Introduction, Overview

Moral Innovators perspectives on seeking knowledge through history

There are different levels of understanding the moral innovation framework. At the top level, it is the balance of innovations with morality. This can also be read as continuous improvements with integrity.

It is easy to introduce innovations without a morality balance. iPhone 7 is a continuous improvement over iPhone 6, and the original iPhone was clearly an innovation. The morality balance is more difficult to illustrate because of the multi-cultural complexities. For example, how do we judge the exploitation of the slave-like Chinese laborers as Apple’s vendors/suppliers get 10% profit when Apple’s intellectual property rights command 90% profit? Apple is among the most valuable companies on earth with these profitable products.

Morality was formalized about 2,500 years ago when the global human population reached 100 million. Socrates in Europe, Ashoka in India, and Confucius in China proposed that humans follow societal rules as we encountered more fellow humans. Humanity as a whole began to diverge at that time, mixed with faith and religion. Socrates followers, through the Roman Empire, became today’s monotheists such as Christians and Muslims. Ashoka followers, through the Persian (Muslim) and British/Portuguese (Christian) influences, became henotheists (e.g. Hindu is generally a monotheist religion at the individual level, but compatible with the existence of many other Gods followed by others). Confucius followers, who were taught “we do not know enough about the living, how can we possibly understand the afterlife?” lead the world of mostly atheists around the world.

Christians and Muslims have inherent conflicts in their beliefs of their God being the only God, resulting in many conflicts that include, but not limited to, the Crusades 1,000 years ago. These conflicts probably drove Christians away from the Middle East. 500 years ago, Spanish Pope Alexander VI and the Portuguese claimed possession of the entire earth through the 1493 Tordesillas Treaty, and later the 1529 Zaragoza Treaty, with no input from the Chinese, Indians, Africans or Native Americans. Note the signers of these treaties were the Spanish and Portuguese. Britain, for example, created economic conflicts among Christians when their pirates looted the mostly Spanish treasure fleets collected from the Americas. After the Spanish Armada failed in 1588 to defeat Britain, the emboldened pirates found an innovative path to the treasures through shareholder risk-sharing investments in the concept of “company” that we know today as stock or equity investments. The British East India Company was incorporated in 1600. The Dutch East India Company (aka VOC) was incorporated in 1602.

Without the corporate governance that we know today, both East India Companies were corrupt with unsustainable immoral practices. VOC took Jakarta, Indonesia as headquarters before the corporate charter expired in 1799. The British East India Company lived longer partly because the British government granted (in 1773) monopoly power to trade opium. This was the nadir of human morality. Opium production was introduced to farmers in India and Myanmar (or Burma), and sold into China in exchange for 70,000+ tons of silver and other treasures earned through Silk Road and other trades. China was the world’s largest economy in 1820 with 33% of the Global GDP when the global population reached 1 billion. In other words, China produced goods and services that represented 33% of all goods and services worldwide less than 200 years ago.

As opium was illegal in China, the opium trade led to two opium wars. China lost over 25% of Global GDP between 1840 and 1940. Even though China has grown very fast in the last couple of decades to reach the second largest economy on earth, her share of Global GDP is only 16% today, less than half the size of economy they commanded less than 200 years ago. Using percentage of Global GDP highlights the relative time scale. In absolute scale, the global economy has grown from $600 billion to $41 trillion (1990$ on PPP basis) between 1820 and 2003. Today, USA is the largest economy on earth and commands 17% of Global GDP.

The outcome: Christianity became the most powerful and wealthy community on earth, with about 35% of humanity following Orthodox, Catholic and Protestant bibles. Most Christians are also capitalists.

After the Chinese revolution in 1911 that established the Republic of China, the capitalist European Christians needed another innovative path to accumulate wealth. Between 1915-1920, Britain’s Mark Sykes (1879-1919) and France’s Francois George-Picot (1870-1951) led the European Christians to decide how the Middle East should be carved up after the first world war. In a region already inhabited by Arab Muslims with rapidly developing nationalist aspirations (called the Committee for Union and Progress), a Sykes-Picot agreement was signed in 1916 that promised the same region to Hashimites, Saudis, and the Zionists of Europe. If not for the dissolution of the Committee for Union and Progress in 1918, death of Mark Sykes due to Spanish flu in 1919, and the 1920 Treaty of Sevres between the Allies and Ottoman Empire, the Middle East may be a very different place today.

In 1948, Israel declared independence with the overwhelming support of Christians in an almost exclusively Muslim Middle East. Christians, especially the USA Protestants, average tens of billions of US dollars subsidy every year for nearly 70 years to help the isolated Jews grow in a Muslim world. Christians are not as passionate as the Jews in reclaiming the Jerusalem homeland, but there is a prophecy proclaimed by Abrahamic religions (that include Judaism, Islam, and Christianity) that lead us to an apocalypse. There are irreconcilable differences to impose a Jewish state in the middle of Islam, especially in light of this prophecy. Even with 7 million brave Jews living in Israel today, this population is only comparable to tiny Hong Kong, a Special Administrative Region of China. While Christians are fantastic tourists for the Israeli economy, Jews and Muslims need to return to their moral principles 2,500 years ago that humans must follow societal rules when they encounter fellow humans. Until we have these new societal rules for Jews and Muslims, our world will deteriorate into suicide bombers. The super majority of Americans suffer delays through the airport screenings due to a tiny fraction of potential terrorists, and trillions of dollars wasted down a path of mutual destruction.

In 1973, the fortune turned for hapless Muslims in the Middle East when Organization of Petroleum Exporting Countries (OPEC) established oligopolistic pricing, and an average of $2 trillion US Dollars equivalent per year has moved into the Muslim dominated OPEC world. This is the second largest transfer of wealth among humans, behind the Opium Wars. It should not be surprising that the current terrorists are likely financed by such wealth, and Saudi Arabia (the largest oil producer in OPEC) is sponsoring Wahhabism, an extreme form of Islam, into places like Malaysia and Asia, where most of the Muslims live.

What is illustrated here is the increasing conflicts financed by immoral actions. David Cameron, the former British Prime Minister, was asked in 2010 during a TV interview why India’s Kohinoor Diamond (at 186 carats the world’s largest natural diamond) cannot be returned to India: “If you say yes to one you suddenly find the British Museum would be empty…”

Humanity is projected to reach 10 billion people by the year 2100, less than 85 years from now. If we do not educate our children with a moral innovation framework, the opportunity to achieve a homologous world will likely give way to a self-fulfilled apocalypse prophecy that is being called for by the Abrahamic religions. Will 40% of humanity reflected by the Chinese and the Indians have a choice for their own destiny?

That is the basis for the Moral Innovator motto: Thrive with knowledge of your place in the world. Do the right things and make it better.

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Innovators World, Introduction, Overview

Moral Innovator Perspectives on Race Relations

Focusing on skin color within the USA is insufficient to improve race relations. By looking globally we can gain knowledge from our past to make future improvements with integrity, and re-discover we must follow a universally accepted Golden Rule: Do unto others what you want others to do unto you.

The worst human atrocity committed against fellow humans took place 300-500 years ago after European Christians committed genocide in the Americas in the name of Christianity (worse than World War II, World War I, Holocaust, Chinese Cultural Revolution, etc.).  Up to 100 million humans perished which represent 80% of Native Americans and Africans transported to the Americas as slaves. There is scant record of many rich pre-Columbian cultures in the Americas (e.g. 5,000 year old Sacred City of Caral in Supe Valley, Peru), and Africa’s population was flat between the years 1600-1850 while the rest of the world’s population more than doubled. Why is Columbus, who never set foot on USA soil, celebrated in the USA? Why is Andrew Jackson, who spent his life killing Native Americans, celebrated on $20 dollar bills? Why is Lord Jeff Amherst (1717-1797) a namesake for a city in Massachusetts? Amherst approved the intentional distribution of blankets used by smallpox victims to Native Americans and proclaimed his willingness to adopt “any other method that can serve to extirpate this execrable race.” His grandnephew Bill (1773-1857) inherited Jeff’s title of Lord in 1797, and went to China in 1816 where he failed to negotiate trade with China which ignited The Opium Wars, then he went on to India and commanded the first Burmese War of 1824 that killed 15,000 British soldiers at a cost of £13 million.

60% of all humans born in the last 200 years have followed Christianity or Islam, much more than the rest of the world largely represented by Indians and Chinese. The key innovation that drove human progress was industrialization which was led by USA/European Christians. The largest transfer of wealth through this industrialization was the forced import of opium into China (against Chinese laws), backed by gunboats, to take an estimated (2014) retail value of $2 trillion per year from China, mostly during the reign of Empress Dowager Cixi who ruled China for 50 years. China fell from the largest economy on earth in the year 1820 with 35% of global GDP to almost declaring bankruptcy in 1902 if not for a 39 year financing to pay Christian countries like Russia and Germany for the suppression of the patriotic Chinese Boxers’ Rebellion. USA also received payment, but returned some to help establish Qinghua University, a top school in China. USA became the global leader with 27-35% of global GDP between the years 1950-2001 on the shoulders of the largest middle class on earth after Henry Ford started to pay premium wages to his workers, but had to share its wealth mostly with Muslims beginning in 1973 when the OPEC cartel steeply increased prices. An estimated (2014) $1 trillion per year cash profit has been paid to OPEC to quench the thirst for energy to sustain industrialization. Both Christians and Muslims have concentrated their wealth in the last 40 years to widen the wealth gap, as the USA/worldwide Christians squeeze the middle class and a super majority of Muslims remain in poverty. Meanwhile, China has lifted more humans out of poverty than the rest of the world by sacrificing their environment.

We do not differentiate Arabs from Jews in the Middle East by skin color. The Chinese, Koreans and other Asians hate the Japanese not because of the color of their skin, but because the Japanese captured and forced over 400,000 women into 400 locations where they were raped by Japanese soldiers multiple times every day until they died. (In Yunnan, China, each Japanese soldier was given two tickets every week to rape innocent females in one of these 400 locations, and these tickets have been shown on documentaries and can still be inspected.)  The Japanese also massacred ~300,000 civilians and raped over 20,000 females in Nanjing, China over a 40 day period where soldiers competed for how many civilians they killed. While forgiveness is a virtue, the Japanese have not atoned for their atrocities. In fact, convicted war criminals in the International Court of Justice are memorialized in a Japanese shrine where top government officials visit every year. This is akin to the USA making August 6th and 9th as Little Boy and Fat Man (codenames for the atomic bombs dropped in Hiroshima and Nagasaki) Holidays with celebratory parades that killed 129,000 Japanese.  To get a glimpse of The Golden Rule, just look at the Japanese reaction to the gang rape of local girls near the Okinawa US Military Base by US Military Servicemen.  A reason the largest US Military Base in Asia is moving is due to the strong opposition of the local residents against these isolated incidents of raping local girls.  Of course, going back one more step, US Military should never have been stationed in Okinawa in the first place because Japan was supposed to be “expelled from all … territories taken by violence and greed…” based on the November 27th 1943 Cairo Declaration which the Allies dictated in accordance with the Potsdam Declaration which was the term of the Japanese unconditional surrender announced in Japanese radio on August 15th, 1945 and signed on the deck of USS Missouri on September 2nd, 1943.  Okinawa, as we know it today, was unilaterally taken by Japan in 1879 and renamed Okinawa Prefecture from the former Kingdom of Ryukyu.  Japan forced the King of Ryukyu Sho Tai (1843-1901) to move to Tokyo in 1897, even as Ryukyu paid tributes to China for over 450 years, with the last tribute left Ryukyu in the year 1874.  This is the subject of another blog…

How do we not focus on skin color or geography? We still have the American Dream where anyone can maximize their potential within their own lifetime. We think of people like Bill Gates, but he left a legacy of monopolistic practices at Microsoft. We can improve race relations by creating a network that focuses on opportunities with positive legacies while following the Golden Rule.  Use the Golden Rule as the foundation of our great society.  We clearly forgot the Golden Rule when policemen used excessive force to kill innocent citizens in Missouri, New York, Ohio and other places.

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Innovators World, Overview, Warrior World

Moral Innovators views on World Order

Moral Innovators balance continuous improvement with integrity. Martin Luther King Jr. and Mahatma Gandhi have been the best known moral innovators. In the business world, among the better known Moral Innovators is Henry Ford who, as he built the Model T cars, helped create the world’s largest middle class that drove consumer spending that contributed to USA’s world leading 32-35% of Global GDP between the years 1950-2001. China’s open market economy that started in 1978 gave business executives an alternative that squeezed our middle class, exasperating the wealth gap today.

The largest contributor to the wealth gap, on a global basis, is the OPEC oligopoly/cartel. With roughly 25-33% of 30-40 million barrels/day production for about 40 years at average profit margin on each barrel of between $50-$100/barrel, the total pure profit transferred to mostly the top 1% of Muslims who control the oil and gas is roughly the same as our total national debt of $12.6 trillion in 2014!

This peacetime transfer of wealth is by far the largest reason the wealth gap has increased on a global basis. The media has focused on large investments made to sustain oil production, including fracking. The world’s largest philanthropist, The Bill and Melinda Gates Foundation, is also the largest shareholder of ExxonMobil, an oil/gas giant. Every time we pump gas in a gas station, or turn on our HVAC system, we contribute to the consumption which helps OPEC sustain their pricing and financing various activities under the name of Islam. The media does not cover this partly because all the major oil and gas companies earn significant profit in refining and distributing the oil and gas products to our gas and power stations.

If oil and gas are truly competitively priced as a consumer commodity, we reduce our national debt, and weaken the financial resources available to sustain the high growth of Islam which has the worst wealth gap among their communities of 1.6 billion believers/followers (which in turn, encourage more extremist activities like Al Qaeda, ISIL, …) We are decades behind in a strategic energy policy to mitigate the influence of OPEC cartel, partly because companies like ExxonMobil and Royal Dutch Shell have self-interests to preserve the status quo, and partly because each President has a maximum of 10 years, or two full terms (which may not deliver results for strategic energy policy initiatives).

Dr. Henry Kissinger’s most recent book, “World Order,” tries to use Westphalia Peace Treaty of 1648 as a reference framework for world order. He did not mention once the OPEC cartel as the root cause of “World Disorder.” Maintaining equilibrium between power and legitimacy under the Westphalia approach ignores the fundamental problems with the world today.

Let’s confront the issues until they are resolved, not avoiding the issues with a framework based on about 200 European Christians seeking to preserve status quo. The status quo can not be sustained, and we will need Moral Innovators.

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Overview

What are high priority issues for Moral Innovators today?

While we are guided by our beliefs, please do not let time’s pressure hasten our appropriate actions. Let us act based on knowledge (or beliefs verified with truths). Do not take actions based on beliefs alone because that have led us to conflicts and future problems.

The link to many issues we face today relate to how we view “companies” that started with a history of corruption like the 17th–19th century British East India Company and Dutch East India Company (or VOC). Companies have been risk-sharing entities for investors who focus on higher profits using continuous improvement methods (i.e. innovations). Even before we treated “companies” as legal entities, ancient civilizations had monopoly practices for several thousands of years where the “victims” have been the general public. In the USA, Rockefeller’s Standard Oil Company was broken up 100 years ago. Today, OPEC (as an oligopoly) has been transferring trillions of dollars of wealth to the (mostly Muslim) oil producing nations, and Bill Gates’ Microsoft created the world’s wealthiest person (and now a Foundation that is the largest shareholder of ExxonMobil) for decades. There have not been sufficient considerations for anything not related to generating higher profit which is the difference between sales revenue offset by expenses such as labor, material, and taxes. Higher profit can be achieved by a combination of higher revenues and/or lower expenses.

To generate higher revenues, we sell products supported by advertisement and marketing. For example, Marlboro Man and Virginia Slims encouraged cigarette smoking that we have learned over the last 30 years could be harmful to our health. The Chinese are still smoking 2.3 trillion cigarettes a year, or 8 times that of the USA on a per capita basis (1800/year/person, or 5/day/person). It is important that we organize efforts to fight intentional unethical practices while respecting regional differences.  Instead of confronting the Chinese by imposing ill-defined human rights practices, we could help the Chinese save many more lives by sharing our experience on the future health care burden from smoking.

Let’s address the expenses by their major components:  Labor, Material, and Taxes. 

To reduce labor expenses, we have squeezed the US middle class with alternatives such as globalization which started with manufacturing (and continuing with services today).  The top 1% of Americans has not been affected because 1) they benefit from the resultant higher profits, and 2) the CEOs and a few other executives have not been squeezed.  Let us illustrate with a public company that trades at 10 time Price/Earnings ratio.  The company can transfer an operation (say from USA to China) to release 100 “middle class” US employees at a salary of $40,000 per year and hire 300 Chinese employees at $5,000 per year.  This would save $2.5 million per year for the company, but the CEO gets $25 million credit towards his/her bonus (calculated from $2.5 million per year times the P/E ratio of 10).  The worst part of this scheme is the fact that the CEOs walk away with big severance packages if anything goes wrong. We know that Mr. Akerson left General Motors and the new CEO Ms. Barra is addressing the faulty GM products that have killed customers during Mr. Akerson’s (and his predecessors’) tenure(s).  Usually the beginning of the change of command carries continuous improvement or innovative ideas, until the change of command is no longer new, when the focus turns to the big severance package(s).

Under normal circumstances, there is not much savings on material expenses, especially if we focus on comparable quality of materials.  Often the savings relate to logistics expenses like transportation and customs expenses.  However, the assumption of comparable quality of materials cannot be taken for granted, as there have been false claims to quality (e.g. Chinese baby milk with toxic melamine).

To reduce taxes, there is an army of experts to address a wide variety of tax issues especially for globalized businesses.  This is partly why the manufacturing economy has shifted to the services economy – because logistics, financial reporting, treasury, taxes are all services to support globalization.

Moral Innovators seek knowledge of where we are in the world.  We do the rights things to make the world a better place.  The right thing to do, in this context, is to know this process, and reward appropriate value add contributors.   Should CEOs get credit for higher profits when they are not held responsible for the delivery of higher profits?  Should governments be responsible for the “victims” of achieving higher profits driven by the CEO?  Should governments subsidize failing companies (e.g. GM, Chrysler, Citibank, Carlyle, etc.) when the CEOs continue to receive incentives in the form of bonuses and severance packages?  Can we count on our faith (e.g. US Christians) to deliver the appropriate moral foundation to support doing the right thing?

This process partially explains why the wealth gap in the USA has widened to support the super-wealthy 1% while the middle-class (the 100 jobs eliminated in this illustration) has been squeezed.

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Innovators World

USA as “land of opportunity” through industrialization

Commodore Cornelius Vanderbilt (1794-1877) started working for his father’s ferry and grew his shipping business to ocean steamboats before becoming the largest US railroad tycoon after the civil war with monopoly of rail lines around New York City. He built the Grand Central Station, and helped a young and near-bankrupt John D. Rockefeller (1839-1937) transport petroleum products like kerosene. Already a Christian (Baptist), Rockefeller was seldom late for meetings. When he was late for the train to meet Vanderbilt the first time in 1863 and the train crashed, Rockefeller renewed his faith with a mission. By promising a consistent quality of petroleum products that minimized accidents, he captured 98% of the US oil refinery capacity in a company called Standard Oil. When the railroad industry formed a cartel (similar to oil’s OPEC today) to increase prices to transport oil products, Rockefeller built pipelines to bypass railroads.
Pennsylvania Railroad’s Tom Scott (1823-1881) lost his business after Rockefeller took away 50% of his company’s revenue. Scott’s personal assistant, Andrew Carnegie (1835-1919), later became the steel industry magnate, before he sold his business in 1901 to JP Morgan (1837-1913) to focus on philanthropy.
JP Morgan invested in Thomas Edison’s (1847-1931) Direct Current (DC) electricity which eventually lost to George Westinghouse (1846-1914) who invested in Nichola Tesla’s (1856-1943) Alternating Current (AC) electricity, partly because DC currents can not economically travel more than about 2 miles. As a financier, JPMorgan created General Electric with Edison’s patents in 1892 (and the only one of the 12 original Dow Jones index companies in 1896 still part of the index today), created US Steel with 67% marketshare after purchasing Andrew Carnegie’s businesses, and worked with Rockefeller (who was concerned about his kerosene business when electricity became available) during the financial panic of 1907 to acquire control of Westinghouse’s businesses. Overall, JP Morgan created several monopoly-like businesses.
The closest to a monopoly was Rockefeller’s Standard Oil monopoly which was broken up in 1911 by the US Supreme Court under the auspices of The Sherman Anti-Trust Act of 1890. However, the 1998 British Petroleum (BP) merger with Amoco (Standard Oil of Indiana) and 1999 merger of ExxonMobil (Standard Oil of New Jersey and Standard Oil of New York) may have re-defined anti-trust in the USA, especially since the OPEC cartel has thrived for the last 40 years.

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