Prosperity, Productivity and the Contest of Ideas

Blog_GreenShootIn his latest book: The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation economist and investor Antoine Van Agtmael highlights signs of unexpected competitive resilience in developed economies. As the guy who coined the term Emerging Markets and a leader in revealing the value to found in those markets it seems Van Agtmael was somewhat surprised at the signs of metamorphosis in developed economies. The author points to the role of both individual agency and institutions in a possible reemergence of highly competitive value creating enterprise.

Individuals lead and individuals bleed. A society’s prosperity depends on its productivity – that is to say, for value to be shared it must at first be created. Individuals create value big and small. Wheels occasionally emerge, and teams peacefully collaborating toward shared ends catch everyday miracles. In this way, for the last 200 years all around the world we have lifted ourselves out of poverty. Why are there smartest places? Why have some people prospered and others are yet to do so? Why have some places forgotten how? What does and does not depend on us? Unless one has an extraordinary belief in coincidence, individual freedom and property rights matter.

Investigating bright green shoots of growth in former industrial wasteland, Van Agtmael identifies the classic role of enterprising individuals in value creation. He also sees the role of individuals forging bridges between universities, labs, industrial incumbents and startups. There are so very many layers of economic capital implicitly being leveraged in his examples. Individuals motivated by incentive striving for success and not crushed by social or economic oppression. Educational and research institutions that are not entirely hidebound to orthodoxy and the will of power. Rather that they enable human capital and the generation of ideas. Whether your economy is emerging, newly emergent, or reemerging from the rustbelt, institutions of law and exchange that are transparent and dependable seem now to be more important than ever.

Perhaps not surprisingly, after 8 long years of the Great Stagnation there are many seemingly willing to accept the false promises of one political P.T. Branum or another. And, so we see salesmen and suckers giving oxygen to Socialism, restrictions on free speech and thought in universities, and the zero sum logic of xenophobia and protectionism. Somehow it seems appropriate to misquote Mao Tse Tung saying 百鳞翅齊放, 百家爭鳴 ‘let a hundred butterflies bloom, let a hundred schools of thought contend’. Did Mao make a mistake that setback the Chinese people’s emergence from death and squalor by two generations? Or was it a cynical way of tricking a generation of a people’s best and brightest so that they could be eradicated like pests? Perhaps it doesn’t matter, for what depends on us is in the present.

Mao was right the first time, if you want a hundred flowers to bloom you need to allow for the contest of ideas. At a time when almost all emergent economies are struggling to deliver persistent growth and prosperity to their people the role of antifragile institutions just can’t be underestimated. So today of all days there appear to be lessons on the extraordinary value of institutional order if you are struggling to emerge, reemerging after a post industrial winter, or simply emergent.

Suboptimal Systemic Design is a Moral Challenge

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To be human is to be a moral agent. To be a designer is to be everywhere and always a moral agent. Design is an act of nontrivial choice. That is to say it holds the prospect of nontrivial impact on others. In absolute terms consequence is beyond knowing. It may be a harsh and uncomfortable truth to face, but as a designer there is no butterfly defense. As a designer you own both your success and the chaos you cause. How then to find a legitimacy for action?

Firstly, design is an act of imagination. Imagination has horizons far beyond the possible. The borders of human imagination include both the best of all outcomes and failure. Design then is an act of extraordinary optimism or arrogance. To design is to imply that the outcome will be better than what would have emerged without your action. History is literally a record of our successes and failures. At least on average over the last 200 years our successes have outweighed our failures. In a period unmatched in history human well-being has improved at 2% per annum. Albert Hirschman made the observation that humans appeared to have two powerful attributes. The near universal ability to underestimate the scale and complexity of a problem matched by the human’s extraordinary capacity to solve problems once we assumed them. This though does not provide an ethical foundation for the reckless juggler of fate. What would have been the achievements in overcoming poverty and disease if our design failures had not cost almost as much as our successes?

Despite the best intentions of our undergraduates, for success, it is not enough to simply reject the heavy stepping design of our industrial past. Passive resistance is not an ethically resilient response to that brutal insensitivity. Two wrongs do not make a right. Pious intellectually limp environmentalism doesn’t heal the earth. It is not what you say that matters, it is your choices. An empty bus driver doesn’t have a green job. As a designer your intentions are important, just like good aim is important to an archer, but it is the arrow that fells the foe. G.L.S. Shackle and Ludwig Lachmann aren’t on the regular reading lists of your undergraduate design degree. However just like Aristotle, they wrote and our ignorance is no defense. Radical uncertainty fractures our design decisions from future consequence. Consequence matters, but in this world design intention alone does not determine success. There lies a design limit of the consequentialist ethic on which action rests. Design determines the very boundaries of the future world, what should guide the hand of the designer?

Exceptionalism is the dominant faith of design history. The hero shots of architects and engineers stare with unnerving certainty from every designer’s collection of coffee table references. Self assured assertive modernism marks both the successes and abject failures of Le Corbusier. Despite our faith in swaggering genius this the most prosperous point in human history is barely decorated with their artifacts. Yet our world is now almost utterly the product of design decisions. Every house everywhere is the product of design and not just jewels of glossy heavy stock magazines. Design success clearly isn’t a product of any particular cult.

The choices of designers determine the very speed limit of societies progress. Ethical design must be successful design. Neither design by precedence nor supplication to a superstar offers assurance of success. Everything that stands between mind and mud is the object of design. That has never been more important than at our moment in history. As we stumble beyond the first years of the 21st century our fears of failure seem matched by the scale and prospect that lies before humanity. If those challenges are beyond recourse to 19th century Consequentialism and 20th century hero fetishism what allows us to act?

At the time of writing, we watch as the very systemic design of The Organization for Security and Co-operation in Europe (OSCE) is failing our future. The border of peaceful democratic and prosperous Europe is being smashed family-by-family, town-by-town, and dream-by-dream. Totalitarianism in democratic drag has used missiles, tanks, nationalism, and lies to suppress its neighbors in Ukraine as well as Russia’s own citizens.

This is very much a question for our time. It isn’t abstract and it isn’t lying for lack of attention in unvisited stacks of academia. Nicholas Nassim Taleb has pushed rich and deep ideas onto the edge of common consciousness. Taleb has increasingly gained collaborators in engineering, systems design, mathematics, physics, economics and philosophy. As the speed and magnitude of design decisions increase, it is an imperative that an effective ethic of design choice be established. That ethic clearly needs to be independent of ends. That is it cannot seek its justification it what may be, rather it must be rooted in justifiable means. Fortunately, the enlightenment philosopher David Hume provided a starting point for such an ethic with his concept of Just Rules. The great 20th Century economist and philosopher Friedrich Hayek recognized the application of Just Rules to meet the challenges of a modern social order. The current work on the Precautionary Principle by Taleb and his colleagues is a significant down payment; there remains much to be done.

Certainly bureaucrats and diplomats have already enjoyed the careers and cocktail parties that were the design consequence of the OSCE’s establishment. Right now though, who would suggest that a veto for the aggressor was a feature of successful design? Who west of the Volga would proudly stand and own that choice? The design flaw was there to be seen on the day it was signed. So who owns the dead? Certainly the aggressor remains responsible, but what of the designers who knew the wall would collapse? Where are they now? What consequence for bureaucrat and politician whose fine speeches marked the ceremony that brought the OSCE to being? Neville Chamberlain notoriously claimed to have designed “Peace in our times.” Perhaps his everlasting shame is consequence enough. I doubt the 10s of millions of dead who paid the price in World War II would think so. The price for the right to continue lifting billions from poverty is the establishment of a universal design ethic that is fit for purpose. Is that too much to ask?

Asymmetry, Hyperconnectedness and the Elevator Pitch

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We are moving into a fundamentally different world. The inherent asymmetry of market relationships is being hyper activated in this many-to-many world. It is our argument that this is a really big event in the function of market economies, just as the same emerging technologies are radically challenging the political landscape of democracies and dictatorships alike.

For enterprises and brands to be able to succeed in the new world order it will require real change to the internal distribution of authority. Everyone has a set of rules that inform their choices and decision-making. This is as true in business as it is in all other aspects of life. We are making claim for the role of the old-fashioned elevator pitch as the center of a brand’s rule set. And its essential value is not its extensiveness, but rather its purity.

The well-known elevator pitch has been a standard tool for marketing teams for years. Don’t know it? It goes like this:

You step into an elevator and bump into the CEO of a potential major client. You have the opportunity to present your offer. Could you succinctly communicate the core of your offer and your brand in the time it takes to ride the elevator up a few floors?

That is the elevator test, and as legend goes you need to be able to pass it, because if you don’t understand the core value of your brand’s offer, then how will anyone else? And why will they choose you over your competitors? The purpose of the elevator pitch has been to craft communication to the consumer, to hook them in to wanting to know more and to show you have a wealth of substance bubbling beneath.

The value of the elevator pitch, is that it uniquely defines your brand as the resolution to the consumer’s need. For the right consumer, the language, colour, form and content of every aspect of your brand should resonate deeply and positively. Your brand’s elevator pitch is what makes them all resonate and ensures that there is no dissonance in the signals your consumer interprets.

So far, and so good, but what makes this anything other than the old marketing trope?

  1. To begin with almost no one ever executes properly, and like the SWOT analysis its use is often abuse
  2. Most importantly though, in a world of social media, brands now live in a metaphorical elevator of entirely unpredictable exchanges

Back in the day, a brand lived in a one-to-many world where the central planning brand god could design a coordinated representation of every aspect of the brand’s core values. Now, in our many-to-many world of #independencesquare and #insertyoursuckybrandhere campaigns, a successful CEO simply can’t be a control freak. That consumer comment that became a campaign won’t stop while you workshop your response. And without a brand control mechanism a decentralized structure can see an ill-advised response from a customer service officer write off decades of goodwill.

The essential statement that passes the elevator test enables a brand’s responsiveness to the unexpected encounter with the consumer. Success depends on more than an immediate response; it requires a response that is consistent with the values and intentions of the brand. A widely and completely understood statement of what makes your brand unique allows the frontline managers of your brand to make coherent and timely decisions. This is the secret value of the elevator pitch.

Asymmetry is not a bug, it is an essential characteristic of the market economy that has only been heightened in our hyper connected world. A brand and a business strategy should fit hand in glove. Too often though, the pressures of the day mean those who lead organisations are focused on ‘what must be done’ to keep up in the game. While in the act of coordinating all those decisions it is easy to lose focus on exactly what it is that makes your brand special to the only individual that matters.

Universally, every individual has a future state of being they intend to achieve. This is as true for buyers of tinned foods as it is for those interested in sports cars or professional services. Every individual acts on their intentions, and the attainment of those intentions requires them to resolve the constraints that act upon them. In doing so, the individual becomes a consumer.

A business’ brand and strategy both play a role in resolving the constraints of particular consumers. Every brand is defined in a unique response to the specific constraints of their own history and their present choices. For example, money is money and equities are equities yet no two pension or superannuation funds are alike. The shareholders of Aston Martin may wish to be as dominant as Porsche or Ferrari, however they are no more likely to produce a 911 Turbo than they are to produce a Transit van. This is a product of their essential values we perceive as brand.

The symmetry of commitment and power are defining characteristics of all relationships. The importance of that is no greater anywhere than in the free exchange of markets. Any consumer’s commitment is to their intention and almost never to a specific solution. By comparison, a business is committed to a specific solution defined by their intention and constraints. Business executives are committed to a ceaseless series of choices. What they do to allow for that moment of consumer choice is extraordinarily complex, and the value of all that activity is entirely dependent on that single act of consumer choice.

There is an inherent asymmetry to the relationship. In the entire history of the modern sports car a consumer has been able to consistently understand why you chose a Porsche or an Aston Martin. During that time it had next to nothing to do with type of carburetor or the location of the engine. And yet, the overwhelming demand on management is for focus on the detail of production. Nonetheless, if you can’t immediately describe the essence of your company’s unique resolution to constraints faced by a consumer you are bound to fail in that asymmetric relationship.

Young mums in Shanghai, the global head of manufacturing for Big Digger Inc., and a self-funded retiree all have unique constraints to the world they seek. We can’t ever know the specific subjective and relative basis for the choices they make. If we hope to win the asymmetric battle of attention we need to be able to describe the essence of our brand character in one fluid statement. If you can’t do that, why should those you seek to influence be able to do so? To sustain long-term success that statement needs to consistently inform every action undertaken by everyone who is a party to your brand. To carry out its essential function in a hyper connected world that single statement will capture almost all the value your brand ever offers.