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The Jewish world celebrated its New Year on Saturday and Sunday, Sept. 19 and 20. By the Jewish calendar, the year 5770 began. In our tradition, Rosh HaShanah marks the day on which the world was created and the time when human beings were created. 

Ask 100 people about the Biblical account of how and when people were created, and 99 will tell you about Adam and about how Eve was created from Adam’s rib. This of course is accurate. But few know that there are two rather different accounts of Man’s creation, one in Genesis chapter one and the second in Genesis chapter two. The key differences between the two are explained clearly by the late Rabbi Joseph B. Soloveichik, the American prophet of modern Orthodox Judaism, in his 1956 article, “The Lonely Man of Faith”, published in Tradition, vol. 7, 1965. The two accounts are relevant for innovators and entrepreneurs.

The first account of mankind, Soloveichik notes, in Genesis 1, states that human beings were created in God’s image. “And God created man in his image; in his image God created man, male and female He created, and God blessed them…”. What does this mean, “in his image”? It means, the learned Rabbi says, that just as God is the Supreme Creator, so are human beings creative, just like their Creator. This first version of humanity speaks of how human beings — men and women, created together, jointly — seek to master their environment, by constantly asking the question “how?”, and come up with ideas that answer it in ways that make life better. This is the ‘feet on the ground’ aspect of innovation and entrepreneurship, whose roots are in Genesis 1. What are our needs? How can we meet them? Here, mankind is commanded “to fill the Earth and conquer it” creatively.   

But the second version of human beings’ creation is “significantly different”, Soloveichik writes. In Genesis 2, man is created by God out of the earth. Women are then created out of Man’s rib. And mankind is commanded by God not to conquer the Garden of Eden, but rather to preserve and enhance it. (In no time, we manage to mess up that mission badly). No mention is made here of God’s image. So, says Soloveichik, in this version, mankind asks metaphysical questions: Why? For what purpose? This version of mankind is “head in the clouds”, the thinkers, the questioners, the dreamers. Mankind questions everything.

Innovators and entrepreneurs fulfill both versions of mankind’s Creation. They are feet-on-the-ground innovators, creators. And they are head-in-the-clouds dreamers, questioners, who challenge every assumption and who break the rules.

Both qualities of mankind are vital if we are to endure and prevail on this earth. And both qualities are vital, if innovators and entrepreneurs are to succeed in changing the world by meeting real pressing human needs.

*This blog was inspired by a brilliant lesson led by our Rabbi, Dov Hayun, Rabbi of Moriah Synagogue, Haifa.

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An interesting article in Business Week by Peter Coy, asks “can we protect consumers (from financial innovation) and still be creative?” [Incidentally — Business Week was put up for sale by McGraw Hill last week. There were few buyers.  Business Week’s famed investigative reporting has reportedly been hamstrung…].

His answer?   

In spite of the public’s mistrust, entrepreneurs and academics are plunging ahead. They’re working on ideas they hope will help the consumer borrow more safely and build wealth more reliably. Some are ambitious, like reducing homeowners’ exposure to declines in local housing prices. Others are fanciful, like an electronically rigged wallet that becomes harder to open when your bank account is low, an idea from the Massachusetts Institute of Technology.

Let us remember Joseph Schumpeter’s memorable phrase: Creative destruction. All creation involves destruction.  Old things have to die in order for new ones to be born. That is one interpretation. Another is: All creative things can be used destructively. It is not inherent in the innovations, but in the people who use them.  

Sub-prime mortgages in principle made housing affordable even for low-income people. A great idea, if used properly. But it was used to enrich unscrupulous thieves. It is not the fault of the innovation, but of those who misused it.

Financial innovation will continue. As it does, hopefully those who pioneer in it will remember that the foundation of capitalism is in creating long-run sustainable value for people,  in creating customer margin as well as company profit margin. The “I’ll be gone, you’ll be gone [before the earthquake we created happens]” principle that drove much financial innovation in the past is hopefully dead and buried.

All eyes are focused on the struggling UK economy, and on each quarter’s GDP numbers. TIM recently completed a fascinating benchmarking program in Britain, and what we learned will be the subject of several future blogs. Meanwhile, let us put Britain into perspective — three centuries of perspective.

The 1800’s were the British century. We had Globalization 1.0. The British Empire, on which the sun literally never set, created a global trading system far more durable, far more global, than the present one. There were fewer government restrictions and impediments to trade. We had the Victorian Internet — the telegraph. The gold standard ensured no country could issue excess currency. Britain set up the system to profit, often at the expense of its colonies. And Britain grew wealthy.

But by 1900 the Empire was waning and America was replacing Britain as the world’s dominant power. The 20th Century was American. America learned to do industrial R&D from Germany and from Britain, and did it better. Two world wars ended Globalization 1.0. Bad politics, not bad economics. But at Bretton Woods, in July 1944, 65 years ago, Globalization 2.0 was born. It worked fantastically until 2007. But it was flawed. The world currency was the dollar. But America overspent, undersaved, flooded the world with dollars and ruined the system. In 2007 it crashed. The UK suffered even more than America, because its financial services caused, and profited from, the bubble as much or more than America’s. Bad economics ended Globalization 2.0. Bad American economics.

The UK chose to join the European Union but not to adopt the euro. It left the European Exchange Rate Mechanism on Sept. 16 1992, under PM John Major, and never rejoined. At first this appeared brilliant. The flexible pound gave Britain elbow room to stimulate its economy. But after the global recession this decision seems flawed. The Euro countries are recovering much faster than Britain — especially Germany.  

Britain clearly needs to reinvent its business model. So far it has focused on short-term survival, rather than long-term competitiveness. 

So which country will dominate in the 21st C.? Will Britain continue to wane or will it recover? With a likely shift from Labor to Conservative government in the works, Britain desperately needs transformative change. But will it happen?   And how will Britain’s global companies endure and prevail within this atmosphere of uncertainty?   

Perhaps the best way to understand the British is by listening to  this song A British Tar (a tar is a sailor) from Gilbert and Sullivan’s H.M.S. Pinafore, 1878. Here is a portion of it:

A British tar is a soaring soul,
As free as a mountain bird,
His energetic fist should be ready to resist
A dictatorial word.

His nose should pant
and his lip should curl,
His cheeks should flame
and his brow should furl,
His bosom should heave
and his heart should glow,
And his fist be ever ready
for a knock-down blow

His foot should stamp, and his throat should growl,
His hair should twirl, and his face should scowl;
His eyes should flash, and his breast protrude,
And this should be his customary attitude,
His attitude
His attitude

Are there still “British tars”? Where? Will Britain’s attitude, energy and innovation continue to sink, behind China (#1?), America (#2) and even Germany (#3)? Or will the British tar make a startling comeback?

Stay tuned, and keep your eye on the long run.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
September 2009
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