Tuesday, July 15, 2003


More Food for Thought.

Source: Escapable Logic

The Meritocracy Dilemma

It's not confusing to most folks, but it bothers me a lot. The conventional wisdom is that we've got the best of all worlds–freedom to innovate and be a winner, in a free-market orgy of talent and capital and consumers. The only problem with the dance is that it's so hard to find anybody that's actually made it work for them. Even those who seem to have it made will–with little prompting–spill out a tangled web of possessions and obligations and stresses that are suffocating them. And for most of the few who have made it without an ulcer or a coronary, there's been a lot of history that they don't want their kids at boarding school to know much about.

Managerial Capitalism - the Rule of Meritocracy

Free-market capitalism is neither aristocracy or democracy. Its special "ocracy" is meritocracy – those who are most able rise to the top of the pecking orders of multi-national corporations and their management teams, not determined by any static biases of family, ethnicity, national origin or even gender. But the lack of those perceptible biases doesn't mean there's a lack of bias. The bias is for a special blend of intelligence and energy called merit. Most of the significant wealth is managed by corporations which need a steady supply of hungry young tigers with big brains and bigger egos to attack markets and destroy competition and launch killer products to conquer market segments. It sounds as brutal as feudalism. The expendable foot soldiers of these campaigns are people from the same social classes as those who rise to the top. The difference may be in their genes–their hearts don't seem to be in the unending fight–and at some level they know they're expendable as soon as a wave of re-engineering or acquisition dictates. There's been a steady increase in the level of commitment, intelligence, energy, ambition and ruthlessness required to rise to the top of any corporation, so the few who make it are reaping greater rewards compared to the people who fight in the trenches. And that's why they're in the game.

Money, not nobility, is the only way to differentiate oneself from the run-of-the-mill. The stock market wealth engine has reduced the process to a formula: Own stock or options in a company; build the company (perhaps from scratch); buy another company or be bought out; own stock and be perceived as instrumental in building the new organization; buy another company or be bought out... That process builds the winner's web of wealth. Stock is never given out of generosity, so folks who don't negotiate hard have a more constrained web of wealth. If they are downsized, they are separated from their web of wealth, perhaps before they have any significant bit of other people's productivity.

Meritocracy's profound, counter-genetic shift

Historically, those chieftains who were woven into a web of wealth maintained a web of support for the many whose productivity they laid claim to. In our time, technology means that more productivity does not mean more workers. The genetically based contract - that the powerful protect the weak in exchange for their productivity - has broken down. It would never occur to a king or noble (or silver-backed gorilla) to estrange a loyal and hard working serf simply because there were harder-working serfs. This all changed with the pervasive application of the Net Present Value calculation.

With no alternative in sight and general agreement that capitalism won the battle of the isms, no one seems to see any alternative but to keep carrying a heavier load each year, like the farmer carrying a calf around each day until he falls under an unsupportable load of bull.

Perhaps this is not the final system. Perhaps there's life after meritocracy, especially when one observes that the products and services produced by the meritocrats are not always satisfactory. Just because these hard-charging companies are defeating each other in the market doesn't mean they're winning customers' hearts and minds. There's something about large organizations which squanders most of the participants' time and energy in producing motion rather than progress. Too often, they seem as competitive with customers as they are with competitors, designing byzantine structures to lock a customer into a complex dependency when all the customer wanted to do was surf the net or call home.

Some day we may discover that our suspicions were correct, that, during the years surrounding the beginning of the third millennium, only 10% of our efforts were producing value but we were going crazy with the cultural and economic myths surrounding that 10% of our effort. All it took was to change the work protocols slightly and people once again were able to turn most of that wasted 90% into a real life.

I believe that Xpertweb provides those protocols, but we shall see.


The Tyranny of Net Present Value

All capitalism is based on a single strategic algorithm: calculating the Net Present Value (NPV) of a series of expected cash flows by discounting each cash flow (cf) by a percentage (discountRate) over time:

NPV=cf1*(1-1*discountRate)+cf2*(1-2*discountRate)+...cfn*(1-n*discountRate)

Why would this dry formula be so important to every one of us?

The NPV calculation lies at the center of all resource allocation decisions

You may resent it, but all your economic possibilities are defined and constrained by this simple calculation buried in the computers of people you will never meet. It is what they are talking about when people say "Follow the money."

The greatest civilization in the history of civilization has been reduced to this single formula. If in the beginning was the Word, then in the end there's only the Net Present Value formula. With it, managers and financiers and governments and pension plans compare any set of cash flows to any other set. Then they sell the lower one and purchase the higher one. Even though it ignores the sweep and drama of the rise of civilization, it's a democratic yardstick. It's also the basis of meritocracy.

It is the process of "capitalizing" every cash flow, whether it's an inflow (customer payments and collections, bond yields, corporate earnings) or an outflow (employee salaries and benefits, supplier payables, social security payments). Corporate managements have an uneven track record in growing their revenues but they are masters at reducing their expenses and making optimistic forward-looking statements. A company's stock market valuation is some multiple of forecast earnings. To increase the value of the shareholders' (i.e., management's) stock holdings and options, the best strategy is to reduce expenses, which appears to instantly increase earnings. As available capital exploded in the 20th century, every discernible cash flow opportunity in the economy showed up on someone's radar screen and was targeted for assimilation or annihilation, whether it's mom & pop retail sales in rural Arkansas (a Wal-Mart opportunity) or a 48 year-old engineer at Chevrolet (a GM expense).

The logic of meritocracy says that an engineer may be a star at 27 but a liability at 48. This is the basis of the pervasive, subconscious grievance against meritocracy, even when it's not framed in those terms. The conventional wisdom of the age is that everyone needs to re-train themselves on a moment's notice to become a software programmer or help line staffer or home health care specialist.

The question is, what is the obligation of an economy to consider and support the preferences of the majority of its participants? Naturally, the "moving hand" school of thought is that the market economy is driving all these choices, and complaining about it is unreasonable, as G.B. Shaw pointed out. Even if individuals can adapt as quickly as proposed and remain employable, they are repeatedly separated from their last company's web of support and their only opportunity for a web of wealth–often, it's obvious, by intention.

I have no answers for the meritocracy dilemma, but it's obvious we have an economy that freezes out most of its participants. The resentment's not boiling, but it's building. That inequality has been embraced and extended by most decision makers in our government, and they seem to think it can go on forever without repercussions.

We shall see. [Escapable Logic]


7:48:38 AM    trackback []     Articulate [] 

Here is some food for very deep thought. I wonder what will cause or create "the situation demands it, when there is no alternative."?

Source: How to Save the World

THE FIVE ELEMENTS: REMAKING OUR CULTURE TO CHANGE THE WORLD.

windmill Change is hard. It's counter-cultural. It only occurs on any large scale when the situation demands it, when there is no alternative . We are now living in a world where huge change is needed, but the awareness that there is no alternative has not yet reached public consciousness. Like the frog immersed in water that is slowly but inexorably increasing in temperature, we are unaware that we are dying a horrible death by tiny increments.

To prevent this requires a fundamental change in our culture, in the prevalent behaviours that have defined us for thirty millennia. Culture change does not occur by revolution, it's not something that can be imposed by law or persuasion or even a massive shift in public will. It is evolutionary , it is viral, it occurs viscerally, instinctively in response to an external threat or extraordinary opportunity. The profound changes that brought about, and were in turn wrought by, human agriculture, animal domestication, mass-production and antibiotics are examples of this.

Evolutionary doesn't necessarily mean slow. As the indomitable Freeman Dyson has argued, where there is awareness, even by a small but empowered minority, of the need for change, evolutionary changes can be introduced quickly and effectively, even in the absence of popular consensus, or even in the face of popular opposition. The abandonment of three million years of hunter-gatherer culture by our ancestors a mere thirty thousand years ago, in favour of the incredibly interdependent, fragile and sedentary culture that replaced it, was certainly viewed as horrific, unnatural, wrong, to most of those ancestors. It succeeded not because if was popular, or even acceptable, to those that adopted it, but simply because it worked, and the old culture didn't anymore .

That's where we are now, again. We need the same degree of focused, subversive effort to build a new culture that works, and show this, as a scalable pilot, to the rest of the world. When the rest of the world sees that the old culture by contrast doesn't work, or, in today's language, is unsustainable, they will join the new culture. Build it and they will come. Don't tear down the old culture, create a new one that supplants, undermines the old, replaces it from within.

The new culture this time around must have five features that are astonishingly different from those of today's prevalent culture:
  1. A New Business Driver: The driver for the new culture's businesses, its economic enterprises, must be the well-being of its members, not growth and profit for its shareholders. The old business model has become completely dysfunctional, pitting us as citizens against us as shareholders. It's now the tyrannical handmaiden of elite greed instead of the servant of common public interest, as it was originally intended.
  2. A New Population Ethic: We are naturally programmed to want to have many children, so that a couple of them  will live long enough to propagate the species. With new medical and reproductive technologies, we have changed the world to the point that having no more than one child is the best way to ensure the healthy propagation of our species. In educated societies we are already there, but massive immigration between uneducated societies and educated ones is preventing this ethic from taking hold quickly and broadly enough. We need to have the courage to make having more than one child socially unacceptable. Not illegal, and not unaffordable (that just makes it unacceptable to the poor). Never underestimate the power of social norms (just talk to any smoker).
  3. A New Energy Economy: The principles of the new energy economy will be renewability and self-sufficiency. Our present economy ties us to a power 'grid' and makes us utterly dependent on foreign energy supplies. The consequence of this has been excessive energy consumption and waste, military adventures strictly to protect oil 'interests', and massive political corruption in countries that rely utterly on other countries' insatiable thirst for their energy. The pioneers of the new energy economy will innovate and use renewable wind and solar energy sources, capture the energy using new hydrogen-cell technologies, and demonstrate the political and economic liberation that comes from freeing your community from dependence on the 'grid'.
  4. A New Trade Economy: The myths of 'free' trade and globalization are quickly unraveling. Unregulated trade, and the extraterritorial laws that diminish local authority that come with it, lead to a host of dysfunctional results: massive local unemployment as jobs are exported to countries with low wages, non-existent labour laws and dreadful environmental laws, the importation, with wasteful and unnecessary transportation costs, of shoddy foreign products made without standards into countries that used to make these same products locally (and better), the forced dismantling of progressive labour and environmental codes, the replacement of overt production subsidies and protections with politically-motivated, politically-extracted hidden subsidies and protections, and the absurd dislocation of local agricultural and manufacturing production in favour of inferior foreign 'coals-to-Newcastle, corn-to-Mexico' imports that the dislocated local workers can no longer afford to buy. The governing principle of the new trade economy is simple: Import nothing that can reasonably be produced locally. If we all refuse to buy foreign goods that could be made domestically, everyone will win. 
  5. A New Conservation Ethic: We currently make it hard for people to conserve. Recycling takes time and is awkward. Buying stuff in bulk is inconvenient. Bicycling to work in most of the world is not only uncomfortable, it's dangerous, and logistically impossible. 'Common' property is neglected, to the point no one takes pride in it, so it becomes unusable, and everyone has to have their own private everything , even though they use most of these things rarely. A conservation ethic means making it easy to conserve, not making it illegal or expensive to waste. That means investing big time in public infrastructure -- parks, transit, bicycle paths -- to ensure it is high-quality, efficient, and a pleasure to use. It means making the reuse and recycling of materials easier than throwing stuff out -- door-to-door pickup and delivery, reusable containers that are attractive, lightweight and convenient, hygienic, omnipresent 'refilling' stations that dispense products at a cost that is a fraction what over-packaged 'disposable' individual portions cost. And just as we need to make having many children socially unacceptable, we need to make unnecessary waste, excessive consumption and unwarranted private ownership socially unacceptable -- greedy, thoughtless, and antisocial. We need to make disposable a dirty word.
All of these things are happening, to some extent, with varying degrees of success, and with almost as many steps backward as forward, today. But they aren't happening in a cohesive manner.

We all live in several physical and virtual communities: the one we make our living in, our family, our neighbourhood, and our communities of interest. Because business is so pervasive today, I believe that what I call New Collaborative Enterprises (NCEs), which exemplify change #1, are absolutely essential to creating the new culture we need. If their business purpose is renewable energy production NCE's can also contribute to change #3. They can espouse the principle of change #4 in their purchasing decisions and the principle of change #5 in their production activities.

In our families and neighbourhoods we can organize programs as citizens and consumers to advance change #3 (co-operative buying of renewable energy is now available to consumers in many areas), change #4 (by simply refusing to buy imported goods unless they're absolutely essential and can't possibly have cost local people their employment), and change #5 (by not only reusing and recycling, but agitating and lobbying and writing and talking to others about what needs to be done to improve public infrastructure and make conservation easier). And we can be a little more overt (not rude or confrontational) about expressing our view that large families, unnecessary waste, conspicuous consumption and extravagant private property are immoral in today's world.

Each of these five changes will ultimately reach a Tipping Point . Our future depends on how quickly they get there. Each one of us, in how we make our living, how we raise our families, how we live our lives, and how we spread the word, can play an important role in getting us there faster. Together we can change the world.
[How to Save the World]
7:14:43 AM    trackback []     Articulate []