Cheap has a price

As a family, we used to play the board game risk. When things weren’t going to plan, one of the children would just fold the board up and throw all the pieces in the air. 

It feels a bit like that now.

“How did you go bankrupt? Gradually, then suddenly”

The sun also rises. Ernest Hemingway.

Gradually

Technology has enabled, over the last fifty years, our ability to disaggregate the elements that made the industrial revolution so commercially effective and reassemble them in an economically efficient way. 

First we outsourced production to low cost economies, then on the back of that, basic services then more advanced services, and finally much of our innovation efforts. 

We were able to reduce costs far more than prices, and create a small group of phenomenal winners, a large group of marginal winners in the developing economies that dramatically reduced poverty, and another large group of losers in the developed economies who saw incomes and living standards stagnate.

We are now looking to continue that progression using machine learning and artificial intelligence.

We have ended up, in aggregate as a world population slightly better off, but with huge perceived disparities and a sense of unfairness and along the way created a very small group who are unimaginably better off.

Suddenly

It is the wont of politicians at present to use metaphors or war when talking about how we deal with a virus that has no politics. It’s good to have someone to blame.

The reality is that much of the economic impact we will experience is a result of the blindness of those pursuing growth at the expense of  prosperity. 

Staying with ideas of war, no competent military leader would dream of extending supply chains in the way that we have with our manufacturing, service and creative assets. We have managed to extend both our material supply chains and our relationship chains at the same time, leaving us heavily exposed to multiple disruptions. 

We got really excited at the Brexit threat to lean production (remember that?) and now find ourselves self isolating in every respect.

I’m noticing lots of small things that add up to a big thing. I tried shopping online with a couple of supermarkets – the welcome screens were full of the benefits and ladels of wonderfulness I would receive, until I got to the ordering bit, which in a cursory manner said effectively “go away”. The same is true of many of other “highly efficient” systems, from banks to protective clothing to pharmacies. 

On the other hand, I live in a village and our local shops just roll with the punches. More expensive, yes but strong on relationships, flexibility and humour in adversity. 

I know the situation is exceptional, but that’s the point. That’s where risk lies. Viruses are not “black swans” – they have long been identified as major potential disruptors, only the timing and initial location was unknown.

We have knowingly created the conditions for the situation we find ourselves in, little by little, blinded by efficiency and growth.

And here we are.

Balancing

We will, of course, get through this, although the degree to which we will be battered in unknown. Lives will be lost. Jobs will be lost. We will end up a long way from where we started.

If there is one lesson we might learn before, like Monty Python’s Black Knight, we climb back on our growth obsessed, AI and ML empowered, mechanical charger, it is that AI doesn’t do this type of challenge.

It may be brilliant at puzzles, where our uncertainties lie in not knowing where the missing pieces are, but Covid-19 is a mystery, the morphs and mutates as we deal with it. 

It is a mystery, not a problem, and we should be mindful of it’s brother – climate change, which promises many of the same issues. 

And humans are brilliant at mysteries. We have been contemplating them since we emerged from the primordial soup.

Our pursuit of mysteries is at the core of who we are. 

Cheap has a price

This is a wake up call. It is going to be be messy and unpleasant, but we will survive it. 

If we want it to have a benefit, then let it be that in the end economies serve people, not the other way round. We can design them, and make choices.

We can create huge opportunities for humans to do what they do best. Imagine, dream, create, love. 

The rest, we can leave to machines. 

I’ll finish with one of my favourite stories from Nietzsche

There was once a wise spiritual master, who was the ruler of a small but prosperous domain, and who was known for his selfless devotion to his people.

As his people flourished and grew in number, the bounds of this small domain spread; and with it the need to trust implicitly the emissaries he sent to ensure the safety of its ever more distant parts.

It was not just that it was impossible for him personally to order all that needed to be dealt with: as he wisely saw, he needed to keep his distance from, and remain ignorant of, such concerns.

And so he nurtured and trained carefully his emissaries, in order that they could be trusted. Eventually, however, his cleverest and most ambitious vizier, the one he most trusted to do his work, began to see himself as the master, and used his position to advance his own wealth and influence. He saw his master’s temperance and forbearance as weakness, not wisdom, and on his missions on the master’s behalf, adopted his mantle as his own – the emissary became contemptuous of his master.

And so it came about that the master was usurped, the people were duped, the domain became a tyranny; and eventually it collapsed in ruins.

Stay safe all.

Seasons and Cycles

Whether nature or business, we are governed by the need to adapt to cycles. We welcome each one, knowing there are things we need to do to profit from the next cycle.

Much as we might like it to be different, there is no perpetual summer, and we can’t go from spring to spring without doing the work in autumn and winter.

So why, I wonder do we think business is different? That with a bit of twiddling, we can live perpetually in summer?

The collapse of Thomas Cook is as iconic as it was inevitable. It’s easy to see in retrospect that it needed to recognise that it was autumn ten years ago, and that it was in winter five years ago, but the investors wanted to wear their shorts by the pool, and the managers, instead of telling truth to power, did their best to provide, probably knowing it was futile, but hey, it wasn’t their business……..

Itinerant gardeers can move elsewhere, but the land isn’t going anywhere, and nor are those who value it.

Right now, both meteorologically and economically, winter is coming. We cannot continue to sit by the pool as the climate changes, inequality increases and societies fracture under the pressure.

Perpetual growth on a planet with finite resources is an oxymoron, and their is nothing wrong (in fact everything good) to be done if we stop taxing the system in pursuit of the unneccessary for a while.

It’s a time to prune, dividends as well as trees. To sit together round a warm fire and plan for spring. We cannot make it happen faster, but we can be ready when it comes.

Winter is a season, not failure, and not a problem

Planning as pain relief

Everything has always been connected to everything else. Whatever happens in one area eventually (and often unpredictably) affects others.

Up to now, we could cope with the complexity by ignoring it. Our plans were sufficiently robust, and the pace of change relatively slow such that we could fool ourselves into thinking we were in control.

The system has caught up with us. It feels rather a though someone has taken “change” out of the slow cooker and popped it into the microwave.

Nothing has changed really, other than our awareness of the things we did not pay attention in the past making their presence felt.

It means we need different metrics. The stuff we have measured ourselves by (GDP, Growth, Market Share) we now understand to be a very small part of what we need to measure.

The future is only frightening if we measure it the way we used to, not by what matters.

Plans need to share the stage with a broader understanding of where they fit into the scheme of things.