Opportunities for innovation from history

Relevant parallels from other times, other places

Frank Ashe
Consultant
Quantitative Strategies

Part of the problem

Education focuses on the now and the future
Too little emphasis on what history can teach us

Business leaders from Asian heritage, and

those from European heritage, need to see
the great similarities in thought
Basic business principles are similar
Itll be a long journey to learn this

Overview
Risk management
Confucius in Basel

Mutuality takaful and friendly societies

Risk Management
Kong Zi
Huainanzi
Kautilyas Arthashastra

Confucius
551-479 BCE
End of Springs and
Autumns period,
beginning of Warring
States
Replacement of
nobility by kings
appointments
5

The first Graduate

School of Management
The MBA circa 500BC
Experienced in management
Saw the need for training of new managers

Case studies
Careers for graduates
Consulting

Analects Lun Yu
Collected by students by about 400BC
Discontinuous collection of brief statements,
short dialogues and anecdotes
Attacked, censored, reinterpreted, but still
going strong

Analects
Censored by late Imperial dynasties
Focus on submission to authority

Confucius (Kong zi) teaches:

Social justice
Political dissent
Moral obligation to criticise abuse of power

A Fractal Society
Same pattern of relationships at all levels:
Turn up magnification from imperium to
family
Same pattern of relationship at all levels
Companies fit into this spectrum

Translation

Very small sample of highlights

Translate the gist into the company realm
Keep the spirit, not the letter
Confucian gentleman (junzi)= senior manager/director
Paragraph references given

Isnt it a joy to acquire

knowledge and put it to
good use
10

The CEO
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To run a company a CEO must

dispatch business with dignity
and good faith,
be thrifty and respect all people,
and allocate work fairly

1:5

12

In running a company the

CEO should influence the
staff with virtue, and they
will engage with the
company
2:1

13

If you run the company using harsh

punishments for breaches of rules and
regulations, the staff will follow the letter
of the law for fear of punishment.
If the senior management team inspires
the staff by transparently correct
behaviour then people will want to
behave well.
2:3
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How do you get respect of

the employees?

Promote the honest

managers.

2:19

15

A CEO is fortunate if
whenever he makes a
mistake, there is somebody
to notice it and tell him.
7:31

16

Independent
Directors
17

A good chairman seeks

harmony but not conformity

A bad chairman seeks

conformity, but not harmony
13:23

18

Not to act when

justice demands,
that is cowardice.

2:19

19

Guide the executive

Forgive small mistakes
Promote the talented
13:2

20

Is the CEO happiest if no one

contradicts him?
If he is always right, thats OK
If he can make a mistake, it is
disastrous

13:15

21

Riches and board positions are

what everyone craves.
But if you have to go against
your principles to get them,
then stop.

4:5

22

Middle
Management
23

The good manager acts before he

speaks; his words follow his
actions.
Afterwards he speaks only
according to what he has done.
2:13

24

Dont worry about not getting a

promotion
worry about not being worthy of
a promotion.
4:14

25

How do you best serve a CEO?

Tell him the truth, even if it offends
him!
14:22

26

Can you report to a CEO with a rogue as

your co-report?
Before he got the position he feared not
getting it.
Now hes got the position hes afraid hell
lose it.
When he fears to lose it hes capable of
17:15
anything.
27

Compliance

28

Dont look at anything improper

Dont listen to anything improper

Dont say anything improper

Dont do anything improper

12:1

29

When everyone dislikes a

manager, one should
investigate

When everyone likes a manager,

one should investigate
15:28

30

Major principles cant be

broken

Minor principles may allow

compromise

19:11

31

Rectification of names
Let the director direct
Let the executive execute
Let the manager manage
Let the auditor listen
In assigning roles, the director leaves
nothing to chance
12:11
13:3
32

Huainanzi
Compiled by Liu An, circa 140 BCC
Summary of management principles for an
Empire
Sourced from major books of the previous 500
years
Confucian and Taoist

Basic rule:
The fish rots from the head
33

Kautilya - Arthashastra
Kautilya - Prime Minister of the first Indian
Empire
Arthashastra the right principles for
management

34

Nury Vittachi
Management principles from
Indian classics
Arthashastra
Mohenjo Daro (the ruins)
Rig Veda
Bhagavad Gita
Kama Sutra
Buddhist sutras
Edicts of Ashoka
35

Arthashastra
Arthashastra,
Loose translation of its title could be The Wealth
of Nations, or The Science of Economics.
Written by the prime minister, Kautilya
(Chanakya), of the first great Indian Empire,
stretching from Persia to Assam, this text covers
just as varied a ground as its empire.

36

Arthashastra
Agriculture and trade are the sole source for a
kingdoms Treasury
and so for its political power.

Purpose of good government (the tone at the top) is:

to provide an environment for gaining new acquisitions,
maintaining and improving them, and then
distributing the profits to the deserved (very often those
who made the profits in an honest way).

37

The tone at the top

After setting the tone at the top, the
Arthashastra delves into:
the creation of ministers,
checking their character (parliamentarians please
note!),
the roles of other arms of government, including
the spy network
hes very big on spies.

38

Duties of officials
Descriptions of the duties of over 20 commissioners:
weights and measures, tolls, weaving, elephants,
prostitutes ;
a large section on legal matters contract law, inheritance,
regulation of deposit taking institutions (APRA please
note!); and
the Removal of Thorns: crime, natural disaster mitigation,
and relief.
fascinating insights e.g. if weavers are forced to work on holidays
then they should be paid more

39

Summary
Management principles are universal
Meta-ethical (Chinese) and meta-physical
(Indo-European) philosophies converge to the
same solutions

40

Great Divergence
Why Europe grew rich and Asia stagnated
Still a large area of debate

European industries grew strong behind trade

barriers
Successful import of Asian intellectual
property

41

Politics
Indian and Chinese central government
weakness
Europe got lucky
Allowed divide and conquer
Initially paid for by American gold and silver

Chinese government never wants alternative

source of power
Destroys successful large private enterprise
42

Mutual Offices = Takaful?

Almost all Shariah requirements for takaful are
parallel to principles of a Mutual life office
British actuaries in 19th and 20th centuries
tackled many problems necessary for takaful
equity between cohorts
appropriate premium and payouts
reducing probability of ruin

43

Takaful Principles (i)

Policyholders cooperate for their common good.
Policyholders contributions are considered as
donations to the fund (pool)
Every policyholder pays his subscription to help
those who need assistance.
Losses are divided and liabilities spread according to
the community pooling system.
Uncertainty is eliminated concerning subscription
and compensation.
It does not derive advantage at the cost of others.
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Takaful principles (ii)

Theoretically, takaful is perceived as
cooperative or mutual insurance, where
members contribute a certain sum of money
to a common pool. The purpose of this system
is not profits, but to uphold the principle of
"bear ye one another's burden".

45

Friendly Societies
What is a friendly society?
Emerging from the medieval Trade Guilds,
ordinary people worked together to help each
other out in times of need.
In its early days of operation, there was no welfare
state, NHS, personal insurance or even trade
unions, so by joining friendly societies members
could protect themselves and their families
against illness, injury or death.
https://www.oddfellows.co.uk/About-us/History
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Discussion
Use history to explore modern questions

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Thank you