Amidst all the problem-solving talk around world poverty, hunger and global warming, there is a recurrent (though admittedly smaller) theme of the role of business and the changing nature of business organisations.
There’s a sense that business – private business – is a key part of the solution. That this is where the change will come.
Like a pattern of fractals opening out, there’s the idea that if private business can re-define itself, the greater world, the bigger picture, will also benefit (how’s that for an incentive)?!
If business just focused on the small detail of getting its own house in order, of creating effective internal communications, of treating employees like people, of generally ‘doing things right’, then maybe greater change can occur.
So how do we go about creating this positive ripple-effect?
I’ve been a fan of Umair Haque ever since I heard him at a Chinwag event earlier this year. Umair has a book out soon which I presume will be around his current theme of ‘Constructive Capitalism’ (all to do with ‘hacking’ the industrial economy and changing our ‘business DNA’).
Umair believes we’re at the beginning of an economic enlightenment. Here are some of his key points:
- We didn’t have much creative destruction until about 1800 and the start of the Industrial Revolution. Since then, there’s been incremental growth until today, where we’re seeing an explosion.
- The costs of this trade-off aren’t sustainable. Poverty levels in Africa are rising, shanty towns in Brazil are growing, obesity in western countries is at an all-time high.
- Social capital – the percentage of people who trust each other and then go onto spread this goodwill to others in the community – has gone down.
- These are all costs of creative destruction.
- Do the benefits of creation really outweigh the costs of destruction?
- Industrial era economic thinking has reached a stalemate because what we gain in one area (eg, financial, intellectual), we lose in another (eg, human, natural resources).
- The only sustainable value is authentic value. If we build firms around that kind of ideal, then they will compete to minimize the costs of production.
- The four forces of constructive capitalism are co-production, co-creation, co-value (sharing the benefits – generousity!) and co-management (co-ordination). (I’m hoping to chat more to Umair about co-management and explore this whole topic more fully).
- The original point behind the setting up of institutions (circa 1800) was that we’d be insulated from the outside world. This is no longer the solution. It’s time to re-think, re-design and reconnect.
- Markets, networks and communities can organize resources more efficiently than firms.
- These models are popping up in ‘weird spaces’ – eg, in Open Source and also in large multinationals like Walmart, Starbucks and Google.
- Google is a cross between a network and a market. It’s not beholden to its shareholders. Google has been set up to insulate itself against its public shareholders (but not necessarily the public at large).
- People can’t be co-erced any more. The only thing that can motivate people is ideals.
- Managing the world’s energy, hunger, thirst, health, education, finance and freedom – these will be the growth industries of the next ten years.
- He’s not anti-capitalist: capitalism is the greatest poverty reduction method we have – but the way that capitalism operates is changing.
- The problem is that, from the charity point of view, we don’t like to think we can make money out of these things; from the business point of view, we don’t tend to think that these things are profitable. But capitalism will solve this thing on its own.
- Umair spent a lot of time working at the World Bank, but the World Bank is not flexible or fast enough to make the right sort of difference.
- The change will come from private companies – although the institutions themselves have to change. We will need a very different type of firm, a very different kind of governance – and that’s the change that’s starting to happen.
There are arguments against this kind of gentle ‘renaissance’ – a voice at the back of Umair’s session argues that we need something ‘massively disruptive’ for the capitalist model to change at all.
Nico Macdonald (Spy) feels that Umair is jumping on a fashionable bandwagon of not believing in progress any more, and that there is a disconnect with the historical body of work critique-ing capitalism (from Marx onwards).
In fact Umair and Nico are locked in deep discussion for some time after the session has officially ended. Shame there wasn’t a live feed!