Tag Archives: Organization

Evidence for Tribalism in Economics

While economists like to pretend otherwise, humans are social animals.
By Blair Fix – The ideal of science is beautifully summarized by the motto of the Royal Society: nullius in verba. It means ‘take nobody’s word for it’. In science, there is no authority. There are no gods, no kings, and no masters. Only evidence.

In this post, I reflect on how ‘taking nobody’s word for it’ cuts against some of our deepest instincts as humans. As social animals, we have evolved to trust members of our group. Among these group members, our instinct is to ‘take their word for it’. I call this the ‘tribal instinct’.

When we do science, we have to fight against this tribal instinct. Not surprisingly, we often fail. Rational skepticism gets overpowered by the instinct to trust members of our group. If the group happens to be powerful — say it dominates academia in a particular discipline — then false ideas get entrenched as ‘facts’.

This is a problem in all areas of science. But it’s a rampant problem in economics. The teaching of economics is dominated by the neoclassical sect, which has managed to entrench itself in academia. Among this sect, I believe, tribal instincts trump the rational appeal to evidence. more>

Do civilisations collapse?

By Guy D Middleton – We also need to think about what we apply the term ‘collapse’ to – what exactly was it that collapsed? Very often, it’s suggested that civilizations collapse, but this isn’t quite right. It is more accurate to say that states collapse. States are tangible, identifiable ‘units’ whereas civilization is a more slippery term referring broadly to sets of traditions. Many historians, including Arnold Toynbee, author of the 12-volume A Study of History (1934-61), have defined and tried to identify ‘civilizations’, but they often come up with different ideas and different numbers. But we have seen that while Mycenaean states collapsed, several strands of Mycenaean material and non-material culture survived – so it would seem wrong to say that their ‘civilization’ collapsed. Likewise, if we think of Egyptian or Greek or Roman ‘civilization’, none of these collapsed – they transformed as circumstances and values changed. We might think of each civilization in a particular way, defined by a particular type of architecture or art or literature – pyramids, temples, amphitheatres, for example – but this reflects our own values and interests.

It is the same with the Maya and with the Easter Islanders. In both cases, civilization and state have been confused and conflated. The Maya world was spread across a huge area with many different environments, from the dry northern Yucatán Peninsula to the river-fed lowlands in the south, and beyond into the mountains. It was an old and interconnected world of cities and kings, divided up among super-states of wide influence and more modest kingdoms that could fall under their spell. There were probably 60 to 70 ‘independent’ states; the fortunes of all waxed and waned. It was a bigger and more complex world than Late Bronze Age Greece.

he idea of a collapse of Maya civilization seems just wrong – and it carries with it the wrong kind of implications – that the Maya all disappeared or that their post-collapse culture is less important or less worthy of our attention. Via many individual collapses, Classic Maya society transformed through the Terminal Classic and into the Postclassic – a development that is hardly surprising when compared with the changing map of Europe across any five-century period. Maya society continued to change with the arrival of the Spanish, and through the colonial and modern eras. If we value the Maya’s so-called Classic period more than their culture at other times, this is our choice – but it is one that should be recognized and questioned. more>

The international order after COVID-19

By Robert Malley – Running parallel to the global battle against the coronavirus pandemic is a tug of war between two competing narratives about how the world ought to be governed. Although addressing the pandemic is more urgent, which narrative prevails will have equally far-reaching consequences.

The first narrative is straightforward: a global health crisis has further demonstrated the need for multilateralism and exposed the fallacy of go-it-alone nationalism or isolationism. The second narrative offers the counterview: globalization and open borders create vulnerabilities to viruses and other threats, and the current struggle for control of supply lines and life-saving equipment requires that each country first take care of its own. Those in the first camp regard the pandemic as proof that countries must come together to defeat common threats; those in the second see it as proof that countries are safer standing apart.

At first blush, COVID-19 seems likely to corroborate the argument for a more coordinated international approach. Given that the coronavirus does not stop at national borders, it stands to reason that the response should not be constrained by them either.

This makes perfect sense from a public health perspective. If COVID-19 persists anywhere, it will remain an incipient threat everywhere, regardless of efforts to wall it off. The more widely that testing kits and, when discovered, treatments and vaccines, are distributed, the faster the pandemic will be vanquished. The more that scientific knowledge is shared, the faster those drugs will be developed. And, in the meantime, the more that governments coordinate on matters such as travel restrictions and social distancing, the smoother the exit from this crisis. more>

Limited liability is causing unlimited harm

The purpose of limited-liability protection was to encourage investment in corporations, yet it has evolved into a source of systemic market failure.
By Katharina Pistor – In a recent tweetOlivier Blanchard, a former chief economist of the International Monetary Fund, wondered how we can ‘have so much political and geopolitical uncertainty and so little economic uncertainty’. Markets are supposed to measure and allocate risk, yet shares in companies that pollute, peddle addictive painkillers, and build unsafe airplanes are doing just fine. The same goes for corporations that openly enrich shareholders, directors and officers at the expense of their employees, many of whom are struggling to make a living and protect their pension plans. Are markets wrong, or are the red flags about climate change, social tensions, and political discontent actually red herrings?

Closer inspection reveals that the problem lies with markets. Under current conditions, markets simply cannot price risk adequately, because market participants are shielded from the harms that corporations inflict on others. This pathology goes by the name of ‘limited liability’, but when it comes to the risk borne by shareholders, it would be more accurate to call it ‘no liability’.

Under the prevailing legal dispensation, shareholders are protected from liability when the corporations whose shares they own harm consumers, workers and the environment. Shareholders can lose money on their holdings, but they also profit when (or even because) companies have caused untold damage by polluting oceans and aquifers, hiding the harms of the products they sell or pumping greenhouse-gas emissions into the atmosphere. The corporate entity itself might face liability, perhaps even bankruptcy, but the shareholders can walk away from the wreckage, profits in hand.

The stated justification for limited liability is that it encourages investment in—and risk-taking by—corporations, leading to economically beneficial innovations. But we should recognize that sparing owners from the harms their companies cause amounts to a hefty legal subsidy. As with all subsidies, the costs and benefits should be reassessed from time to time. And in the case of limited liability, the fact that markets fail to price the risk of activities that are known to cause substantial harm should give us pause. more>

Collaborators in creation

Our world is a system, in which physical and social technologies co-evolve. How can we shape a process we don’t control?
By Doyne Farmer, Fotini Markopoulou, Eric Beinhocker and Steen Rasmussen – This is a disorienting time. Disagreements are deep, factions stubborn, the common reality crumbling. Technology is changing who we are and the society we live in at a blinding pace. How can we make sense out of these changes? How can we forge new tools to guide our future? What is our new identity in this changing world?

Social upheavals caused by new technologies have occurred throughout history.

Cultural institutions are also a kind of technology – a social technology. Just as physical technologies – agriculture, the wheel or computers – are tools for transforming matter, energy or information in pursuit of our goals, social technologies are tools for organizing people in pursuit of our goals. Laws, moral values and money are social technologies, as are ways of organizing an army, a religion, a government or a retail business.

While we are fascinated and sometimes frightened by the pace of evolution of physical technologies, we experience the evolution of social technologies differently. Our values, laws and political organizations define and shape our identities. We often regard those who use different social technologies – people from different cultures, regions, nations, religions or those with different values and beliefs – as ‘others’.

When social technologies change too quickly, we experience a loss of identity, a collective confusion about who we are and how we distinguish ourselves from others. But when social technologies change too slowly, this can create tensions too – for example, when political institutions fail to keep pace with wider changes in society.

Physical and social technologies co-evolve all the time, pushing and pulling on each other. The influence is in both directions. Physical and social technologies are so entangled that it can be hard to separate them.

What drives technological change? In many popular narratives, invention is an act performed by heroes such as Thomas Edison and Tim Berners-Lee. In reality, technological change comes about through an incremental process that involves a great deal of trial and error, and networks of people working in ecosystems of innovation. Technological change is an evolutionary process, very much like biological change is an evolutionary process. more>

Updates from McKinsey

The drumbeat of digital: How winning teams play
Pace and power go hand in hand for digital leaders, which typically run four times faster and pull critical strategic levers two times harder than other companies do.
By Jacques Bughin, Tanguy Catlin, and Laura LaBerge – Most executives we know have a powerful, intuitive feel for the rhythm of their businesses. They know how hard and fast to pull strategic levers, move their organization, and drive execution to achieve their objectives. Or at least they did. Digitization has intensified the rhythm of competition in many industries, leaving executives adrift, with information-gathering systems that are too slow or disconnected, direction-setting approaches that are too timid, and talent-management norms that are misaligned and incremental.

These leaders know their companies must adjust and accelerate. Digital is putting pressure on profit pools as it transfers an increasing share of value to consumers. Furthermore, those profit pools are bleeding across traditional industry lines as advanced technologies enable companies to forge into adjacencies, changing who in the value chain is making money, what share of the pie they capture, and how. The slow and inefficient are left behind, competing for scraps.

What is unclear to these executives, however, is how much and how fast to adapt their business rhythms. The exhortation to “change at the speed of digital” generates more anxiety than answers. We have recently completed some research that provides clear guidance: digital leaders appear to keep up a drumbeat in their businesses that can be four times faster, and twice as powerful, as those of their peers.

You can’t quicken the pace of an organization by fiat. You have to build it by accelerating the frequency of manageable practices that are integral to achieving key goals, such as serving the customer or driving internal efficiency. These “light-touch” actions are low risk and low investment, but they can provide high-yield returns. We have grouped them into two buckets that can help mold incumbents into digital players.

How often does your organization analyze customer data to look proactively for new ways of delighting your customers?

How frequently do your senior business leaders take time to investigate and understand new digital technologies so that they recognize which ones are truly relevant to their areas of the business?

How quickly and consistently does your company share lessons acquired from test-and-learn experiments performed by those on the front lines? more>

This is the one secret to managing an organization

By Maynard Webb – It’s all about people. You don’t have anything if don’t have great people doing great things.

So, what’s the secret? You have to have conviction about what you are doing. You have to have a mindset that says you are doing something amazing and exciting and people will want to be a part of it. In order to attract people to your endeavor, you must believe that it’s an incredible opportunity for others and you must execute and deliver on that promise.

Always be on the lookout for great people, and do so with a mindset of abundance. People are yearning for good opportunities and you have the privilege of being able to offer them a chance. See what you have as what’s scarce—a rare and special opportunity. Instead of thinking of hiring as chore, see it as a gift that can change someone’s life.

Always pick and promote people who will help you and your culture grow.

Don’t eliminate people because they don’t seem like a “culture fit”—embrace differences and stay rigorously focused on the cultural attributes that actually define your company. more>

No, Productivity Does Not Explain Income

Marginal productivity is a thought virus that is sabotaging the scientific study of income.
By Blair Fix – Did you hear the joke about the economists who tested their theory by defining it to be true? Oh, I forgot. It’s not a joke. It’s standard practice among mainstream economists. They propose that productivity explains income. And then they ‘test’ this idea by defining productivity in terms of income.

The marginal productivity theory of income distribution was born a little over a century ago. Its principle creator, John Bates Clark, was explicit that his theory was about ideology and not science. Clark wanted show that in capitalist societies, everyone got what they produced, and hence all was fair.

Clark was also explicit about why his theory was needed. The stability of the capitalist order was at stake!

Clark created marginal productivity theory to explain class-based income — the income split between laborers and capitalists. But his theory was soon used to explain income differences between workers.

In the mid 20th century, neoclassical economists invented a new form of capital. Workers, the economists claimed, owned ‘human capital’ — a stock of skills and knowledge. This human capital made skilled workers more productive, and hence, made them earn more money. So not only did productivity explain class-based income, it now explained personal income.

Given the problems with comparing the productivity of workers with different outputs, you’d think that marginal productivity theory would have died long ago. After all, a theory that can’t be tested is scientifically useless.

Fortunately (for themselves), neoclassical economists don’t play by the normal rules of science. If you browse the economics literature, you’ll find an endless stream of studies claiming that wages are proportional to productivity. Under the hood of these studies is a trick that allows productivity to be universally compared. And even better, it guarantees that income will be proportional to productivity. more>

Europeanization from below: still time for another Europe?

By Donatella Della Porta – Progressive social movement organizations have long been critical of the European Union—and progressively more so. Yet at the same time they have sought to promote ‘another Europe’.

They Europeanized their organizational networks and action strategies, developing cosmopolitan identities.

Research on social movements and Europeanization had indicated a move away from protest towards advocacy, understood as an adaptation of movements to EU structures. But there was also evidence of a repoliticization of EU issues, which saw the selective use of unconventional, protest-oriented strategies among groups forming part of the GJM (global justice movement).

The increasing criticism of existing EU institutions has targeted their democratic deficit, perceived as worsening during the financial crisis and counterposed to national sovereignty, but also their policies, perceived as less and less driven by considerations of social justice and solidarity. There has been criticism too of the definition of Europe as an exclusive polity, with proposals to go instead ‘beyond Europe’. more>

Updates from Ciena

Tomorrow’s cities: evolving from “smart” to Adaptive
Cities are going smart – trying to deal with the proliferation of people, sensors, automobiles and a range of devices that demand network access and generate mind-boggling amounts of data. However, being smart is not an instance in time, and a “smart city” is not static. To be worthy of the name, a smart city must continually evolve and stay ahead of demand. This is only possible if the city’s underlying network is just as smart and can adapt to its constantly changing environment.
By Daniele Loffreda – Cities are constantly in flux. Populations move in; populations move out. Demographics change, economic growth falls and then soars. New leadership steps in and—if you believe all the commercials—technology will make everyone’s life better.

Municipal governments understand the need to consider which smart city applications will best serve the demands of their diverse demographic segments. The City of Austin’s Head of Digital Transformation, Marni White, summed up these challenges stating, “Our problems will continue to change over time, so our solutions also need to change over time.”

The one constant in the smart city is the network running underneath these solutions—and the truly smart city has a network that adapts.

Smart city applications must be aligned with where a city and its citizens want to go. Some municipalities that created model smart-cities early on have had to initiate extensive revamping. For example, the City of Barcelona has long been at the cutting edge of using digital devices and the Internet of Things to improve municipal operations; however, in 2017, Mayor Ada Colau gave Barcelona’s CTO, Francesca Bria, a mandate to “rethink the smart city from the ground up.”

This meant shifting from a “technology-first” approach, centered on interconnected devices, to a “citizen-first” focus that responds to the changing needs that residents themselves help define. more>

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