Lecture by Professor Mustafa Ozel
4th July 2009 10.30am
Seri Pacific Hotel, Kuala Lumpur
Johor Corporation's Business JIhad Lecture Series
Western superiority comes out of organizational differences. These organizational factors are superior to the Muslims’. How did this come about?
Longetivity of an institution is rare, so that very few states or organizations can endure for more than 200 years. Historians have looked at civilizations. All in all, in the last 7000 years, only 40 of those survived more than 200 years. It is not lasting to be a lasting organization.
As for the present capitalist system, there are about 100 million companies in the world. In the US alone there are 7 million companies. In Paris, there is an association or a club called the “Hennokians” whose memberships is restricte to companies existing more than 200 years old, and there are only 40 companies that qualify.
What is the main principle of creating such considerable longetivity?
Ibn Khaldun studied this. Also Tsu Ma Chien, a Chinese historian. He says all organizations arise out of a basic principle. Each will have its own basic priciple. For example in the Sung dynasty, the principle was “justice”, but after awhile this principle became corrupt. All dynasties rise when the principle is pure and genuine and fell when it became corrupt. Tsu Ma Chien said that short term changes occurred every 30 years, medium changes every 100 years and long term changes every 300 years.
All historians will talk about degeneration of principles, so that when it is lost, the organization transforms and decays.
The question is, what was the guiding principle fot he Ottoman polity?
The Ottoman principle was set 200 years before the Ottoman empire even appeared on the world stages. It began with Ald Aslan (Brave Heart Lion) who forwarded this idea. He wanted to combine the Arab and Persian ideals and named his son Malik Shah. His priciple is that you can conquer a land on horseback but you cannot rule a land on horseback. He believed in assimilating both Arabic and Persian knowledge in order to rule. This was the basic principle of the Ottomans.
Compare this to the Japanese Tokugawa dynasty. After the final battle of Sakgehara which marked 300 years of peace for Japan, the shogun never got back on a horse.
There is also the japanese company Kongogumi established in 578AD. It was started by a Korean temple builder, and today all major Buddhist temples in Japan are built by this company. Their longetivity was not secured by gloodline, but thru principles. In his will, Kongogumi declared that after him, if there is a son that can carry out the principle, then let him carry on. But if not, to give him a salary, but offer the best manager his family name, and if he accepts, he is to be given the company. This company has lasted 1400 year.
The idea is to take good people and let them administer. In the Ottoman empire, no Turks had ruled. It was the non-Turks that ruled the empire.
Prof Ozel developed a 4 stage model based on the historical evidence. He believes that most organizations go thru these stages. All stages are associated with a crisis. It was always thought that the strong is the one that survives, but actually it is the one that is most adaptable that will survive. Since all entities will face crisis, so long as it can adapt, it will survive.
Stage 1 crisis – “leadership”
This does not mean the CEO ro the boss, but it is an attitude or a way of thinking or acting and becoming a role model for the rest. There are 3 substages-
a. Transformational Thinking – this is often done by an individual. It indicates
a. Knowing the world (eg in todays terms, knowing capitalism) – concept of capitalism today does not equate to free markets. Every capitalist is a lover of monopoly. It is concentrated political power against the masses and it is free capital looking for the highest profits supported by state power
b. Knowing your world (so in Islam, it means the Muslim world) – the Islamic economy concentrates on the Medina model. In order to understand it, must study the Jahiliyah economy. They were very sophisticated traders. Hashim the grandfather of the prophet had created the mudarabha concept (see verse al-Quraish) there were joint stock companies which invested into caravans. The Prophet when he migrated to Medina found 4 main communites there (Pagans, Jeews, Christians and Islamic). He asked them all to bring 100 articles of values from each community, and found 52 commonalities. This later became the constitution of Medina. He also visited the markets of medina and decided they cannot be the markets for the Muslims. So he established a separate market for Muslim in an area he rented from a Jewish family, which flourished. After a while the Jewish leader was unhappy, so the Prophet decided to move to a piece of flat land . He established 3 main principles for the market ie a Muslim economy.
i. That is should be built on flat place – in modern terms, there should be no informational asymmetry, and must be transparent
ii. Not capturing any particular place in the market and say it is your property. So no monopolistic tendencies. Governemnt authority should not allow “rentier” approach to the economy. It should not give any advantages to any particular group. This is also achieved by the waqaf institution. Every city is a market. The community depends on each other. In order to enter the market, there are 2 institutions, the hammam (public bath) and the big mosque (jamid kabir). So the idea is that you must be physically and spiritually purified to enter the market. Your should trade within the market only;
iii. Price formation – can only be set by Allah. So no party or power can know the just price. Only Allah knows
In this circumstances when there is minimal price fixing or information asymmetries and no captured market, it is an Islamic market whether is is run by Eskimoes or Russians.
b. Organizational Thinking – you cannot expect 1 person to keep on doing the thinking. So the innovativeness must become an organizational quality. Only 1 thing prevents this from happening – the ego of the leader. Most times when you have an innovative leader, you tend not to listen or seek counsel from others. But in the sacred texts there are many examples where the prophets sought counsel eg Moses and David. In this way you can make individual transformational thinking into organizational thinking.
c. Strategic Thinking – in the face of competition, 2/3rds of organizations fail. They cannot transform because they prefer their comfort zone. But for those who manage to transform so far, they will need a long term sustainable advantage. You would make plans with your rivals in mind.
Stage 2 crisis – “autonomy”
There are many talented people in an organization. But often the organization will go astray and become pyramidic where all the power is concentrated in the top. So the different people at the bottom feel they cannot prove their talents and become dissatisfies. They either leave and they compete with you, or they remain within and continue their opposition to you. Either way it is not in your favour. In a nutshell, power must be shared, if this is done successfully you will grow and also go thru the next crisis.
Stage 3 crisis – “control”
The nature of man is that with success comes dissapointment. People must be trained with rational empowerment. There must be a rational hierarchy empowerment
Stage 4 cirisi – “renewal”
In the last 200 years in Turkety they are experiencing a crisis of renewal. The rational bureaucracy turns into irrational bureaucracy. It becomes a self seeking entity instead of putting the interests of the organization first. In this stage, they do not allow the right questions to be asked. The wrong question is usually “how can we make the organization stronger” . the right question is “how can we make the people stronger”?
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