The Case for Business & John 'Max' Faulkner (1942-)

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 NB caution !! ... I only keep these preliminary notes on my website so I don't lose them !   

This is an initial draft of musings & gleanings which contain many omissions, errors, inaccuracies & misinterpretations ... help!

 

John FaulknerWe all learned from history ... but beware fake history was rampant, in the end it was only biological history that didn't lie? And for sure we did learn, we learned more from our peers & mentors than from any demagogic soothsayers with their printed curricula, prescribed syllabus, attainment targets and the bureaucratic paraphernalia of the despotic powers that be.

Ask Copernicus (1473-1543) and Galileo (1564-1642) ... and Darwin (1809-82) about their battles with conventional wisdom?

Our tutoring mentors came not from the hierarchy but from our peer group, inspired guys like Tony Bowen at school, Jost Wendt at University, Mike Cowan at Unilever ... and John Faulkner, a business friend for over 60 years.

 We learned the hard way that successful companies were embroiled in a Darwinian process -

The unleashing of a process of technological & institutional innovation which involved the generating & testing of a diversity of ideas which discovered & accumulated more survival value for the costs incurred than competing alternatives.

Survival value was 'know how' discovered & accumulated through satisficing behaviour as entrepreneurs tried desperately to imagine a future into existence by cooperating with their mates to cope with the uncertainty & risk involved in the four underlying terrors of business life - 

complexity - the best laid plans of mice and man were a fatal conceit

scarcity - there was no free lunch bills had to be paid, balance sheets had to balance

change - the ball game continually changed, the 2nd law of thermodynamics saw to that, this time was different and they all said they wanted to discuss it

conflict -  parasites & predators inevitably evolved and were always tying our shoelaces together & as soon as there were stocks there were thieves

Companies gathered help and impetus through cooperation with other like minded groups through constantly seeking synergies of specialisation & scale through innovative experiments ... the result was economic growth for the successful ... as less successful companies were weeded out during legal due process -

 Mergers & Acquisitions

 Bankruptcy & Administration

... in this way valuable resources were not hogged but released for compassionate redeployment in profitable projects that 'worked'... by definition?  

All this Dawinian business business sounded a bit dry ... but it was fun, honest.

Willie Lever pushed his business activities by addressing problems of hygiene in Victorian Britain with wanted goodies - 'pure' Sunlight and 'effective' Lifebuoy soaps. Cleanliness was always next to Godliness as grinding poverty was alleviated and lives improved & extended, which seemed to please folk otherwise they wouldn't have bothered ... these was real jobs, real surpluses, well worth the effort ... economic growth @ 3% compound was fun.

From the start there was a team, nobody could grow a business on their own. The Lever business was an association of many cooperators, apart from his brother, there was famously, the expertise of soapmaker Edward Wainright and the discipline of Francis D'Arcy Cooper who carefully nurtured the investment funds ... and lots of others including the ladies from Rock Ferry on the twilight shifts who could guarantee their boxes were filled with quality soap and offered to eager consumer's in good nick.

Commercial Businesses; traders, organisations, associations, partnerships, companies, enterprises, firms, corporations, were all involved in the production of goods & services for consumers. Legal entities; and it was illegal for commercial businesses to trade if they were insolvent ... the bills had to be paid, day in day out ... sustainably.

JCF was minded to support the case for business ... the acute problem was access to the youngsters and from where we stood they seemed to be learning the case against business ... the 'conventional wisdom' was rampant; the teachers, the educators, the BBC, the popular press, political despots & demagogues had all claimed the moral high ground and understood 'natural selection' as 'nature as red in tooth & claw' ... it was 'intelligent design' of perfection that was the vogue ... that was the modern way to counter the waste & greed of all the parasites & predators resplendent in businesses big and small? 

Two CulturesThe problem was immense.

Darwin's insight about giraffes & long necks and folk & aspirations just didn't cut the mustard. As C P Snow argued in 1959 there were two dominant cultures and the plausible yarn about class conspiracies and greedy businesses & profit was easy to relate to. Whereas Darwin's insight was difficult to grasp, the necker cube had to flip, and the pompous & dogmatic words of the pontificators of science had no meaning for honest Joes -

 A pre-existing inherited variant with a survival advantage in the local environment will always increase in population frequency as alternative variants die out, thus changing the environment which then inevitably feeds back and influences the survival chances of any new variant.

What on earth did that mean?

The penny had to drop ... not only to explain the giraffes long neck but also to explain business behaviour and why profit was not a cost!

One splendid place to start was the acclaimed essay by C P Snow from 1959 - 

'A good many times I have been present at gatherings of people who, by the standards of traditional culture, are thought highly educated and have with considerable gusto been expressing their incredulity at the illiteracy of scientists. Once or twice I have been provoked and have asked the company how many of them could describe the 2nd Law of Thermodynamics? The response was cold'.

Snow went on to rail against ignorance on both sides, for sure Shakespeare was unsurpassed in his eloquent descriptions of human activities and intrigues but -

How many educated people know anything about productive industry and the loosest analysis of human organisation which it needs?

The estrangement of humanities and science seemed problematic. Any culture that didn't punish scientific ignoramuses, and instead handed them the keys to public life, was likely to be vulnerable ... a sucker for any passing nonsense as evidence was out and myth in.

These hard underlying terrors & realities of business life were compounded by a lifelong friend, a Marxist, who had typically avoided 'dirty' business and devoted himself to the 'ethical' state education system to contribute to the 'the public interest' ... in this way, with privileged access to the kids ... the kids were being taught, quite rightly, about Shakespeare ... but they were seldom being taught about the complex human organisation necessary the production of pins and buttons?

 The state system was largely monopolised 'education' as educators self perpetuated dangerous business myths ... our grandchildren deserved better.

Political Realism   

The soothsayers had nothing to offer about the future, it was 'a woven web of guesses' all about experiments and learning from outcomes. Chase profits and cut losses.

Darwin's insight focused on the scarcity of the mutual benefits from synergies and the profusion of failures in the trial & error process. Political economy by passed success and concentrated on failure which was a painful outcome to be avoided by the intelligent design of success. It was the failures, the parasites & predators and the dark side that made the News ... rackets, con men, cutting corners, spoils, plunder, exploitation, blame, bluff, shams, scandals, excesses ... the bright side of business success was just luck or by the grace of God ... hard work, honesty & thrift were not News.

Some questions we might answer in the style of a typical politico - change the question then answer that one - but to stand up at the hustings and proclaim,

'we just don't know how the cookie will crumble'

 Such was never a vote winner?

 But jcf was a successful businessmen and again 'by definition' he was a survivor of the rigours of reality ... he learned from failures ... and understood the relevance of evolved natural law; Caveat Emptor, Due Diligence ... and trust ... 'My word is my Bond'.

The myth of top down intelligent design confronted the reality of bottom up trial & error, and the management task of chasing profits by cutting out all the failures.

Kids learned that taxing other people's riches, borrowing from nationalised banks and printing fiat money could be popular vote winners. But there was an elephant of debt in the room that no one talked about. However popular bailouts & subsidies were ... there was no free lunch ... bills had to be paid, both sides of the Balance Sheet had to balance. Kicking the can down the road until after the next election simply prolonged the wasteful agony of zombie companies at the expense of creating and growing wealth through profitable projects.

Increasingly complex, changing & conflicting taxes & regulations, based on political populism, interfered with & distorted legal due process which sifted business enterprise.

Companies had a legal obligation to report on risks to their business, including political risks ... but they seldom did.  We wonder why?

Despite the high level of global political risk & uncertainty, the quality of company reports was variable, with an excessive tendency to report risks in a generic form and pull punches which provided stakeholders with little information for evaluation. The efforts of auditors never seemed to help?

Bain Capital were successful turnaround specialists, the Romney and Obama Presidential election campaign in 2012 completely missed the business case about discovering profitable projects and bankruptcy as a sifting process.

Magnificent SevenTurnaround specialists were growing businesses they were not 'picking winners' as candidates for subsidies funded by other people's money. Businesses had skin in the game.

'Party political' manifestos were largely silent about the discovering & sifting process of natural selection? ... such were invariably about intelligent design of utopia and subsidies & bailouts which distorted balance sheets and made a mockery of the P & L accounts of the zombies.

Picking winners in competitive markets was not a business strategy.

Continuous innovation in the Unilever Innovation Funnel in competitive markets ... now that was a business strategy!

It was quaintly called 'market development'?

But who was making the case for business?  

Facts from FiguesCalculus ThomsonArt of MoreMathematics & 2nd Law - Risk/Probability/Statistics & Uncertainty/Change/Calculus

Calculation or Concepts?

Did Ken Hart (our first mentor?) teach mathematics as a study of  -

how to calculate (and now almost irrelevant if you can design electrical circuits)? or

the concepts of maths as a description of real life problems and their interpretation (particularly change)? 

When did we learn that real life business problems were difficult not about throwing money around?

Ken Hart was very important to us and did not spend any time on how to calculate. He taught the elegant application of logic. Perhaps there was, as we remembered, not much effort to relate mathematics to real life problems. It was much more the fun & joy of solving problems in the world of mathematics where everything flowed from initial assumptions. Much easier than real life. As students we interested ourselves in the uncertainties linked to probabilities but we don’t remember being taught much about this. We taught ourselves, often linked to gambling, in an attempt to win by understanding the odds.

Arithmetic was OK for sums. Geometry was OK for shapes. Algebra was OK for operations. Trig was OK for some functions. But Calculus was for complexity & change, definitions of f(x) that were complex and changing ... and it was change that messed up business ... and the concepts were difficult ... the penny had to drop!

Calculus provided the capacity to model & control some systems and potentially extraordinary power over the material world to make it do what you want it to do ... and an industrial revolution? Unfortunately real systems were far from trivial! But systems could be simplified by eliminating time and considering the instantaneous ... Newton's laws of motion and single variable calculus explained a lot. The instantaneous change of any function was its derivative (differentiation; integration takes you from the derivative to the function). Interesting functions were power series which converged to a number.

The 'what if' spread sheet!

Change & 2nd law of thermodynamics - ds = dq/T - change in entropy = energy added/temperature, things at time t are different from things at time t+1 for any isolated system. 

Growth & power equations - y = A(1+r)x  = it was physically impossible for the exponential growth of a thing to go on for ever.

Stein, 'if a thing can't go on forever it will stop'!

Populations, knowledge bases & innovations are constantly changing.

Emergence & nonlinearity - y = A(1+yr)x  = equations have no solutions, equations have to be run and patterns emerge.

Thatcher, 'there is no such thing as society, it's a tapestry'.

Cycles & predation - xt+1 = Fxt(1-fx) = enter the parasites & predators ... interaction, feedback & nonlinearity..

As soon as there were stocks there were predators and cycles.

Difficult mathematical description of problems and interpretation of results ... or easy calculation by computer.

Difficult concepts - Thermodynamics. Compound Interest. Growth equations. Multifaceted feedback.

1. Synergy 2 + 2 = 5?

Our maths lessons were often learning how to calculate. How if this then this was logical cause & effect, the on or off, of Alan Turing's machines. Once our problems were defined in mathematical terms equations could be solved and actions recommended.

But maths was more than Turing machines?

Synergy and the 2nd law iterations involved nonlinear equations which had no solutions? - - 'computerbasedmath.org'

2.  Evolutionary non-linear equations with no solutions bent the mind towards understanding real happenings?

Much easier than real life. Probabilities, rates of change, inevitable change from thermodynamics and non-linear equations without solutions?

Facts from Figures. Calculus. Denbigh. Prigogine. Holland.

Kewill Business CardKewill Systems -- some questions to ponder?

Social Animals & Cooperation with beer drinking mates

After establishing his social credentials as an Usher at our wedding John 'Max' Faulkner built on this training and his growing perspicacity to do great things.

Looking back over 60 years; when, where, with whom and how did social cooperation with friends lead to business activities? Fascinating questions ...

Teachers today were oblivious to the concept of 'social cooperation in commercial businesses'. It's all exploitation, a top down conspiracy and a capitalist plot, tendencies which were truly terrifying ... but we've been here before?

Could Kevin had done it on his own?

Raging Emotions of flip flopping Excitement or Fear   

Did our studies of the turf teach us anything about the management of the excitement of risk & the fear of uncertainty?

Did your first business venture, flogging tips on race days in Liverpool, result in excitement, fear, pocket money or education - or all four? There were earlier ventures. We seem to remember herbal cigarettes and we definitely saw a bit of inept bookmaking at school. We say inept because the excitement trumped what should have been ice-cold calculation. Selling tips at the races was motivated by a mixture of fun and a desire to make a few bob. Fear or education did not come into it.

We will always be adamant that studies of the turf were immensely helpful in business life. It taught that it was impossible to be certain about any planned outcome. Horse racing was a fairly restricted domain with masses of information readily available but it was very difficult to predict the outcome of any race. Analysis helped but uncertainty remained. Many businessmen go broke because they believed their own forecasts. Because of horse racing, we learned to manage the excitement of business and in particular we were able to handle disappointment when things did not turn out as expected. We had developed an optimism that said 'just keep on trying'. Believe me, two winners and four losers was a good day at the races.

How were risk & uncertainty at The National Coal Board and Kewill different? And how were they different from the Sporting Index?

Raging emotions of love, life and horse racing. Learning how to manage such passions & risks.

Bankers always had their margins. As did successful business ventures. But what about those raging emotions?

The excitement of gambling tickled the fancy but the mathematician knew bankers always had to win otherwise they wouldn't exist ... there were two zeros on the roulette wheel ... but the real dice were loaded ...

Real life was not a zero sum game, trade & business ventures involved synergies?

The National Coal Board.

How did our experience of change & obsolescence at The Coal Board influence our business career?

There were big differences between life at the NCB and Kewill. The NCB faced massive problems of bureaucratic sclerosis and business uncertainties but fortunately we did not have to worry about them. We were a small cog in a big wheel and the worse thing that could happen would be finding a job elsewhere, which we did!

Kewill was quite different. Everything mattered, profit had to be made or the Company would cease to exist. Surpluses had to be created to invest in the future. Salary sacrifices had to be made. All this was pretty stressful and only bearable because of personal belief in the business and potential rewards. Risk and uncertainty were constant companions but we learned to handle them by not spending more than we earned. Big enterprises definitely had difficulty in impressing this concept on employees or indeed citizens. This was quite different from Sporting Index or Betfair where risk should be patently obvious and was in truth inexorable - mind you it maybe took me forty years to accept this. Gambling was entertainment and no way to get rich.

The National Coal Board and learning about dreary obsolescence and the folly of tying up talent in subsidised industries benefitted nobody ... certainly not the skilled experienced folk with lots to offer who wished for 'real' jobs and retraining not charity. 

British Oxygen Company.

Can science solve business problems?

Operational research. Non linear equations don't have solutions?

IRS Consultants

Kevin supervising, Bill selling, John doing.

KO was ... WL was ... they were different ... and JCF learned to do.  

Kewill Systems LogoKewill SystemsKewill & The Case for Business 

What motivated you to start your own business?

independence from stifling bureaucracy or rather

opportunity for betterment?

Did the reality of the excitement & fear of the business cycle lead to

fear of failure or rather

opportunity for creative destruction?

Kewill shares were to peak at £33 in March 2000.

Kewill Systems seemed like a good bet at that time & place.

Kewill SystemsTwo initiatives that we remembered were fun!

We were perplexed. How do we concoct a beer drinking story of fun around the Kewill Systems brochures which were made available around 1974 for Nigerian agents with optimism but without a clue?

Around that time we were sweating & lost under the soap pans in Apapa, paying our dues and hoping for glory.

We were still mavericks and prepared to try anything but high tech software was not top of the priority list and the teeming millions around Lagos who had no electricity and certainly no computers.

And to cap the lot everybody knew that stocks were for thieving not for 'control'.
We failed miserably but nobody was surprised it was just a bit of fun.

However Max was resilient had had another scheme to pursue and this one was not half baked.

Kewill MicrossWhat could be better than a Government grant 'scheme', the 'free' survey. £2,000 grant for a survey to see how computers could help your business. Good sales talk; folk loved to feel they were getting a bargain. But outrageous time consuming form filling and freebies encourage bribery & corruption. Enter the sharks and distortions of the good product.

What happens when the subsidy was withdrawn?

Tax distorted investment. Why tax businesses at all?

People pay tax in the end because businesses have to balance their balance sheets and don't survive if they don't pay their bills?

Acquisitions, turnarounds or shut downs.

Were the directors share sales in October 1996 at £6 premature or perspicacious?

Business beckoned, the economy was growing at 3% pa compound as the knowledge base grew.

Nobody could stop folk learning more and creating more opportunities.

The task was to select the best bet profitable project and learn from mistakes.

Innovation

Bog standard stock control moved on to Tracer. Was Tracer special?

Competitive Advantage? Was software patentable? Oracle weren't daft, they could write similar software, Tracer had no competitive advantage?   

Fast technology change, innovation funnels, patents, licensing, first to market, commoditisation,

Manufacturing & Services. Trade in ideas.

Comparative advantage. Build cars in Detroit or grow cars in Iowa?

Directors Share SalesBankruptcy

Cut your losses, free up resources for profitable projects?

Who were these guys ... 'messiahs'?

Geoffrey Finlay -- Paul Nicholls 

In January 2016 as technology roared ahead spear headed by the innovative AI of the remarkable 'Alexa'. Amazon offered some fun with 'Webminster' advertising slogan. Labour MP Hodge was not amused, taxes were the solution not innovation -

'Amazon should use its profits to pay taxes, not pay for an advertising campaign designed to give them the cloak of respectability they do not deserve' ...

heigh ho ... 

Who was making the case for competitive commercial business?

john p

 

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