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Drive Moral Innovations – An Introduction

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1 Drive Moral Innovations – An Introduction
David S. Wu President, Wu & Associates, LLC April, 2012

2 Table of Content Moral innovation is an action oriented framework to drive harmony Introduction of Humanity and Maslow’s Hierarchy Drivers for Individuals and Groups Moral Innovation and the Four Worlds of humans Exploitative World Zero Sum Game World Ascetic Living World Harmonious World Distribution of Humans by Maslow’s Hierarchy Layers Moral Innovation Lines Moral Innovations in China Case Study – Solar energy in China Summary – Next Step

3 Disclaimer No one can please everyone all the time
There is no absolute scale for moral innovations. If we take them apart, there is no absolute scale for morality, and no absolute scale for innovation. Fortunately, we do not need absolute scales. We use a relative scale to average moral innovations. By definition, average moral innovations mean average morality and average innovations. High/low morality and high/low innovation are relative to the average. By analogy, the Director of Admissions at Princeton University shared 20 years ago that 16,000 applicants apply to Princeton each year, but only 2,000 or slightly more than 10% get accepted (the percentage is lower today). If you do not look at the quality of the essays, teachers’ recommendations and the volunteer alumni who interview the applicants, about 9,000 applicants have roughly the same SAT/GPA statistics. Therefore, the Admissions office can roll dice to admit applicants within these 9,000 applicants without any visible impact on the SAT/GPA profile. This approach would miss the best Asian Americans who work full time to support their family and take care of siblings while still taking a full load of college level courses in high school. In this analogy, a rejected Princeton applicant can still be a superior student, even though he/she is “below the average” among Princeton applicants. Of course, Princeton takes into consideration all non-statistical profiles such as essays and alumni interview reports in order to reinforce the “best undergraduate education” ranking. Keep this in mind when you read moral innovations. No one can please everyone all the time

4 Humanity Humanity represents 7+ billion individuals on earth (in 2012)
On average each individual knows less than 10,000 people during a lifetime (implied in the six degrees of separation) A person at birth is determined by the parents After birth, that person is driven by his/her passions and needs His/her personality and drive, influenced by family, define a person’s network Parents, siblings, relatives, children and friends Network of acquaintances and work associates/teammates Apply First Law of Geography to groups with similar values and culture “Everything is related to everything else, but near things are more related than distant things” Race/ethnicity, culture, nationality, language, wealth/power, etc Churches/Temples/Synagogues, schools, subjects of interest (e.g. music, literature), etc. At death, a person physically stops driving passions and needs Some believe the soul will last forever, but not the body on earth Aggregate individuals into groups reflect averages only, outliers will always exist

5 Maslow’s Hierarchy is a static snapshot of Individual’s Needs
At any point in time, a person has a combination of five layers of needs

6 Everyone has unique drivers to climb this hierarchy…
Focus on an Individual’s dynamics Dynamic Drivers: Passion, faith, Commitment, Motivation, etc Static Position at Time 1 (e.g. birth) Static Position at Time 2 (e.g. death) Everyone has unique drivers to climb this hierarchy… Tergiversation (e.g.politics) distort meritocracy…Those who can, will seek shortcuts

7 Morals and Innovations Defined
Follow Golden Rule: Don’t do unto others what you don’t want others to do unto you Confucianism cultivates virtue and develops moral perfection A habit of the soul, according to Aristotle’s Nicomachean Ethics adopted by St. Thomas Aquinas ( ) for Christians Doing the right things, even when no one is looking (e.g. Innovations Conceptualize or modify status quo to enrich lives Create advantage for some, but most of the time also create disadvantages for others Moral Innovations evolve over time High moral, high innovation = harmonious progress High moral, low innovation = ascetic preservation Low moral, high innovation = exploitative progress Low moral, low innovation = zero sum game Harmonious Society has high morals and high innovation

8 Moral Innovation Framework
Exploitative Progress HI Four Worlds: High Innovation/Low Moral = Exploitative Low Innovation/Low Moral = Zero Sum Game Low Innovation/High Moral = Ascetic Living High Innovation/High Moral = Harmonious Progress LOW Zero Sum Game LOW Four Worlds reflect 5,000 years of humanity 8

9 Global Population Distribution
Christians (33%) Indians (18%) Muslims (24%) Chinese (20%) Global Population Distribution 1800: 1 Billion People 2010: 6.8 Billion People - 50% Catholics 50% Protestants and Orthodox Christians (29%) Indians (17%) Chinese (30%) Muslims (18%) - 85% Sunni - 15% Shiite Over 90% humans in these four groups, with <10% overlap *China and India had over 50% of the 100 million global population reached about 2,500 years ago, when Roman Republic started. China and India had over 50% of the 5-30 million global population reached about 5,000 years ago when Egypt and Sumer dominated.

10 Christians The Protestant Confederation dominates USA and UK Christians* *260 million of 360 million people in USA and UK are Christians million Protestants, 80 million Catholics, and 20 million Anglicans.

11 Exploitative World Moral Innovations
Morals 10 Commandments with exceptions Old Testament (Joshua 6) violates the “Thou shall not kill” commandment Life begins as sinners (Augustine) Scripture Egyptian Book of the Dead Bible (generally accepted = books) Book of Revelation describes hell Aristotle’s Nicomachean Ethics adopted by Catholic Christian St. Thomas Aquinas ( ). Innovations Powerful bureaucracies Vatican’s bishops Napoleon’s codes Crusades Heaven without purgatory Forced exodus Aboriginal deaths in South America, Tasmania, and other places Africans to Americas and Europe as slaves Muslims to Pakistan, Hindu to India Wealth accumulation Inquisitions (e.g. Spanish Inquisitions) Opium Wars in China Servitude motto: “To serve God in God’s Kingdom”

12 Muslims The Muslim Confederation has many more national boundaries 12
*Sikhs have Hindu roots and Muslim influence. E.g., the word Khalsa (baptized Sikh) has Arabic origins. There are 5 “K”s in Sikh, similar to Islam’s 5 pillars

13 Zero Sum Game World Moral Innovations
Morals 5 Pillars Scripture 77,934 words never to be changed 114 chapters with verses each Fourth day after death, walk the Zoroaster bridge to heaven, or fall into hell Admission to heaven only by Allah, with 7 grades of pleasure in celestial paradise Recognize Jesus as apostle, just like Adam and Eve. Innovations Mostly focused on better weapons Sumerians invented wheels. Amorites invented the Zodiac. Hittites improved upon the Egyptian chariots Assyrians invented the battering rams and excavations to remove city walls. Muslims improved upon Chinese invented gunpowder to make rockets, and invented programmable robotics, etc. Jihad Apply to both Shiite and Sunni Muslims Umma prohibits separation from Islam – perpetual warfare

14 Ascetic Living World Combined Pakistan/Bangladesh/India had over 1.5 billion people in 2010 14 14

15 Ascetic Living World Moral Innovations
Morals Henotheistic (~1 million super beings) Pursue Nirvana (nothingness) Hindu Dharma (ethics) and Samsara (Rebirth) Buddhist (Karma) Four Truths (sufferings) Ten Virtues Social Structure Hinduism united India with the four canonical Samhitas of the ancient Hindu scripture based on scribes of oral communications (developed chaturvarnya – caste system) 5 realms for rebirth in Buddhism, and more than 20 hells in Hindu Innovations are also pragmatic Earliest cotton and cotton related textile production was along the Ganges River Earliest shipyard with 225 meter x 37 meter dry dock along the Ganges River Aryabhata was the earliest to discover that the orbits of the planets around the Sun are ellipses Accepted colonization for 500 years Mongoloid Emperor Babur first to take possession of the Kohinoor Diamond Britain took Kohinoor Diamond to England and cut the 186 carat diamond to carats for the British crown in the 19th century Readily accepted progress as a Mongoloid, then Christian colony 15 15

16 Harmonious Progress World
President Hu Jintao is driving for “harmonious society” 16

17 Harmonious World Moral Innovations
Morals Live ethically Priorities are Self (修身) Family(齐家) Country(报国) Humanity(为人民) Societal beliefs Change (易经) Ethics (道德经) Arts (诗经) Egalitarian(墨子) Confucius (论语) Free will(庄子逍遥游) Laws (韩非子) Eternal Life with Reincarnation Innovations are pragmatic/ancient Compass Gunpowder Large scale irrigation Environmentally friendly world (大同世界) Horse harness Paper Paper currency Printing Qi (or dark matter/energy today) Failed to continuously improve Gunpowder helped Muslim invent guns, and Christians invent cannons Paper and print helped Germans invent type-print to recruit Protestants Overemphasized morals at the expense of innovations 17

18 (Population in Billions (Population in Billions
Distribution of Humans by Maslow Hierarchy Layer (Population in Billions Around the year 1800) Key word for the level World Chinese Indians Christians Muslims Others Self-Actualization Legacy 0.0002 0.0001 0.0000 Esteem Standing Out 0.02 0.01 0.00 Love/Belonging Acceptance 0.25 0.14 0.09 Safety Comfort 0.38 0.10 0.06 0.08 Physiological Survival 0.35 0.05 0.04 Total 1.0 0.3 0.17 0.29 0.18 (Population in Billions Around the year 2010) Key word for the level World Chinese Indians Christians Muslims Others Self-Actualization Legacy 0.0200 0.0040 0.0020 0.0100 0.0000 Esteem Standing Out 0.28 0.05 0.04 0.18 0.01 0.00 Love/Belonging Acceptance 2.30 0.16 1.50 0.20 Safety Comfort 3.20 0.90 0.41 0.85 0.14 Physiological Survival 1.00 0.10 0.50 Total 6.8 1.3 1.2 2.3 1.6 0.4 Christians led the industrial revolution and grew the most between 1800 and 2010

19 Human Growth in 210 years (In Billions)
Composition of Human Growth by Maslow Hierarchy Layer Human Growth in 210 years (In Billions) Key word for the level World Chinese Indians Christians Muslims Others Self-Actualization Legacy 0.0198 0.0039 0.0020 0.0099 0.0040 0.0000 Esteem Standing Out 0.26 0.04 0.17 0.01 0.00 Love/Belonging Acceptance 2.05 0.14 0.15 1.41 0.20 0.16 Safety Comfort 2.82 0.80 0.84 0.31 0.77 0.12 Physiological Survival 0.65 0.05 0.11 0.40 0.06 Total 5.8 1.0 2.0 1.4 0.4 % Growth in 210 years Key word for the level World Chinese Indians Christians Muslims Others Self-Actualization Legacy 9900% 3900% Esteem Standing Out 1300% 400% 1700% Love/Belonging Acceptance 820% 100% 1500% 1567% Safety Comfort 742% 800% 1400% 310% 963% 600% Physiological Survival 186% 0% 122% 150% Total 580% 333% 606% 693% 789% 567% Christians leveraged innovations to lead the climb in Maslow’s Hierarchy

20 Findings Need Moral Innovations to drive Harmonious Progress
Faith accounted for nearly 60% of population growth in the last 210 years Christians leveraged innovations to climb the Maslow Hierarchy Colonies and slaves drove unsustainable exploitative progress The highest (self-actualization) layer is redistributing wealth Individuals like Bill Gates: Driving philanthropy Governments like the USA: Driving entitlements Muslims attracted the largest proportion of the poorer population Growth mostly in Asian nations like Pakistan and Indonesia The highest layer is dominated by OPEC oil owners, but natural resources are limited, and can not be sustained China has not climbed the Maslow Hierarchy as fast as Christians Invasion by outsiders like UK and Japan woke up the dragon Strong economic growth for 30 years but not sustainable Issues include: Wealth distribution and environmental impact India has not climbed the Maslow Hierarchy as fast as the Chinese Democracy is the worst form of government, except there is none better Need Moral Innovations to drive Harmonious Progress

21 Elemental Moral Innovations Lines
Exploitative Progress HI Christians (Protestants) Christians (Catholics) Christians Christians (Orthodox) Indians LOW Muslims Zero Sum Game LOW Significant differences among the four groups over time

22 Composite Moral Innovation Line
Exploitative Progress HI 5000 years ago 2500 years ago 100 years ago 500 years ago LOW Zero Sum Game LOW Pursuing zero-sum game instead of harmonious progress 22

23 Future Scenario: Reverse Course
Start with USA and China moral innovation initiatives (24% of humans) Obama focused on innovations and productivity Don’t revert to British style imperialism Hu focused on harmonious societies Don’t revert to isolational communism Stimulate continuous improvement initiatives with people who support continuous improvement (e.g. Protestants and Jews would add 10% of humans, or 34% of global population) Use results to seek win-win initiatives with the rest of the world Moral innovations reinforce global leadership… Leverage localized continuous improvement initiatives

24 Moral Innovations Summary
Exploitative Progress 5000 years ago HI 500 years from now 2500 years ago 100 years ago 500 years ago LOW Zero Sum Game LOW Green target for the next 500 years

25 Summary – Next Step Chinese strengths are to develop harmonious society Need innovation in continued globalized world Need to sustain 30 years of vigorous economic development Strong commitment to not interfere with a nation’s sovereignty This is very similar to Point #5 of Woodrow Wilson’s 14 points in 1919 “…Adjustment of colonial claims, that in determining all such questions of sovereignty, the interests of the people concerned must have equal weight with the claims of the government whose title is to be determined…” USA strengths are continuous improvement and innovation Not burdened by the imperialist UK legacy Passed legislations on Bill of Rights, Civil Rights, Women Suffrage, Emancipation Proclamation, etc. Need to sustain global leadership and the world’s largest economy Experienced with Japan on implementing continuous improvement concepts USA and China can set examples for the rest of the world

26 China’s 12th Five Year Plan (2011-2015)
Focus on Five Key Areas Rebalance Green Globalize Urbanize Innovate – our focus today Change from “Made in China” to “Designed in China” 26 26

27 China is regaining global share of GDP after a century of humiliation
Price for lack of Continuous Improvement Is 28% of global GDP within 100 years Current Baby Boomers see the rise of China, not the fall of China China is regaining global share of GDP after a century of humiliation Source: Financial Times, September, 2011.

28 Guide your audience to “Moral Innovations”
Compelling Story - Illustrated China has the longest continuous history among civilizations.  Chinese were the first hominids to control the use of fire millions of years ago I-Ching was the first to recognize change as a constant 5,000+ years ago.  Confucius taught morality before Socrates was born 2,600 years ago.  For 1,800 of the last 2,000 years, China was the largest economy in the world. Between the years 1500 and 1800, Europeans forced an exodus of 10+ million out of Africa, and mined 133,000 tons of silver in Mexico and Peru to pay for products made in China. 200 years ago, Britain and other countries opened the China market by teaching the Indians how to produce and manage opium shipments to China . China’s economy as a percentage of the global economy went from 33% in the year 1820 to 5% in the year 1950, but is projected to return to 33% by the year 2020.  China’s President Hu Jintao calls for a Harmonious Society for humans The 12th Five Year Plan calls for innovation.  First sentence of the Chinese National Anthem: Stand up, those who do not want to be slaves…” Guide your audience to “Moral Innovations” 28

29 Case Study 1 – Solar Energy in China
In 2008, Polysilicon (PS) raw materials for solar panels increased to over US$400/kg Solar panel makers scrambled to sign long term contracts to ensure supply of the Polysilicon raw materials By 12/31/2008, the global financial crisis was in full swing, and the PS market price collapsed to as low as US$40/kg Solar panel makers faced bankruptcy if forced to meet their contractual obligations and pay PS at US$400/kg GCL - Poly was the largest supplier of PS raw materials in China Many long term contracts were enforcible at US$400/kg What would you do if you were GCL?

30 Outcome of Case Study 1 GCL - Poly agreed to re-negotiate contracts
PS raw material prices came down in the new contracts GCL - Poly customers (i.e. panel makers) became loyal customers Prospective partners going global Strengthen PS market position worldwide Stock market did not greatly penalize GCL - Poly Basis for Harmonious Society as Moral Innovator

31 Case Study 2 – Solar Energy in China
In 2010, Solar Energy Production capacity worldwide increased 130% to 17.5 Gigawatts China consumed 75,000 tons of PS, GCL-Poly was a major PS supplier at about 30,000 tons. Spot prices for Polysilicon (PS) raw materials went as high as $150/kg, with general market price at about US$90/kg Many GCL-Poly PS prices stood at US$50-55/kg (re-negotiated during the financial crisis) What would you do if you were GCL?

32 Outcome of Case Study 2 GCL - Poly did not re-negotiate the prices
PS raw material prices remained at US$50-55/kg Several reasons: Solar Energy industry will never become competitive if prices are both high and volatile Solar Energy is still subsidized by various governments today Solar Energy industry in China will become less competitive Slower customer acceptance worldwide if end user prices are negotiated again (already negotiated during the original contract signing, and again during the financial crisis) Basis for Harmonious Society as Moral Innovator

33 Summary Know where you are coming from Know where you are going
Competitive advantages/knowhow to leverage Know where you are going Explore/research how your competitive advantages can be customized around the globe Be respectful and be careful with assumptions Do not be greedy or make empty promises Follow the Golden Rule Look out for entrepreneurs vs intrapreneurs vs professional managers Communicate to the hearts and minds of your team/workforce, reach agreements with your team instead of demanding what is expected of them Be firm on the objectives and principles. Be flexible on the path to get there Give them a chance to succeed, supported by investment in tools and rewarding success, not just words Listen, listen, listen Moral Innovations can be an action oriented framework that delivers global harmony

34 Selected References “A Theory of Human Motivation,” by Abraham H. Maslow, originally published in Psychological Review, 50, , 1943. “Correlated History of Earth,” Worldwide Museum of Natural History, Pan Terra Inc., USA, 2000 “中国思想史 (History of Chinese Thought),” by Zhao-guang Ge (葛兆光), Fudan University Press (复旦大学出版社), Shanghai, China , 2001, ninth reprinting, 2010 “Organizing for Profit in China,” by David S. Wu, iUniverse, USA, 2003 “The Catholic Church,” by Hans Kung, A Modern Library Chronicles Book, translated by John Bowden, ISBN , New York, 2003 “The Human Story,” by James C. Davis, Harper Perennial, New York, 2004 “Guns, Germs and Steel,” by Jared Diamond, WW Norton & Company, New York, 2005, 2003, 1997 “China – Five thousand years of history and civilization,” City University of Hong Kong Press, Hong Kong, 2007 “Chinese Cultural History (中国文化史),” by Tian Yu Feng (冯天瑜), etc. Higher Education Publishers(高等教育出版社), Beijing, China, 2007 “大学,中庸(Da Xue and Zhong Yong),” by 曾子(Zeng Zi) and 孔子思(Kong Zisi), annotated and Chinese translated by Shi-mei Shao (邵士梅), Sanqin Publishers (三秦出版社), Xian, China, 2008 “Destiny Disrupted – A History of the World through Islamic Eyes,” by Tamim Ansary, PublicAffairs Publishers, ISBN , New York, 2010 “公司的力量(The Power of Corporations),” CCTV documentary series 1-10, 2010 “How China’s leaders think(中国30年: 人类社会的一次伟大变迁),” by Robert Lawrence Kuhn (罗伯特.劳伦斯.库恩), Chinese language edition translated by Jialing Lu (吕佳龄), Chen Xu(徐辰), Rongshan Li(李荣山), and Peng Lu(吕鹏), and published by Shanghai Century Publishing Co., Ltd. (上海人民出版社世纪出版集团), 2008; English language edition published by John Wiley & Sons (Asia) Pte. Ltd., Singapore, 2010 “On China,” by Henry Kissinger, Penguin Books, ISBN , New York, 2011 “Financial Management with focus on Moral Innovations,” compiled by David S. Wu, McGraw-Hill Publishing Company, ISBN , Singapore, 2012

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