Tag: Heroes

Ronald Coase – hero of the Sovereign Professional

Eighty years ago, in The Nature of the Firm, Ronald Coase (1910 – 2013) explained why firms exist. His answer (transaction costs) both explains the recent rise in the number of sovereign professionals and highlights the challenge faced in building a high-value sovereign professional business.

Essentially, Coase argued that firms exist where the cost of contracting individual tasks becomes too burdensome. It is relatively cheap and easy to contract simple tasks in the open market, such as taking a taxi or paying a window cleaner. However, the myriad subtle responsibilities of, say, a personal admin assistant are more effectively met by hiring someone on a contract of employment.

The rise of technology, especially smartphones, the web and cloud computing, has dramatically reduced transaction costs on both sides. Size matters less and it is easy for an individual to market themselves, to be found, engaged and for all the requisite admin to take place. Those relatively concrete transaction costs are clearly lower as a result. One could imagine such relationships reaching a new equilibrium where it is now economical effective to contract out a larger set of “tasks” to sovereign professionals.

However, building on Coase’s work, Sanford Grossman and Oliver Hart described two types of rights over a firm’s assets: specific rights, which can be contracted out and residual rights which cannot. The more a sovereign professional works on a client’s strategic projects, the closer he or she comes to those residual rights. At that point, as The Economist describes in Coase’s Theory of the Firm “a merger would make more sense” – i.e., that work may be better done by an employee.

The challenge for the sovereign professional is to build the sort of “trusted adviser” relationship that gives access to strategically important (and therefore valuable) projects while maintaining independence.

Both papers are worth reading and digesting;

The Sanford and Hart paper, The Costs and Benefits of Ownership:
A Theory of Vertical and Lateral Integration, (which is on my “to read” pile) is here
.

 

Image: GNU

A maker of tea bowls

Raku Kichizaemon XV is the fifteenth grand master of the Raku family. He traces his line back 450 years to Chōjirō, founder of Raku, who made the original tea bowls for Sen no Rikyū, originator of Japan’s tea ceremony.

In a corner of his studio, in crumbling sacks is his raw material; clay, stored by his forefathers over 100 years ago.

Kichizaemon, in his turn, lays down clay for his descendants.

Eschewing the labels of “artist” or “potter”, Kichizaemon says he is simply a chawan’ya, a maker of tea bowls.

How’s that for a sovereign professional role-model? A clear and simple understanding of the value he adds, and the vision to plan generations into the future.

Here’s a clip from BBC Four’s excellent series, The Art of Japanese Life, describing the wabi-sabi of one of Chōjirō’s original, simple tea bowls. (I’m struggling to embed the video in any sensible, visible way, but the click-through seems to work.)

And, here’s a YouTube clip from Nippon.com in which Kichizaemon describes his work. It’s strangely compelling.

More here, from the Nippon.com website.

Conventional wisdom is a common language of sorts – something that helps us communicate. At the same time, it’s similar to stopping our thought processes. Everyone agrees this is the way things are; nobody questions it. And nobody peers into the depths behind those things to question them.

Raku Kichizaemon XV

 

Image: The Met Museum

Marcus Aurelius – hero of the Sovereign Professional

Emperor Marcus Aurelius Antoninus (121 – 180), philosopher-king and last of the “Five Good Emperors“, is best remembered today for his Meditations.

Meditations was probably never intended to be published. It consists of Marcus Aurelius’s private thoughts and reflections. Today, it’s regarded as a classic of Stoic thinking.

But, what does that mean for the Sovereign Professional?

I would argue that stoicism provides a solid philosophy that is wholly relevant to the inevitable turmoil of individual toil.

The Daily Stoic site offers this definition of stoicism:

The philosophy asserts that virtue (such as wisdom) is happiness and judgment be based on behavior, rather than words. That we don’t control and cannot rely on external events, only ourselves and our responses.

That second sentence is key. We “cannot rely on external events, only ourselves and our responses.”

If you want to be sovereign, you recognise that your fate is in your own hands. Equally, you are no self-pitying victim. You don’t control external events, but you certainly control your response.

Marcus Aurelius, no passive, other-worldly sage in rags is a perfect role model. He was the most important and most powerful person in the known world. When he became emperor, Rome (as Republic and Empire) had stood for over 600 years. Sometimes, we talk of Ancient Rome like we do Victorian Britain or Soviet Russia; we forget it lasted a thousand years (in the west, and a further millennium, to 1453, in the east). Meditations tells us that Aurelius was a practising Stoic. His notes are not original philosophy. They are reflections and reminders, notes-to-self and admonitions. Indeed, the historian Mary Beard argues:

If a text like this were to be discovered today in the sands of Egypt, not tied to the name of an emperor, we would almost certainly interpret it as a set of fairly routine philosophical exercises – the kind of thing that a philosophically trained member of the Roman elite would compose to keep himself in good intellectual shape.

Meditations is Aurelius’ workbook, not his textbook. That’s where the value lies: practical philosophy for real life. Remarkably relevant and contemporary, despite being 1,800 years old.

Aurelius is a hero because he was a practitioner.

The Daily Stoic has a biography, here.

The Wikipedia article is here.

 

 

 

My own copies of Meditations have been the Penguin Great Ideas edition of a 1964 translation by Maxwell Staniforth, but I’m very tempted to try the recent Gregory Hays translation, as recommended, here.

 

Albrecht Dürer – hero of the sovereign professional

The 15th / 16th century German artist was a pioneer and a role model for today’s sovereign professional.

Back in 2011, The Economist published this article in their Christmas edition: Portrait of the Artist as an Entrepreneur, the Economist. I wrote about it at the time, over on the Burning Pine blog. 

Albrecht Dürer was a sovereign professional in so many ways. He was proudly independent. In an age when artists so often depended on patronage, he considered court painters to be parasites…

hanging round great men, waiting for a commission to fall from the lordly lips. He, by contrast, was an independent businessman. He made his money not by grovelling, but by selling copies of the woodcuts and engravings printed, since 1495, at his workshop in the centre of Nuremberg. He was not even a member of a guild, for there were no artists’ guilds in the city: he was a free individual, unaffiliated, making money and a reputation purely for himself.

Dürer was also keenly aware of his cost base (both the materials used and his limited time) and of the return on investment from various projects.  Of his “Madonna of the Rose Garlands”, he wrote: “My picture … is well finished and finely coloured [but] I have got … little profit by it.  I could easily have earned 200 ducats in the time.”

To a customer, he wrote, “I shall stick to my engravings, and if I had done so before I should be a richer man by 1,000 florins.”

By investing in his own printing press, Dürer was able to produce copies of his works and leverage his creative work more effectively whilst also maintaining control by producing the prints himself.

He also understood how to market his services. He understood the value of his brand, going to court in Nuremberg and in Venice to defend his trademark monogram.

Dürer took a strategic approach to levering his talent, he developed re-usable intellectual property and he built his own brand. He understood his business – his P&L – and his marketing. In every way, we have much to learn from Albrecht Dürer.

There’s a spin-off benefit, too. Even 500 years later, original Dürer prints are available on sites like Artsy for just a few thousand dollars. Not pocket-money, but not the mega-millions of original works either.