for too long until they BECOME wrong. Amazon became a market leader in on-line book sales, then broadened to selling everything, was highly successful – and while it was successful, Bezos is reinventing it, a highly difficult task. (“If it ain’t broke, why fix it? How many CEO’s believe that, and die with their company).
According to David Streitfeld (NYT April 4, p. 15), Amazon Fire TV “is part of a multi-billion-dollar effort by Amazon to move from selling goods produced by others, (low margin), to presiding over the entire process of creation and consumption (downloads and streaming).”
Amazon is now selling a device, Amazon Fire TV, that lets consumers watch Amazon’s video library, as well as play games, on their TV sets.
Recall that very quietly, Bezos positioned Amazon as a major supplier of cloud services, leaving Microsoft, IBM and other huge technology companies behind.
Bezos is using what Bain & Co.’s Orit Gadiesh called “profit pools” – a tool that shows profit margins at each stage of the value chain, and asks senior managers to ask, ‘where is the money [today]?’ and ‘where will the money be in 5 years?’? This is precisely what Bezos asked. His answer: creating download content. And he is able to move Amazon, with alacrity and skill, to where the money will be.
Bezos may well slip and fall in future. But until now, his strategic moves have been alacritous and visionary. And risky – he is not afraid to risk billions.
He’s worth watching carefully, to learn how to innovate tomorrow even when what you innovated yesterday is a big success.
TIMnovate 