wu & associates llc © 2009 all rights reserved [email protected]...

Wu & Associates LLC©2009 All Rights Reserved

[email protected]@wharton.upenn.edu

Drive Moral Innovations – An Introduction

David S. Wu

President, Wu & Associates, LLC

April, 2012

1



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

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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.

Disclaimer

No one can please everyone all the time



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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



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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



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Dynamic Drivers:Passion, faith,Commitment,

Motivation, etc

Static Positionat Time 1

(e.g. birth)

Static Positionat 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

Focus on an Individual’s dynamics



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Morals and Innovations Defined• Morals

– 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 (1225-1274) for Christians– Doing the right things, even when no one is looking (e.g. www.characterfirst.com)

• 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



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Moral Innovation Framework

LOW

Four Worlds reflect 5,000 years of humanity

Four Worlds:High Innovation/Low Moral = Exploitative Low Innovation/Low Moral = Zero Sum GameLow Innovation/High Moral = Ascetic LivingHigh Innovation/High Moral = Harmonious Progress



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- 50% Catholics- 50% Protestants and Orthodox

- 85% Sunni- 15% Shiite

Global Population Distribution

Over 90% humans in these four groups, with <10% overlap

Christians (29%) Indians

(17%)

Chinese (30%)

Muslims (18%)

1800: 1 Billion People 2010: 6.8 Billion People

*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.



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Christians

The Protestant Confederation dominates USA and UK Christians*

*260 million of 360 million people in USA and UK are Christians - 160 million Protestants, 80 million Catholics, and 20 million Anglicans.



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 = 66-73 books)• Book of Revelation describes hell

– Aristotle’s Nicomachean Ethics adopted by Catholic Christian St. Thomas Aquinas (1225-1274).

• 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

11Servitude motto: “To serve God in God’s Kingdom”



1212The Muslim Confederation has many more national boundaries

Muslims

*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



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Zero Sum Game World Moral Innovations

• Morals– 5 Pillars– Scripture

• 77,934 words never to be changed• 114 chapters with 3-286 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



141414

Combined Pakistan/Bangladesh/India had over 1.5 billion people in 2010

Ascetic Living World



151515

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 108.93 carats for the British crown in the 19th century

Readily accepted progress as a Mongoloid, then Christian colony



1616President Hu Jintao is driving for “harmonious society”

Harmonious Progress World



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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



(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 0.0040 0.0000

Esteem Standing Out 0.28 0.05 0.04 0.18 0.01 0.00

Love/Belonging Acceptance 2.30 0.28 0.16 1.50 0.20 0.16

Safety Comfort 3.20 0.90 0.90 0.41 0.85 0.14

Physiological Survival 1.00 0.10 0.10 0.20 0.50 0.10

Total 6.8 1.3 1.2 2.3 1.6 0.4

Distribution of Humans by Maslow Hierarchy Layer

Christians led the industrial revolution and grew the most between 1800 and 2010

(Population in BillionsAround the year 1800)






Safety Comfort 0.38 0.10 0.06 0.10 0.08 0.02


Total 1.0 0.3 0.17 0.29 0.18 0.06

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% Growth in 210 yearsKey word for the

levelWorld Chinese Indians Christians Muslims Others

Self-Actualization Legacy 9900% 3900% 9900%

Esteem Standing Out 1300% 400% 1700%

Love/Belonging Acceptance 820% 100% 1500% 1567%

Safety Comfort 742% 800% 1400% 310% 963% 600%

Physiological Survival 186% 100% 0% 122% 400% 150%

Total 580% 333% 606% 693% 789% 567%

Composition of Human Growth by Maslow Hierarchy Layer

Christians leveraged innovations to lead the climb in Maslow’s Hierarchy

Human Growth in 210 years (In Billions)






Safety Comfort 2.82 0.80 0.84 0.31 0.77 0.12


Total 5.8 1.0 1.0 2.0 1.4 0.4



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Findings• 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



Christians (Protestants)

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Elemental Moral Innovations Lines

LOW

Muslims

Indians

Christians

Christians (Catholics)

Christians (Orthodox)

Significant differences among the four groups over time



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Composite Moral Innovation Line

LOW

5000 years ago

2500 years ago

500 years ago

100 years ago

Pursuing zero-sum game instead of harmonious progress



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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



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Moral Innovations Summary

LOW

5000 years ago

2500 years ago

500 years ago100 years ago

Green target for the next 500 years

500 years from now



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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



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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”



27China is regaining global share of GDP after a century of humiliation

Source: Financial Times, September, 2011.

Price for lack of Continuous

ImprovementIs 28% of

global GDP within 100 years

Current Baby Boomers see the rise of China, not the fall of China



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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”



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?



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



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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?



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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



Summary• Know where you are coming from

– 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



Selected References• “A Theory of Human Motivation,” by Abraham H. Maslow, originally published in Psychological Review, 50,

370-396, 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

08129-6762-3, 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, ISBN978-158648-8130, 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 978-1-59420-271-1, New York, 2011• “Financial Management with focus on Moral Innovations,” compiled by David S. Wu, McGraw-Hill

Publishing Company, ISBN 978-112-142288-9, Singapore, 2012

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