Since January 1999

Tao of Management

   Last Update: 15 November 2004  

NON SUM ERGO NON COGITO
(= I do not exist, therefore I do not think.)
TAO OF MANAGEMENT

by Makoto Okubo

(1995, Lecture at HEC School of Management, Jouy-en-Josas, France)  

Strategy? Yes, but why ?

It is a part of management. Management, what is it exactly?

Nobody knows, everybody is searching, but it's not explicit yet.

It means "master". Then, master what ?

M arket?

I nformation?

S trategy?

T echnology?

A ccounting ?

K nowledge?

E conomic value added?

N etwork ?

Whatever you master, you may try to research it by knowing and to decide by previewing. We may try to respond by non-thinking and to act by non-action. In the Occidental management, the first method was essentially taken. For a long time, the way of physics and management has been dominated by Cartesian-Newtonian mechanism. It has influenced profoundly every aspect of the society.

On one hand, the study of 20th century on atomic as well as subatomic world has revealed the limits of classic ideas, and on the other hand, facing with the invalidy of scientific hypothesis such as efficient market, perfect information and certain universe, the management now tends to adopt the integratrice, organic and non-deterministic thinking.

These new concepts, including modern physics, provide often curious parallelism with the ideas explained in Oriental philosophies. Besides, Japanese language, which belongs to the Ouralo-Altaic family, incites us sometimes to adopt those notions.

My objective is to present the second method, which has dominated Japanese management but Western people have not paid so much attention to although existing since ancient Greek era, and to imagine together the world beyond epistemology. For that purpose, I would like to give it a new attempt of aufheben of Japanese and Occidental cultures. The goal is not to comprehend Japanese particularities nor trust Oriental method as viable instrument in any occasion.

I would like to define the first method as cogito(=think) management, the second as non-cogito management. I believe that the combination of cogito and non-cogito management would be a key toward the new world order. As Niels Bohr suggests, the contrary is complimentary (Contraria sunt complimenta).

This paper is, therefore, not to address simply readers who are interested in Japanese relations but any business people or students. I hope this might be helpful to today's managers who have never been interested in working on Japan, but finding themselves in environment complicated, uncertain and fuzzy.

How have you been dealing with your business environment, whether internal or external? Cogito management adopts "precision" method, trying to seize all the relevant data and information and make a decision after substantial analysis. When the world is simple and certain, it will be an easy job. Cogito management uses deterministic approach. Although that hypotheses is usually illusory, the method is quite effective where the margin of error is not significant. To cover uncertainty, cogito management even employs stochastic approach, trying to apply statistical method with a range of probable events, and then determine reasonable actions.

Non-cogito management adopts "integration" method, similar to Lao-Tsu's non-action principle, trying to integrate everything into one system, matching themselves with the world and do not care what the world is, which they believe is impossible to recognize by any means. Non-cogito method is not always efficient and profitable, but is sometimes more effective, where some assumptions for cogito management cannot substantially be expected.

 

(Math Allegory 1 Fibonacci Sequence)

You have to process the series as below:

a₁ = a₂ = 1, a₃=a₁+a₂,=2, a₄=a₃+a₂,=3 a₅=a₄+a₃, =5.....

Ms. Non-cogito doesn't care about what it is, but knows

how to process inductively, and follows the rule:

a_n+2 = a_n+1 + a_n, a₁ = a₂ = 1

Mr. Cogito insists, however, on figuring out what it

is by definition. It has turned out to be:

Do you still want to define what it is ?

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CHAPTER 2. TAO OF MANAGEMENT

"What we can learn from ancient Chinese?"

1: Yin & Yang

It appears that, in Western world, there is significant influence of dualism. In most cases, they are mutually exclusive and not reciprocal. If you are good, you are not bad and no problem. If you are bad, you are not good and should become good.

In Asia, there is also a dualism of yin and yang. But they are merely seen as the two extreme poles of the same reality, and mutually complementary. If you are strong in some way, you are weak in another way. If you are inside, you are outside in a sense. Everything is shown as dynamic, cyclical, reciprocal combination of the two natures. You are constantly moving on the road(=Tao) between the two poles. If you reach one pole, you return toward the other pole. If you are too rational, you may turn toward intuition to keep in balance.

Exclusive dualism "Contraria sunt exclusiva" : Occidental model
Good vs. Bad
Positive vs. Negative
Rational vs. Irrational

Complementary dualism "Contraria sunt complementa" : Asian model
Yang <-> Yin
Strong <-> Weak
Inside <-> Outside
Rational <-> Intuitive

Some dual comparisons are misleading.

Which is more similar to Japanese, French or Americans ?

To be somewhat like a Japanese ...

be socialized like a French (Individual vs. Government or Society, Art, Cuisine, etc.)

be organized like a German (Law, Organizational behavior, etc.)

be pragmatic like an American (Concrete Thinking, Practical, Market-oriented, etc.)

play a game like a British (Island Sprit, Casting vote rather than explicit initiative, etc.)

sing like a Spanish (Folk Songs, Pronunciation, Soul, etc.)

think like a Chinese (See this chapter)

believe like an Indian (See Chapter 3)

talk like a Computer (See Chapter 4)
 

Which is more arrogant, French or Americans?

In Paris cafe, three persons, an American, a French, a Japanese, discussed what people is the most arrogant in the world.

The Japanese said, "It's American. They think American way is the best one, don't hesitate to say it, and want you to understand it".

The American opposed, "There is another people more arrogant than us. It's French. They think French way is the best one, say it, and don't care about your opinion. That would make no sense!"

The French opposed, "There is another people more arrogant than us. It's Japanese. They think Japanese way is the best one, but don't say it. Because they don't think that you might understand. What an arrogance!"

By the way, can you tell which is stronger, Utah Jazz or Holyfield?
 

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2: Non-action and Detour for Access

Taoists act with their sages intuitive, spontaneous and harmonized with their environment. Lao-tsu taught us that, if we match perfectly with the nature through "non-action" , there would be nothing impossible to accomplish. Viewing Tao as a continuous reaction between the two opposite energies, they tended to be optimistic in adversity and be prudent in prosperity. To carry out something, they begin with the opposite: " Expand before contraction, enforce to weaken, exalt to eliminate, give to take, etc." If you want to push something forward, there would be always a lot of hurdles. All the reactions would try to prevent you from realizing your objectives. If you pull it instead, there would be the opposite reactions. The power is usually shorter-term but even stronger. When the power gets ready to launch by itself, all you have to do is just let it go. It will go alone in your direction, and you will see your objective accomplished. If it is hard to understand, imagine "archery". To let an arrow to go forward in the right direction, you pull it instead of throwing it. Don' t pull too strong nor too weak. Release it when your influence disappears.
Yeah! That' s it. It' s the spirit of non-action.

Non-action as well as making a detour for access are the key principles in any aspects of Japanese culture, arts, Aikido, Judo, Karate, and management.

Ancient Greek                                       Problems?

                                         

Ancient Chinese                                    Detour for access !

                                    

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3: Tao of Management

Long-Term Vision : Different Optimization Models

In cogito management, your first job is to recognize your internal or external environment.. You list up alternatives, analyze them and choose the best one. This method is based on assured accuracy of information. When information is not sufficiently obtainable or erroneous even if provided, this method might lead you to wrong plan of actions. Non cogito management, based on forecast incapability and attempting to stabilize resources irrespective of situations, might be an alternative in that circumstance, presumably in emerging markets.

Japanese management tend to set a direction to optimize their intrinsic value; not only financial resources but also human resources, technology, new products, information, independently of circumstances, unlike the Occidental model, which provides the optimization at a given time or for a given period with certain hypothesis. With the belief that the world is controlled by organic and cyclic rhythm, Japanese model has a long-term vision usually containing at least a whole cycle: prosperity, recession, adversity, recovery & prosperity. With this direction, operational plans will be set to ride on a tide. Today, US people may view Japanese firms dead and their strategies just failed. But in Japanese perception, they have not reached the middle of the road yet. Besides, the word " strategy" had not existed until borrowed from military terms to interpret a foreign word, but it seems most do not distinguish it with " tactics" . The vision and plans had only been necessary.

(Math Allegory 2)

You have two alternatives A & B.

Mr. Cogito's formula

IF A >= B THEN choose A

IF A<B THEN choose B

His first job is to find out which is larger, A or B.

Ms. Non-cogito's formula

(|A+B|+|A-B|) / 2

She prepares the system which is good for either case.

Be careful, she is not seeking (A+B)/2.

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Short-Term Plans : Continuous or Discrete Adaptation Models

Lao-tsu might say, "Get short to be long." To implement a long-term vision, Japanese management has its plans extremely short-term, let' s say three months. Since the environment is changing without interruption, the hypothesis valid today would become invalid tomorrow. Long-term plans may be optimized only for a short-term. Under this philosophy, the operational plans should be cut into small pieces, get inductively modified and keep continuously adjusted to the environment. The competitive advantages may be gradually established with indivisible multiple plans. This method is similar to the "differentiation" in mathematical term. The total activities may be compared to the integral function. Nevertheless, Western people are not doing anything fundamentally different, since their hypothesis and assumptions are changing day by day. Simply, as each plan is separate and relatively longer-term, the method would be likened to the "summation of discrete series" . When the environment changes in continuous and differentiable fashion, the differentiation method may be more effectively and minutely adjustable to the circumstances. However, when the changes occur in discontinuous or indifferentiable manner, it can no longer adjust itself, therefore it may repeat the same thing or otherwise stop.

Differentiation Method (Non-cogito management model)

 
 

Discrete Summation Method (Cogito management model)

 
 
 

Has Japan been competitive in international marketplace?

As mentioned above, the Japanese model is based on continuous improvement & adjustment rather than selective optimization. Whatever discussed in political arena, Japanese firms have shown competitive advantages in the area where the environmental changes have gradually occurred and only a slight and subtle improvements may have had an impact on customers' choice, such as automobile, computer hardware, TV set, audio, household electronics, etc. However, they are far from forerunners in the area where environment has changed brutally and discontinuously, such as financial services, telecommunications, operating system, medical & chemical products, etc.

The difference in consumer's risk tolerance between Japan & US

While variable annuities, mutual funds, and equities are the hot funding vehicles for retirement in the US. Japanese prefer to invest on guaranteed products. Variable products are relatively rare in the marketplace. The survey conducted by Nikko Research randomly for 500 households in each country in 1996 shows that US consumers tend to have a higher risk tolerance for longer investment, and the exact opposite for Japanese consumers. This may be an amazing contrast. But, to me, it is understandable that Westerners as "selectors" try to choose products with higher growth for longer-term investment, and Japanese as "adjusters" try to avoid taking risk for longer term investment, which would not permit them to adjust for a longer time.

What does Japanese Big Bang means?

It has been a long time since Japan has suffered economic hardships. Not only public sectors but also private sectors are trying to find a way to recover from it. But all those measures have not given any significant impact yet. I am feeling that the situation may be quite similar to the "freezing" of Windows 95. Whatever you type on the keyboard, the machine never reacts. The only way to recover is to reboot it !    The differentiation model discribed above assumes that you are always on going and continously improving. Once you stop, it might have no autonomy to restart. Japan must take measures, whatever they might be, that are discontinous and independent of the past in order to reboot the economy.

Don't worry, partners. Japan is not dead, only sleeping for a moment. Of course, to improve our returns by 5% may not be easy. However, if you really need 15% improvement, it may not be impossible to carry out.  Fortunately, we know we have much to alter. What we must do is to make up our mind not to repair but to recontruct things.  Let us pull out the plug and turn it on back. Once we restart, we know how to improve it constantly and efficiently.   This is what Japanese Big Bang is all about.

By the way, please do not forget about cyclical nature of the world.  Since you are on the top of prosperity, it might be already your turn to worry about your future.

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4. Detour and Advance

In prosperity, financial resources come in one after another. There are a lot of businesses and people are constantly busy and even hard to breathe. In adversity, although cash inflow is limited, people have more " spare" time. This might be a good opportunity to gain a foothold for tomorrow, by gathering information, conducting research, reviewing the process and accumulating human capital through training of the employees, etc. Rationalize the process? Yes, but what for? The reduction of cost and the creation of idle time are the key aims. The idle time of the employees are considered the source of innovation.

To let firms go forward, management may employ the two opposite forces: " The law of Sun" & " The law of Inertia" . The former is positive intrinsic energies toward progress, expansion, innovation, joy of success, etc. The latter is negative extrinsic energies to resist following the current; traditional customs, old paradigm, risk aversions, fear, protectionism, personal interests, reluctance to the unknown, etc.

When the solar force is superior to the force of inertia, your job is to set your position in balance and adjust your sails with the wind. On the other hand, when the force of inertia gets stronger and blocks the firm, it may be more effective to draw it to the opposite direction and utilize the force of inertia to launch, by creating problems, denying past goals, promoting crisis, investing at risk, setting unrealizable budgets, etc. When the employees react against the contradictions, imbalance, fear of penalty, crisis, their passive resistance should be transformed into positive intrinsic energy to move on.

How to catch customer's heart?

A book titled"How to catch woman's heart" was widely read among sales people. Apparently, women are driving consumer market. Let' s take an example from that book. You are with your girl friend mixed with anticipation and reluctance. How should you ask her to stay?
Alternative 1 :     You stay? ,,,,,You can go, if you like.
Alternative 2:     You go? ,,,,,You can stay, if you like.
Logically the two sentences are the same. But the book explains the latter would be better. In the first case, when she heard "you stay?", she had a little "no" on her mind, and the words
"you can go" will release her to go. In the second case, when she heard" you go?", she might have a small disappointment on her mind, and "you can stay" might let her to stay. In fact, this kind of reverse psychology has been quite effective in marketing area, although I have never tried it in a romantic context.
 
International deregulation in financial service industry

When you compare two regulatory systems A & B and find a point that A is more restrictive, you may often find another point that B is more restrictive. Some restrictions are related with other authorizations. If the door is open, the safety boxes are locked (US model). If the door is closed, the safety boxed are open (Asian model). To make the latter type of countries open the door, the first step might be close the safety boxes.

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5. Dynamism of Yin and Yang in Management

The world is too complicated to characterize in any single word. Contradictions are always found; competition & cooperation, conflicts & harmony, success & failure, etc. Under the equilibrium in conjunction with dynamism of Yin & Yang, any combination of opposite forces are possible by actions & reactions vis-à-vis with the environment. " Oxymoron" , the combination of contradictory concepts such as competitive cooperation, harmonized conflicts, successful failure, may be an appropriate answer, if you try to describe it in a word.

a) Cooperation & Competition

There is a perception that Japanese as collectivists are cooperation-oriented while Americans as individualists are competition-oriented. This is not incorrect, but may be inaccurate. While Japanese firms often show renowned harmony, they sometimes manifest intense competitions with external and internal rivals even more aggressively than Western firms. For Asians, cooperation and competition are the two faces of a thing. For example, whom highly competitive Japanese salespeople are competing with? In most cases, what they have on their mind are not external competitors such as those of other firms, but internal competitors such as those of next sections of the same firm or rivals in their section. By competing one another, they cooperate to realize the firm' s turnover, which would lead to competition with other firms, that could be viewed as cooperation in the industry or nation' s scope.

Collectivism may bring harmony, companionship, sympathy and collaboration, when the members are psychologically equal, but may cause strong jealousy and competitive sprit when some members try to be superior. If we say the ambition to become a winner is a driver for competition in individualism, the evasion from becoming a loser may be a driver for competition in collectivism. In addition, the latter tends to limit the scope of competition within insiders. For example, most of the Japanese firms have expanded their exports not through competing with foreign outsiders but through competing with domestic exporters. Except for truly global firms such as Sony, Honda, etc., they view only domestic firms as emotional competitors and have little allergy to team up with foreign competitors in order to beat domestic rivals.
I hope we could expect some interesting arrangements in the context of Japan Big Bang initiative, if we can transform such a " non-global" perception of competitions into various partnerships with foreign companies.

 

Paradox : Karaoke behavior of Japanese & Westerners

Karaoke, that is indispensable for Japanese private and business life, seems to have become familiar to Western people. In the US and France, I have seen Westerners bring Karaoke devices to a party and sing songs together. Japanese would prefer singing alone, and joining someone's singing might be impolite. This would be a precious occasion for self-assertion. I assume both people unconsciously challenge their prototype as individualists or collectivists. Everybody has both characters. The collectivism implication might be applicable to Westerners to some extent.

As far as cooperation is concerned, we should also pay attention to the remuneration system. While American reward system is more task-oriented, Japanese system is more human-oriented, where evaluation depends on how you have made contributions to the firm, the teams and the other employees. You may maximize your gains by sharing information, transferring knowhows, educating and giving chances to others. In this circumstances, the employees may be competing with each other through cooperation, in other words, repeated games of gives-and-takes. With American reward systems, you might be sometimes better off if you hold key information, preserve knowhows, and do important jobs by yourself. There might be the sort of jobs requiring more "teamwork" such as operations, processing, production, customer services, etc., as well as the genre of jobs needing more "competitions" such as planning, R&D, investment, sales, etc.
I'm afraid, many Japanese firms, with cooperative reward system, seem to be demanding their employees to compete with each other, while many American firms, with competitive reward system, appear to be begging their employees to work in harmony.

b) Consensus & Creativity

A firm has a variety of people with different backgrounds and opinions. It would not be an easy task to reach consensus, even for the Japanese known as people toward consensus. Besides, seeking consensus is not always a good approach. because consensus might kill creativity of the plans. The creative plans are generally biased to a particular direction. If the plan is too left or too right, right or left person disagrees respectively. The process of consensus, which is equivalent to averaging process, may make the final products banal.  See Financial Modernization Bill!  On the other hand, the consensus assures lower risk of the plan, since the plan was reviewed carefully from all the different standpoints though negotiation.

If you are financial managers, you may be familiar to the efficient curve of risk and return. We may apply it to the creativity, that is return of planning, and its associated risk, and consider to choose the strategies on the efficient curve.  By doing so, you are choosing the most creative plans with given risks you can tolerate with.

When you are going on the tide, all you must do is to do "nothing". Some businesses may grow at 15% without doing anything. Doing nothing is easy to say but hard to carry out. For example, just try think nothing. You may be now thinking "Don't I think anything?" Normally you are forced to do "something" to justify your salary, which would make the matters worse. If you can remove all the frictions, the business will find its own way enjoying stable growth. The best way to do nothing may be to find consensus of all the managers and keep in harmony.
On the other hand, when you are going against the tide, you would be drained into death without doing anything. What you should do is to create the frictions to step on. You need the creativity and stimulation. You should let each manager to work independently and pick the innovative ideas. Some degrees of conflicts would be welcome to awaken the sleepy company.

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(To be continued)

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CHAPTER 3. NOTION OF EXISTENCE

"What can we learn from ancient Indians? "

1 : Conception of Emptiness

-Two status of existence (Ancient Greece) full - empty

-Three status of existence (Ancient India) empty (ku) - full (ge) - implied (tai)

Contribution by absence

The mirror world of potentials

The best way to integrate is not to exist
 

2: Hadronic existence

The existence is defined a priori by the nature of material or spirit

(Ancient Greece)

The existence is defined a posteriori by the interactions with the world (Ancient India)

- Management of Values

- Upstream Rationales & Downstream Rationales

- Vertical Specialization & Horizontal Specialization
 

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CHAPTER 4. INTELLECTUAL OPERATION

"What can we learn from Japanese?"

- The Americans run after thinking.

- The Japanese walk while thinking.
 

1. Just-in-time System of Communication

The Japanese as Ouralo-Altaic family

I America to go want

I this afternoon movies to go can not.

Inverse Polish Notation

D A B * C + =    (D ni A to B o kakete C o tashite dainyusuru = machine language)

cf)  D = A * B + C    (D is replaced by A multiplied by B plus C = BASIC, C++, Pascal, etc.)

Inverse Polish Notation in management

Efficiency in operation vs. decision

Why is it so difficult to work in group in English or in French?

Two advantages of Japanese language toward consensus
 
 

2. How to liberate yourself from fixed ideas?

- Imprisonment in your language

Why do you learn Japanese even if you never use that language in your life?
: Another reason to learn foreign languages

- Imprisonment in our fixed ideas

Koans & Nazokake: The art of jump and association

- The Management of Creativity

Give birth to the things that have not existed. (American, French, etc)

Associate the things that have nothing to do with. (Japanese, etc.)

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CHAPTER 5. AUFHEBEN OF CULTURES  (CONCLUSION)

"When do Westerners become more asian than Japanese?"

1. Asset Liability Management : New World of Taoism

2. Net Present Value Concept : Hadronic Existence

3. New communication tool: "Japanglish"  or "japonçais"

4. Conclusion  "Contraria sunt complimenta"

Let's master the world together by the complimentarity of Cogito & Non-cogito Management

  Note: No part of this publication may be copied, duplicated, translated without my prior written consent. This publication is not intended for commercial purposes , and I am not liable for any potential problems that this publication might produce.

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Biography:
La philosophie orientale de la science et du management, ISA-HEC 1994, Okubo
Le dé tour et l'accè s, CAMERON 1995, Franç ois Jullien
Information, communication et prise de dé cision straté gique, ISA-HEC 1994, Andreu Solé
Le prince bureaucrate, Flammarion, 1982, R. Laufer et C. Paradeise
La tao de la phisique, (The Tao of Physics), Berkeley 1975, Fritjof Capra
Quantum Theory, Prentice Hall 1951, David Bohm
La philosophie du Tao, Editions Dangles 1993, J.-C. Cooper
La pensé e chinoise, 1990 Albin Michel, Marcel Granet
Fuzzy Thinking The New Science of Fuzzy Logic, Hyperion 1993, Bart Kosko
Straté gie, structure, dé cision, identité , InterEditions 1993, STRATEGOR
La Straté gie de la Valeur (Valuation:measuring and managing the value of companies), 1991, Tom Copeland, Tim Koller, Jack Murrin
La duration et le risque de taux, MATIF 1991, Abbas Mohseni, Jean-Marc Plumyene
Nikkei Publications, Harvard Review reports, textbooks or other printed materials on management, production, marketing, finance, computer science, organizational behavior, linguistics, philosophies, English literature, etc.

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