Union Minister of State for HRD Dr Shahi Tharoor delivered keynote address at IIM World Conference in Goa on May 31, 2013.
His address was based on the theme “Education & Looking Beyond Profit.” The two-day world conference on "Emerging Issues in Management" was jointly hosted by Indian Institutes of Management.
In his address, Dr. Tharoor urged businesses and B-schools to look beyond profit and come forward to contribute towards the overall development of the society.
Here follows the remaining part of his full speech. The first part of the full address was published earlier.
Again, we have environmentalists to thank for drawing our attention to this concern. In the decades since Rachel Carson first wrote about the environmental costs of pollution, most nations have brought in legislation to ensure that firms are forced to take account of at least the most egregious of these implicit costs – paying taxes equivalent to the damage they cannot avoid, and liable to massive fines if they cause damage by negligence. Whether it is superfund legislation in the USA, methane taxes on livestock in New Zealand, international treaties to protect fish stocks under the Law of the Sea, or our own Supreme Court’s 2009 judgment in the Vedanta / Niyamgiri alumina mining case, we already have an understanding that costs are no less real merely because they are imposed on others. How else can one explain the outrage against clothing or sporting goods multinationals when their products were found to be the result of sweatshop labour, or the willingness of customers to pay a premium – a loss to them! – for Fair Trade goods?
The challenges and opportunities that corporations and industries pose for business leaders, nations and governments pose for politicians. Despite the different habitats inhabited by our two apparently different species, I would suggest that the temperament, the intellectual ability and the qualities of endurance and patience that are required in a successful business leader are entirely the qualities that no self respecting politician desiring recognition and seeking public office can do without. Owing to my own background, much of what I have to share with you about leadership today will be applicable to both business and politics in equal measure. By now, most of you would have heard endless times that a new age is upon us. This is a banal and trivial truism if ever there was one, for new ages are always dawning upon the generations that live in them. The old order is always changing and yielding to the new, sometimes smoothly and sometimes in extremely disruptive and disorienting ways. What, then, makes this new age of our times so different from the new ages of the past? I believe it is the speed with which it has come into being. In the last 25 years or so, beginning with the fall of Communism in 1989, a paradigm shift has taken place in politics and business. But what characterizes the defining features of this shift, the changes that leaders must deal with today? What does this new age mean for you?
It means several things to me. As I see it, the salient features of this paradigm shift are – the spread of globalization, the growth and success of democracy and universal ethical standards, and the occurrence of sudden systemic shocks both in politics and business. Related to these three prominent features are the no less significant changes caused by the spread of technology and environmental degradation.
The first challenge for leaders in our new age is of course globalization. Now more than ever, leaders must be able to grasp and balance the scales of a globalized world economy and society. “Globalization” is a fairly new term. Professor Theodore Levitt, a marketing professor at the Harvard Business School, first employed it in a 1983 article in the Harvard Business Review. Globalization became a buzzword following the end of the Cold War, but the phenomenon has long been a factor in the foreign relations of the United States and has deep roots in history. Globalization is a complex, controversial, and synergistic process in which improvements in technology (especially in communications and transportation) combine with the deregulation of markets and open borders to bring about vastly expanded flows of people, money, goods, services, and information. This process integrates people, businesses, nongovernmental organizations, and nations into larger networks.
Globalization promotes convergence, harmonization, efficiency, growth, and, perhaps, democratization and homogenization.
But globalization has a dark side too. It promotes convergence but also disruption: the era of increasing globalisation is also an age of terrorism, religious intolerance and the so-called clash of civilisations. It produces economic and social dislocations and arouses public concerns over job security; the distribution of economic gains; and the impact of volatility on families, communities, and nations. As modern day leaders, one must learn how to handle the thorns that come with the roses. In the words of the distinguished Nobel laureate Amartya Sen, “We cannot reverse the economic predicament of the poor across the world by withholding from them the great advantages of contemporary technology, the well-established efficiency of international trade and exchange, and the social as well as economic merits of living in an open society. Rather, the main issue is how to make good use of the remarkable benefits of economic intercourse and technological progress in a way that pays adequate attention to the interests of the deprived and the underdog. The question is not just whether the poor, too, gain something from globalization, but whether they get a fair share and a fair opportunity.” The assets of the 200 richest people in the world are more than the combined income of 41% of the world’s people; this would be one indication that our ideas of profit and profitability have some disconnect from ground reality.
The second element of leadership in the new age is learning how to deal with black swans – especially the psychological bias that makes people individually and collectively blind to uncertainty and unaware of the massive role of rare events. Black swans have existed throughout history, yet their shape has transformed. The Cretaceous-Palaeogene extinction event, almost 66 million years ago, wiped out the entire dinosaur population; while closer home, one of the greatest financial crisis of all times threatened to throw the Euro zone into darkness. Uncertainty affects decision making in many ways. For instance, if firms cannot predict future levels of effective demand or growth rates, how can they take a rational decision regarding investment? Similarly, how can banks lend to potential borrowers if they do not know whether they will be able to repay their loans, given the uncertain levels of effective demand in the future? Malcolm Gladwell’s theory on uncertainty provides some valuable insights.
In his book Blink, Gladwell narrates the story of a statue dealer. A dealer brings a new statue to the Getty Museum, a Greek Kouros. The Museum was ecstatic, but first wanted to check the statue’s authenticity. The lawyers went first and found no problem with the paperwork. Next the Museum checked the stone to see if it came from the right quarries and see if it had been out of the ground long enough. So far, so good. Getty’s then decided to buy it, pay a huge amount of money ($10M) for it and invite an expert to see it. The expert takes one look at the statue and says it’s a fake, but can’t explain why. Another expert is called in; he too gives the same immediate response, but is unable to say why. The Museum takes the statue to Greece and unveils it to a huge audience of experts who then have the same response. When they get back, the lawyers call to say that there is now in fact a problem with the paperwork and the geologists calls to say that there is a problem with the age test. In the end, the data proves that it is indeed a fake, just like the experts thought it was. In the statue example the experts were doing a kind of complex pattern matching – taking a pattern they had in their head about real Kouros statues and matching it to the actual example in front of them. In military circles they talk about coup d’oeil – at a glance – the ability to see immediately what was needed. Building such deep levels of intuition requires great amounts of experience. Research suggests that a person needs 10,000 hours of experience to build the kind of knack we described.
One of the effects of globalisation and the knowledge society will be to give any person easier access to others who possess such expertise, and to reduce the opportunities for arbitrage based on unequal access to information (though opportunities for discretionary arbitrage will remain nonetheless). Despite that advantage, though, not everyone can be an expert, and even an expert can be wrong. In dealing with uncertainty, there will always be those who make the wrong bet; I put it to you that there is nothing wrong with this, unless (as with white swans) they persist in making the wrong bets by being repeatedly and predictably wrong. Failure is an important part of learning, and learning is at the core of adaptation and capacity building.
To borrow the words of Rudyard Kipling, in his poem IF,
‘If you can make one heap of all your winnings,
and risk it on a turn of pitch-and-toss,
and lose, and start again at your beginnings,
and never breathe a word about your loss.’
– then you could still profit from your failure. There is a case to be made here, once again, for our traditional understanding of profit and loss to be re-examined.
The third and last element relevant in this new age that I would like to talk about is one that is often characterized by grey – ethics in business. The key difficulty surrounding business ethics is that ethics, by definition, goes beyond the merely legal— but how far beyond? No institutionalized rules exist defining an upper limit. Public opinion is not a very good guide. It is subject to change. Ask Ramalingam Raju! Then as leaders how do we judge what is right and what is wrong? A great philosopher who sought to establish ethical rules on the firmest possible foundation was Immanuel Kant. His deontological ethics principle puts forth a simple question – “What if everyone did that?” When one is in doubt about a particular course of action, consider the impact if everyone does the same thing. If it will lead to greater harm to society – to a loss to everyone involved – then it is just as wrong for even a single person to do it. This is a simple Kantian insight, but I believe that this simple logic, except in some cases, works as an eloquent compass in times of moral dilemmas.
Ajit Balakrishnan began this morning by talking about corruption. Undoubtedly much of this stems from politics and politicians, from their ability to profit from the power to permit. When a business has to factor in what needs to be paid to obtain a licence to perform an economic activity or sometimes merely to expedite its processing – and especially if these are costs that cannot even be legally accounted for – it distorts not just ideas of profit and loss but even of the viability of the business. Indian politics has seen its fair share of scams and scandals in the recent past, and as a result lost not just domestic but foreign investor confidence. Ethics in business & government has to be the anti-clogging device that cleans the system every now and then, lest it burst from the pressures of greed and corruption. So in a world mired with shaky souls and broken promises, we must each find the will to stick to the right path as leaders of not only a knowledge-driven but also a value-driven society. Only then will we see the positive economic connotations from the creation of trust, even as we see the negatives today. The experience will be an eloquent argument for appreciating the role of societal context in determining profit, and of ensuring that we do our part to protect and maintain that context in its most conducive state.
Before I wrap up, I’d like to end by quoting a few lines by Rabindranath Tagore, he says that “The highest education is that which does not merely give us information but makes our life in harmony with all existence.” This is a wonderfully Indian idea – a Tagorean idea of harmony. I believe that the IIM World Conference is just such an event, that creates this harmony for educators and business leaders alike. I thank you all for contributing to it so tunefully, and hope that I have been able to strike some modest chords of my own. I look forward to your comments and questions.
Stay tuned to MBAUniverse.com for more special address by policy makers on MBA Education.
