Hi Guys, When I saw there was a posting on a newly published Human Capital Handbook I thought "Wow! The world is paying attention after all!" I was thinking, of course, that the post referred to: The…

Hi Guys, When I saw there was a posting on a newly published Human Capital Handbook I thought "Wow! The world is paying attention after all!" I was thinking, of course, that the post referred to:

The Oxford Handbook of Human Capital

Edited by Alan Burton-Jones and J.-C. Spender
Foreword by Gary Becker
720 pages | Numerous tables and figures | 246x171mm
978-0-19-953216-2 | Hardback | 10 February 2011

Ah well. But in spite of discovering that you meant something else, I'm glad to find out about YOUR handbook - which I look forward to looking through.

Regards, JCS


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Comment by Stuart Shaw on May 1, 2011 at 9:18am

Hi JC,


Of course I'd be delighted to have a copy. As your chapter covers his life's work, it will be the perfect way for me to get a grip on his thinking. Are you emailing it? My address: stuart@hubcapdigital.com 


Please don't, with your deadline, be distracted by my musings - unless the distraction actually helps (which it does sometimes for me, oddly just as I'm nearing the end of a piece). 


Looking forward to it. 


Best, Stuart

Comment by JC Spender on May 1, 2011 at 9:00am

Hi Stuart,


This looks like tremendous stuff!  Thanks.


On Simon - with whom I'm struggling and who I hope to have on the mat by the end of today - I'm dealing with his whole life and oeuvre.  I'm trying to pin him down.


For several years I have been trying to write the book that presents my 'agentic theory of organizing' and the outline has always had a chapter titled 'Did Simon say it all?'  I did not know what I was going to say in this chapter.  Then I had this opportunity to do a chapter on Simon's life and work so I set to to really get a fix on him.


It has turned out to be remarkable productive - rather complicated of course.  Gradually I got a sense of this chap.  So the chapter is titled "Herbert Alexander Simon: Philosopher of the Organizational Life-World".  It covers his entire life.


If you want I'll let you have a copy when I get it done.


Regards, JC

Comment by Stuart Shaw on May 1, 2011 at 8:46am


You will have to reply only when you’re very busy!  I mean that sincerely, and apologise for the tumbleweed of my absence – family over for Easter, giving me the glare every time I dared for the laptop, work then squeezed into 3 days, which of course has over spilled into this second bank holiday weekend...I’ll try to offer some understanding and ideas here on your presuppositions as best I can.

Before I do though, Herbert Simon, are you publishing a study of his life/work or just focusing on the early Proverbs of Administration stuff (I’m reading this for the first time: http://stevereads.com/papers_to_read/the_proverbs_of_administration...). 

Thank you, yes, I visited the ‘humanizing the firm’ page at the IESE site. I’d come across it before, and your 2008 conference paper, What Man in Man-agement? As you say, RM was a perhaps necessary MoI (in the face of nihilism) but wrong step. Wrong in the unbalanced, string theory eggs and baskets sense (wasn’t it Nietzsche who forewarned that a blind faith in science and rationalism was as dangerous as the previous faith in religion?) As RM’s face fades like Foucault’s smiley doodle in the sand, alternatives need to be urgently thought through....Humanizing the firm then is an effort in breaking out of the crystal palace and facing up to our true (rational+irrational) artistic nature in the face of time and uncertainty (which itself bounds rationality and causes the need for the artistic flowering and passing of the firm itself as a kind of more natural/organic phenomenon?) The fear for most here might be letting go of the utopian delusion of scientific TOEs. 

I must add here before I offer some reflections to your presuppositions, that there are parallels in your thinking of Agentic man in, of all places, marketing. I don’t know if you read Seth Godin (why would you?), but he and many others are – I think - talking the language of Agentic man, and certainly with him in spirit. Perhaps this is natural, in that these folk are living the knowledge economy dream (an economy which I think is still over stated) but in this context it matters not as Godin is about identifying the creative uncertainty conquering process in all its guises and imploring leaders and business to redefine themselves in new ways to unleash it (meaning-giving work spaces that are also being called for by business thinkers like Ulrich): Only do work that matters, your boss works for you, the work is personal, I own the means of production, I am an artist - just a few Godin lines from his recent Linchpin Manifesto. Try this random post for an insight into his perspective: http://sethgodin.typepad.com/seths_blog/2011/04/the-opportunity.html Not for everyone, but you might like it. 

Coming – finally you might well be sighing - to your presuppositions, my initial thoughts (forgive them in advance if they sound as reaching as they might be):

a) It is about real people... There is an appetite and expectation in the connected world for more than just transparency, access, and a fair deal. There is also, perhaps ironically given how technology isolates as much as it binds, an appetite for really changing things that comes when one idea can multiply in seconds. This, tied into our natural human empathy for others and the environment, is an unstoppable force. The danger, perhaps, is that the pace of change might be too much for some, who will want to restrict or use this technology to coerce that change or impose new panopticons. 


b)...you cannot avoid presupposing a MoI - This I think is at the heart of the new firm project (along with Knightian uncertainty). You can never know all the facts for a fully rational decision, you never know the future, which bounds all rational decision making and invites purely subjective judgement (question then is how is this creative instinct managed – or is the old notion of management no longer applicable, and any talk of it a residual effect of RM thinking?) If this is true, then it naturally begs the question of why base all goals and models and management theories on RM as your MoI. Answer, we have the whole Enlightenment scientific project to thank. But there is so much anti-RM thinking going on for example in behavioural finance and occupational psychology and marketing (as mentioned)


c)...non-mainstream economists....This aggregate journal/blog is full http://rwer.wordpress.com/ of them and interestingly the only other place where I heard mention of Knightian uncertainty as a vital missing link. I need to find out more about the Austrians. (PS This a good intro - http://mises.org/journals/scholar/wood.pdf ?)


d)..so long as we don’t need creativity....Again, I think this is powerful and fits right into a lot of current marketing thinking as well as the thinking of people like Clay Shirky. The connected world is fundamentally creative (and destructive). It sniffs out and addresses knowledge absences and avoids – vocally – inauthenticity.


e) ..would have these folks arms and legs off in a flash....I need more time here. Starting with Edith, then Grant? 


f) Managing the creativity of others....A new MoI , facing up to fundamental uncertainty,  recognising the transience of IC’s value, more open and connected, more free to be creative and authentic (more free also to manage themselves, or see management as servile and freeing rather than authoritative and constraining), leading naturally to a revision of the notion of scientifically supportable manageable resource theory, and with that a theory of management based on leveraging tribal (Godin phrase) methods to ally emotional work to an emotive, meaningful vision...text books need a rewrite...not just management, but economics, and let’s bring back some philosophy...


I would like to continue this, to me highly valuable and instructive correspondence, albeit conscious you have books to write and articles to hone, and I have further reading.  A lot of it too. 

I’d like to see how these presuppositions inspire and coalesce into shaping a new theory of the firm, particularly as such a theory would be timely in knitting together or shedding light on possible solutions to the momentous changes you mention. 


I am not a CSR expert, but have insights into the causes of the financial meltdown, particularly from the inside. I also share significant vested interest in fleshing out and deconstructing the core philosophical and psychological assumptions/approaches behind much of current business theory thinking.  


In short, I’d like to help share the ideas (yours) being discussed here too, both because the process of doing so will further help me get up to speed, so to speak, but also because, although modest, I do have the means to help share them. If I can get so much from this, so will others.  And if some of them read more, fine. But if some free thinking hungry PhD graduates gravitate your way, even better. I can’t promise this, but I can lend a shoulder.


In that spirit, do you think we (I mean you of course) could fashion some form of a statement of first principles, even a manifesto or rallying cry out of this - Humanizing the Firm: A Manifesto? Doesn’t have to be long (most aren’t), merely a concise distillation or what’s fundamentally wrong with current thinking that you’ve outlined here so richly (a myth debunking why we’re here – and getting nowhere fast), together with pointers at future areas of exploration (where we need to look – and what value that would have). 


This might sound preposterous, but knowing you’re schedule, would you – with guidance, naturally – permit me to go through this entire correspondence again, picking up on the various associated documents, offer a short draft? I have a lot of experience in the Web 2.0 marketing manifesto world (which simply means taking great ideas and making them accessible, viral and social), and above all without wanting to ‘spin’ your ideas too heavily, together we might fashion a version which could serve our twin purposes?

Comment by JC Spender on April 21, 2011 at 7:18pm

I have missed explaining and/or illustrating how the concept of IC turns on the MoI adopted.  Clearly most of our field takes a positivist stance and presumes knowledge is some kind of representation of 'reality out there'.  In this epistemological framework it is not obvious what IC would mean - other than 'knowledge' somewhere in the process of being habilitated and inducted into the 'body of accepted scientific knowledge' - such as unsupported hypotheses, etc.


The MoI I have suggested implies some connections between explicit knowledge and the rational aspects of our thinking and some other kinds of connection between implicit/tacit knowledge and the judgment dimensions of our activity.  I say activity rather than thinking because Polanyi's notion of tacit knowledge seems not necessarily confined to the mental.  Thus a bike-rider's or a ballet dancer's knowledge may well be embodied, as Frank Blackler has suggested.


My critique of the TC+IC approach is that the epistemological presuppositions are generally unclear.  If the writer is hewing to a positivist line then IC is no more than a subset of TC - poorly articulated perhaps, or untested empirically, or whatever other states of knowledge are admitted.


If we move towards admitting judgement, then IC might be associated with that.

Comment by JC Spender on April 21, 2011 at 6:10pm

Hi Stuart,


Thanks for these sympathetic musings.  I shall not made a full reply because I have to address some other publishing deadlines and do some thinking - not necessarily the same thing of course.

One is to make some final revisions in my lengthy examination of Herbert Simon's life and oeuvre - not only one of the few giants in our field and the person who gave us 'bounded rationality', but also one whose project to develop a science of administration that could help us build organizations that would be rational even though their components (human beings) could not be is one of the most significant ever conceived.  


The lessons to be learned from his heroic failure seem to have been almost completely ignored - with major implications for our field and our sense of what management education is or could be about.


Then I have to finalize another, even more difficult, paper around the IESE project on 'humanizing the firm'.  Check their website (iese.edu) if you think this project and CSR etc. interesting.


My presuppositions have now become pretty much distilled over the 30+ years that I have on this project.  Here are a few.  Yes, they suggest a new theory of the firm, and yes, I would surely appreciate any help with gaining wider exposure.  Fame would be OK, but my real hope would be to find younger others (especially PhD students) who can find something more satisfying than the current BSchool agenda (see my published critiques) as well as both helping my project with their horsepower, but more importantly, carrying the project forward, since my time is surely running out.


While what I have in mind is a new theory of the firm in the neoclassical or OT sense it is more importantly a view of the firm that might shed some different light onto the matters of business ethics, CSR, the recent meltdown, the future for our kind of democratic capitalist system, globalization, and so on.


(a) It is about people (real people with ethical concerns and commitments, like you and me) rejecting the current theorists' tendency to invoke non-people entities such as 'systems' with their own idiosyncratic characteristics.  This switch was HARD for me - after all I was a control-systems and nuclear power plant engineer who came into the academic game to study systems dynamics, Forrester-style.


(b) When it comes to theorizing/analyzing people you cannot avoid presupposing a model of the individual (MoI).  As Simon noted, nothing is more strategic to our research strategy than the choice of MoI.  When it comes to the study of managing, Rational Man (RM) is not an appropriate MoI - unless your project is a Nobel in neoclassical economics.  In my Industry Recipes (1989) I adopted John Locke's MoI - rationality + judgment. It follows that, for me, managing implies managing both the rationality AND the judgement of others.  This was Simon's MoI too, though there are significant differences between him and me.  But we are agreed that rationality must be defined as bounded; were it not, judgment would be meaningless, nothing other than irrationality.  Absent a bound there is neither need nor room for any complement to rationality.


(c) RM is an inappropriate model for theorizing the managerial condition for a whole raft of reason, especially because the real world's ever-present Knightian uncertainty stops rational reasoning in its tracks.  The non-mainstream economist's way of dealing with Knightian uncertainty (the mainstream ignores it) is to consider how judgment might be managed.  We might look to the Austrians, such as Shackle and Lachmann, but that is not the only place.


(d) Judgment cannot be managed in the way rationality is managed - by prescribing others' decision-making.  On the contrary, legions of practicing managers know it is about shaping a work-context into which those managed are able to project their own 'human agency'.  Hence the connection to Heidegger's sense of 'thrown-ness'.  His notion of 'authenticity' is that, in this projection process, it is about you really being you, not about you pretending to be someone else. In the latter situation you are being 'inauthentic'.

There's nothing especially important about authenticity, of course, so long as we don't value or need people's creativity.  The point being that there is no tenable explanation for the existence (or more properly, the persistence) of firms unless one admits Knightian uncertainty and the process of addressing such knowledge absences creatively (throwing again).  The Heideggerian intuition is that the inauthentic have no creativity.


(e) Those theorizing this way have to get around the conventional approaches that deny real assets' problematicity.  The RBV, for instance, which turns on the unproblematic though heterogeneous nature of resources - and thereby fails to provide a theory of the firm (and/or its management) on no less than two counts.  First it offers no theory of the firm that indicates how VRIN resources might logically be acquired and transformed into SCA (barney's strategic-factor market argument). Second it pays no attention to the matter of integrating multiple non-problematic resources - the point which Rob Grant has been hammering for decades.  


Of course the un-determinedness of the process of integration offers one possibility of Knightian uncertainty, whose resolution might yield profit.  This could be made into a theory of the firm which, in turn, would indicate that management is about resource integration not resource allocation - which is what we teach in BSchool.


Alas the bulk of people who write about the RBV - to what end I am not sure, given they ignore Knightian uncertainty - misguidedly (and insultingly) cite Penrose as some sort of source.  Alas I knew Edith, and were she alive today she would have these folks' arms and legs off in a flash - something for which she was justly famous and deeply revered.  The whole point of her thought is to problematize resources and suggest that their value is always constrained by the 'management team's' creativity.  The welder's argon-shielded-arc kit is worthless if s/he doesn't know how to drive it.


(f) If judgment and creativity are to be the core of an alternative post-Knight or post-Simon 'new' theory of the firm, it must spin around managing them (note Simon was an undergraduate in the U Chicago Economics Department when Knight was its leading force and while Simon never conceded any link between bounded rationality and Knightian uncertainty the family resemblance is unmistakable.)


Managing the creativity of others is something that has been addressed for 2000 years or so in art departments.  I was very excited to unearth a paper by Knight that I have never seen cited, concluding management is an art rather than a science, and Knight knew what he was talking about when it came to art.


There have been management schools throughout the last 3000 years - no, that is not a typo. Some of the earliest schools were established by Alexander the Great to train administrators for his new Empire.  Until the 19th century the core of the curriculum embraced rhetoric - the study of the use of words to persuade others to act towards the rhetor's ends.  Then rhetoric disappeared to be replaced by 'science' and the presumption that everything interesting about the human condition could be explained in terms of causal analysis.


In summary:


There is no viable theory of the firm that can inform entrepreneurship, Penrosian thought, endogenous growth theory, strategizing, and so forth.  As soon as we take Simon's arguments seriously we are into agency as the core of the MoI.  Management is then about the use of language and other means of non-rational persuasion to harness the agency of others to her/his vision.  And so on.


Regards, JC

Comment by Stuart Shaw on April 21, 2011 at 2:18pm


Perhaps it was I admitting to catching up rather than you falling short! 

Thankfully I did study (some) Heidegger. Actually, I recall the first lecture with the faculty’s Chair, Tim O Hagan, a fine Rousseau scholar as it happens (http://www.uea.ac.uk/~j520/ROUSSEAUBOOK.htm)

There we were, first week, above average sized class, some of whom, like I, had already bought a rather extortionately over priced copy of Being and Time, and the first thing he said was, big smile:


 “This is the only class where even I can’t claim to have fully understood everything the author wrote. As such it is the only class where you have a week’s grace to dive in and out of its icy bath and if you feel like never venturing back in switch to Mill with my full blessing.”


Needless to say, a week later we moved to a smaller room (his office as it happens)...


Anyway, back to our conversation.  I confess I think I’m with you. In philosophical spirit, if not in detail, as I would like to explore the alternative wood-path you’re alluding to, the post-positivist non resource based existential route into and out of a mediating-giving IC that no doubt must now be fashioned from a new language (if ‘resource’ is deeply misleading, perhaps ‘capital’ too – although perhaps the first order of business here is to convince the world that they’re looking in the right place but with the wrong glasses)?  In that vein, I will check out SECI – any misunderstandings you can suggest I avoid?  I’d also like to explore the new theory of the firm in light of these insights (a new theory that must also be grounded not just on a revaluation of IC but with it on a new economics?)


All of which made me think, after reading your lengthy response, and walking the dogs, which is when I think best, unless I encounter someone, that this new thinking, and its impact on the wider project, needs greater exposure (something I can offer, in a limited but committed way on the HC network I run, if that in any way helps).


For example, on the walk, I was struck with the parallel here with the IC accounting project and physics. I don’t know if the whole 11 dimensional M-theory stuff floats your boat, but I remember reading Smolin’s excellent The Trouble with Physics (http://www.amazon.com/Trouble-Physics-String-Theory-Science/dp/0618...) a long while ago. Here he said that the trouble with physics (and the reason for its perilous stalling on the long road to yet another – as you rightly argue impossible grand unifying TOE) – is quite simply that everyone involved (the whole grant giving academic system as well as the community of physicists – he admitted to falling for the allure of the big stringy TOE as much as the rest) not only assumed that this project was possible (hence the allure), but threw all their collective weight and ideas behind one theory. Which in turn became, as all theories do, a million competing theories. All of them unprovable and untestable. Which itself kept things ticking along nicely. Until some paused, like he did, and began to look back and think, had they missed a trick here (in Smolin’s case, he believed - ironically, given our conversation - that time was still not properly understood).  The trouble with physics, for Smolin, was that by then (now) it was too late – all the teachers and all the journals were incapable of changing- they couldn’t unlearn even if they wanted to.


I’m not saying this parallel with your idea here might stick, but I suspect by virtue of you readily admitting that this new approach to IC critically undermines the entire (current and long established) IC+TC tied up in string project, it might. In which case I’d very much like to – knowing full well you have better things to do – explore this further, particularly with a view to seeing where this leaves my own project which is to convince the largely corrupt financial system that a better valuation of a firm is better for the interests of them, business, and society as a whole.  


Which sadly is all I can add for now. A deluge of family arriving for Easter as I write this. If I don't hear from you before, I hope you have a good break too.

Comment by JC Spender on April 20, 2011 at 10:34am

No problem Stuart.


I guess this gives me one piece of information.  Compared to much of my writing, I hoped this piece would come across as blindingly simple!  Alas, another falling short!


I hoped the widely-accepted idea of IC as an 'intangible' resource/s that must, these days, be added to 'tangible' resources in management's thinking, would contrast clearly with my notion of IC as 'mediating' all TC, just as the welder's skill with the welding torch (intangible) mediates the value of the welding equipment (tangible).


The paper is an exploration of why IC cannot be treated as a resource of the same type as TC - as it must be if they are to be 'added' or 'summed' - and the attempt to explain IC this way is a significant error, not only because it doesn't (and cannot) work, but more importantly because it obscures a more appropriate way of thinking about IC.  While I have all kinds of problems with Nonaka & Takeuchi's work (I know and respect them both), they are exploring this more appropriate way of thinking in the SECI model (widely misunderstood, of course).  But this attempt is what makes their work (a) so important and interesting, and (b) so appealing to practicing managers. 


The underpinnings of this argument are, of course, not as everyday as my metaphor of the welder suggests, but are buried in epistemology - especially the kinds of epistemology that lie beyond the reach of the 'positivist' approach that implies that all knowledge is a representation of a 'reality out there'.


IC is 'post-positivist' - as Lord Kelvin's remarks about something being real only when you can measure it.  Thus IC points to the distinction between knowing something (measurably) as an object - a welding kit - and knowing how to engage it in one's own projects (immeseasurable).  


So long as we are not able to understand everything about the world - in a 'theory of everything' sense - we have to rely on our experience as a major source of our knowledge about to we should proceed through the world.  Another way of expressing this is that we cannot ever completely evacuate our sense of our own experience by explaining it as an instance of some general law/s.   The implication is that well-reasoned action in the world calls for some element of subjectivity to 'complement' or mediate our 'objective knowledge of the world.


For anyone interested Heidegger's distinction between ready-at-hand and ready-to-hand is what I am drawing on here.


So, going back to your earlier comments, the IC as supplement project is fatally flawed.  Correct.

An 'insider' or 'experiential' - more properly an 'existential' - approach MAY be one in which the distinction between TC and IC would be useful and informative.  Especially because the firm itself is a phenomenon that stands on the Heideggerian (or Knightian) distinction distinction between what can be known 'objectively' and what can only be known 'subjectively'.  The first obviously unable to support profit or 'strategic competitive advantage' because is can be known to all, while SCA (and Penrosian rents - see my earlier papers) can only be grounded in the second.


Then you insight that IC is a reflection of the transience of our situation is bang on.  There an be no such thin when the system has equilibrated, and thus it cannot be brought into an analysis that presupposes 'the system' is in the process of equilibrating.


The background, therefore, is more one of Schumpeterian 'destruction'.  The analysis must be stabilized in some other way - other than in the way/s typical of neoclassical economics.


The James or Ryle distinctions between 'knowing how' and 'knowing about' are chasing the same rabbit.


This line of thinking leads - as you also correctly intuit - to abandoning any sense of 'the future value of the firm'.  The future is what the firm - and the rest of the actors in the economic system - make.  It is not something already formed that we are merely 'enacting'.  That's a metaphysics Western philosophy abandoned over 500 years ago.  The alternative position spins around 'human agency', our ability to remake our circumstances - of which 'economic growth' is a measure.  The firm cannot be explained without presuming economic growth.  Yet neoclassical economics has no theory of economic growth (endogenous growth theory being the best it can offer) nor of the firm (lots of dispute here of course).


Bottom line is that IC is actually an aspect/component of the NEW theory of the firm as an entity or process in a non-equilibrium situation - one that cannot ever be completely known, and one in which the possibility for profit and growth turn on what is NOT known (as Knight and Penrose have shown us).  


To try and retro-fit neoclassical notions of the firm by extending the notion of resource to embrace both tangible and intangible is so misunderstand the entire project.  The idea that you can calculate someone's 'potential' and so forecast the results of bringing it to bear is simply to make the same methodological error, but at a different 'level' of analysis.  Not only does it not work, it actually introduces a further problem - how one might 'manage' the potential of the employees so that it benefits the firm.  This leads one to have TWO major questions rather than one - and in terms of Lakatos's notion of a 'research program' is clearly regressive.

Comment by Stuart Shaw on April 20, 2011 at 9:35am


I've made a school boy error confusing the article to be by Giovanni, rather than by yourself.  Eagerness to read re read then reply to it quickly with something worthy your time led to the misunderstanding. Forgive me.





Comment by Stuart Shaw on April 19, 2011 at 12:24pm

I'll appreciate, when you have time, to hear if I have understood Giovanni correctly, then whether my challenges hold any water.

I'll think where I read about the firm being borne from uncertainty - one recent writer that holds this view is Peter Radford on RWER: Peter Radford, on the RWER site, links uncertainty to the firm (and money) in numerous places, here being one: http://rwer.wordpress.com/2010/12/21/coase-uncertainty-and-the-firm/ ‘Firms are a hedge against uncertainty’ etc. There are others, but off the top of my head that was the most recent that came to mind while reading this paper.

I will check with Giovanni, thanks. Are you and he working together, or is his view on IC as expressed here just a more recent view that you also share? I'd be interested to note what other IC specialists make of it.

Best, Stuart
Comment by JC Spender on April 19, 2011 at 10:08am

Hi Stuart,


Thanks for the warm response.  I cannot respond fully at the moment but shall try to do so reasonably soon - and yes, I do know Goran.  In the meantime I shall have to re-read Giovanni's 'complex argument' and see whether I agree with your take on it.


Couple of other matters.  I would be most interested to have the/any citations of those works that argue uncertainty is the reason for the firm's existence.  Would be much appreciated since I have been writing on this matter for 30+ years and am always looking for Man Friday's footprints.


On the matter of sharing the piece on your alphahubcap website, perhaps you had better check with Giovanni?


Regards, JC

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