Tag Archives: innovation

Obsolete social capital

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In preparing for a workshop on trust and the economy early next week, I picked up Robert Puttnam’s famous [amazon_link id=”0743203046″ target=”_blank” ]Bowling Alone: The Collapse and Revival of American Community[/amazon_link], which I read in 2000 and not since. It isn’t too hard to supplement Puttnam’s tale of declining mutual cohesion and understanding with the additional evidence of executive/financial greed during the mid-2000s boom and its aftermath.

[amazon_image id=”0743203046″ link=”true” target=”_blank” size=”medium” ]Bowling Alone: The Collapse and Revival of American Community[/amazon_image]

Of course, social capital has an ugly side, as Dalibor Rohac points out in an article in The Umlaut (which seems a very promising new magazine). It depends on the scope and aims of the group of people among whom there is social cohesion. In the presence of a tightly cohesive ‘in’ group, such as a mafia family, or predatory political party, or circle of corporate executives rewarding each other generously, it is just as well not to be a member of the ‘out’ group.

Still, economic policy requires ample social capital to the extent that it requires trade-offs between groups or over time between generations. People in general need to believe that even if a policy does nothing for them – or harms their interests – now, it will be worthwhile in the end. Puttnam concluded: “Over the last three decades a variety of social, economic and technological changes have rendered obsolete a significant stock of America’s social capital.” We need, he said, a new era of civic investment.

This challenge of building new institutions is a bit of an obsession of mine – it was my theme at FutureFest recently. If our stock of social capital has become obsolete, there’s nothing for it but to invest in new kinds of social institution. On optimistic days, I think there’s plenty of that going on, but it isn’t clear.

Update: Moments after posting, I read this excellent Scotsman article by John McTernan about trust in politics (lack of) and the ‘small battalions’ of party workers.

Predatory capitalism

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Isn’t all capitalism predatory, some contemporary critics might well ask, looking at the post-crisis economic landscape? Geoff Mulgan, chief exec of NESTA, is more optimistic in his recent book [amazon_link id=”0691146969″ target=”_blank” ]The Locust and the Bee: Predators and Creators in Capitalism’s Future[/amazon_link]. He foresees the possibility of sustainable economic growth built on relationships, with productive health and social care sectors, green innovation and social enterprise.

[amazon_image id=”0691146969″ link=”true” target=”_blank” size=”medium” ]The Locust and the Bee: Predators and Creators in Capitalism’s Future[/amazon_image]

It won’t be business as usual; instead we’ll see “concentrations of capital guided by social and environmental goals as well as commercial ones; circular production systems; the civil and social economy; the ever-growing social industries providing health care, education and support; the collaborations of cyberspace and new tools for collective intelligence; the household reasserting itself as a place of production; the worlds of parallel exchange systems, collaborative consumption and time accounts.”

This lovely vision of ‘creative capitalism’ is some distance from the ‘predatory capitalism’ that brought us the crash, and continues to serve up poor service at high prices to support executive pay packets. The book makes a good case that the dysfunction we’re all too aware of now is itself the dynamic that will change the character of the capitalism mixed economies we live in. Mulgan draws on the literature on technology-driven long waves to explain how cycles of change come about: every crisis contains the seeds of its own destruction, as it were. Of course there are forces of reaction, but he has a fundamental belief in the power of innovation and human creativity to overcome them. The chapters on these dynamics form the core of the book, and set out the dynamics very clearly.

This is cheering, but I’m not so sure. The book is excellent on the economic dynamics of innovation, but oddly quiet – certainly for such a politically-aware author – on the politics of changing ‘the system’. It discusses, and dismisses, the utopianism of anti-capitalist protest, but does not cover the forces of cynicism and inertia. Mancur Olson’s classic work on rent seeking and the political economy of elite predation (for example in [amazon_link id=”0674537513″ target=”_blank” ]The Logic of Collective Action[/amazon_link]) is cited briefly; this theme is underplayed. The predators are in a strong position. They are defended by a barricade of legislation, ways of doing business and social norms.

Take one small example of the ability to resist change: today’s FT reports that the drive to increase the proportion of women in the boardroom of FTSE companies has ground to a halt, might in fact be going into reverse. The reason is almost certainly that the method of recruitment remains the old boys’ network: incumbents and headhunters will say, with sincerity, they’d love to appoint more women, they make huge efforts to shortlist women, but there aren’t enough suitable candidates. But ‘suitable’ means known to them and with the same career path as a male candidate. Of course, nothing will change without a legal quota. What are the odds on getting that legislation? Indeed.

Now pan out, and think about the legal and regulatory changes needed to open large swathes of the economy – banking, transport, pharmaceuticals, farming & agricultural trading – to the innovative start-ups that are indeed, as the book suggests, all around.

So although I like the vision set out in [amazon_link id=”0691146969″ target=”_blank” ]The Locust and the Bee[/amazon_link], and like Geoff Mulgan am encouraged by the opportunity offered by the crisis and inherent dynamics, it’s time to plunge into the legal and political nuts and bolts of turning predation into creation.

The idea of progress

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A while ago I started reading [amazon_link id=”1451695764″ target=”_blank” ]Abundance: Why the Future is Better than You Think[/amazon_link], by Peter Diamandis and Steven Kotler, only to put it down part way through. It’s very readable but has a rather breathless tone which put me off. It also covers the same kind of territory of techno-optimism as the excellent [amazon_link id=”1846683572″ target=”_blank” ]An Optimist’s Tour of the Future[/amazon_link] by Mark Stevenson and [amazon_link id=”0007267126″ target=”_blank” ]The Rational Optimist: How Prosperity Evolves[/amazon_link] by Matt Ridley – even some of the examples overlap. And it has some of the environmental optimist flavour of Mark Lynas’s [amazon_link id=”000731342X” target=”_blank” ]The God Species: How the Planet Can Survive the Age of Humans[/amazon_link]. Having said this, I finished Abundance yesterday and did enjoy it.

[amazon_image id=”1451695764″ link=”true” target=”_blank” size=”medium” ]Abundance: The Future Is Better Than You Think[/amazon_image]

It is important to point out that for all the well-founded economic and environmental and political gloom in so many countries at present, there has been huge progress over our lifetimes in things that matter to us, from improved longevity and health to smartphones and low-energy lightbulbs. And that there is at present an amazing array of technological discoveries close to commercial potential – all of the innovations covered in these titles in what could be described as the techno-optimism genre.

It’s all the more important as there’s a countervailing techno-pessimism genre, including Brynjolfsson and McAfee’s [amazon_link id=”B005WTR4ZI” target=”_blank” ]Race Against the Machine[/amazon_link] arguing that innovation is making people redundant, a theme picked up by Paul Krugman in his column Rise of the Robots this week, with as a side-branch Robert Gordon asserting that innovation-driven growth is over anyway.

Why is it important to be optimistic? Because expectations about the future shape today’s decisions. Paul Krugman himself demonstrated this in a marvellous but little known 1991 QJE paper on endogenous growth theory, History Versus Expectations (pdf), showing that growth outcomes depend on expectations of a promising future outweighing the disappointments of the past.

History casts a long shadow unless the future shines a bright light. Progress only occurs when people believe in the idea of progress.

Having said that, the techno-optimists can lack important nuance. Abundance is a good example of that shortcoming. The authors allow no room for doubt, and give no space to questions such as how the investment required for the innovations they describe will be financed, how innovators will succeed when incumbents have so many relevant markets sown up, where the complementary infrastructure will come from, and how politics will navigate the sharing of costs and benefits. So I prefer (not surprisingly) my own (2001) formulation of the ‘[amazon_link id=”1587990822″ target=”_blank” ]Paradoxes of Prosperity[/amazon_link]’.

I don’t want to sound too down on Abundance just because I happen to have read some other similar books. It has loads of good nuggets of information and soundbites. For example:

“When seen through the lens of technology, few resources are truly scarce; they’s mainly inaccessible.”

“Human beings are designed to be local optimists and global pessimists.” (We are more optimistic about thing we think we can control, think we’re all more intelligent and better drivers than average etc. – although global pessimism is what helps impending disasters become self-averting. Was there a genuine Y2K problem or not?)

I was interested to learn that India has switched from being a major importer to a major exporter of cotton thanks to GM varieties.

I also really liked, for personal reasons, Bill Joy being quoted on the ‘dematerialisation’ being brought about by modern technologies. In 1996 I published The Weightless World (pdf), which used the fact that the economy of 1990 literally had no greater physical mass than the economy of 1980, thanks to minaturisation and the use of new materials and the switch towards services. Bill Joy has updated this by pointing out that one smartphone is now a phone, camera, TV screen, radio, web browser, tape recorder, range of books etc.

So, if you know someone who’s feeling – not surprisingly – pessimistic about the state of the world, you should give them one of the techno-optimism books as a seasonal gift. Cheering up the population one person at a time until we collectively believe in the possibility of progress again is an important civic duty.

[amazon_image id=”1846683572″ link=”true” target=”_blank” size=”medium” ]An Optimist’s Tour of the Future[/amazon_image]

A Great British success story

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One of the activities in which the UK has a comparative advantage is creating video games – maybe this shouldn’t be at all surprising in a country with an illustrious history of creativity of all types. A new book, [amazon_link id=”1845137043″ target=”_blank” ]Grand Thieves and Tomb Raiders: How British Video Games Conquered the World[/amazon_link] by Magnus Anderson and Rebecca Levene, describes its accidental growth.

Part of the story involves the deliberate policy of encouraging innovation in personal computers. The Sinclair ZX Spectrum and the BBC Micro play a key role in the development of today’s games industry. As the book notes, “These home-grown machines democratised access to computers and made simple programming skills commonplace – for a while Britain may have been the most computer literate country in the world.” So a key lesson there for the debate about teaching coding skills in schools now.

Just as interesting, though, is the grassroots nature of the early days of the industry. “In the early 1980s the British games market saw one of the most spontaneous, fragmented and lively proliferations of creativity in its history …. British gaming didn’t feel at all corporate: it was ad hoc, unstructured and rather parochial.” Professionalisation followed reasonably quickly, but my reading is that this unstructured and chaotic phase was vital.

This book is based mainly on interviews with key people in the industry. It’s a fascinating business history, that ends up with the Raspberry Pi, whose founders are hoping to repeat the burst of creativity Britain enjoyed in the 1980s. “There’s a fierce hope that the traits that first inspired the British games industry – passionate home coders, a market flourishing with ideas – are robust enough to take hold again.”

[amazon_image id=”1845137043″ link=”true” target=”_blank” size=”medium” ]Grand Thieves & Tomb Raiders: How British Videogames Conquered the World[/amazon_image]

Innovation – in English

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Yesterday I posted about an excellent book, Katherine Boo’s [amazon_link id=”1846274494″ target=”_blank” ]Behind The Beautiful Forevers[/amazon_link]. I found two new English words there, I think specifically Indian innovations. One was ‘overcity’ – the Mumbai where the rich and powerful live, in contrast to the slum where the book is set. The other ‘by-hearting’, the learning by rote of school work.

It reminded me of another magnificent word, ‘pre-poning’. This is the opposite of postpone. Instead of putting something off until later, you bring it forward. It was used by the Indian telecoms regulator in announcing that the deadline for submitting bids for a spectrum auction was going to be far earlier than most potential bidders had previously thought.

[amazon_image id=”1846274494″ link=”true” target=”_blank” size=”medium” ]Behind the Beautiful Forevers: Life, Death and Hope in a Mumbai Slum[/amazon_image]

Time to go and pre-pone my lunch….