Manufactured music
Today’s music feels as standardized as a McDonald’s hamburger or a Honda automobile. They are manufactured according to set templates. The music supply chain also has set formulas for the musicians. It does not make logical sense that God bestows musical ability and good looks with such high correlation in human beings. A more likely scenario is that the music manufacturing specification starts with somebody who is good looking as a necessary condition. Then the attributes of the music are superimposed on the individual including stage dramatics and standardized instrumentals. Then comes the music itself. A recent analysis shows that most of today’s music can be shown to be mathematically equivalent. This means that the basic music manufacturing template is shared across all producers. Finally, most have forgotten that an important aspect of music is the lyrics, In the manufactured music of today, especially those emanating from the US, there is really no place for lyrics.
Music seems to have lost its sole. A few bands such as Pink Floyd and Dire Straits have demonstrated that music starts with the lyrics – not good looks, formulaic instrumentals and stage dramatics. However, their examples appear too foreign to contemporary performers vying for the attention of fans through anything other than good music.
A bright future for the world economy
Contrary to the opinions of people in power and what the God’s men have professed so far, the economy runs on innovation. Judging from what has happened thus far and the proclivity of accountants and economists to predict the future based on past data, we may be getting over the hump. There are only two attributes that hold the world economy down – fraud and incompetence. The former is seen not only in companies but also in the enforcers of the law and regulation. The latter is seen in companies but especially in the financiers who claim to save the world by lending and providing themselves bonuses at regular intervals.
If the world can get rid of fraud and incompetence – largely seen and practiced by a small percentage of the population – it can grow fast and reach heights, yet to be imagined. Most fraud comes from those who are adept at finance, accounting and law and most incompetence come from those who pretend to run large companies. These people, who rose to positions of power and regulations through contacts, family connections and pure luck are destroying the world. They should never have been there and apparently results never deter them.
If the current doldrums can get rid of fraud and incompetence from an insignificant part of the population, the world economy can begin to grow again aided and abetted by most of the world (who seldom receive bonuses)
Greed
Many seem to believe that greed is bad and that they are less greedy than others. This is more likely a problem of definition. Greed is a fundamental attribute of all biological systems if defined in a general way. Greed is the desire to have more of something, whatever that something may be. Greed is a binary attribute and cannot be measured in a continuous scale. Since the greed for “X” is different from greed for “Y,” it is difficult to construct a common metric. There are other attributes such as morality and integrity that share the same characteristics. Although it is common for us to pass judgement on the higher or lower level of morality and integrity of others, one could argue that they are binary as well. You either have it or you do not. Unlike greed, however, they are not fundamental to all biological systems.
This has two implications. First, systems that utilize greed in a constructive way are likely more optimal than those attempting to oppress it. Since such oppression will be cosmetic and tactical, the systems that practice them will be also unstable. Capitalism, for example, is a more stable and optimal system compared to planned economies and socialism, because the rules are clearer and the objective functions are simpler. Second, a measure of advancement for humanity can be constructed based on how societies are able to use greed to improve societal utility. At less advanced level, greed will be intricately connected with materialism but as we advance greed will be related to complex utility functions including art, science and culture. Further ahead will be societal designs that utilize greed to maximize societal utility in a more constructive way.
Free Option
Recent revelation of hidden information from the grand bailout scheme has proved what many market observers had known for over a year. Bailouts were conducted in a class system – where certain parties were treated “special.” What is intriguing is that the masters of finance, who create complex collateralized debt obligations and swaps for a living, conveniently forgot the meaning of some common terms that most business school graduates are familiar with. These include “collateral,” “counter-party,” and “risk.” Simply put, when you enter into a transaction with somebody else – to lend or borrow money with collateral, it means that if a default occurs, only the collateral will remain. This is not dissimilar from mortgage obligations that most Americans hold. In case of default the bank gets the house and not the original loan.
For the very special companies in Wall Street, these common place notions do not seem to apply. In their case, when a default occurs, the government will give them the original debt with nothing subtracted from it. After all, they have demonstrably proven that they are indeed special, able and willing to take risk through complex transactions and gladly accept the upside (less some charity) and go back to the government for the full investment, when the bet does not work. It is indeed a “free option,” with full participation on the upside and no risk of downside. Perhaps, this is a new type of security invented by the magicians – but they may have to share their invention with the rest of the country soon.
Stagnation by accounting
Accountants, financiers and economists have been working over time. They see crisis everywhere – global debt, GDP stagnation, job losses and many other areas. The lament that the end of the world is near – the end by numbers, not quite what the Mayans had predicted. They see patterns – charts have emerged that portrays historical data in every hue, color and shape. They look to history and predict slow growth. Recently, the great management consultants of our time, at least the ones outside prison, seemed to have joined the fray.
Most of these experts were not in sight a mere 24 months ago. They were out hunting for the 3rd house in Florida or planning their next European vacation. They predicted robust growth for many years to come and they saw uncorrelated growth in the BRIC countries. The magicians at the Fed saw goldilocks economy – not too hot and not too cold – and sat in complete awe of their own capabilities to balance the country and the world on the knife edge so miraculously.
If the experts of today were wrong before, it is likely that they will be wrong again. Driving a car using the rear view mirror is dangerous. Finding patters in historical data and using that to predict the future is equally so. Growth of the economy is not driven by accounting numbers, it is driven by innovation. Innovation, however, does not fit neatly into spreadsheets – it does not spawn numbers that precisely add up in rows and columns. That is anathema for those trained in the business of prediction by extrapolation. As the politicians sit confused – cramming stimulus down the throat of the economy and getting no “results” from it, as the TV pundits analyze and reanalyze words and numbers and teach everybody the truth by using display technology that makes a sports commentator blush, as the report writers push out commentaries on the bad and the worse as if wisdom is free, as the financial advisors help everybody invest for the future as if investing without advice is only for those who cannot afford it and as investment bankers reluctantly part with a small percentage of their bonus for the good of the world, most forget that future growth comes from new ideas and not from the past trends or past vehicles of storage such as gold, silver and junk bonds and not even from the deft hands of the bankers adept at moving money around.
Opening paragraph from "Flexibility : Flexible Companies for the Uncertain World"
Today’s world is embroiled in uncertainty at all levels—political, economic, social, and commercial. This is nothing new, although every generation seems to believe that they faced the worst. In the last hundred years, the world has seen much—world wars, nuclear bombs, airplanes, computers, and the Internet. Quantum theory was revealed, options theory was forged, planets were discovered outside the solar system, and the human genome was mapped. Bigger wars were followed by smaller but more potent ones, as some tried to spread philosophy and others, religion. Diseases spread across the globe by air, water, airplanes, and human contact but were conquered by chemicals and magic. Capital and labor clashed, some driven by profits and others by power, aided and abetted by philosophers of various persuasions. Countries were freed by war and peace, divided into many by walls and mountains, and then combined into one again. Democracy and religious extremism has spread hand in hand. Planned economies failed, while the foundations of the free market philosophy were also shaken. Companies grew to gigantic proportions, with revenues dwarfing the GDP of countries, and they spread across the globe, creating sprawling multinationals. They merged with others or acquired smaller rivals, creating even larger enterprises using size and revenue as the fundamental measure of success. Trade blocks and alliances formed, aided by geographical proximity of countries with different specializations, and then grew into unions of currencies and cultures. Bitter enemies became best friends and vice versa for oil and gold. Frozen alliances in a cold war broke into pieces while new ones were put together with no real objectives. Nobel laureates lamented about a warming globe fueled by dirty coal while dirtier energy policies went unheeded.
Complexity!
It appears that humans like complexity. Simpler explanations to observed phenomena are generally put down as “too simplistic,” and complex and incompressible theories are embraced by most. This is true in most scientific disciplines. For example, in Physics, today’s theories for the beginning of the universe is so complex that they can only be approached by a handful. And, experiments are being planned in grand scale – none of which advances thinking but they increase the complexity of the “current understanding.”. In life sciences, chemical drugs are made up of complex designer molecules and nobody can predict what their net effects will be on biological systems. In the government, policies are architected in such complexity that most law makers do not have the time to even read the policies as they are written.
Reduction in complexity (and not an increase) has to be the measure of knowledge advancement and progress. A metric – incremental increase in understanding / incremental increase in complexity – may provide an interesting measure to assess if the proposed new idea/technology/policy is better than status quo.
Policy making technocrats
Technocrats have been in full force in policy making positions in the emerging economies. They have been analyzing data, optimizing output and in general “engineering” tactical growth for most of these countries, some of which have been growing at an impressive rate of over 8% per year. Not to be left behind, the financiers of the high flying investment banks in the West have been flocking to these countries like dogs chasing Frisbees.
Rude awakening may be on tap for both the engineers and the financiers on couple of fronts. First, sustainable growth in a country comes only from innovation and not from labor cost advantages, currency manipulations and monopolies, the fist two are well known. Monopolies, however, have not been on focus for the great minds of our generation for unknown reasons. For example, the country in the East, responsible for providing technical services for the rest of world has been riding high, churning out engineers like pancakes in a breakfast diner, has to realize that most of its output is coming from a handful of companies, who have monopolized industries if not whole sectors. The leaders of these companies are pictured in the Fortune 100 list and are available for the public to worship when they are not fighting each other. However, over 1/3 of the population still goes to bed hungry, awaiting a brighter tomorrow that never arrives as the corrupt politicians and criminals run the “democracy.” To the North is a single monopoly, an autocracy, that has convinced itself that a few men (is there another gender?) know everything is there to be known and driving their country’s output to hitherto unknown levels. While the financiers take a break learning a new language, not to be run over by the Monmouth, who has been attempting to corner every raw material source on earth, as if men are made of steel and oil, most of the country has been sinking from 16 hour work days making cheap toys and clothing.
Policy making cannot be left to technocrats, for we already know the dire consequences of it in every country that attempted it. Good policy is about societal utility, a boring and unfaltering concept, unknown to both the technocrats in the East, worried about efficiency and strategy and the financiers in the West, worried about their own bonuses (and a precious few, worried about conducting God’s work).
The uncertainty premium
Most people, business and political leaders included, tend to dislike uncertainty. In the business context, many consider uncertainty a “bad,” as it makes the management of their own respective organizations difficult and it has deleterious effects on their own tactical compensation plans. For individuals, uncertainty is a “bad,” as it makes it difficult for them to plan for retirement and life’s major events such as marriage, graduate education and home acquisition. Thus, most individuals and business leaders are willing to pay a “premium,” for reducing uncertainty and this has implications for the functioning of the economy.
For example, if businesses try to reduce uncertainty – either by taking up projects that have less uncertain outcomes or diversifying their portfolios by diluting the organization’s competence, this will lead to less shareholder value. Innovation, generally, happen in environments that promote uncertainty. By designing and managing to reduce uncertainty, organizations will also reduce the probability of innovation. Since, innovation is the only attribute that increases shareholder value, anything that decelerates innovation will also diminish value. Hence, Individuals and organizations should seek to increase uncertainty (attempting technological and social breakthroughs) and position themselves to take advantage of such discontinuities through flexibility. Flexibility is an attribute that allows individuals and organizations to take advantage of uncertainty (not to eliminate it). Those who are flexible – nourishing the characteristics that allow them to identify and use opportunities in the uncertain future world – will win. Those who fall back on status quo notions of management and the elimination of uncertainty as the basic principle, will lose.
Thus, paying a premium to reduce uncertainty is always worse than buying flexibility to counteract it.
What holds us back?
As the New Year sets in, the most fundamental question for humanity to answer is what exactly is holding us back. We have abundant resources in a planet that is delicately designed with temperate climate for long periods of time. It avoids being hit by inter-planetary debris with monotonous regularity. In spite of our low genetic diversity, we have also avoided extinction by efficient microbes. Overall, it is a planet so fantastically optimized for its 7 billion human inhabitants and countless other species that thrive in the ocean, on land and in the air.
Yet, we have found a way to divide it in countless ways, magnify differences and make life miserable for most people. We fight for no reason, hoard food and wealth, wipe out other species and pollute our own air and water. We relentlessly eliminate our enemies, live in gated communities based on visible features, build walls to stop foreigners and spread hate and violence. We consider our gods to be superior to others’, our vehicles faster than the ones in the street, our children smarter than our friends’, our brains bigger than our colleagues’, our houses grander than our neighbors’ and us to be better than anybody else. We cheat, lie, mutilate, humiliate and then pray for mercy.
What is holding us back? It is not recessions, natural disasters, population growth, crop failures, pollution or accidents. It is not incompetence, politics, disease, age or weakness. It is not even wars, religious fervor, autocracy, monopolies, fraud or death. What is holding us back is our attitude – formed by ignorance, ego and a lack of perspective. If we can somehow change that, everything else will fall into place and every human will be endowed with food, housing, energy, health and knowledge.
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