Both governments and companies suffer under illusions of power… the intoxication of the material world and the dismissal of the power within the heart and mind.

Flash back to Vietnam. In 1966 I was getting bored. I was serving in the 513th US Army Intelligence Corp in Oberussel, Germany. Vietnam was beginning to happen. It was where the action was, the excitement, the focus of the news. So, at the age of twenty, I volunteered to go.

It is perhaps hard for most Americans today to recall the mindset of the times. The threat of global communism, the domino theory, the assumptions of power. We saw Vietnam as an incredibly small, backward country. We had all the aircraft carriers, missiles, a huge army fending off the Soviet Union and China. What did Vietnam have? Jungles. My office was in a building directly under the flight path into Tan Sanut Airfield, then the busiest airfield in the world, as three fighter jets, side-by-side took off and landed every minute. It was an incredible display of power.

Ho Chi Minh said “You will kill ten of my men for every one of yours I kill. But, it is you who will tire of it.” General Patton said “Every war is the same. Tools change, but war is the same. You defeat the soul of the enemy, man.” They both knew something about power.

We lost fifty-eight thousand men and it is probable that the Vietnamese lost ten times as many. Yet, they won and we lost.

We should have learned something about the nature of power. At its peak we had more than five hundred thousand soldiers in Vietnam. We built massive air fields and ports. None of it mattered.

Whether there is a valid parallel to what is happening today in the Middle East we can all speculate and I won’t debate it here. But, what is clear is that to the degree that we do not understand the realities of power, we will lose. We are fighting the wrong war. The great irony of Vietnam is that now we are investing in Vietnam and businesses view it as a new market, source of labor, economic opportunity. The Vietnamese want IPODs, blue jeans, and wireless Internet access. We lost the military war. We are winning the war of attraction. The soft-power war.

A couple of years ago Joseph S. Nye, the Dean of the Kennedy School of Government published Soft Power, a book that should have been read by more leaders in both business, but in particular, in government. Nye defined soft-power as “getting others to want the outcomes that you want” or, “the ability to shape the preferences of others.”

Soft power is the critical element of business success today. Money and muscle do not sell product, attract the best people, or produce breakthrough innovations. Nor do money and muscle win the hearts of Pakistani villagers, Afghan farmers, or Iraqi children. Neither does it win the affection of teenager digital download devotees or website surfers.

Another way of defining soft-power is social and spiritual capital. Just as one has money in the bank that may attract earning, social and spiritual capital attract the heart and mind, the affection, the loyalty, and trust of both the market and employees.

How many classes, meetings, seminars, have you been to on building social or spiritual capital, or soft-power? Most likely none! We are primitive in our understanding and skills at building these forms of capital. A hundred years from now both business and political historians will look back and ask, “what were they thinking?”

I want to be the moderator at the next Presidential candidate debates. There are a couple questions I would like to ask about their plans for creating national wealth.

In this age, the well-being and security of the country are not determined by the number of tanks or airplanes, but by the human capital, the spiritual wealth, the intellectual competence of our people, and by the degree to which people in other countries and cultures feel affection rather than alienation from us. The wealth of our country is not merely the measure of GDP or national debt. It can be measured by the five forms of capital described in previous posts on this blog.

So, I would like to judge our candidates by the quality of their thinking about the wealth of our country and how they will enhance it. OK, so now I am going to get to be the moderator of one of their debates. Here goes…

“Dear Candidate, given that the President is the Chief Executive of our government, and given that it is well accepted that CEOs should have a strategy for increasing the net value of that over which he or she is “Chief,” what is your overarching strategy for increasing the total wealth of our nation? I have a few follow-up questions after you provide an over-arching framework.”

We can then assume response that has little to do with our question, but will surely touch on the three talking points, which the candidate’s polls have indicated are the hot buttons for their most important interest groups. It would be a shock if the question was answered with an actual strategic framework… but, we can hope.

“Thank you. I would now like to ask you about some of the specific aspects of your strategy. We know that democracy relies on internal sociability or what de Tocqueville called the “art of associating,” a characteristic that has proven to be a leading indicator of economic well-being. What is your understanding of the trend regarding this quality, and what would you do to improve this foundation of democracy and free enterprise?”

“Well, that is an interesting approach. You have obviously given some thought to how you may influence the culture of our nation.”

“This brings me to the issue of our external relations with the rest of the world. As you know, most corporate strategy includes a plan to improve the brand-equity, the market’s perception of the firm’s brand. As a nation, our ability to gain support on issues of security or trade, our ability to attract the best minds, or sell our products, is largely based on the degree to which we are trusted by the leaders and citizens of other countries. How would you go about improving the value of our nation’s brand?”

Of course, our candidates would surely have given great consideration as to how they might improve both the internal and external social capital of the country and their answers would no doubt be illuminating. So we will now turn our attention to human capital.

“Madam Candidate, I would now like to ask about education and the competence of the American (insert your own country’s name) workforce. As I am sure you know, China is now graduating three times the number of engineers, more MBA’s, and the trend is similar in other countries. Given that our economy is built, as I am sure you agree, on the foundation of knowledge and technology, what is your strategy for ensuring that our country maintains its competitive advantage?”

Well, you get the idea. Is it unreasonable to judge candidates by the quality of their thought, for the logic of their plans, to improve the well-being of our country? I think not. Is it unreasonable that the legislative branch attempt to assess the wealth of the country in a comprehensive manner and develop a plan to increase all forms of wealth? Again, I think it is not unreasonable.

The skeptic is likely to resist the idea of a national strategy to address the five forms of capital due to the absence of a clear and universally accepted system of measurement and accounting. I will suggest that this is a lame excuse for failing to seek to improve the very qualities upon which our future economic well-being and security depend. Can we accurately measure our military might relative to other countries in any reliable way? I would argue that we cannot. The number of bombs, planes, or missiles was not predictor of success in Vietnam and it is likely not a predictor of success in Iraq or elsewhere. We don’t know how to measure genuine military power. That has not stopped us from investing in military power. Why should it stop us from investing in social or human capital?

If I were President or King for a day, I would create an Institute of National Wealth Strategy (INWS, of course, it must have an acronym! Everything in Washington does.) I would charge the director of this new agency (it can be small in numbers and costs, by the way) with developing an index to measure each of the five forms of wealth, along with a strategic plan for the improvement of each. I would then charge each cabinet member with the task of defining his or her plans in light of the overall strategy to increase aggregate national wealth.

For any concept to be useful in the practical, what will it do for me now, world of business, it must be defined in a way that is operational.

Few words are more fuzzy than spiritual or spirituality. The very concept seems to defy any concrete definition. Let me suggest that an ultimate defintion may be well beyond our capability, but developing a definition that is useful is not.

In some places spiritual capital is being equated with participation in formal religion. I find this unfortunate because my own experience does not lend credence to the idea that formal religion has any exclusive patent on spirituality; although for most, the discipline of formal religion is the training ground for spirituality. The Templeton Foundation is funding research and John Templeton has done an admirable job in his pioneering promotion of spirituality and its link to health, business and general well-bing.

Spirituality simply refers to our aspirations, our guidance, our connections not founded in the material world, but rather from some source, we regard as more noble. I think there are two key components of spirituality in the workplace that are of genuine value, assets, to the organization. The first is the degree to which members of the organization are committed to an ennobling purpose; and second, the degree to which shared values serve to guide ethical behavior.

A worthy purpose, the impulse to do something significant, to make a contribution to humanity, is the most fundamental form of motivation. Great leaders instill a sense of noble purpose in their followers and thereby create human energy.

Shared values, the discipline of adherence to a code of values within a group, is the basis of trust and sociability. Just as low-trust societies are economically handicapped, so to are low-trust companies.

To the degree that an organization can enable, support, or encourage a depth of personal morality and dedication to a noble purpose, it possesses spiritual capital.

Wealth will be achieved by the country, company, team, and individual able to create the currency of competition in the new capitalism. The measurement of wealth will not be by money alone, but the abundance of all five forms of capital.

Capital and capitalism need redefining. Capitalism is not only the private control of financial capital, it is also the private control of social capital, human capital, spiritual capital, and technology or process capital. What you own when you buy the stock of a company, is not merely the value reported on the balance sheet and income statement. If you knew that a corporation, with no current income, had just hired a team of scientists who had the capability to discover the cure for cancer, the financial statements would in no way reflect the value of that firm. The same is true of Pixar and almost every other firm whose value is in human talent and creativity. If you knew that the leaders of a company adhered to the highest ethical standards and were motivated by a worthy purpose that inspired the members of the organization to their highest possible efforts, the value of the firm would be greater than if the reverse were true. And, if you knew that the firm had instituted the most productive and effective sales, manufacturing and product development processes, you would know that the firm possessed an asset that might be deficient in another firm. True wealth, net asset value, is not measured by the financial balance sheet.

What I have attempted to do in my new book is to define what really matters in the process of wealth creation. Of course, it is easiest to measure cash flow, net income and the financial balance sheet. But, most often, this is not the root cause of either building great companies or their decline and defeat. Rather, it is much more likely in the success or failure of human, social or spiritual capital. Many companies that are gaining market share, such as Toyota and Honda, are doing so because of their superiority in process capital. If you have organized your production process according to “lean production” you have acquired an asset, the asset of process capital.

Many companies, particularly those that depend most on human performance, rely on social, human and spiritual capital. Examples of these types of capital and what you can do to develop them, will be the primary subject of future posts on this blog. It is also the focus of my soon to be published book.

Social capital has been the subject of investigation by the World Bank and the International Monetary Fund as factors in economic development. It is now well accepted that countries must develop in a balanced way, both socially and economically. No country that relegates half of its population, women, to menial roles and supresses free expression and science, can possibly develop economically to compete in the world market place.

Social Capital on a country level is generally considered to be the degree of trust, social networks, or what Francis Fukuyama calls “sociability” which defines the “radius of trust” prevelant in a culture. This, Fukuyama found to be a predictor of economic progress since all commerce is ultimately an act of trust or sociability. If it is true that the degree of sociability is related to economic progress, isn’t it also logical that the degree of internal sociability within a firm may be related to its ability to innovate, to solve problems, and to make effective decisions? I have attempted to define not only social capital, but human, spiritual, and technology or process capital within an organization (private or non-profit) and provide a roadmap to building these forms of soft-capital that are the necessary anticedents to financial capital.

This poor blog has been too neglected in recent months and there is only one guilty party, me.

Now I promise to be better behaved. I have just finished a book, again, again… Yes I thought I was finished with this several times previously, but this time it is off to be published and should be available very soon.

For those who don’t know, this is about my fifth book (I say about because it all depends upon what you choose to count, training manuals, very short books, etc.). The title is Competing in the New Capitalism.

From the back cover:

This book is about the self-initiated, free enterprise transformation of capitalism into something better. Capitalism is transforming, not because of the external force of regulation, but because of the internal exertion of virtuous self-interest.

Today, every organization is struggling to create the new currency of competition. In the early days of capitalism, money mattered most. We have entered a new phase of capitalism and the rules have changed. To be a player in the tomorrow’s business, you will have to master the creation of five forms of capital or wealth: social, human, spiritual, financial and process or technology. These are the keys to competition. However, most organizations have not yet learned to manage these new forms of capital. This book is about creating the currency of competition in the new capitalism.
This new capital resides at three levels: the organization, team and individual. This book defines the most important disciplines that unify energy and effort toward common business strategy. These are the currencies, which build the bank account of each of the five forms of capital. The pursuit of all five forms of capital will define not only your organization’s success, but also that of your team, and your personal net worth.
Mr. Miller has redefined the nature of wealth and given us a roadmap to achieving it.
The workplace of today is different because of the competitive urge to produce innovative and high quality goods and services. Creativity and commitment are the fuel of commercial competition and they only come from people who are fully engaged. We, the business community, will transform capitalism again, not because of compliance to external regulation, but because we must, to compete.

Mr. Miller has brought unity to the concept of wealth. He has provided a roadmap for creating both personal wealth, effective teams, and an organization that creates not only economic value, but ennobles the human spirit.