Nigel is a Leaders’ Quest Associate and Executive Director of CDP. This blog is a deeper exploration of some of the themes and arguments of a popular workshop on ‘Wisdom Economics’ that Nigel led at the 2013 Pow-Wow.
What would it look like if we were to sketch out the guiding principles of the wisdom economy? What role would there be for humility, courage, purpose and beauty? And what do we want the economy to deliver? It’s for us to choose…
The ‘Folly Economy’: efficiency and its limits
Economic progress in the last three centuries has been enormous. Yet we find ourselves trapped in a way of thinking about the global economic system that lacks soul and is increasingly unattractive to young people about to embark upon their active economic lives.
How has this happened? How have we become so captive to an economic view based on a belief in ‘the invisible hand’, which magically transforms the selfish drives of individuals into societal improvement?
Conventional thinking describes our economic development as an upward movement through distinct phases. The agricultural, industrial and information economic ages take their names from the nature of the technology driving increased output. We assume that more production will lead to improved lives, without questioning the underlying beliefs. This is the efficiency paradigm.
It has been wildly successful, but it is reaching the end of its usefulness. It has led to material improvements in the lives of billions unimaginable just a few centuries ago. But the outcomes are not all positive.
As those who have observed the behaviour of complex systems (such as cities, oceans, the climate, or economies) know, any intervention, no matter how well-intentioned, will lead to some unintended consequences.
And we are indeed experiencing some major negative consequences of the current system of global economic organisation. In particular, the continued destruction of the very ecosystems upon which we depend (we use the equivalent of 1.5 planets’ worth of natural resources, and rising), and shocking inequalities of wealth distribution (1% of the global population own 40% of the wealth).
Efficiency trumps effectiveness and material wealth is held in higher regard than personal happiness – this is the age of the ‘Folly Economy’.
The emerging paradigm: beyond efficiency – from quantity to quality
In our pursuit of efficiency, we have lost sight of the fact that the economy exists to serve society. We have come to believe that more always equals better, and at this moment in history the evidence is showing this to be an increasingly flawed assumption.
And yet, just as the shortcomings of this economic age become more and more apparent, a new paradigm is emerging – one where the qualities of our work, our firms and our economy become just as important as the quantities we can measure.
As so often, the green shoots of change can be found flourishing somewhere in the cracks of the current paradigm if we look hard enough. We can see enough exciting, successful innovation in different ways of being, thinking and doing in our economic world today to sketch the coming wisdom economy. We can dare to hope, on the basis of proven examples, that the transition is within sight.
So what are the qualities of the wisdom economy? What do we want it to deliver and how should we organise it to do so? It is for us to define the laws, structures and institutions that govern economic behaviour and its impact.
The elements of Wisdom Economics
To build the wisdom economy we need a set of values or guiding principles that have implications at all levels of system organisation – for individuals as citizens, consumers, and leaders; for firms as economic actors and users of capital (financial, human and natural); and for governmental and non-governmental institutions. Our list might include the following:
- The humility to accept we may not know the answers, to acknowledge the mistakes we will inevitably make, and to learn from others.
- The desire to find purpose and meaning at work and pay more attention to what Sir Ronald Cohen has termed the ‘invisible heart’ (as opposed to Adam Smith’s ‘invisible hand’) of our economic system.
- How to take responsibility for the impact we each have, recognising that intention influences outcome whilst avoiding the trap of hubris.
- A healthy relationship with the many dimensions of time:
- Incorporating respect for the future and lessons from the past into our decision-making.
- Acknowledging the importance of presence, the ability to experience what is actually happening right now.
- Keeping our feet on the ground – ensuring our leadership is based on direct experience of the world, not on increasingly abstract notions.
- Understanding the fundamental interconnectedness of everything, and I don’t just mean social media.
- Transparency – the information age has given us the data and the tools for a radical new form of self-organisation, one that might be led by the ‘Barcode Buddha’ generation of citizens holding corporations to account via their smart-phones.
- The (re-)integration of beauty into our economy – such as we see in the growing interest in beautiful (and local, seasonal) food, and a return to valuing the durability of the crafts.
- A return to common sense – we could start with taxes, where it has become the norm to punish something we want (employment) whilst levying no (or negative) taxes on behaviour we would rather prevent (extraction of rare resources, pollution).
- Broadening our concept of stewardship – governance of the firm need not be limited to considerations of shareholder value. Alternatives include the rise of the B Corp, the principled leadership of Patagonia, the radical governance of River Simple and the recognition that ‘The Tragedy of the Commons’ is not inevitable.
- A healthy role for faith – both a review of the stance towards wealth in the major world religions and of the faith of the entrepreneur that ‘if we create value, Money will come!‘
- Courage – to step into a wisdom economy, knowing the guardians of the folly economy will laugh at you, fight you, dismiss you. Of course, courage (a close companion of folly to be sure) is a prerequisite for entrepreneurialism, upon which nearly all of the adaptiveness of our economic system depends.
This is a first tentative sketch – outlining the shape and features of the emerging wisdom economy. I invite you to help me add to this sketch by sharing examples of other individuals and organisations who are helping lead the transition to the wisdom economy. In later pieces, with the help of your feedback, we will flesh this out into a handbook of hope, an early map of the topography of the wisdom economy, with enough information to plan your journey while leaving the detailed cartography to further exploration.