The end of power by Moises Naim

The end of power by Moises Naim

From Boardrooms to battlefields and churches to states, why being in charge isn’t what it used to be.

Power is the ability to direct or prevent the current of future actions of other groups and individuals. Or put it differently, power is what we exercise over others that leads them to behave in ways they would not otherwise have behaved.

For Aristotle, power along with wealth and friendships were the three components that added up to a person’s happiness. Power is spreading and long-established, big players are increasingly being challenged by newer and smaller ones. And those who have power are more constrained in the ways they can use it. We know that power is shifting from brawn to brain, from north to south, west to east, from old corporate behemoths to agile start-ups, from entrenched dictators to people in town squares and cyberspace.

But power is decaying. To put it simply, power no longer buys as much as it did in the past. These trends extend beyond traditional power arenas - war, politics, business - into philanthropy, religion, culture and the personal power of individuals. The long entrenched power of the major organized religions is decaying at a remarkably rapid pace. For instance, Pentecostal churches are advancing in countries that were once strongholds for the Vatican and mainline Protestant churches. In Brazil, Pentecostals and charismatic made up only 5% of population in 1960 - compared to 49% in 2006.

In practice, power is expressed through four different means - call them the channels of power.

The muscle - force or threat of force

The code - (e.g. religious code)

The Pitch - (e.g. advertisement)

The Reward

In strategy Formulation: Politics Concepts published in 1978, MacMillan sought to educate business students about complexities of power and negotiation. He observed that in any power interaction, one party manipulates a situation in a way that affects the actions of another party. But various kinds of manipulation are available depending on the answers to two questions:

1. Does the manipulation change the structure of the existing situation or does it instead change the second party’s assessment of the situation?

2. Does the manipulation offer the second party an improvement, or does it instead lead the second party to accept a result that is not an improvement?

Outcome seen as improvement: inducement by reward or persuasion via pitch

Outcome seen as no improvement: coercion via muscle (law) or obligation via code (religion or moral duty)

Identify the barriers to power and whether they are coming up is going down and you can solve a large part of the puzzle or power. In his seminal work (the visible Hand), Chandler argued that the visible hand of powerful, managers replaced the invisible hand of market forces as the main driver or modern business. The ascent and dominance of these large industrial companies led Chandler to identify three distinct models of capitalism, each associated with one of the three leading bastions of capitalism at the time of the second industrial revolution:

a)personal capitalism found in Great Britain, b) the competitive (or managerial) one common in USA and c) Germany’s cooperative capitalism.

UK companies are usually family owned/dynasty that lacked the drive, agility and ambition of their counterparts. In contrast, separation of ownership and management that Chandler called managerial capitalism enabled American companies to adopt new org forms - that were far superior for raising and allocating capital, attracting talent and innovating and investing in production and marketing. In turn, the propensity of German companies to cooperate with labor unions led to a system that Chandler labeled cooperative capitalism which eventually became known as codetermination. German firms thrived to include more stakeholders in the company’s governance structure beyond shareholders and top managers.

Power and the three revolutions:

More revolution - overwhelms the barriers: “harder to control and coordinate

Mobility revolution: Circumvents the barriers: No more captive audience

Mentality revolution: Undermines the barriers: Take nothing for granted.

Consider these three revolutions in different types of powers:

Muscle Power (actual or potential use of coercion)

More Revolution: Can laws or armies ‘keep the lid on’ when people are more numerous, healthier and more informed?

Mobility revolution: Jurisdiction and market boundaries are porous and slippery; frontiers are harder to police

Mentality revolution: Automatic deference to authority is no longer the case.

Code power (moral and traditional obligation).

More revolution: Can moral claims keep up with changing material realities and more information?

Mobility revolution: Aspirations attacks all certainties

Mentality revolution: Universal values take precedence over dogma

Pitch power (persuasion, appeal to preference):

More revolution: Is a big market an advantage when there are so many promising niches?

Mobility revolution: There is an awareness of almost infinite alternatives and a growing ability to get them.

Mentality revolution. Skepticism and mindset are more open to change and there is an increased propensity to switch preference.

Reward power (inducement in exchange for compliance):

More revolution: How to tailor incentives in a world of so much choice?

Mobility revolution: How to tailor incentivizes when people, money and ideas are on the move?

Mentality revolution: The cost of loyalty is ever increasing and there are weaker incentivizes to accept status-quo.

Consider the crisis of Roman Catholic Church, whose growing inability to recruit priests who accept the vow of celibacy - or to compete with small evangelical churches that can tailor messages to the culture and the concrete needs of specific local communities-makes for a particular cautionary tale.

The Forbes 2012 ranking of the world’s 2,500 biggest companies found 254 based in US -more than 200 fewer than 5 years prior and 14 fewer than the year before. More and more of the world’s largest companies have headquarters in China, India Korea, Mexico, Brazil, Thailand, the Philippines and the Gulf states.  Among the top 100 companies in the Fortune 500 listing in 201, 66 were survivors from the 2000 list. 36 hadn’t existed in 2000. Bloomberg lists world’s top 20 billionaires list daily at 5:30 pm New York time - http://www.bloomberg.com/billionaires/2013-04-08/aaa

Among the victims of hyper-competition in the global business landscape are the markets themselves - that is the stick exchanges where most shares are traded and that media, politicians and the public monitor for clues about the health of overall economy. Hallowed markets such as the New York Stock exchange and the London Stock Exchange have rapidly lost ground to alternative marketplaces. Kansas-based upstart BATS (Better Alternative Trading System) runs more trading volume than any exchange other than NYSE or NASDAQ, surpassing Tokyo, London, Shanghai, Paris and all the test.

Meanwhile, Hedge funds proliferated, going from 3000 funds to 10,000 funds between 1998 and 2008. In 2012, hedge funds took part in half of US bond trading, 40% of equities trading and 80% of trading in distressed debt.

Same story goes with Roman Catholic Church. The essence of the Pentecostal and evangelical advantage lies in the ability of these churches to spring up without regard to any preexisting hierarchy. The church resembles nothing so much as a small business launched in a competitive marketplace without funding form a central source. It must succeed on the basis of the members it draws, the services it provides them and the tithes and collection revenue they can be persuaded to give. Any Pentecostal who feels dissatisfied with the offerings of the local church is free to move on to another, even to start this or her own church in a basement or garage.

Other religions such as Islam and Hinduism seem less vulnerable to the rise of the charismatic Christianity, probably for deep-seated cultural reasons. Secondly these religions are less centralized and hierarchical than the Catholic or mainline Protestant churches.

Five risks:

The decay of power generates risks than could lower social welfare and individual quality of life in the short term and prompt a backlash or even a disaster down the line.

1. Disorder: We consent to power of the state because it is supposed to guarantee the minimum level of stability and predictability we need to lead fulfilling life. Rules from business regulation, liberal laws, and ballot access to international treaties all aim to calm the unpredictability of life and ward off the risk of chaotic disorder, even anarchy. The decay of power discussed in this book threatens that promise in a way that political rivalry, business competition, conflict among nations, and even world wars in the 20th century sense did not. The implication is obvious: while few societies become and remain anarchy for long periods, it is not that hard for a society to become paralyzed by too high level of power decay.

2. The de-skilling and loss of knowledge:

Big entities (party, companies, and universities) accumulate experience, practices and knowledge within their walls; they achieve their success and inculcate habits, culture and operational routines in their employees or members. None of this transfers into a world of diffuse power without some or a lot of loss. Big parties replaced with ad-hoc movements temporary electoral coalition is appealing to the millions of voters everywhere who are fed up with the corruption, ideological stagnation and disappointing government performance of many political parties. The demagogues who seek power by exploiting the ire and frustration of the population and making appealing but terribly simplified and ultimately deceitful promises. The radical decentralization of knowledge - Wikipedia, MIT courses-is one of the most exciting trends in the dispersion of power. But ability of these new sources of knowledge to match internal R&D or preserve institutional memory in inconsistent at best.

3. The banalization of social movements:

In the Facebook & Twitter era of digital social world, joining a group or liking of a group is simply a matter of few clicks or sending small amount. That is not insignificant, but it does not constitute the kind of risk-taking activism that propelled so many of the greater social movements. The proliferation of small players and short-term initiatives brings the risk that actual, forceful, coalitions directed toward specific social goals become impossible to orchestrate.

4. Boosting impatience and shortening attention spans.

While millions of online activist may raise the social visibility of myriad issues, they also create a level of ‘noise’ and distraction that makes it very hard for any single cause to retain popular attention and support long enough to gain substantial and permanent strength. Hyper-competition can be deleterious to civic and political activism as for private companies faced with a profusion of competitors that forces each one of them into small size and limited power.

5. Alienation

Big changes with uncertain consequence often breed alienation - the estrangement or distancing of people from each other, or from what used to matter to them or in extreme-cases even a certain separation from their own sense of self, the identity them in their own eyes. The bombardment of technologies, the explosion of digital communication and online opinion, distraction, and noise; the decline of automatic acceptance of traditional authorities feed a disequilibrium with broad and poorly understood consequences.

The Medici Effect by Frans Johansson

The Medici Effect by Frans Johansson

Breakthrough Insights at the intersection of ideas, Concepts and cultures.

When you step into an intersection of fields, disciplines, or cultures, you can combine existing concepts, into a large number of extraordinary new ideas. The name I have given this phenomenon, the Medici Effect, comes from a remarkable burst of creativity in 1th century Italy.

For an original idea to be creative, it must also have some measure of relevance. it must be valuable. Mihaly Csikzentmihalyi said, “There is no way to know whether a thought is new concept with reference to some standards, and there is way to tell whether it is valuable until it passes social evaluation”.

When the Latin American artist Shakira made her US debut with the album laundry service, she shot to the top of the charts. Her music has been unusual even in her home country of Colombia. Her father is Lebanese, and her song combined Arabic and Latin sounds into ‘a distinctive blend of pop and rock unlike anything being done by Columbian singers at the time. She managed to take this innovative music and intersect it with American tunes.

Breaking down our associative barriers is the first challenge we face in our search for the intersection. People who done it so, did one of the following things:

·         Exposed themselves to a range of cultures

·         Learned differently

·         Reversed their assumptions

·         Took on multiple perspectives

By learning fields and disciplines on our own we have a greater chance of approaching them from a different perspective. Assumption reversals are a remarkably effective way to challenge the way you think about almost anything. This is assumption reversal work:

·         First think of a situation or concept related to a challenge you are facing and think about the assumption associated with that situation.

·         Next, write down those assumptions; then reverse them

·         Finally think about how to make those reversals meaningful.

The other method is think different perspectives. Leonardo da Vinci believed that in order to fully understand something one needed to view it from at least three different perspectives.

Other couples of suggestions are

·         Apply the idea to someone or something else

·         Create constraints

Following are some of the best ways to find combinations:

·         By diversifying occupations

·         By interacting with diverse groups of people

·         By going intersection hunting

Linus Pauling once said, “The best way to get a good idea is to have lots of ideas”.

·         There are at least three ways to proceed:

·         Strike a balance between depth and breadth

·         Actively generate many ideas

·         Allow time for evaluation

Then do the following

·         Produce as many ideas as possible

·         Produce ideas as wild as possible

·         Build upon each others ideas

·         Avoid passing judgment on ideas

Most of us have a desire to connect ideas and concepts from our disparate backgrounds. So why not actively seek out these connections?

Plutocrats by Chrystia Freeland

Plutocrats by Chrystia Freeland

The rise of the new global super-rich and the fall of everyone else.

Behavioral economist Dan Ariely discovered in a 2011 that the wealth distribution in the USA where the top 20% own 84 % of the total wealth and in Sweden where the share of the top 20 % is just 36 %. Larry Summers, the Harvard economist points out the “for the first time since the Great Depression, focusing on redistribution makes more sense than focusing on growth”.

Consider the America’s economic recovery in 2009-2010. For 99% of Americans income increased by a mere .2% and income of 1% increased by 11.6 %. There is a similar story behind the boom in the emerging markets. The ‘India Shining’ of the urban middle class has left untouched hundreds of millions of peasants living at subsistence levels as BJP discovered to its dismay when it sought reelection on the strength of that slogan. Likewise, China’ booming coastal elite is a world apart from the roughly half of the population who still live in villages in the country’s vast hinterland.

Wealth inequality is China is now higher than it in the US and is also surged in India and Russia. Citigroup calls the phenomenon the “Consumer Hourglass Theory” and since 2009 has urged investors to focus on companies best positioned to cater to the highest-income and lowest-income consumers. It created an index of 25 companies, including Estée Lauder Cos. and Saks at the top of the hourglass and Family Dollar Stores Inc. and Kellogg Co. at the bottom. The index posted a 56.5% return for investors from its inception on Dec. 10, 2009, through Sept. 1, 2011. Over the same period, the Dow Jones Industrial Average returned 11%.

In egalitarian America and even in aristocratic Europe, the industrial revolution eventually lifted all the boats, but also widened the social divide. With technology & globalization transformation, developing worlds like India and china are going through their own gilded ages. Between 1820 & 1950, both India’s & China’s per capita income was flat. From 1950 to 1973, it rose to 68%. But then Asia started to catch up, the per capita increased by 245 percent between 1973 & 2002 and it continues to grow despite global financial crisis.

Forbes classifies 840 of the 1,226 people on its 2012 billionaire ranking as self-made. In 2012 of the 1226 people on the Forbes billionaire list, 77 were financiers and 143 were investors.

Jeffrey Winters, a political scientist at Northwestern University believes America’s super-elite have been particularly effective at using the tools of a political democracy to protect its minority privilege. In 1918, the initial tax for the very rich was 77 % and in 2012, it came drastically down to 15%.

Raghuram Rajan, an economist said, “India risked becoming ‘an unequal oligarchy or worse perhaps far sooner than we think”. His assistant Sinha had calculated the number of billionaires per trillion dollars of GDP in a number of countries around the world. Russia, with 87 billionaires and a national GDP of 41.3 trillion, had the highest billionaire-to-GDP ratio. India, Rajan said, was number two, with 55 billionaires and $1.1 trillion o GDP. Most of India’s super-rich weren’t software pioneers or inventive manufactures. Instead, “too many people have gotten too rich based on their proximity to the government.... Land, natural resources, and government contracts or license are the predominant sources of the wealth of our billionaires and all of these factors come from the government”.

Rajan shared his concern: in an age of super-wealth, we need to be constantly alert to efforts by the elite to get rich by using their political muscle to increase their share of the preexisting pie, rather than by adding value to the economy and thus increasing the size of the pie overall.

Unlike Russia which is rich in oil & metal, China’s new rich got rich by real-estate and the capital which is closely controlled by the government.

In April 2010, MIT students asked Bill Gates how it felt to be the richest person in the world. Bill Gates suggested it wasn’t a very big deal. “Well, the marginal return for extra dollars does drop off. I have not found any burgers at any price that are better than McDonald’s”. He admitted there were some great perks, like flying on a private jet, but said that after a few million or something, it’s all about how you are going to give it back”.

Low taxes, light-touch regulation, weak unions and unlimited campaign donations are certainly in the best interests of the plutocrats, but that does not mean they are the right way to maintain the economic system that created today’s super-elite.

In 1343, La Serenissima petitioned the pope for permission to trade with the Muslim world. Here is how the city made its cause: “Since by the Grace of God, our city has grown and increased by the labors of merchants creating traffic and profits for us in the diverse parts of the world by land and sea and this is our life and that of our sons, because we cannot live otherwise and know not how except by trade, therefore we must be vigilant in all our thoughts and endeavors, as our predecessors were, to make provision in every way lest so much wealth and treasure should disappear:.

This will end in tears by Adam Brent Houghtaling

This will end in tears by Adam Brent Houghtaling
The miserabilist guide to music.

Aristotle suggested that we are drawn to the beauty of the tragedy and that we find excruciating pleasure in our experience of artfully constructed tragic creations  -essentially when we swoon at the grace of lyric or vocal performance and thrill to the intricate architecture of a symphony.

Aaron Smuts, assistant professor of philosophy at Rhode island college, wrote in his essay “Rubber Ring: Why do we listen to sad songs?” that we listen to these songs not for catharsis but rather ‘to intensify negative emotions partly as a means of focusing our reflection on situations of great importance. It is possible that we listen to sad music precisely so that we may crawl deeper into our sorrows, and that the more unfathomable the grief, the more likely our brains will respond to the distress by opening the dopamine taps and shaking loose protective hormones. As classical composer Stephen Johnson has noted,” There is something about seeing your own mood reflected that allows you to let go of that feelings” .

We may turn to gloomy music and sad songs to wade in our own sorrows, and the music we choose to listen to may drive us deeper into our despair, but sooner or later the hope is all roads lead to catharsis.

Szomorú Vasárnap by rezső seress had recently translated to English and marketed as The Hungarian Suicide song, due to a number of reported suicides attributed to the grim power of the work.

Out of 100 saddest songs listed in this book, let me list first 10 songs.

1. Adagio For strings - Samuel Barber
2. Strange fruit - Billie Holiday
3. In darkness let me dwell - John Sowland
4. Marie - Townes Van Zandt
5. Rank Stranger - The Stanley Brothers
6. I’m so lonesome I could cry - Hank Williams
7. Only the lonely - Frank Sinatra
8. Nothing Compares 2 U - Sinead O’Connor
9. Caroline, No - The beach boys
10. D|P 1.1 - William Basinski