A smartphone today has more computational power than Apollo 13. The computerised devices around us are increasingly smarter and they multiply at high speed changing the ecosystem in which we live. Some of us may feel suffocated by this change and with all the software code we use every day it seems human emotion is valued less and less.
One of the changes becoming more visible by the passing of each day is the invasion of data in the way we think. The digital replaces the analogue. Every move is broken down into small components and expressed into a binary form. Time is digital, distance is digital, the images are digital and the sounds are digital. The last two frontiers resisting to conversion are the tactile and the smell sense, but it is just a matter of time before they capitulate.
Has the technology made us less human?
It all started with “let’s improve our lives”. The cars have better controls, the phones are more convenient and helpful and the digital cameras are so good in capturing personal memories. At a personal level, this is a welcome upgrade. We like that.
But then, gradually, as these devices kept crunching numbers and generating more data than ever, a new development has grown out of the science labs into the daily life of the average person. This new wave of change is incessant and unforgiving. We were comfortable with the introduction of computing units at the beginning because the adoption process was so familiar: it was industrial, it was large and remote. The Univac, the IBM mainframes and the likes fit our industrial model of the world. There was a kind of order we were used to and we liked: punching cards required scheduling and approval from authority; the computer rooms had managers who made decisions after careful and lengthy considerations. In the old James Bond movies the computer labs are static, inflexible and secretive.
Digital change comes in waves
The first wave was about the macro-economy. Large data bits helped the modelling (through accidental and implicit development or by design) national economies and world trade in new ways leading to globalisation. The abundance of data changes the way nations trade among themselves, how populations live and how big infrastructure projects are built. One example in which this change had an impact on the human expression is tourism. Kevin Kelly (in “Pre-Globalization”) remarked how we lost in one swoop access to great historical and human treasures hidden in distant corners of the world. “Now every village gets visitors every now and then. Just as you get electricity, you get visitors. Multiplied by millions every year, the exchange produces a subtle leavening, a quiet education; a silent bridging that may in the end be as powerful as electricity and roads”.
The second wave brought change at home, at school, at work at individual level. You could call this the BYOD wave. It’s all about personal stuff. Maybe this started in the 90s when the PC started slowly to make its way into our lives with CD-ROMs, games and word processors. It is still happening at much accelerated pace: smartphones, tablets, heart monitors, digital cameras, etc.
The third wave, which started about 10 years ago, is about big data. Amazon was probably the first to recognise the value of customer data and monetise it successfully. Large networks received bits of information generated by our interaction with the electronic medium and make sense of what happens by reading behavioural patterns. All these innocent and cute devices that we love to have are in fact little Trojan horses opening the doors to a scary guy called Big Data. This guy is demanding now that we do things differently, forget about our old ‘human’ ways and learn new rational tricks.
Take this as an example: Progressive Insurance offers an insurance plan 30% less expensive if you agree to install a black box called Snapshot on your car. This device counts how often your slam you breaks, how many miles you drive and how often you drive between midnight and 4am. This a classic behavioural learning scheme based on stimuli and response. We are like lab rats.
Skills from out-of-body experience
The most unsettling aspect of the way big data influences our lives is that it diminished the value of knowledge accumulated through direct personal experience. As an individual we need to get good skills at learning about global knowledge and understand the large patterns. Intuition and emotion are very important, but it is essential to get better at bypassing emotional impulses based on individual experience in favour of “emotional” data patterns based on the experience of large groups. We need to develop antennas that capture large social digital signals.
So, are we less human?
In the grand scheme of things, the answer is no. We will be just different. If you take a hard look at our past, we were not that human as we want us to believe. Let’s not forget that there was a time when we thought children are little monsters and their evil needed to be eliminated through pain. Beating was OK. Jonathan Swift even proposed poor parents eat their children to reduce their burden and for the benefit of the public.
To survive, the human race needed to adopt behaviours that while cruel from a modern perspective it made sense at the time. We are readier to understand this when we observe other species. We watch on TV how lions kill the cubs bestowed with the ‘wrong’ DNA and we listen thoughtfully the voice of the narrator that explains that this is just natural selection. If we were an alien sitting on a distant couch and watch us changing family values, adopt new social norms and promotion systems would we be surprised at all about our new adopted behaviours? Not likely.
This book has strengthen a perception of mine that even great journalists have a problem when they try to write non-fiction books. The Social Animal has a noble goal but the delivery is painfully dragging its ideas through a long winding story of two people who live an unhappy life. This is already a contentious point. For reasons that are not clear to me, the book is meant to describe the life of two people “who lead wonderfully fulfilling lives”. How can this be, when these two people live their lives absorbed in demanding jobs, with different ideals and that consider divorce at the age of fifty amidst desperation, bouts of alcoholism, a case of adultery, loneliness and realisation that they don’t fit each other? It is only because of a moral inner struggle that they decide to stay together, giving a strong impression that this is because there is no other practical option.
The main idea of The Social Animal is to follow two threads that are intertwined throughout the book: a story of two people that met, fell in love and decided to live together and a scientific exploration of the current status of research in human development, society, social behaviour, psychology, mind, genetics, biology and professional development that explain the way we make decisions and behave. It is a great idea, but difficult to implement.
The fundamental concept is that we make decisions at two levels: conscious awareness and subconscious. The first is the rational aspect of our behaviour, the logical thinking, the dry calculation, the methodical process by which we arrive at conclusions. David Brooks refers to this as the French Enlightenment thinking framework, “le rationalisme” personified by Voltaire and Descartes. The second level is the realm of deep unconscious, the unknown laboratory of human emotions, where feelings are born and fight against the rational thoughts from level 1 to ultimately determine how we make our decisions. This way of thinking is favoured by the British Enlightenment which affirms that in the end this is how we really decide. David Brooks has a plethora of examples of research studies that support this claim.
It may be that this is how we make decisions, with “epistemological modesty”, but it is rather hard to make sense of this book, other than just to say “hey, did you know that researchers discovered that… so and so?”. This is simply because I could not find “the hidden sources of love, character and achievement” as stated in the subtitle. I could see that hard work is necessary ingredient of success, that genetic inheritance is another asset that is good to have on your side and that being born in the richer part of society opens the door to more opportunities; but this is something that is hardly new.
There are a few interesting ideas here but they are lost in a long series of scientific explanations and popular statistics, but they lose traction because they are so disjointed, diluting any message that the book might have.
Here is one intriguing observation: we live today in a world where the cognitive load is so large it makes it more and more difficult for people from poorer parts of the society to traverse through education system to the richer side. The knowledge required is too high. David Brooks is not talking about the logical knowledge, but the emotional one which is the cultural fabric of society. This cannot be taught in a logical fashion in schools and in time it causes an increasing inequity that will lead to social tensions difficult to resolve.
The ramifications stemming from the idea that the subconscious in fact is quite rational are vast. You can choose your patch and rest assured you have in there plenty of interesting work for many many years. You could look at this from a computing perspective and think of the human brain as a sophisticated system with massive parallel processes that makes decisions in the background. Or look at this from a cognitive science perspective and try to understand the working model of the mind based on these “underground” processes. Then if you are an educator ask yourself how much of of our children formation is influenced by the education system and which parts are mostly influenced by other sources. I thought the subconscious intelligence is an important attribute defines us as a “social animal” in ways much more significant than the standard IQ. Unfortunately David Brooks did not insist on this topic. The brush he used was too broad in his attempt to cover all aspects of our lives.
Overall, I found that reading was an uneven experience as if I was traveling across the country often by a boring bus and occasionally by an exciting Ferrari. I must say, that despite this review, I love David Brooks posts in The New York Times and I look forward to read his writing.
I know I am walking a fine line here. The social capitalism is a term coined probably by Kees van Kersbergen in his published work, “Social Capitalism: A Study of Christian Democracy and the Welfare State”. Kevin Rudd also made references to this model in his speeches during his Prime Ministership which came about the time when the Global Financial Crisis (GFC) was in full swing. In essence this model proposes an improvement of the capitalist model through a greater intervention of the state designed to address imbalances using macroeconomic regulatory tools. This post does not refer to such model. This article focuses more on the corporation as an economic entity and the transformation of its model of operation which has more and more a broader social meaning, as opposed to a narrow economic definition. I use the term eco-social capitalism because it refers to the existence of corporations in the context of the natural environment and social habitat, rather than an element on government’s agenda.
Many centuries ago a wonderful innovation was created: the corporation with limited liability. This propelled the economic development at amazing speeds. Where before the risk sat with the individual entrepreneur, the limited liability increased the appetite for risks and large rewards. East India Company, launched on 31 Dec 1600 with the royal blessing of Queen Elizabeth I, is probably the oldest chartered company. Investors put their money into this venture hoping for big gains. When the first ship returned back the profit was huge, some reports indicating Drake made a 5,000% return. This was one lucky strike because over the years many ships went under ruining hopeful investors. The morale of this story is that shareholders take the risks and the rewards and this is all that mattered. Until now.
In recent years the corporates, especially the large public companies with transnational operations and vast resources at their disposal, have undergone a radical change in the way they are perceived by the public. Many companies are accused of putting the interests of their shareholders and executives ahead of the broader community. This unfavourable image is compounded by the fact that many companies use cheaper labour markets to increase their profits at the expense of local employees.
In Creating Shared Value, an article published in Harvard Business Review magazine (2011), Michael Porter and Mark Kramer redefine the corporation in very different terms using the concept of the “shared value”. Departing from a model in which the corporations act as a self-contained entity, Michael Porter is proposing a model that extends the business concerns beyond “internal” processes to include “externalities” such as social and environmental issues. The practical reason is the limitations and the risks associated with a regulatory regime that as elected representatives tries to respond to the public concern by imposing laws and regulations that force the companies to address environmental and social issues. However this solution creates a very complex environment which increases the costs of business, it reduces the speed of new jobs creation and actually incentivising corporations to consider moving some of their operations overseas.
The better option is for the corporation to have an more flexible strategy of creating shared value. This requires an approach to the value add process which incorporates the “externalities” in the business design from the very beginning. This is not a welfare initiative and this is not a “fair trading” scheme, but an adjustment of business scope beyond the creation of value for its shareholders. This works only if the corporation investigates opportunities in three areas:
Reconceiving products and markets
Redefining productivity in the value chain
Building industry supportive clusters at the company’s locations
This creates vast opportunities, if the company has the adequate resources, brain power being one of them. The approach resembles the Blue Ocean strategy (W Chan Kim, Renee Mauborgne) which takes into consideration all the elements of the value chain and find competitive ways in which a distinct value proposition can be offered. The two main elements of the strategy are the environment and the communities. The environment includes resources and energy while the communities include local wellbeing, employment in areas that match the local skills, local economic development through planting seeds of industry green shoots that help regional development and thus supporting the existence of a sustainable market where the company can supply its goods and services.
There is an interesting point in the case of government agencies. The notion of good from the point of view of the role of the agency is the delivery of benefits to the society. This has been the case for most agencies. It sounds like a “duh” moment, but when you take a closer look, delivering benefits does not necessarily mean producing value. Value is generated only when benefits are delivered at the right cost, otherwise there is no value. In fact the focus on benefits rather than value is the cause of the current budgetary crises in local and federal governments in many countries. The benefits or even worse, the mere exercise of a function, while ignoring the cost, builds up losses after losses, hidden behind the positive news. In the wider context these benefits cost more and at the expense of other areas which will be underfunded and neglected. A government agency that chooses to focus on creating value by looking for opportunities in the same three areas will support society and environment in a sustainable way ensuring more equitable long term prosperity.
The shared value creation model is very appealing and it is increasingly applied by large companies with sufficient financial clout and intellectual capital. It is difficult to believe though that in general corporations will adopt this model consciously because “it is good”. The real driving engine is the necessity of managing the risk of losing reputation which threatens to destroy a company faster than many think is possible. BP almost collapsed during the disaster in the Gulf of Mexico.
The change is dramatic, but difficult. This is more so for listed companies which have a tortuous reporting cycle that forces the adoption of a short term vision. The change to a business that creates shared values is almost impossible. However the public pressure will “help” this transition. Because the reporting cycle required by sharemarkets around the world is an impediment, and most agree that it comes with negative consequences, it may be that we will see the dawn of a new investment system by which the pooling of capital will take place outside sharemarkets.
I am not referring to private equity but to a new way of public participation to enterprise ventures based on very fast global networks in which information is shared and large group of participants can take part in new start ups some of them as investors and others as creators. This new “shareholding” system is already being used to setup companies that have a different moral compass and that are made up of people who are more ethically advanced and conscious of our responsibility towards the fragile environment in which we live. This also means that people with superior societal skills, knowledge of environmental concepts, team work and creativity will be in high demand. The eco-social capitalism is here already.
Today Moody downgraded Japan’s outlook from stable to negative. I am not sure how many in the market are shocked by this news. Not many, I suppose. An interview on Bloomberg with a journalist from Kuala Lumpur was not much concerned with the news “shock” factor. However, the journalist looked a bit worried and he particularly picked on the tone in the language Moody used to announce the downgrade. In his view the word “inexorable” stands out and that is a strong warning signal. Japan is moving towards a moment of reckoning with its huge debt.
The interesting part of the interview was about why Japan cannot fix this problem, at least in the current political climate. For one, Japan is ageing fast. Many politicians are old and they will never adopt measures to hurt themselves and the ones closed to them and force measures that are going to drastically change the system.
And this brings me to a point that I thought of yesterday whilst pondering about a recent report on Japanese students’ apathy towards international studies. Japan has one of the most inflexible immigration policies in the developed world. Combine this with the negative population growth and the huge debt and the unwillingness to reform the political system and you get a lethal recipe. Stagnation is the word that comes to mind.
Japan had a vibrant economy for many decades after the Second World War. Starting from a very low level Japan grew at rapid pace to become the second largest economy in the world and leaders in many top industries. The Japanese worked very hard and had a dedication to discipline. The school system was designed with ambition to become the best system in the world that produces students with superior results in all universally accepted indicators.
Preparing students for a successful life, which sometime ago was defined as lifetime employment at the best Japanese companies, was demanding big sacrifices from parents and children alike. Studying during extra curriculum activities became the norm. A TV documentary caused consternation a few years ago in Europe and US when it showed young children studying all day until 10pm struggling to cope in a very competitive and stressful environment.
The results were impressive from the business point of view. Students who survived the tough school environment and excelled in their field were selected to become the leaders of tomorrow. The Keiretsu system helped their members to make sure they prosper and their workers had secure jobs for life.
All went well until the real estate bubble burst. Coincidently, at that time the world has entered the era of the internet and started to learn how to use the newly invented world wide web. The crash hit hard Japan because it came at a moment of demographic stagnation and the emergence of a new type of economy facilitated by the use of Internet. In the following years the deflation kept eroding the national wealth. The Keiretsu culture and the stagnating population level ensured that the deflationary period was to be extended for many years.
After a period of fast growth and population going through a hard schooling system, with extended deflation, high debt and almost zero immigration, what would Japanese society do and feel like? It is a question leaning on the soft side, I know. However, I think is an important one. Deflation is difficult to fight. It is slow and it spreads through many aspects of society influencing its behaviour. The question is about the background of the overall mood of the society.
In the new internet based economy, the term is a bit passé, but nevertheless useful in this context, the creative turmoil of Silicon Valley has started a global transformation with broad impact. This is the antithesis of rigidity. Creative entrepreneurship does not bode well with rigid schooling system. Challenging the norm has become the new norm. This is difficult to imprint into the Japanese disciplined system. This adds an extra challenge to its political leaders.
Japan has an obsession with its long term security. As an island nation, security has been a priority for a long time. With a strong culture, Japan has never embraced immigration like other nations did. Knowing that the ageing will become a social issue in a few years time, Japan is investing a lot of resources into developing robots that can be used in the household for all sorts of chores. It is interesting how many of the demonstrations run the scenario of helping old people, including robots carrying in their arms pensioners who have a high degree of immobility. The robots seem to be a solution for an ageing population that will face loneliness and a large debt burden in the future.
I wonder if in the long term the conservative tendency will not lead to a new period of isolation similar to Sakoku, the foreign relations policy initiated by Tokugawa started in 1633. In a business sense this does not seem plausible because Japan has many global companies, among the best in the world. However, these companies invest increasingly more overseas, especially in the emerging economies where the workforce is dynamic, hungry and creative. This trend could accelerate the isolation and strengthen the preference for maintaining a stable but rigid environment characterised by risk aversion and consequently limiting opportunities for growth.