Economist John Kay has just published a book ‘Obliquity: Why our goals are best achieved indirectly where he makes observations that ” the most profitable companies are not the most profit-oriented”
He goes through the episode where the pharmaceutical giant Merck (original ethos – “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear”) changed their ethos to become industry “top-tier growth company” in the 1990s. It is now an “has-been” after getting stuck with flawed products.
“Today, the pharmaceutical company which has created most value for its shareholders is Johnson & Johnson, whose oblique credo was set out in 1943 by Robert Johnson, a scion of the founding family and company chairman for 30 years. “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services”, it begins. The credo ends, many lines later, “when we operate according to these principles, the stockholders should realise a fair return”. Events seem to have proved Robert Johnson right.”
John Kay then goes through the stories of Sam Walton (of Wal Mart), Bill Gates (Microsoft), David Beckham (with his “curved” free kicks) and many more. He also delves into the story of the most profit-oriented corporations in the history of the world – Bear Sterns “Let’s make nothing but money.” and Lehman Brothers who disappeared in the 2008 financial debacle.
Of recent experience, has been the Toyota car recall. This is the world largest car recall and currently, there are uncertainties of the true cause of the technical issues. Akio Toyoda (Toyota President) has acknowledged that the company grew too fast – in 2002, with 10% of the world car market, a decision was made to become the largest motor manufacturer with the aim of 15% of the market (and presumably, increase profitability as well). Toyota had built its reputation on producing solid and reliable cars. This reputation has now been called to question with these problems.
As a child, I was encouraged to go for my passion and not for the money. The quality of life is far more important. Also, there was the story which I will never forget.
“If you chase the money, money behaves like a dog. You chase it, it will run faster than you as it has 4 legs. But, when you are in demand, money will be chasing you; just like a dog chasing you”.
The point of this blog?
The Government strategy started in the 1980s of supporting the Service industries, particularly financial services, has come to an end with the 2008 financial debacle. A new strategy has to be started by the new government of whatever hue.
As I see it, as a trend, emphasis will move away from the financial services (shuffling of money around) to the creation of products of value – like new technology, things that are beneficial to people’s lives. There was an indication from the budget of a one-off £270m funding for 2010-2011 that will support subjects including science, technology and maths in universities in England from September. Also, there has been a greater number of programmes on the BBC on Science and Technology since 2009.
Have I seen the light or living in cloud cuckoo land?
Dr Michael Oon
