The Wise Company

"What good is knowledge if it isn’t put to use wisely?" This book explores how businesses can thrive by integrating wisdom, purpose, and societal harmony into their operations.

1. The Reliance on Explicit Knowledge is Insufficient

While data and numbers are useful, they are often unable to provide the full picture. Relying solely on explicit knowledge leaves gaps in understanding customer desires and adapting to change. Successful companies must move beyond numbers to interpret social and emotional cues in their environment.

Executives often believe data-driven decisions yield guaranteed results. However, data lacks the context and human element needed to tackle complex, unpredictable scenarios. For instance, an automobile company can learn price points from data, but understanding customer preferences or product experiences requires closer engagement.

Leaders often focus on one-size-fits-all solutions derived from data instead of nuanced approaches. This constrains a company's adaptability. To succeed, companies must combine explicit data with tacit, experience-based wisdom.

Examples

• Kodak failed to adapt despite market data hinting at the rise of digital photography.
• General Motors struggled with understanding holistic customer needs beyond car affordability.
• Circuit City's downfall came from ignoring the larger social and market dynamics, despite their strong analytical approach.

2. Ancient Philosophies Offer Modern Lessons

Ancient thinkers like Aristotle provide a framework for actionable wisdom. Aristotle coined the concept of "phronesis," or practical wisdom, which emphasizes ethics, context, and purposeful action. This classical philosophy still resonates in today’s business world.

Practical wisdom involves looking at the specific context of decisions and ensuring they foster good for society. It's not enough to just know; that knowledge must align with actions serving a larger purpose. Wise leaders integrate this ethical lens into decision-making.

Modern leaders who embrace phronesis actively engage with societal needs. By doing so, they enrich their company’s role in the world and maintain ethical standards in business practices.

Examples

• Aristotle's "Nicomachean Ethics" serves as a foundational text explaining phronesis.
• Martin Heidegger emphasized that actions in the present shape the future, linking practical wisdom to everyday decisions.
• John Dewey, through pragmatism, connected personal experience with purposeful action.

3. Companies Should Serve Society, Not Just Shareholders

Businesses play a major role in society, and their actions impact people far beyond shareholders. A wise company aligns profitability with societal benefit. Sustainable success comes when companies balance financial goals with making a meaningful difference.

Focusing only on shareholder returns fosters short-term thinking and often ignores societal needs. Wise businesses, however, bake social good into their values. Leaders must view society as a partner, working toward shared prosperity.

CEOs like Tadashi Yanai of Fast Retailing demonstrate this philosophy. For instance, their "All-Product Recycling Initiative" donates clothing to refugees, proving that societal benefit and business success aren’t mutually exclusive.

Examples

• Honda shifted its mission to developing low-emission engines for future generations instead of just beating competitors.
• Fast Retailing initiated large-scale social programs like donating 10 million clothing items yearly.
• Karl Polanyi emphasized that all companies, as social institutions, must assume moral responsibility.

4. Wise Leadership Grows from Personal Experience

Practical wisdom stems from understanding situations deeply and acting on them with attention to nuance. Wise leaders leverage personal experiences to assess and articulate the best paths forward, even under rapidly changing conditions.

Grasping what’s unfolding in the moment requires more than theoretical knowledge. It demands hands-on engagement and an understanding of subtleties. Leaders who take the time to notice details and embrace lived experiences foster innovative solutions.

This understanding was pivotal for Gen Terao, founder of Balmuda. Inspired by personal memories, he created a game-changing toaster by prioritizing the essence of perfect toast rather than merely creating advanced features.

Examples

• Gen Terao’s sensory experience of toasted bread inspired Balmuda’s famed product.
• Honda’s engineers, grounded in personal values, highlighted the social impact of their work.
• Soichiro Honda’s retirement showed his acknowledgment of team member wisdom over his own.

5. Collaboration Drives Creativity and Problem-Solving

Collaboration spaces, or "ba" in Japanese, make knowledge sharing possible. Leaders foster these spaces to spark ideas, build trust, and ensure people work cohesively toward shared goals.

Informal gatherings can spark innovation, as demonstrated during Balmuda’s staff barbecue where the toaster concept was born. Even in formal meetings or virtual connections, collaboration must embrace transparency, trust, and clear purposes.

Ba ties people together, enabling creative solutions without hierarchy or red tape. When knowledge flows, it’s less about who came up with the idea and more about working collectively to build better results.

Examples

• Japanese concept "ba" highlights spaces for honest conversations and collaboration.
• Safecast volunteers used online platforms to solve radiation concerns post-Fukushima disaster.
• Open-door policies in companies support ongoing exchanges of information and ideas.

6. Storytelling Aligns Teams Toward a Vision

To galvanize their teams, leaders must effectively communicate their vision. Sharing purpose through stories and metaphors creates a sense of belonging and mutual understanding.

Powerful storytelling engages logic, ethics, and emotion, which motivates individuals to rally behind a common cause. Leaders create narratives that provide direction, clarity, and inspiration for challenging missions.

For example, Michimasa Fujino shaped his team’s focus on creating Honda aircraft using a relatable marathon metaphor, emphasizing persistence and achieving small goals step by step.

Examples

• Ernest Shackleton’s honest recruitment message attracted volunteers for a dangerous journey.
• Honda Aircraft’s CEO used sports stories to inspire innovation and perseverance.
• Leaders unlock motivation by tying their rhetorical messages to shared team aspirations.

7. Business Politics Can Serve the Greater Good

Machiavellian thinking can sometimes empower leaders to guide their organizations effectively. Acting astutely and finding unique methods to inspire or manage are forms of benevolent strategy when grounded in constructive motivations.

Manipulation, when ethically executed, helps build unity and morale without breeding negativity. Shackleton, for example, balanced the health and morale of his Antarctic crew through subtle but impactful gestures, such as treating everyone equally to rebuild spirits.

Leaders like Steve Jobs also used radical expectations to push boundaries. Jobs' “reality distortion field” motivated suppliers and employees to strive beyond conventional limits.

Examples

• Shackleton ordered group milk breaks to care for sick crew members without singling them out.
• Steve Jobs convinced Corning’s CEO to restart Gorilla Glass production in record time.
• Politically-savvy decisions allowed damaged teams, such as Shackleton’s, to survive against odds.

8. Sharing Leadership Amplifies Impact

Distributed leadership ensures that practical wisdom flows through the entire organization. Empowering employees, instead of centralizing decision-making, enables faster and better responses to challenges.

When wisdom is shared, organizations operate effectively at every level. Mentorship prepares employees to make sound, independent decisions, reducing dependence on any single leader. More perspectives also lead to innovative solutions.

Toyota’s team dynamics exemplify this. Each employee, regardless of rank, is entrusted with vital responsibilities, highlighting the benefits of shared leadership.

Examples

• Toyota’s “ring of power” illustrates how teams share responsibilities and decision-making.
• Soichiro Honda prioritized his team’s visions, proving the strength of distributed leadership.
• Effective mentoring programs secure succession plans and nurture future leaders.

9. Social Purpose is Essential for Longevity

A company’s role extends beyond revenue generation. Striving for harmony with society sustains not only profitability but also relevance in marketplaces shaped by changing values and expectations.

Businesses that align their goals with societal goodwill build stronger reputations and customer loyalty. People gravitate toward brands committed to improving quality of life and addressing social challenges.

Organizations like Fast Retailing exemplify how businesses can prioritize social purpose. By ensuring their contributions create meaningful change, they position themselves as trustworthy partners in societal progress.

Examples

• UNIQLO’s CEO makes society-focused initiatives a core aspect of their brand value.
• Fast Retailing’s refugee clothing donations adapt social service to business values.
• Karl Polanyi’s work highlights companies’ societal roles and mutual dependencies.

Takeaways

1. Combine personal experiences and current market context to make better decisions, blending tacit knowledge with explicit data.
2. Create spaces for collaboration within your team where ideas flow naturally, whether through informal gatherings or structured meetings.
3. Center your company’s mission not only on shareholder profits but also on societal contributions for long-term success.