Here is my script for the presentation to be given on November, 22nd at the philolsophical course of lectures in the Grashof at Kalbach. To this day, the script is not completely finished. Regardless, I now publish it here, hoping that my readers will be benevolent but still ready to criticize. And, for a change, I reserve my right to maybe modify some of it as time goes by.


It is a long article for the weekend. Enjoy reading or browsing.

Entrepreneurial Success Between Honesty and Bluff

This presentation is intended as a provocation.
Introduction:

The following presentation has been designed by myself. If I were a politician or the director of a DAX enterprise, this would not be the usual procedure. In that case, one of my two assistants would have written an essay after having been quickly briefed. My back-office would have made the slides and then I would have read the contents – calling it my own – after minimum modifications.

Question: Is that already dishonest? Is it a lie if you do not even know what you are talking about?

Warming-up:

I am talking about enterprises. So, first and foremost, here is a definition. What is an enterprise?

In my book, an enterprise is an eco-social system. That is a social system with ecological goals. As a general rule, an “enterprise“ has businesss goals. It makes products or provides services and has built up its own cosmos for this purpose.

It is, however, also part of a greater cosmos, namely the environment and the world. There are often competing eco-social systems in the “environment“. They like calling themselves “market participants“. In former times, they were called “other contestants“, before that „competition“.

There are many stake holders in an enterprise. They own part of the enterprise and have a special relationship with the enterprise. Among them are certainly the employees and the share holders. All stake holders have influence and take part in the development and life inside the enterprise in various ways. Stake holders are mostly human beings, but they can also be other systems. Share holders are a special species of stake holders.

I will try to describe possible approaches to lies and bluff in two dimensions:

  • Relative to the stake holders of an enterprise and
  • looking at the practice, i.e. the way they work.

Besides, I want to point towards and critisize a few “lies spreading all over the world“ concerning economic science and national economics. Ever since I was quite young, these lies have reached me. The finishing lines of my presentation will be dedicated to showing that it is perhaps more important for an enterprise to have “stories“, than relevant “decisions“. Stories will determine the future and consequently they can never be just the plain truth.

Decisions will always be made with a factor of uncertainty and ignorance. If a complex decision is to be made, it might be justifiable to base it on values. Technical reasons for a decision, however, will mostly be incorrect or accidentally correct.

But here is what I have to say about the stake holders of an enterprise.

Stake holders:

An enterprise is a social system.

To be sure, an enterprise “is owned by“ the share holders. In other words, the capital of the enterprise belongs to natural or corporate bodies. They can decide about how to use the profit and will be included in its distribution.

In well-structured family enterprises that have been successful over many generations, you have the following important rule:    
The well-being of the enterprise has priority over the well-being of the family!
(It is not the duty of the enterprise to finance the expensive cars for all members of the family).

But the family is only a special case among the share holders. If we extend this idea, we might come up with the notion that this rule should hold true for all share holders. In other words:

The well-being of the enterprise has priority over the well-being of the share holders!

This seems to be a revolutionary approach – only “reasonable share holders“, those who, for instance want to use their shares for security in old age, will probably think like that.

The share holders are relatively unimportant for the company success. For them, it would be best if they just kept quiet, trusted the management and were delighted about the profit they get for their shares without ever having to lift a finger.    
Additionally, they might perhaps (collectively) take care that the enterprise will not degenerate towards becoming an injustice system or otherwise suffer. As a general rule, however, this is the task of an elected supervising board or VR (in Switzerland). Yet some additional control by the supervising board can never do any harm.

For the entrepreneurial success, however, the stake holder is more important. I will now list a few lies and catch words that show where dishonesty and lies are the daily practice in the relationship between enterprise and stake holder. Afterwards, I will ask questions that imply those lies.

The  stake holders:

  •  The customers – without them, the enterprise cannot survive.
    Marketing lies (formerly innovative product announcements, today psycho tricks on a new level, Telekom when they privatized, Canadian Oil slates against crude oil).
  • The employees who constitute and shape the enterprise.
    In this area, lies are  found all over the place, from the day an employee is recruited to the day he or she retires.
  • The suppliers. All enterprises have them.
    You will find a lot of lies and blackmail.
  • Management (mostly enjoying a special status)
    The management is lied to and they also lie themselves. The lie is often a system-immanent necessity – more on this later during my presentation.
  • The supervisory board.
    In Germany, their major role is to control (in Switzerland, they do more than that). But be careful: there is often quite a bit of intrigue going on between the directors and the supervisory board.…
  • The community where the enterprise is situated.
    Promises that have been made in order to gain some advantage are not always delivered (example: Nokia).
  • The state that gets taxes from the enterprise.
    Tax fraud – concerns are not the only ones finding legal means by which to reduce their tax dues.
  • The families of employees.
    Also one sector where stories told are not always true (nomad working life).
  • The kindergarden and the pub around the corner.
    (dependancy)
  • And more!

But even apart from the stake holders integrated into the enterprise both personally and systematically, there is more of the “world” influenced, shaped and lied to by the enterprise.

And I mean more than just the environmental pollution as in emissions and soiled water, even though those two certainly play an important role. There is no need for us to go to India in order to see the ISO number displayed on huge posters up front while poison is pumped into the ocean behind the scenes.

Even in Bavaria, you can find the forest worker whose bunper stick says “we love the forest ” and who, as he cuts wood, destroys just about everything you can destroy (this is something I saw myself on my last bike tour). But this is not just about environmental pollution. What about the shop that says “bakery“ but sells rolls after only having warmed them up?

This is also about the local and global impact an enterprise has on people and their complex social structures. It is about the change taking place in societies, nations, peoples, perhaps even the world (Nestle) caused by an enterprise. Let me call it the “external world”. The influence a big enterprise has on the “external world” (apart from the stake holders) is enormous. And here, lies are immanent. Is that necessary?

Wouldn’t it be about time to demand an externity balance sheet from enterprises and then to inspect it critically? Afer all, concerns get more and more powerful on a global scale! Concerns like Exxon or Nestlé cannot easily destroy (or preserve) environment. They can change entire countries and social habits.
What is an externity balance sheet?

Formerly, concerns like Siemens did a social balance sheet in addition to their business balance sheet. It contained, for instance, how many kindergarden places or jobs for handicapped people had been provided. Today, in analogy to this, it might be desirable to have a balance sheet describing, evaluating and balancing all the influence an enterprise has on the external world, i.e. the environment and the world around.

Some enterprises try something like this. However, the result ís mostly a totally phony image brochure or a part of the yearly report that is all but objective.

Practices where bluff and lies prevail:

With this, I mean the operative activities as structured and described in text books. The things an enterprise just has to do. Of course, the best course is to call them Best Practises. There are different dimensions an enterprise can engage.

  • Strategy and planning.
    The entrepreneurial lie in the business plan.
  • Marketing and sales.
    Astronomical price discounts, groupon, utilizing all effects you can read about in the book “it might be useful if you think, but it will not help“. A good example for selling expensive products is the practice of leasing.
  • •Goal agreements, profiling, ranking, carrotting (workpower).
    Here, practice and theory are often based on a wrong concept of humans (assuming that they are basically controlled by material factors).  People often suffer financial disadvantages because their activities aer detrimental for the entrepreneurial goal in the strictly formal sense.
  • Certifications.
Fraud in the technological sector.
  • RISC management and ISO.
  • The security lie, processes getting priority over common sense. Enterprises often act according to an “entrepreneurial super-ego” which, being a doctrin or dogma,  must not be questioned.

So it often happens that people lie, partly because they find themselves in a tight corner or forced to do so.

Mostly, however, they lie where it is not really necessary. And once in a while, I am sure a lie is necessary. Yet we lie more and more often. Also, the lies get more and more subtle. More often than not, the entrepreneurial “must-does” force us to lie. It is irrelevant if such a “must” is seen as stupid or reasonable. Often, you cannot even think in terms of “right” or “wrong”.

Frequently, the must-does themselves are already lies. But what if I, as the one who is actively doing something, believe in them? Is the derivation of a lie also a lie, even if it reflects the world as the individual feels it?

Big Lies (world lies)

Finally, I want to give a few examples that should motivate you to start thinking. These are typically ideals/guidelines so little questioned that, to me, they look like world lies. I hope they will also be a good basis for discussions. Here they are:

  • Free trade without borders is a good thing!
    Where did that take us in real life?
  • Growth is a good thing!
    Everybody knows that the earth is a limited unit and that our resources are finite. Yet we grow on borrowed money (or by additional purchases), thereby seemingly making natural laws invalid.
  • Service society (versus industrial production)
    We often hear: the future belongs to service. And as soon as there is a crisis, they say: we have too few industrial jobs.
  • You cannot live without a car.

The last one is a particularly good example for decades of continued manipulation. It is so hugely accepted that it is quite unpopular and heretical to demand measures against the car (no more subsidies, speed limit…).

Because it gave us fluency! Have you ever asked yourself if this is actually true? In former times, I would have used the car in order to get to the Grashof. Well, it was just how I was socialized/trained… 
Let us take a closer look at the history of the car. Initially, cars were “toys for the rich”. The industry saw the huge chance it offered if such an expensive product could be produced in large quantities.

And with many individual measures (for instance by making it more acceptable through sports – at the Nürburgring), the triumph of the car was promoted and an irrational but highly emotional product was created. It was supported by political interests (Third Reich). One of the results was the building of German motorways. They were going to be exemplary for the entire world. The car industry is also an excellent example for another issue: for the necessity of external balance sheets (fatal accidents, environmental damage, health hazards through noise and lack of exercise…).

Entrepreneurial success

Social systems, such as enterprises, are very complex. Almost always, entrepreneurial decisions are multi-dimensional, serving many goals. But the success also hugely depends on the decisions being the right ones.
Humans, however, are probably only able to evaluate a very small number of arguments at one time. Thus, they tend to simplify.

Decisions will always be made with a high uncertainty factor. It is easier to make them if you are the owner of what is allegedly the truth and are  “sure” of something  (certainty).

Consequently, leaders will find it easier if they can select and simplify things. And then define dogmas in order to justify their decision and their behaviour.

But the pressure is immense. The demands come from above or from dogmatic thinking:

Only market leaders survive.
When we say survive, of course we meen permanent growth and more profit all the time.
Now everybody must become the market leader. But there can be only one. And when you have finally made it, you start lamenting:    
It is a huge disadvantage to be the market leader!
Because defending your position is a lot harder than reaching it.

And the supervisory board demands:
Turnover and EBIT (that is the profit before tax) must rise all the time.

But:
I know no company that managed to do so over any relevant period of time. Even IBM and CocaCola had their crises. Besides

Growth costs money.
This is a simplified example for an extremely complex enterprise world with constantly conflicting demands that sometimes totally contradict each other. An enterprise is supposed to grow all the time and the results are to improve all the time. Yet you know that growth costs money: you have to invest either in research or in new employees who will first have to be trained. Consequently, the “social system“ enterprise will be left behind. The management mutates to system agents, the people become “enterprise slaves“.

Now they say success is dependent on the ability to be innovative. Well, there might be some truth in that. But how is a fascist social system consisting exclusively of system agents and achievement providers supposed to be innovative?

Especially since being innovative means you have to look beyond the horizon. The horizon, however, is extremely close (on our planet, it is 4.5 kilometres away).

Lies versus ethics:

We have to question things that seemed to go without saying! That is never easy. Thinking beyond mental patterns. Sharing knowledge. Being rational, being able to listen, demanding empathy! Making the enterprise a fear-free zone. Creating freedom and breathing space. Setting simple and clear rules. Generating transparence. Making a meeting on eye-level possible for everyone!

These are all things that might well leave room for lies. Here is some advice for the management:

Decisions?

During each “strategic discussion“ or “planning session“, we realize that things are so complex that rational planning is no longer possible. Many chaotic influences can be imagined.

Predicting developments is difficult, especially if they lie in the future.

Remember the proverb: no matter what you think, it will always turn out differently! Or: man proposes, God disposes.

My own memory of the past (along with that of other entrepreneurs) confirms this opinion. Most of what we assumed in the last few years was wrong. Customers we thought to have secured were gone. Totally different ones were suddenly there – often due to chains of accidential events. Sales is not a determined process – as often declared (that is the sales lie). Being an entrepreneur also means you have to bet. Try it with soccer games or horses. You will be wrong more often than right … After all, it is part of the definition of a decision that there is a factor of uncertainty involved. Basically, you never have the truth.

So where to get orientation when you have to make decisions with a high uncertainty factor? Well, ethics is not a bad compass. As the proverb says.

Ill-gotten goods never prosper.

The history of proverbs is the history of us hunans. There is a lot of truth in them. If a decision is based on ethical values, it is basically never a wrong decision. In my personal experience, our “ethical decisions“ that followed an ethically responsible balance of goods and values were never bad decisions.

Here is a personal aside on entrepreneurs and managers

On lies:

After all, lies are only a minor part of management. It is normal to bluff and put on a show. But the question is particularly relevant for managers. Incidentally, research at RISE in St. Gallen proved:

And entrepreneur or manager spends most of his time at the enterprise “telling stories“ about the enterprise, its future and its past (see: RISE, St. Gallen). We are talking considerations, justifications for decisions, reflections about past events and many, many theories why something works (or will work) or not.

When a story is told in retrospective, it sounds totally different from the opposite end.

When we tell storiers, we make it easier for ourselves by justifying measures taken with our so-called certainties. Since, however, we know nothing, the stories we tell and statements we make have to be lies by definition.

So we lie.

The only remaining question is: do we lie on purpose or is it involuntarily?

The purposeful lie is perhaps the one I prefer, because the person telling the lie is at least aware of not knowing anything, thereby not having the truth at his disposal. Still, he has to tell something that sounds plausible, because the enterprise has to survive.

In the other event, he tells lies and believes them himself.

Both might be problematic. I feel more comfortable if an entrepreneur tells something he believes, yet knows that he is on shaky ground. And thus, he has to stretch truth a little bit once in a while.

A convinced actor who tells things about the future and is certain he is telling the truth is an actor who gives me pause.

Well, this was a rather lengthy presentation. Consequently, I was not able to relate all my ideas. I knew that before I started. But at least I had time to read the following text – which caused quite a few smiles.

Text:
From the presentation by Thomas Vallon/InterFace AG    
The enterprise as a place where you can unfold?     
delivered during the Humans&Management symposion in the spring of 2011

Conversely, the marketing rhetorics in all the job adverts still promise the well-qualified and those who are willing to make an effort all varieties of chances for participating and evolving. No hand-me-downs, but instead something that is oriented towards your individual interest and need (promises Porsche), an extremely stimulating work surrounding (offers McKinsey), a place overflowing with individual perspectives for the best (Daimler), on the best way (accompanied by Siemens) into a world full of oportunities (which IBM opens up), room for variety enthusiasts (which Adidas will open up) and inventors of the future (says Fraunhofer), certainly more than just work (guarantees Bayer), it cannot be weighed in money (is the contribution of Audi). If, in the face of this, the Max-Planck-Gesellschaft prosaically announces self-responsibility and room for your own design, then you can only assume that this is due to typical understatement by scientists. Well, they never managed to rank any higher than on place 10 on the list of the most favoured German employers as published by the “Wirtschaftswoche“ last year (and from the most recent job announcements of which the aforementioned sentences have been taken).

In the weekend edition of the SZ one week before that, I read on the first text side of the personal ads:

Empty formulas will no longer do any good. The young people are fed up with those flowery phrases. Now they want facts.

RMD

2 Kommentare zu “Presentation No. 6: Entrepreneurial Success Between Honesty and Bluff (Author: Roland Dürre)”

  1. Chris Wood (Wednesday November 9th, 2011)

    Roland’s analysis reminds me of Socrates.
    When I was young, I admired Socrates’ analytical discussions, but could not understand why his victims kept agreeing with him, although some steps in the logic were dubious. What we know of Socrates comes almost entirely from Plato, who was clearly dazzled by him, and whose writings have been preserved because of their style, rather than for clever content.
    I decided that Plato had probably remembered Socrates’ analysis badly because he did not understand well. Later I heard enough about Socrates to stop giving him the benefit of this doubt.
    One problem is that these old Greeks took (individual) words too seriously. Consider the New Testament creation story, “In the beginning was the Word ….”, which came, (much later) from Greek culture. Plato wrote that a chair was a “chair” because it was like an “ideal” chair (in heaven). He did not realise that words are just a means of communication, whose use depends on enough people having roughly the same idea what is meant, and that the meaning can change with time, and according to point of view. I suspect these guys were not good at foreign languages. Certainly Socrates was far from being a democrat and would not have liked the idea that a word just means what enough people agree on.

    Roland writes “Das Interesse des Unternehmens geht vor dem der Familie”.
    (This refers to a “good” family firm that is successful over several generations).
    This is very paradoxical, since it is surely in the best interest of the family for their firm to be successful over several generations. Of course there is also a problem about what should be regarded as success. A firm that is financially successful for generations may be contributing to the downfall of civilisation, or be killing millions with cigarettes..
    Of course what Roland means is that a family firm will not be profitable for generations if the owners dissipate the assets. But this is too obvious, so Roland finds an exaggerated formulation.
    Roland then extends this to “Das Interesse des Unternehmens geht vor dem der Shareholder”.
    This is dubious. Blood is thicker than water. My shirt is closer than my jacket. Kin selection is very well established in evolution theory. Most people are more ready to do things for the benefit of current and future relatives, than for fellow shareholders! I find this family principle, (maybe also nationalism), less firmly anchored in Anglo-Saxon laws and customs than in the German ones, (not to mention the Mafia). Non genetic group selection is now accepted in evolution theory, but is still relatively weak.
    Certainly, some big concerns have their own “house” banks, which are ready to support them, (rather than plunder them), for decades. The major shareholders, such as pension funds anyway cannot afford to take out their money too quickly, for fear of killing the share price.
    Small shareholders are in a very different situation. They have not the time, expertise or power to do anything significant for the firm. They cash in their shares when it seems clever, or when they need the money, but usually lose out to the professionals. They too should seek to invest long-term in good solid firms, but these are increasingly difficult to recognise.
    Perhaps competition has been over-emphasised in evolutionary theory, but let’s not over-emphasise cooperation.
    Oh, should I have mentioned sooner that firms are like organisms that find various ecological niches and evolve.

    Roland then jumps wildly into a monologue against deceit (lies).
    Of course truth and lies are alternative tactics in the “fight” for survival, just as are cooperation and competition. For success they should be used selectively. Constant lying soon fails. Remember the boy who cried “wolf”? A poker player who bluffs at every chance will lose even faster than one who never bluffs. Similarly constant deception usually works out badly, despite various historic cases where it has successfully spread evil.
    Hypocrisy, (a form of lie), mostly works well, but fails when it becomes too obvious. Still it is better than outright advocacy of evil doing. I remember a nice girl with whom I was having an affair (before I married). She once said “Chris, I cannot be a hypocrite; I slept with another boy last night”. I said “At least you could try”. I still wonder whether she understood. She looked puzzled, but was perhaps just disappointed by my apparent lack of jealousy.
    Of course it is better not to be regarded as a liar. It is good always to advocate truthfulness. People may think you mean it. It may encourage others to follow the advice. But, as Shakespeare suggested, one who is too strident about this may give the impression that he is hiding something.

    Roland lists some big lies.
    Mostly I agree, but it is very doubtful whether world trade is free enough to regard free trade as the cause of past or current problems.
    Some growth is good and some is bad. Growth in “real” wages is in itself good. People can use the money to get things they want. But the real costs should be taken into account. Growth “auf Pump” is a dubious concept (roughly “produced with borrowed money”). One man’s credit is another man’s debit; it doesn’t matter much where the money comes from. It was Roland himself who pointed out to me one of the main evils of such state debt; that a government makes promises (of interest) that can only be met by later taxation, or by cheating in terms of inflation. If there is no cheating, this may be “worse” since it involves wealth transfer from younger workers to the older people who had money to invest. Of course if the invested money was honestly earned, this may be a decent way to organise pensions.
    That about “service” is not really wrong. Industrial production may increase efficiency faster than “services”, so requiring relatively less workers. Similarly, 200 years ago most people were occupied with food production. But of course some services have shown enormous increases in productivity too. Through TV, the service of entertaining, for instance by 22 good footballers, can be shown to hundreds of millions of people at once. Entertaining with good music or acting shows similar huge productivity increases. The service society is not a lie, but just an exaggeration.

    Besonders, da innovativ sein heißt, hinter den Horizont zu schauen. Der Horizont ist aber sehr nach (auf der Erde 4,5 km).
    Note the typing mistake “nach”. Assuming the Earth to be a perfect sphere, the distance of the horizon depends on the height of ones eyes above sea level. It may be accurately calculated using the intersecting chord theorem. A good approximation is
    d2 = 2rh
    “d” is distance, “h” is height, “r” is radius of the Earth.
    I reckon that Roland’s 4.5 km is about right for a child with toes in the sea.

    Just one more comment

    Roland writes that ethic is a good guide for management decisions. But the accepted ethic changes, and like everything else it keeps changing faster.
    For instance was it bad that companies supported various nationalistic wars of aggression? Such wars were OK, according to the accepted ethic when the decisions were made. What about the ethic of Islamist extremists? Perhaps Roland means “the right ethic”, (what is currently accepted in Germany).

  2. Joe Blow (Sunday November 27th, 2011)

    Der Referent Roland Dürre ist jung, unreif u. leidet an Selbstüberschätzung. Z.B. lässt er Sprüche los wie: `Da man eigentlich nie im Besitze der Wahrheit ist, lügt man fast immer !` Man kann sich nur wundern in welcher Umgebung dieser arme Mensch aufgewachsen ist ?
    Dann will er Rentner zu Fussgängern machen: `kein Recht zum Autofahren, weil Sie nicht mehr arbeiten !`

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