Clever Geek Handbook
7 July 2025

The Social Factor

Recommendation

Four signs that you are seriously behind the Internet-driven times: 1) You type “www” in front of Web addresses, 2) You think “geek” is a term of derision, 3) You subscribe to TV Guide and 4) You have a landline. If these descriptions fit you, then you will find Maria Azua’s book eye-opening. She describes online developments such as wikis, cloud computing, crowdsourcing, widgets, social bookmarking, folksonomies, avatars and all the rest – and explains what they can do for your business. However, if you are already an experienced social networker, Azua’s guide will be a review of familiar information. BooksInShort recommends this book to businesspeople who are feeling mystified by the Internet – that is, anyone who needs to update his or her Web skills. Online, it’s a new world. Azua’s book provides a good map.

Take-Aways

  • Social networking is the most revolutionary aspect of the Internet.
  • Remarkable technological advances are ushering in a new age.
  • The most radical changes are in socializing, collaborating and communicating.
  • Online communities spur creativity and innovation.
  • Tap into the power of social networking to make your company more competitive.
  • Use social networking to plan, refine, test, critique, and redesign your products and services.
  • Establish wikis to enable employees, vendors and others to collaborate, even when they’re all located in different places.
  • Disseminate vital information immediately through company blogs.
  • Use blogs to get valuable customer feedback about your products and services.
  • Cloud computing can save you money on information technology and provide quick access to the Internet.

Summary

Social Networking: More Revolutionary than the Internet

How businesses operate and compete is changing radically due to three factors:

  1. Information overload.
  2. Commodified communication, which has resulted from technology standardization.
  3. The emergence of Internet social networking tools that make inexpensive, two-way communication possible.
“The enormous social networking capabilities of the cellphone are transforming it into a genuine social extension for the user.”

The Web has had a huge impact, but social networking is the true revolution. By the millions, people have joined online social networks and now widely use social networking tools like wikis, blogs and tags.

Social networking helps people deal systematically with the proliferation of online information. Companies benefit from social networking in these six areas:

  1. “Teaming and collaboration” – Online tools enable users to connect with other people and learn about and from them. Their commercial benefits include increased productivity and better team building. By collaborating over the Internet, companies can significantly boost their research and development.
  2. “Succession planning” – Online “expertise profiles and skills assessments” make this extremely efficient.
  3. “Recruitment and on-boarding” – Companies can use social networking applications such as LinkedIn to recruit new hires. Employees can use wikis to learn how to do their jobs. They can gain access to mentors through blogs and online profiles.
  4. “Content and expertise capture” – Workers bring their knowledge and talent to the social networking communities they join.
  5. “Skills development” – Online communities of experts are available to help people do their jobs better and become more professional. Social tools add a new dimension to e-learning that includes ratings, recommendations and tags.
  6. “Innovation” – Social networking applications spur innovation by making collaboration possible.

Wikis

Collaboration thrives on the Internet. Wikipedia is a good example. Working together, contributors volunteer their time and effort to make Wikipedia the most comprehensive encyclopedia available online. Wiki applications enable people to collaborate on all types of projects. Using wikis, they can organize and monitor action items and distribute tasks. People working on wiki projects may never meet one another face-to-face. Indeed, project collaborators may be located just about anywhere.

“Company blogs are a great way to record institutional memory and provide a channel for expression to the most innovative employees.”

Businesses use wikis in various ways. These Web sites enable firms to communicate with people in diverse locations and to catalog company information, including “tacit knowledge” that employees gain on the job. Through wikis, all staffers have access to the same information. Thus, wikis provide transparency and make business practices more democratic. Using wikis, companies can bring people from far-flung locations together and set aside “private team spaces” for group members. Wikis inspire experimentation, which leads to innovation. Companies can also use wikis for data mining “to anticipate future demand and new products.”

Blogs

Anyone can be a publisher on the Internet. Through blogs, people disseminate their thoughts on every conceivable topic. Before blogs, most information about businesses came from approved sources and took the forms of newsletters and other company publications. By the time firms published the information, it was already dated. Using blogs, both employees and managers can publish company information immediately. Company bloggers can share insider knowledge of the organization’s identity and operations.

“The most successful blogs have identifiable themes or offer a particular political viewpoint or technical perspective.”

Blogs “push” information outward, whereas wikis “pull” information inward, from collaborators. Blogs can replace business e-mail blasts by providing frequent posts about important commercial matters. Use a blogging Web site like Wordpress.org, Blogger or TypePad to set up your own blog. They have these common features:

  • “Free” – You can establish and maintain your blog at no cost whatsoever.
  • “Comments” – They enable you to interact with the people who visit your blog. You can moderate comments and even delete comments that you don’t like.
  • “Profile” – Use this to showcase your company’s history, capabilities and expertise.
  • “Access controls” – You have control over who sees your posts.
  • “Customization” – Choose from a variety of themes to design your blog.
  • “Widgets” – These include “search, blog archives” and “recent comments.” You can also add such elements as Flickr and Twitter to your blog.
  • “Embedded authoring tools” – Use these to write your blog posts. You can import photos, control format and work in rich text.
“Researchers have found the average enterprise worker spends more than 12 hours per week searching for information.”

Blogs and wikis are terrific vehicles for “social ideation,” wherein “individuals or groups generate ideas, concepts and hypotheses.” The process is like brainstorming over the Internet. Companies can benefit greatly from social ideation in the areas of “cost-savings, process improvements [and] innovative business model changes.” Using blogs and wikis, you can contact your clients and partners to explore emerging needs and opportunities.

Tagging

One recent, notable cyberspace development is tagging, which involves the labeling and classifying of items online. “Tag clouds” are keyword aggregations. You can tag a “Web page, a document, a video, some new music, a friend’s blog, some wiki comments, a book, a collection of bookmarks or even a person.”

“Virtual focus groups offer the opportunity for employees to speak honestly about their work, and they provide a forum to engage regularly with customers and business partners.”

Internet cognoscenti call tagging “folksonomy” (a takeoff on “taxonomy”). “Folksonomy” means classification by and for the collective. Folksonomies change as online communities change. They are highly important to the groups that generate them. As such, they’re also important to businesses that want to market products to these communities.

“The mark of an efficient innovation process is that everything is as easy as possible.”

Tag clouds provide insights that you can use to evaluate the opinions and interests of online communities. Data about how online communities tag your products and services are priceless for marketing to the more than 250 million people who belong to social networks.

Cloud Computing

In cloud computing, you store your information on the Internet rather than on your personal hard drive or a server. Cloud computing enables you and your employees to access computer services from anywhere. Computer clouds act as “colossal data centers” and provide information technology (IT) services at bargain rates, because you no longer need expensive “application configuration and maintenance.” They substantially cut energy costs as well. Cloud computing has “three layers”:

  1. “Physical” – The hardware is largely “virtualized.”
  2. “Network” – This layer “links computers in different locations.”
  3. “Services” – This layer “provides an easy-to-use interface through available applications.”

Social Media

Numerous Internet tools and Web sites enable people to connect with each other and to share information:

  • Twitter – A microblogging Web site on which you can post messages of 140 characters or fewer. Twitter communications can contribute to superb “business intelligence.”
  • LinkedIn – Replaces business cards by providing personal and business profiles of members. LinkedIn groups form around innumerable topics.
  • Facebook – Lets you stay in touch with your contacts and develop new ones.
  • YouTube – Enables you to distribute videos concerning your products and services.
“Local knowledge spillover is one of the reasons high-tech companies gravitate to the same geographic area.”

Use these Internet tools to monitor social trends and customer preferences:

  • “Technorati” – Discover the rankings of top blogs according to usage.
  • “Google Alerts” – Monitor “Web pages, blogs, video [and] Google groups” through keyword searches. Google e-mails you the results.
  • “Twitter Search” – Search Twitter for a specific word.
  • “Bloglines” – Search for and subscribe to blogs that interest you.
  • “Google Blog Search” – A Google-alert service about blogs.

“Open Software”

Software that people create collaboratively is “open.” Open software is a radical change from the way programmers traditionally created software. It is transparent. No single programmer or programming team controls how the software will function, and it is available to anyone at no charge. Social networking tools such as wikis and blogs enable programmers to participate in open development. Many companies use the “LAMP software stack” (“Linux, Apache, MySQL [and] Perl/PHP/Python”), a set of open software that works with most operating systems. Businesses should consider adopting the open-software development and distribution approach, which places a premium on collaboration, in other areas.

Innovation

Innovation involves more than technology upgrades. Meaningful innovation also incorporates “social innovation,” which centers on new-idea development. New ideas can emerge only in a “culture of innovation.” Social tools help innovators connect with one another and with “early adopters,” who are crucial to getting new developments off the ground.

“Combining open collaboration methodology and open source distribution creates a potent virtuous cycle.”

Implement an “innovation factory” approach at your firm. In this model, the “innovation community” transforms an idea into a working prototype. After gathering feedback, the team that created the item adapts it. It does additional testing and makes further refinements. Finally, the product is ready for release and marketing. Plan to spend 45% of your IT budget on innovation. The remaining 55% keeps your current infrastructure up and running.

Social Tools and Gross Domestic Product

Innovation and technological advances are important not only for individual companies but also for the countries in which they operate. A direct correlation exists between the rate of technology development and GDP growth. A similar correlation exists between the health of social networks and the economic growth of nations.

“The real power of Twitter is using Search to narrow your cyber-eavesdropping to those conversations that are relevant to your field, skills, interests or organization.”

Social networks spur the development of service companies, which are particularly important in advanced economies. Currently, 60% of all people in the United States work in “service-related businesses.” By 2011, this figure will increase to 80%. Online social networking will help enhance this growth.

Mobility

Because of recent technology advances, people now use mobile devices to “connect anywhere, any time.” Current devices offer far more computational power than similar devices did in the past, and social tools enable users to leverage this power. Using mobile devices, businesses can immediately access product and customer information. The data is literally at people’s fingertips.

“Tags are like fingerprints or an audit trail in social spaces that can provide a way for you to understand your customers’ preferences.”

According to IBM, more than five billion people will connect to the Internet by 2015, the majority through “wireless connections.” Such connectivity will increase the power, range and scope of social networking.

About the Author

Maria Azua is responsible for the development of cloud computing applications and methodologies at IBM. She was inducted into the Women in Technology International Hall of Fame.

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The Social Factor

Book The Social Factor

Innovate, Ignite, and Win Through Mass Collaboration and Social Networking

IBM Press,
 


7 July 2025

Diversification Strategy

Recommendation

When a company fails, diversification is more likely to get the blame than concentration. Running multiple businesses is supposedly more dangerous than operating just one. But focus is overrated. With proper management, business diversity can deliver excellent investment returns. So says corporate strategy planner Graham Kenny whose book lists seven steps that “successful diversifiers” follow. Blending practical information with meaty, real-life examples, Kenny illustrates how notable conglomerates, such as General Electric, exercise the discipline that successful diversification demands. Although the book lacks some of the finer details you’d need to apply Kenny’s diversification program, BooksInShort recommends this clear volume to business managers who want a research-based framework for assessing diversification opportunities.

Take-Aways

  • Focused companies have been in vogue for decades, but firms that fail to diversify their business may leave their shareholders feeling poorer.
  • General Electric, Bidvest, ITC and Wesfarmers are highly successful diversified firms. But Warren Buffett’s Berkshire Hathaway does not optimize its position as a diversifier.
  • Effective diversified companies follow seven steps:
  • First, they create a central headquarters to provide basic support for each division.
  • Second, they choose division managers who are capable of leading.
  • Third, successful diversified corporations use appropriate evaluation measures, such as return on equity, to assess their overall performance.
  • Fourth, they offer compensation packages that give top executives incentives to balance short- and long-term business considerations.
  • Fifth, they “align the corporate culture” among the mother company’s various divisions.
  • Sixth, they “secure competitive advantage” by creating value for all their stakeholders, not just their shareholders.
  • And seventh, they make smart acquisitions and seize new business opportunities.

Summary

Diversification Versus Concentration

Many business executives consider diversification risky. Concentrating on a core business has been a fashionable style of management for decades. It won many followers after the 1982 publication of In Search of Excellence, an influential, widely read book by Tom Peters and Robert Waterman, who urged companies to focus, to do only what they do best and to “stick to their knitting.” Investment analysts are more likely to cite excess diversification than excess concentration among the reasons why companies fail. But, alternatively, branching out can breathe new life into a company, and avoiding diversification can have adverse consequences. Firms that fail to diversify their business are likely to leave their shareholders feeling poorer.

“Diversification is the variation between businesses within a company.”

However, succeeding in multiple lines of business can be difficult. The diversification process is fraught with change and challenge. Misguided diversification often stems from business acquisitions that are overpriced or poorly planned. And many diversified companies lack the managerial expertise to oversee two or more different businesses from one headquarters.

“The prevailing view is that focused firms are the norm...This simply isn’t true...Far from being freaks, diversified businesses are normal.”

Effective business diversification usually improves the financial performance of a company by leading to lower costs or to a higher-quality product or service. However, David Jones, a high-end Australian department store, did not achieve either result when it attempted to diversify into retail food stores in the mid-1990s. High-priced, high-quality merchandise distinguishes David Jones from other retailers. However, it tried to expand into the food trade without really understanding the business. David Jones exited its Foodchain business after numerous blunders, including poor store locations, inappropriate opening hours, ineffective product range and pricing errors.

Diversification Done Right: Four Case Studies

Some companies clearly are better “diversifiers” than others. Four highly diverse conglomerates, General Electric, ITC Limited, Wesfarmers and Bidvest, are particularly worthy of emulation. They take a disciplined approach to diversification that discourages poorly conceived expansions into unfamiliar businesses. Research shows that these four multiline, multinational companies consistently earned annual returns on equity (ROE) of more than 14% for at least the 10 consecutive years prior to 2006. The best gauge of a company’s economic power is ROE, or annual net income divided by shareholders’ equity, because its formulation does not include volatile movements in share prices.

“Diversification has become the leper of management: something you certainly don’t touch.”

Bidvest, founded in South Africa in 1988, is the youngest of the four companies. It carved its path to growth and diversity through a series of acquisitions. By 2006, the firm held a mixed portfolio of business interests in freight logistics, commercial cleaning services, private security, financial services, auto sales and food wholesaling. Bidvest also diversified itself geographically by expanding into Australia, Europe and New Zealand.

“Managers and boards are frightened to stray from ‘core business,’ even though this concept proves illusive in practice.”

Incorporated in 1910, the Imperial Tobacco Company of India Limited never settled for serving only smokers. Now called ITC Limited, it has become a leading firm in India with far-reaching business interests, including hotel operations, retailing, information technology sales, paper-product manufacturing, agricultural production and packaged food distribution.

“There is no such thing as a perfect measure, [but] ROE is widely viewed as a sound metric for assessing overall corporate performance.”

In 1892, Thomas Edison’s General Electric Company merged with the Thomson-Houston Electric Company to create a combined entity, General Electric. GE went on to become an American corporate icon. A sprawling multinational conglomerate, GE sells products that range from jet engines, railroad equipment and medical imaging systems to refrigerators, freezers, washers and dryers. GE also sells financial services such as auto loans and private-label credit card accounts, and it distributes television programming through its ownership of NBC Universal.

“First-class corporate governance and proper dealings are important to all of them.”

A group of farmers formed Wesfarmers in 1914 as a cooperative venture that provided goods and services to residents of rural areas in the state of Western Australia. By 2006, Wesfarmers ranked among the 20 largest companies headquartered in Australia based on the market value of its stock. Wesfarmers became a five-division corporation with a wide spectrum of enterprises, from supermarkets to coal mining to the sale of chemicals, fertilizers, insurance and industrial safety products.

Seven Steps to Successful Diversification

The success of these companies confirms the potential power of diversification. All four firms took similar actions to build their business portfolios and adhered to seven essential steps to manage the issues that diversification commonly entails. In fact, if the financial performance of any of these four companies worsens in the future, the reason probably will stem from failure to follow one or more of these seven steps:

  1. “Establish a supportive corporate center” – Assemble a corporate headquarters staff that adds value to the company’s divisions but does not provide detailed operational direction. The home office should primarily supply basic support, including regulatory compliance, corporate governance, accounting and financial reporting. In addition to these functions, some central offices also handle corporate planning, human resources and investor relations.
  2. “Select capable division managers” – Bidvest follows a policy of hiring division managers who perform as if they were “owner-managers” of their divisions. Michael Chaney, former chief executive officer of Wesfarmers, hired division managers who offered “emotional intelligence,” not just technical competence. Jack Welch, former CEO of GE, sought “integrity, intelligence and maturity” when he recruited division managers. Welch warned against hiring people who pretend to be more capable than they are.
  3. “Install appropriate performance measures” – Diversified companies commonly use ROE and comparable gauges of financial performance to determine how their divisions are performing. For example, GE has used both ROE and “return on total capital,” or “profit before tax and interest divided by shareholders’ equity plus long-term borrowings,” to rate the operations of its divisions. “Return on capital employed” is one of the measures of success at Wesfarmers’ divisions. Bidvest uses a similar calculation called “return on funds employed.”
  4. “Set effective incentives” – Compensation for top executives and division managers should include bonus payments that have the potential to exceed their annual salary. The way firms remunerate their managers ought to encourage them to balance short- and long-term business considerations. Paying long-term incentives in stock, for example, can inspire sustainable business diversification and discourage thoughtless conglomeration.
  5. “Align the corporate culture” – The corporate and division-level cultures of a diversified company should exalt common priorities regarding business expansion, divisional autonomy, corporate integrity, return on investment, and so on. Leaders of these companies must respect the cultural differences among their divisions while ensuring that the cultures of those divisions and the home office mesh well.
  6. “Secure competitive advantage” – Successful diversified companies quell their competition by building strategies based on service to shareholders and other constituents. For example, both GE and Wesfarmers put their strategic focus on satisfying stakeholders, including their workers and customers, not just their shareholders. Setting operational strategies – such as capacity utilization, product branding and other internal business functions – at the corporate level is less effective and less likely to make a company more competitive.
  7. “Buy well and integrate” – Bidvest, GE, ITC and Wesfarmers are “good shoppers” for acquisitions. They calculate their risks, avoid overpaying and address integration issues before they complete buyouts. These four companies diversify not to avoid risk but to seize business opportunities. Wesfarmers’ Chaney believes firms should reject narrow operational goals like “being the world’s biggest something.”

Failed Diversification: The Case of Burns Philp

Prior to the 1970s, Australia-based Burns Philp focused primarily on South Pacific shipping and trading. By the early 1980s, Burns Philp had grown substantially more complex through diversification into additional businesses. In 1983, it reported 175 separate enterprises, ranging from travel agencies, hotels and retail hardware stores to cement distributors, mining ventures, film processors and distributors of drink-dispensing machines. A new CEO diagnosed excess diversification as a drag on profitability, so Burns Philp restructured between 1984 and 1996, selling some businesses, acquiring others and narrowing its line of products.

“Rapid growth by diversification is usually achieved through acquisition.”

The restructuring focused the company on three products: antibiotics, spices and yeast. Its yeast production process gave Burns Philp a technological advantage over its competitors, but the strategy of concentrating antibiotics and spices was unsuccessful. Burns Philp bought an Italian antibiotics company, and then unexpectedly paid an amount equal to nearly half the acquisition price to build a new antibiotics factory, replacing an existing plant because it posed an unforeseen environmental threat. Burns Philp had failed to conduct adequate due diligence before buying the Italian firm. In the US spice market, Burns Philp crumbled under pressure from competitors that increased the “slotting fees” they paid supermarket operators to gain the best positions on store shelves. Burns Philp acquired businesses in Canada, China, Germany, Ireland, Italy, New Zealand, Portugal and the US, among other countries. But its failure to plan for differences in foreign cultures, particularly in Italy and the US, led to administrative chaos at headquarters and contributed to its financial fragility. The company ultimately surrendered its own independence: Rank Group acquired Burns Philp in 2006.

Diversification and Financial Structuring

The financial structure of a company can affect the benefits of diversification. For example, American billionaire and master diversifier Warren Buffett is CEO of US-based Berkshire Hathaway, which has interests in insurance, manufacturing, retailing and publishing, among many other industries. Originally an insurance business, Berkshire diversified by acquiring large equity stakes in other types of firms. This approach evolved from the insurance business, which involved collecting premiums and investing the money in stocks and bonds.

“You can’t dabble in diversification. Those who do get their fingers burnt.”

Despite other measurable successes, however, Berkshire Hathaway’s return on equity averaged 7.8% during the same 10-year period when returns on equity at Bidvest, GE, ITC and Wesfarmers averaged more than 14%. This is largely because Berkshire focuses on increasing net worth per share, not return on equity. Berkshire pays no dividends, a policy that increases retained earnings and cash. By holding large amounts of cash, Berkshire deepens its capacity to buy businesses without borrowing money, but depresses its return on equity.

Diversified Companies, Focused Divisions

In 2003, a news periodical in India published an article calling ITC a “focused conglomerate,” thus acknowledging that ITC and other parent companies with multiple divisions are families of focused businesses. Specializing in one product or service is a proven way to gain advantages over unfocused competitors. But focus at the division level is rewarding only if the division’s strategic mission addresses all the major stakeholders. In this respect, diversified companies can learn from successful companies that dominate a single market niche. Quick-service restaurant chain McDonald’s, for example, is a powerful, focused company that has long addressed the needs of such stakeholders as its customers and suppliers.

“Successful diversified firms are masters at keeping it simple and at establishing systems and procedures that ensure it remains that way.”

The obvious importance of specialization has led some researchers to question the value of business diversification, but few question its popularity. Even a small real estate firm engaged in property sales and leasing has two distinct businesses. Indeed, diversified companies probably outnumber focused ones. So for many corporate leaders, the challenge is not whether to diversify but how to improve their management of different businesses under the same umbrella.

About the Author

Graham Kenny is the managing director of Strategic Factors, an Australian firm specializing in strategic planning and performance measurement.

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Diversification Strategy

Book Diversification Strategy

How to grow a business by diversifying successfully

Kogan Page,
 


7 July 2025

Good Value

Recommendation

Depending on your perspective, HSBC Chairman Stephen Green’s analysis of the global economy and the moral ambiguities that will inevitably shape society’s evolution is either brilliant or convoluted. It may be both. Readers will applaud Green’s intellect as he draws from fertile philosophical, literary and religious sources to frame his take on civilization’s economic beginnings and development. The one drawback is that his obsession with detail and stylistic prose can sometimes obscure his fundamental points. Green ponders where society is headed in this age of globalization and economic uncertainty, and how people will adapt without compromising their humanity. BooksInShort finds that his hopeful prescription positions him more as a philosopher than as a major banking executive, though he willingly shoulders both roles.

Take-Aways

  • Economic globalization has spurred urban growth and fostered “cultural exchange.”
  • Only two countries in history – Britain and the United States – have exerted true world dominance.
  • The balance of economic power is shifting from the West to the East with the emergence of China and India.
  • The world has just undergone the worst financial crisis since the Great Depression.
  • That will usher in a new capitalism with different dynamics that will demand social responsibility, ethics and concern for the environment.
  • Businesses must accept this mandate. Profit can no longer be their sole motivation.
  • Economic evolution in the 21st century necessarily involves morals and ethics.
  • Finding satisfaction and purpose requires adhering to fundamental principles.
  • Wealth and power never deliver on their promises of fulfillment.
  • People must seek meaning in their work and meet their social responsibilities.

Summary

The Course of Change

As this century nears its second decade, the world is undergoing a sweeping economic, political and social evolution. As always, educated observers and experts are trying to identify emerging trends and patterns, but future events are impossible to predict. The worst financial crisis in decades has caused serious damage globally. Housing markets are in shambles, banks are struggling to remain viable, unemployment is rampant, prices continue to rise and money buys less. People have lost their sense of security. The foundation of trust is eroding.

“Globalization is not a concept or an ideology; it is a phenomenon. It is part of the sweep of human history.”

Individuals often become introspective during periods of extraordinary upheaval. They question their motivation as they struggle to find intrinsic value in their daily routines and the pursuit of financial stability and material possessions. Some decide to give their all, sacrificing the security of suburbia to rescue exploited children in India or educate youngsters in African nations. But most people quickly brush aside notions or impulses of social responsibility, choosing to maintain their comfortable – if not affluent – lifestyles.

“The urban transformation of the world is the most important social, political and cultural consequence of globalization.”

Why do some people rise to the occasion and respond to humanitarian challenges – whether in big ways or small ones – while others simply shrug their shoulders? What makes life purposeful in this age of great uncertainty? How do people maintain hope for a brighter future in the face of tsunamis, earthquakes, political corruption, religious extremism and nuclear threats? What role does spirituality play in the human experience?

Globalization: A Permanent Trend

Globalization is not a new phenomenon. In fact, until the British Empire rose to dominance in 1815 – following France’s demise under Napoléon Bonaparte – no country had ever exerted singular global influence. In ancient times, the Romans and Chinese were tremendously powerful, but they existed independently and had little contact with each other. Britain maintained its superiority until 1871, when the German Empire emerged. By 1914, Germany was the world’s most formidable industrial state.

“The First World War may have ended in 1918; but the lights of progress, global integration and economic expansion remained out until at least the 1950s.”

After the end of the Cold War in 1989, the United States became the world’s second sole superpower, with unrivaled political, economic and military strength. But America’s dominance began to waver some 15 years later, as China flexed its economic muscles and the popularity of Western democracy declined in many corners of the globe. China’s growth as an economic superpower will likely continue for decades.

“Capitalism for the 21st century needs to rediscover a fundamentally renewed morality to underpin it.”

The impact of globalization also manifests in urban growth – city populations are booming compared with 50 years ago – and “cultural exchange.” Chinese classical pianists play selections from German and Italian composers. Art exhibits throughout China reflect Japanese and Western influences. In 2009, a British art gallery displayed the works of up-and-coming Muslim artists expressing their vision of Arab culture in the context of contemporary urban existence. Many publishers are translating books and literary pieces from Asia, South America and Africa into English. Such cultural interchanges are byproducts of economic globalization. “Connected commerce” contributes to the expansion of larger, more vibrant cities and creates an atmosphere where individuals from diverse cultures can swap ideas.

Expanding Horizons

The term “globalization” became popular around 1985, but people have ventured beyond their own geographic boundaries since the beginning of civilization. In biblical times, the Phoenicians, who had enormous vessels capable of transporting some 400 tons of cargo each, brought back goods from the coasts of Europe and Africa. During the Middle Ages, Europeans went to great lengths to procure exotic spices, such as nutmeg and cinnamon. The global economy’s growth exploded in the 1500s, when Spanish explorers such as Vasco Núñez de Balboa and Francisco Pizarro conquered territories in the New World and shipped home vast amounts of gold and silver.

“Government oversight, regulation and, in times of stress, intervention are essential.”

The modern-day global economy did not really take shape until after World War II, when the U.S. abandoned its isolationist philosophy and led a movement to lower the trade barriers that had effectively stifled commerce for the previous 100 years. U.S. tariff reform initiated in 1947 loosened trade restrictions worldwide, eventually leading to the most significant global trade occurrence since 1990: the emergence of China and India as major financial players.

“Markets cannot be relied on to be stable and self-regulating.”

Capitalism, consumerism and technology have opened the doors of opportunity and prosperity for millions of people. But economic expansion creates questions concerning the stability of the free enterprise system, the prospects for individuals and countries that can’t keep up, the planet’s resource capabilities, and the effect of progress on society’s moral values and responsibilities.

A Critical Juncture

The global economic meltdown that began in 2007 has become the most severe crisis since the Great Depression. In fact, it may turn out to be a defining time in history, depending on its consequences. Although the crisis caught almost everyone by surprise, including former Federal Reserve Chairman Alan Greenspan, signs of trouble had started appearing on the horizon in 2005.

“We cannot fulfill ourselves in business through power or work or wealth.”

A fundamental change that will influence world economics for the next 50 years is emerging from beneath the surface of the crisis. Capitalism now demands responsibility, ethics and concern for the environment. This has yet to play out fully, but four axioms are undeniable:

  1. Capitalism is king – The market is far from perfect, but it’s better than any other alternative. Capitalism has benefited many more economies than it’s damaged. Look no farther than China and India. However, capitalism’s future is not just about economic principles, variables and trends.
  2. Change is permanent – Economic principles that worked in the past are history. Society can’t go back. Denying the realities of a global economy is impossible. The focus should be on strengthening the capital market.
  3. Be ready to step in – In a crisis, the market requires bold remedial action. People can’t expect the market to correct severe imbalances automatically. World leaders must determine how to preserve the market’s vitality while maintaining oversight.
  4. Balance is shifting – The East, not the West, is becoming the center of economic power. Leaders must recognize the influence of emerging economies and give them input.

Questions to Ponder

Society’s attitudes have changed. People are more mistrustful of institutions. Their confidence has been shaken. In the race to accumulate material possessions, humankind has lost its moral compass. People realize that prosperity does not ensure happiness or contentment. Thus, any discussion of 21st century life must include ethical and behavioral considerations. Indeed, in this age of economic fluctuation and political unrest, people are pondering fundamental philosophical issues. They are asking if individuals are morally obligated to contribute to society’s overall well-being? Are they responsible for how they leave the world for future generations?

“The value of our business is dependent on the values with which we do our business.”

Consumerism has spawned legions of status-hungry shoppers more concerned with “price, not value.” And yet, people have an instinctive understanding that cost does not accurately reflect real worth. Men and women recognize that their families and friends are more important than their possessions, but uncertain times and world conditions have created a selfishness that compromises concern for the greater good. Despite having advanced technology that has fostered an unprecedented ability to communicate, society, in many ways, has lost its sense of community.

“How, in this individualized world, can we preserve a sense of obligation? What do we teach our children?”

Globally, the bridge dividing the “haves” and the “have-nots” remains formidable. Malnutrition, drought, homelessness, infant mortality and discrimination affect millions of people. In some countries, millions more are enslaved. In theory, the world has enough resources to eradicate poverty, but corruption and political dissension promise to hinder a solution for decades to come.

“We know for sure that we will stumble, but that remorse is always an option; atonement and renewal are always possible.”

What about the societal obligation to protect the planet’s resources and ensure a safe environment? Global warming, though controversial, is a major concern for many experts. Pollution is an issue for numerous emerging countries and the increased amount of greenhouse gases is undeniable.

Businesses Must Share Responsibility

Global problems have no easy solutions, yet it’s evident that businesses must play a meaningful role and accept “social responsibility.” Companies need not cast aside their profit motives to embrace other goals as well, particularly social causes. Adhering to these guidelines will assure your organization’s contribution to society:

  • Practice sustainability – Organizations must try to maximize returns and maintain trust with investors while establishing realistic objectives and sensible competitive practices.
  • Be committed – Seeking to improve customer service is a fundamental tenet, but businesses these days also should invest in their communities and in environmental concerns. Companies cannot afford to be passive members of society.
  • Engage your workforce – Community involvement energizes your employees and boosts their sense of self-worth. Prioritize projects that are outside the workplace. Be creative and innovative.
“If we want to see life as more than just ‘one damn thing after another,’ we have to begin by seeing we are part of what makes it what it is.”

Corporate scandals and the collapse of various financial institutions have severely damaged the public trust, putting the onus on companies to operate now with unshakeable integrity and sincerity. Profit as the sole motivator is no longer an acceptable business practice. The public expects firms to be sensitive to broad social issues and respond accordingly.

The Individual Road to Fulfillment

No one attains fulfillment through wealth or power alone. Many people spend years amassing possessions or scaling the corporate ladder only to discover that their lives ultimately lack purpose. Even those with a firm grip on reality and no delusions of grandeur often search for meaning within the daily corporate struggle. Such fulfillment is in reach if you follow these guiding principles:

  • Practice integrity – The importance of honesty and fair play cuts across cultural boundaries. People may argue about issues such as abortion or the use of the death penalty, but everyone agrees about the role of integrity in business.
  • Treat people well – Frame your relationships with decency and kindness. Manipulating or abusing others never works in the long run.
  • Have healthy ambition – The desire to achieve is commendable as long as you’re not driven by selfishness. Always keep the common good in mind.
  • Seek balance – Acknowledge the importance of work, play and relationships, and devote sufficient time to each.
  • Be a guiding light – Leadership doesn’t come just from executives. Personal leadership means taking your responsibilities seriously, inspiring others and fostering camaraderie.
  • Find your purpose – Every individual needs to determine the extent of his or her contribution to humanity. If self-examination reveals that your daily pursuits lack value, then a larger question looms: “Why exactly am I doing this?”

A Message of Hope

While it is enormously important, no amount of self-realization can provide all the answers. Life is complicated, ambiguous and uncertain. It is tragic and exhilarating. Despite individual noble intentions, mistakes and disappointment are inevitable, yet hope and optimism always remain within reach. The human spirit has prevailed throughout the march of time. Mighty civilizations rise and fall. Heroes and villains share the same stage. War, plague and famine have claimed countless victims. Great societies have ignored the lessons of history and imploded. But you can make your society better. Tomorrow is a new day and the possibilities are endless.

About the Author

Stephen Green, current chairman and former CEO of HSBC, is also chairman of the British Bankers’ Association and chair of the Prime Minister’s Business Council for Britain.

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Good Value

Book Good Value

Reflections on money, morality and an uncertain world

Allen Lane,
 



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