book review final 1

7/31/2019 Book Review Final 1

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1

MIND OVER MATTER

WHY INTELLECTUAL CAPITAL IS THE

CHIEF SOURCE OF WEALTH

By RONALD J. BAKER

Book Reviewed by :

Imran Aziz Fozia Iqbal Badar ul Islam Syed Ali Azfer Fareeha Nisar

Afaq Haider

Submitted to :

Dr. Bakhtiar Ali


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Mind Over MatterRonald J. Baker

Chapter 1-2

Imran Aziz


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Introduction

Encompasses the triumph of human spirit,

imagination, and creativity.

Knowledge economy.Challenged the physical fallacy.

Intellectual capital- The key to success in

the twenty-first century.


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Mind Over Materialism

Materialist Fallacy

Land, Gold, Oil, Land, Raw materials.

Israel per capita GDP $17,220

Saudi Arabia has $8,870 Taiwan, Hong Kong, Singapore have no natural

resource yet have standards of living than Russia& Indonesia.

There is no such thing as a natural resource,except for the mind of man.

An Inquiry into the Nature and Causes of the Wealth

of Nations (Adam Smith)


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Smith exposed the mercantile system fallacy

Humans can produce more goods than they

can consume. Specialization & Division of Labor. e.g. Pin

Factory

Money is not wealth. Real wealth- Goods or services money can

buy.

e.g. India


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Do Trade Deficits Diminish Wealth?

Free Trade Zone in America

It can work internationallyThomas Sowell

Germany and France have had international

trade surplusesTheir unemployment rates were in double

digits.


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Mind Over Marxism

Karl Marx- Labor was a source of all values.

Adam Smith proposed Classical Model of

Competition .Freedom

Self- Interest

Competition


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Mind Over Marxism

Cost of producing commodities.

Cost of capital

EquipmentRent

Risk

All of the above factors determines theprice of the commodity.


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KARL MARX, FALSE PROPHET

Value of commodity is determined by

quantity of labor.

Not applicable at land and labor.

e.g. China & India

Did not take into account the law of

diminishing marginal utility.


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THE MARGINALIST REVOLUTION

Three economists developed Theory ofMarginalism

William Stanley Jevons Great Britain

Leon Walras France

Carl Menger- Austria

The value of goods arises from their

relationship to our needs.

Value is like beauty


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Mengers Law of Imputation

Lower order goods

Higher order goods

Demand for higher order goods is derivedfrom lower order goods.

e.g. Tobacco

Combination of Marginalism & Law ofImputation

Explains human behaviour


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12

MIND OVER MATTER

Chapter 3 - The Economy in Mind

Chapter 4 - A Flawed TheoryThe Old

Business Equation

Chapter 5 - A Better TheoryThe New

Business Equation


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13

In The Wealth of Nations, Adam Smith

wrote of four stages in society:

The age of hunters

The age of shepherds The agrarian age

The age of commerce


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14

The transition from the agrarian age to theIndustrial Age is dated from the late eighteenthto the early nineteenth century.

French used the term in 1820s.

Marx used the term in 1800s


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15

The term service worker was coined around1920.

The terms knowledge industries, knowledgework and knowledge worker were coinedaround 1961.


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Dr. W. Edwards Deming used to say,

Without theory, experience has no meaning.No one has questions to ask. Hence withouttheory, there is no learning. Theory leads toprediction. Without prediction, experience and

examples teach nothing.


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Kant said,

Concepts without perceptions are empty;perceptions without concepts are blind.


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IC has three categories originally proposed byKarl-Erik Sveiby, a leading thinker in knowledgetheory, in 1989:

Human capital

Structural capital

Social capital


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Negative intellectual capital


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ANALYZING THE PREDOMINANT

BUSINESS EQUATION

Revenue = Capacity Efficiency Cost-PlusPrice


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New Business Equation

Profitability = Intellectual Capital Price

Effectiveness


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MIND OVER MATTER

Chapter 6 - The Scarcest Resource of All

Chapter 7 Ideas Have Consequences


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THE SCARCEST RESOURCE OF ALL

Information is not knowledge

Specific knowledge is more important the generalexpertise

Local knowledge---Tacit knowledge; knowledgespecific to time, place, and circumstances


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Information Wants to be Free,

Knowledge isnt

People develop shortcuts to decipher all of theinformation that bombards them on a daily basisknown as heuristicsand allow us to make moreeffective choices

Data. Factual information (as measurements orstatistics) used as a basis for reasoning, discussion, orcalculation. There is no judgment, interpretation,context, or basis for action. It knows nothing of its own

importance or irrelevance


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Cont

Information. Root in Latin is formare, meaning toshape. Data endowed with relevance and purpose. Ithas to have a sender and a receiver, and it is thereceiver, not the sender, who decides if the message

is information or not. We add value to information invarious ways: Contextualized; Categorized;Calculated; Corrected; Condensed


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Cont

Knowledge. The fact or condition of knowingsomething with familiarity gained through experienceor association. To turn information into knowledge weneed: Comparison; Consequences; Connections;

Conversation Knowledge by itself is static, but knowingis dynamic


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Ideas Have Consequences

knowledge is far more scarce than ideas

economic growth revolves around the human mindand its capacity for invention, discovery, and thetransformation of physical objects and ideas into

valuable goods and services


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New Growth Theory

It is not just knowledge that makes countries rich orpoor, but how that knowledge is used

innovation rests on individuals ability to create andtest ideas, thereby creating new knowledge and

wealth (Paul Romer)


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14 Meta-Inventions 800 BC- 1950

Artistic realism Linear perspective Artistic abstraction

Polyphony Drama The novel Meditation

Logic Ethics Arabic numerals The mathematical proof The calibration of

uncertainty The secular observation of

nature

The scientific method Paul Romers new factors of productionpeople,

ideas, and thingsand explore the characteristics ofwhat is known as intellectual capital.


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MIND OVER MATTER

Chapter 8 - The Characteristics of

Intellectual Capital

Chapter 9 Human Capitalism


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Chapter 8:

The Characteristics of Intellectual Capital

In knowledge economy, thousands of invisible factoriesworking on turning ideas into knowledge

Merv Griffin has made close to $70 million to $80 millionin royalties from the Jeopardy!theme song, which hewrote in less than a minute.

One of Japans largest export industries, reaching anastounding $80 billion in 2004, is animation.

Not even two years old, with no profits, YouTube waspurchased by Google for $1.65 billion.

Disneys Snow Whitevideo release generated $800million in revenue

The knowledge economy has been a gradual evolution,an indication to the importance of mind over matter, aswell as a further refutation of the physical fallacy


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Knowledge is a Verb

Knowledge has always been at the heart of economicdevelopment, recognized by economist AlfredMarshall (18421924)

Knowledge is our most powerful engine ofproduction; it enables us to subdue nature and force

her to satisfy our wants (Warsh 2006:82). Adam Smith recognized the importance of knowledge

attributed the wealth of nations to the division andspecialization of labor

Knowledge is the acquired and useful abilities of all

the inhabitants or members of the society (ORourke2007: 7475).

Carl Menger believed that knowledge was ultimatelywhat made nations prosperous.


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Knowledge is a Verb

Peter Drucker also coined the term knowledge worker,distinguished among five types of knowledge in hisextensive study1. Practical knowledge

a. Professionalb. Businessc. Workmansd. Politicale. Household

f. Other practical2. Intellectual knowledge3. Small-talk and pastime knowledge4. Spiritual knowledge5. Unwanted knowledge


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Knowledge is a Verb

Knowledge has no finite capacity, since it can be usedsimultaneously without diminishing

The knowledge is also cumulativeand uncontrollable,since the buyer can add to it, improve it, and createmore of it leads to invention leaving the origin of

idea. the buyer is unable to judge the value of knowledge

until he or she has had a chance to use it Knowledge is like the dark matter of the cosmoswe

know it is out there, but we cannot see, touch, or

measure it. Intellectual property such as patents, copyrights,

trademarks, databases, are recorded on a firmsfinancial statements at cost, which does not at allreflect their value-creating capacity


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Intellectual Capital

Intellectual capital as knowledge that can beconverted into profits, which is an adequatedefinition for our purposes since it considersknowledge as a verb (Lev 2001:155)

The goal of any firm is to leverage applicableknowledge and use it to create new knowledge

In turn, this becomes the firms IC, the ultimatefulcrum for the company of the future


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Chapter 9:

Human Capitalism

U.S. Steel entrepreneur Andrew Carnegie statedTake away my people but leave my factories, andsoon grass will grow on factory floors. Take away myfactories but leave my people, and soon we will have

a new and better factory. The economists weresaying that accountants should

treat investments in people the same as they treatinvestments in things


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The More Human the Capital, the Less

We Can Measure It

The most valuable of all capital is that invested in humanbeings - Alfred Marshall, Principles of Economics, 1890

Economist Fritz Machlup, in his study of knowledge,published in 1962, distinguished among eight types ofeducation:

Education in the home

Education in school

Training on the job

Instruction in church

Training in the armed forces Education over television

Self-education

Learning from experience


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We Can Measure It

Edison, the Wright Brothers, Frank Lloyd Wright andMies van der Rohe, and the list of entrepreneurs wholaunched successful enterprises like Michael Dell, BillGates, Steve Jobs, and Steve Wozniak, among many

others with no, or very little, college education More schooling is not automatically more human

capital

Human capital is knowledge, experience, judgment,

leadership, problem solving ability, motivation, abilityto adapt, and wisdom put to use to serve others, theessential expression of wealth.


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We Can Measure It

To complicate matters, converting that brain powerinto useful intellectual capital that organizations canuse and reuse requires us to understand thedifference between tacit and explicit knowledge

Tacit knowledge tends to be dynamic, while explicitknowledge is static; both are required for innovationand leverage to take place

Like any capital investor, human capital will go whereit can earn a decent economic return and is well

treated


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We Know More Than We Can Tell

Distinction between tacit and explicit knowledge

Converting tacit knowledge to explicit knowledge isone of the major roles of a chief knowledge officer(CKO)

For us knowledge management is critical. Its one ofour four core processessell work, do work, managepeople, and manage knowledge

Tacit knowledge is not necessarily always superior


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Four different modes of knowledge conversion:

From tacit knowledge to tacit knowledge, whichwe call socialization;

From tacit knowledge to explicit knowledge, orexternalization;

From explicit knowledge to explicit knowledge, orcombination; and

From explicit knowledge to tacit knowledge, orinternalization


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Managing explicit knowledge is certainly easier thanmanaging tacit knowledge

Explicit knowledge can be managed by assemble it;validate it; standardize and simplify it; keep it up to date;

leverage it; make sure everyone who needs it knows thatit exists, and how to use it

Tacit knowledge cant be managed as it is in the mind ofthe worker which neither be explored


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Karl Marxs Revenge

Human capital determines the performance capacityof any organization

People are not assetsand will not be replaced bycomputers no matter how far advanced artificial

intelligence becomes Knowledge work is nonlinear

We must stop thinking in terms of command-and-control management and operational efficiencymetrics.

Knowledge workers need to focus on effectivenessand deserve better than these other outdated modesof thinking


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Karl Marxs Revenge

Rabbi Daniel Lapin asks:Why do people raise theirfood to their mouths instead of lowering their mouthsto the plate?

Wealth creation is inherently spiritual, not material, in

the sense that it cannot simply be measured usingany scientific device.


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MIND OVER MATTER

Presenter :Fareeha Nisar

Chapter 10

Chapter 11

Chapter 12

Chapter 13


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Knowledge workers

Intrinsic reward Opportunity to grow

Recognize accomplishments Economic rewards


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Top 10 reasons to work at google

Lend a helping hand

Life is beautiful

Appreciation is the best motivation

Work and play are not mutually exclusive We love our employees and we want them to know it

Innovation is our blood line

Good company every where you look

Uniting the word ,one user at a time Boldly go where no one has gone before

Free lunch


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Developing And Inspiring Knowledge

Workers

Management revolution Productivity

Knowledge worker effectiveness frame work

Six major factors effecting on knowledge worker

productivity1. Task

2. Autonomy

3. Innovation

4. Learning5. productivity

6. Asset than cost


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Job categories

1. Transformational

2. Transactional

3. Tacit


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Tools for developing and inspiring

knowledge workers

knowledge organizations

Personality testing

Performance appraisals

Education Work life balance

Negative human capital


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Structural capital

Organization structure

Recruitment and remuneration policies

Management information system

Intellectual property Performance management system

Management contracts

Supplier contracts


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Methods for knowledge transfer

Story telling

Mentoring ,coaching, shadowing

Communities of practice

After action reviews


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Knowledge lesson from US

1. Us army

2. Toyota production system

3. Microsoft


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Social capital

Accounting for tastes

Element of social capital

1. Customers2. Brands

3. Networks

4. Suppliers and vendors

5. Shareholders/stakeholders6. Joint venture partners and

alliances

7. Industry association

8. Alumni

9. Unions

10. Corporate universities

11. Mass collaboration12. Cultural ,moral and

ethical capital


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Presenting By

Muhammad Afaq Haider


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Knowledge versus Beliefs

In everyday life a person with a clear-cut life goal,which he strives to reach in all circumstances, willalways be superior to others who are aimless.

It is imperative to bear in mind that man is guided farmore by his beliefs than his knowledge.

You are best understood and appraised by others onthe basis of the things you believe rather than on the

basis of the things you know.

Faith is key


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DEBITS DONT EQUAL


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DEBITS DONT EQUAL

CREDITS The theory gets more and more complex to

accountfor its lack of explanatory power.

In all fairness to accounting, it never was meant

to predict value prospectively, only to recordtransactions retroactively.

The principles of accounting also do not

comprise a theory; rather, they are simply a setof guidelines, rules, and procedures formeasuring financial items


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FINANCIAL MODEL REFORM

Financial statement accounting today is wherephysics was a century ago.

Heavily regulated industries are rarely hotbeds ofinnovation.

Another innovative tool being used by somecompanies are so called information markets.


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Summary and Conclusions

If we constantly reinvigorate, revitalize, and

challenge our worldviews, there is no limit towhat we can achieve, as long as we do not

lose faith in ourselves


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PURPOSE

It has often been observed that if you defineyour happiness by your level of success, youcan never achieve enough success to makeyou happy.

the great humbugs of life are three: Fame,Wealth and Power.

When one works simply to make money, thework is rarely joyful or meaningful.

VOCATION WHAT IS CALLING


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VOCATION: WHAT IS CALLING

YOU?

The bottom line of a calling is measured bypain, learning, and grace.

Vocation literally calls you to contribute yourtalent, energy, passion, enthusiasm, anddesire to the work you love and believe in.

Business is all about purpose, those internalbeliefs and worldviews that define who weare and what we want to accomplish.

CONTINUOUSLY DEVELOP YOUR


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CONTINUOUSLY DEVELOP YOUR

INTELLECTUAL CAPITAL

The illiterate of the 21st century will not bethose who cannot read and write, but thosewho cannot learn, unlearn, and relearn.

The most skilled are constant students, willingto look at the world in absolute wonder andthink about why things are the way they are.

IC is more than your human and structuralcapital.


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book review final 1

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