Parameters of Success and Safe-guards against - How securing the integrity of supply chains is crucial for economic success

http://www.arabiansupplychain.com/article-8842-flaws-imperfections-in-nation-building-success-formula

I attended the Africa Global Business Forum in Dubai recently where a favourite theme for discussion was how African nations can learn from others as to how to become successful business and trading hubs.  As is usual, pointing out the real issues holding Africa back was kept to a minimum. Rather, convenient excuses for sub-par performance, with pat suggestions of possible remedies, were preferred. A recent favourite I’ve been hearing is how computers with Internet and Facebook, installed in all classrooms across Africa, would be the magical solution for the continent’s problems. 
 

It brought to mind a story from about a year ago now when I ran the Masai Mara Marathon in Kenya. This is a remarkable event, requiring some impressive logistics out on the savannah. No expenses are spared, with backing from several big-name corporate sponsors. Every kilometre along the track sees an armed guard on the lookout for wild animals. 

Despite the marathon’s seemingly impressive organisation, the water supplied at the stops was insufficient for about half of the runners. Numerous people collapsed under the scorching sun and were evacuated by ambulances. Many were furious, as were the sponsors, who made public apologies to the participants. 

It was probably not that someone had failed to calculate the number of bottles required for the number of runners that had registered. An educated guess is rather that, somewhere along the supply chain of getting the water out on the track, an ‘entrepreneur’ saw the opportunity to take a detour and offload the water bottles to disburse for their own profit. 

This scenario can almost be seen as a microcosm of the challenges faced daily in Africa. Overlooking even the simplest logistical detail can jeopardise the entire operation. Any opportunity to pilfer will be taken if there are even any remotely reasonable grounds for denying being complicit in the theft.

It is not corruption so much as sheer ‘leechism’ that explains nations that fail to create overall prosperity for their people. When I lived in Jakarta, I was told it was an open secret how jobs as public servants in positions to take bribes were sold to applicant able to pay the most. These economically counter-productive ‘jobs’ were often the most well-paid jobs available. It may sound provocative, but it is a simple observation that various forms of ‘leeching’, on all levels of society, is the ‘national industry’ of most countries that remain poor, despite these having favourable conditions to promote prosperity. 

Having spent much of my youth in both Singapore and Chile during the periods of their strongest economic growth, what I saw as central to both their success stories was the in-built safety mechanisms that prevented societal inefficiencies taking root and becoming burdensome. Fundamental parameters were in place to restrict public servants abusing their positions by creating obstacles and delays to obtaining bribes. Opportunities for parasitical behaviours overall were deliberately minimised. For instance, among the first things I noticed when arriving in Santiago was how most stores, small or big, only had a single person allowed to accept payment and to handle the cash register. Even buying a piece of gum at a pharmacy required one to wait for three separate people to hand pieces of paper to each other before the goods were handed over. As for Singapore, the opportunity for even getting fined for spitting gum on the street is insignificant as it is illegal to bring in a single pack to the country.

Both countries have long been among the least corrupt countries in the world, according to Transparency International. In the context of Chile widely outperforming its Latin American neighbours and Singapore’s unique position in Asia, this is particularly impressive.

It is irrelevant to ask whether these countries have populations with more evolved morals and character. Character is not revealed in what a person can restrain himself or herself from doing in any given situation. That is largely dictated by the aggregate of life experiences and the given circumstances at hand. True character can only be revealed by how we would act if we knew with absolute certainty that we would not get caught. 

For economic prosperity, what is needed is often not about more opportunity, but less. Consider that when we live in the habitat our bodies were designed for, six hours in movement each day with an all-natural diet, the natural norm is having the physique of a professional athlete. That we fail to live up to this natural state of being is explained more by our unnatural opportunities not to, rather than any individual strength or weakness of willpower.

It is not difficult to apply the same logic to understand how the economic health and efficiency of societies functions similarly. That is, only allowing for opportunities to engage in activities that are non-sabotaging makes success inevitable.

The Side-Effects of Economic Success: Backtracking our steps in order to get a glimpse of the road ahead

The willingness to pay a premium for immediate versus future rewards is a familiar concept. economists call it hyperbolic discounting. However, less
attention is given to how the opposite also applies. that is, our willingness to accept disproportionately higher risks and costs if there is a time lag for paying them.

For instance smoking and sun-tanning: imagine if consequences such as cancer materialise instantaneously instead of with a delay. engaging in any of these activities recklessly would probably be
as uncommon as seeing anyone taking their chances of running across a heavily- trafficked highway.

our inability to correctly price the long-term costs and consequences of our decisions is reflected in every level of society, irrespective of a person’s background or social context.

this blind spot is so all-encompassing that a government borrowing for pensions, while knowing it will be unable to repay this, is not dissimilar to the self- imposed denial of an individual massively overspending on their credit cards.
i see economics as the extension of sociology and psychology. it is the scorecard of the aggregated incentives that a group acts upon. the story which economics reveals cannot be understood if separated from either of these two.

if the global economic crisis is behavioural at root, can we find better solutions if we treat the problems from a social perspective? i see an obstacle in doing so in that freedom, democracy and capitalism are used interchangeably to justify self-sabotaging behaviours.

yes, the world’s population is better off than in previous times in terms of health and daily conveniences. But our entrepreneurial spirit, innovation and market efficiencies have, in a sense, succeeded too well.

Demand has been driven too far for our own best interests when we are lured into sacrificing our future well-being for fleeting luxuries.

Democracy and capitalism are largely to thank for increased welfare and decreased conflicts through the spread of free enterprise and trade. yet, this relies on power structures remaining stable, and it is often overlooked that this stability hinges on the mechanism of self-oppressing spending patterns of the majority of citizens. that is, people voluntarily sacrifice opportunities for long-term benefits and chances of self- improvement in exchange for satisfying momentary urges. a good demonstration of this can be seen each morning in cities around the world when minimum-wage workers wait in line to pay five dollars for coffee in paper cups.

Consumerist ideals have become fundamental drivers and conditions that shape human existence. it is unreasonable to expect that this trend can be reversed. we need to recognise that what unites most of us now is instant gratification, the currency that people can be incentivised with most effectively.
solving the economic problems we face on a global scale requires that we design policies aligned with this reality. that is, figuring out how to apply a mix of short- term incentives that results in the daily behaviours and decisions of citizens to simply act less self-destructively.

I do not suppose that there is any silver bullet for this. in the past, social norms and religion filled the function of promoting virtues of delayed gratification and resisting temptation; however, in 2013, both social protocol and faith are declining. to keep pace with changing values and lifestyle demands, an updated understanding and approach of the motivating triggers that influence our impulses will be required. A rough mental image and outline of our future selves, along with the sacrifices and efforts needed, is probably a good starting point to not abandon our destiny to the mercy of our whims.

Winner's Dilemma - Enthusiasm and the battle for the status quo

Link to article online

The first-mover advantage is often understood as having the good sense and fortune of being first to enter a market. While that is often the scenario of many market leaders, rarely is it about merely being first.

Seizing the advantage referred to is laying claim to big enough market territory to leverage market inequalities that arise and result in an uneven playing field.
All companies that have been able to reach a position of dominance tend to share this trait. Competitors are crowded out through means of advantages of scale in production and/or distribution.
Rockefeller dominated by owning railroads that gave access to distribution. Microsoft holds its position largely due to the needs of compatibility. Amazon built a supplier and distribution system of incomparable reach and efficiency.

How raising the entry barriers for competitors function are well covered in economic theory. Yet, rarely do you find much discussion on strategies for how corporations can benefit from stifling change and progress. Maxims such as ‘innovate or die’ are far more palatable.
While the value of continuous innovation cannot be understated, what often is, if not completely overlooked, are the inherent difficulties in upholding a consistent level of performance. The term ‘status quo’ has negative connotations and is often deceptively understood as a euphemism for complacency.

It is fascinating to study how complete failure and breakdown usually occurs shortly after an organisation reaches its pinnacle of achievement. In my theory, which I call ‘the winner’s dilemma’, I attribute two major factors to explain this phenomenon. The first is that success can be like a disease in how even the best can be seduced into underestimating their competitors and overestimating their contribution and value.

The second factor is the stamina of enthusiasm. As seen in countless Hollywood movies, enthusiasm alone can make up for any number of shortcomings in overcoming incalculable odds.
Though these movies are mostly exaggerated, it is nonetheless the case that our capability is constrained directly by our level of enthusiasm. It is the fuel that feeds the fire of resolve and perseverance.

Put simply, the secret is about not letting boredom seep in. We have an overpowering urge for novelty and for the sense of moving forward if we are to maintain enthusiasm.
I suspect this is our strongest motivator and influence on our perceived wellbeing. Consider how the most intelligent and wealthiest of parents sometimes fail most miserably in kindling any drive or curiosity in their offspring to accomplish anything.
For motivation or desire to exist at all requires an absence of fulfilment. Thus, full satisfaction can become a state of no satisfaction.
Inevitably, nothing fails like success. Given enough time, it has no place to go with nothing left to prove.

The most challenging of circumstances for winning followers and rallying troops is not having a goal line to cross or adversary to conquer. Where a company’s peak performance is likely to only result in a status quo, or even decline – this is where the most difficult victories are won.

On the surface, increasing competiveness and profitability is a mathematical formula of maximising output of resources and minimising cost. Modern markets favour companies that compete this way on economies of scale by making jobs both standardised and interchangeable. Until they are not; our human need for a sense of belonging and purpose remains unchanged.
Despite, or maybe because of, increasing automation, the competitiveness of any organisation depends more than ever on its ability to stir up a desire for life in its members. Ultimately, nothing that is human can thrive without enthusiasm.

Value economy over knowledge economy

 link to article online


There is an overwhelming trend to speak obsessively about the move towards a knowledge economy that will dominate future job markets. However, if you look at the US, a majority of the unemployed have some form of college education, and the US Bureau of Labour Statistics estimates that seven out of ten growth occupations over the next decade will be in low-wage fields such as service jobs.

This is not a pessimistic observation about our economy, it is more of a reassurance for the world’s economies; the demand in the market remains centred on the need for people to simply do things that need doing. That nobody is particularly thrilled about having these jobs does not change this reality. The countries that are able to act on delivering a “value economy”, and not solely focusing on a pipedream of a work force in the “knowledge economy”, will have major advantages in being able to create the most valuable asset of all: social stability through means of gainful employment.
This challenge is common across the globe, and the solutions required are probably similar. It is about providing answers for the age-old questions of why and what. These are the two main areas in which we define our sense of purpose and who we are.

What is different in our day and age compared to just a generation and even longer ago is that there is no longer as strong a correlation between working and surviving. For an ever-growing global urban population, the basic human needs of survival are catered for, and what used to be seen as luxuries are now considered to be necessities. Most people can afford coffee in the morning, transportation in motorised vehicles, cigarettes and smart phones. Significant improvements in lifestyles and personal well-being require radically-increased spending power. However, instead of this being something positive, it is proving to be a cause for social incitement and upheaval around the world.

Maslow famously argued in his Hierarchy of Needs that, once a person is able to fulfil his or her basic needs, they will aspire towards self-actualisation. But now that the fight for survival has largely been removed, it is having the ironic implication of becoming another human tragedy. Our essential needs (and more) are no longer earned, but are instead provided for, and are now expected, as a minimum human right. Meanwhile, self-actualisation is being confused with fulfilling impulsive urges for consumption of luxury goods, the desire for instant gratification is self-perpetuating. This is fuelling an existential angst, in that we no longer have clear answers as to the why and what of our lives.
It is said that it is not the attainment of happiness that gives us satisfaction, but our pursuit of it. If this is so commonly agreed to be true, why is it being ignored? While it may be controversial to postulate, is not the value and product of a population’s work activities secondary to providing a task to complete, and some form of duty and responsibility that offers a sense of purpose, identity and self-worth? If you disagree, you only need to look at the consequences of pursuing happiness per se.
Having expectations that are in line with our achievements, and feeling a degree of control in influencing this balance are central to our sense of justice and personal satisfaction. I see this as the most valuable consequence of what is referred to as democracy. That is, rewards are not random or dictated by favouritism. Seen from this perspective, any group, regardless of their relative affluence or welfare, can be made to feel disadvantaged, dissatisfied and oppressed. Is this not what we are seeing today?

The priority on any nation’s agenda should really not be to increase the academic skills and intellect of populations. The work ahead of us is really not about increasing the skills and growing the intellect of populations. The correlation between intelligence and work ethic is unpredictable at best.
Yet, it is not a question of being ‘either/or’. The logistics sector offers a good example of the inflection point between the knowledge side and the delivery aspect. There is no limit to the demand for faster and better services, and meeting these demands requires continued improvements in processes, equipment and professional operations staff on the ground.

There is no question that new technology offers limitless ways for improved solutions for delivering services. Yet, in the end, actually delivering value that is of any use to a whole population comes down to the work ethic and pride of the individual. What is needed first and foremost is the reinstatement of the basic work ethic of national work forces to serve in the ’value economy’. It is vitally important that there is a greater understanding of the fact that economies thrive on the basis of services being delivered to a higher overall standard, services with an explicit spelt-out function and purpose. Societies can really only thrive in a context where the output of a nation’s work force serves as much of an economic function as it does a social purpose.

Innovation Overreach - How Increasing Complexity calls for Greater Simplification

 

I lived in a villa in the Dubai Marina with an ICT system that was mind-boggling. Cameras, sensors and screens allowed control and monitoring via the internet. Yet none of it could be made to work. It was not even possible to adjust the temperature, which was stuck at 17°C. That is what you tend to get when you go for cutting-edge technology branded ‘smart’.

The term ‘innovation’ is used so much that it has practically become meaningless. At the same time, it is billed as the Holy Grail for overcoming every modern challenge. Whenever you hear innovation called for, it is worthwhile to question how, when and to whom it is beneficial.

Innovation is not just misrepresented in the consumer market. Consider the F-35 fighter jet, with an estimated lifetime cost of $1,5tr (!). After seven years of continuous delays, it is still not militarily operational. In short, the plane has simply been made too complicated to work as it should. For example, there are 24 million lines of computer code just to fly it. There are few systems in the world more complex than this.

Both public and private organisations can fall victim of engaging in initiatives and routines either unrelated to or that directly impede their supposed end goal and purpose. On all levels, employees are often compensated in a way to make them neither care or acknowledge this disconnect between their mission and their efforts towards achieving it.

Malcolm Gladwell argued in ‘The Tipping Point’ that, when any division grows beyond the approximate size of 30 people working together on a particular project, the links between them become too complex for the minds of individual members to process effectively, with efficiency suffering as a consequence.

In line with this logic, I believe that, when an organisation grows beyond a certain size, group belonging becomes too diffuse and diluted for members to relate to and value. When shared interests and a sense of joint responsibility disintegrate, we become willing to enrich ourselves at the expense of, and corresponding harm to, the collective. As such, I would argue that the end product of communism and capitalism is, ironically, similar in terms of the effect on organisational behaviour.

Why we fall down this slippery slope in the first place is, I believe, due to our relentless pursuit of economies of scale. Somehow, how large organisations adopt many disadvantages of scale is usually suppressed. For instance, how there can be a sharply diminishing rate of return for each additional employee once a certain threshold in size and scope is passed. Look at recent innovation at Microsoft, Sony or Nokia. Though many believe otherwise, it is not as simple as a case of not being hip enough to attract the best people. They have attracted too many!

Nonetheless, the determining success factor for increasing the wellbeing of both our lives and businesses will depend on innovation that can solve actual needs and increase efficiencies. This is different from innovation as a gimmick to fuel commerce and be able to charge a premium.

Innovation is about finding the inflection point of the greatest possible utility at the highest possible simplicity. It is here where you can see the relationship between seemingly disparate works of genius like Beethoven’s Ninth, the iPhone or the T-Ford.

From waste management and debilitating traffic and air pollution, all will no doubt require as much in terms of resolute determination as technological innovation in order to overcome.

In aiming for the goal of as simple as possible, but not simpler, it can be a challenge to resist the temptation of this wrong sort of innovation. That is, the type of innovation that allows the most resource-intense and technologically-sophisticated organizations to unlearn even the most basic abilities, such as how to make an airplane fly or how to control a thermostat. While today’s problems are ever more complex, their solutions will remain focused on simplification.

Matter of Fact - How morals distort our ability to reason logically

Meeting up with the speakers the night before our annual conference in Doha I enjoyed a candid discussion with men who together look after literally tens of billions of dollars in various projects that will decide how one of the fastest-growing cities in the world will ultimately take shape. Half way through the evening one of the guys quipped that he hoped that I was not recording our conversation. It struck me that this was one of these moments where we could look back years from now and without a sound recording, no one would be able to recall and much less admit even to ourselves, if any of our predictions about the future would prove to be flawed.

It is fascinating that our minds are almost incapable of allowing us to remember any instances when we were wrong. At best, we may be able to admit to having been misinformed and been led astray in our thinking. It’s a self-defence mechanism that even has us making up completely false memories to reframe our mistakes so that they make sense and serve a purpose.

No one, not even the best and brightest, are immune from false memories. Hillary Clinton claimed on numerous occasions with apparent sincerity that she remembered landing in Bosnia under sniper fire and running with heads down to the car for cover. When footage was found that could jog her memory of her very relaxed and peaceful arrival that day, she claimed to have misspoken.

Even worse than altering memories from our past, we suffer from similar handicaps in our failure to correctly interpret our present reality. Every day we are often unable to see plain facts, causal links or lack thereof, to anything that runs counter to our beliefs.

The TV where I sit in our open landscape office is constantly turned to CNN where for months now I have been force-fed Piers Morgan speaking on the US gun problem. For perspective: there are an estimated 300 million guns in America that won’t just disappear. Statistically, if all guns are considered equally likely to cause deaths, to reduce just one fatality you would have to retrieve 10,000 guns. Secondly, more than half of all non self-inflicted gun fatalities are constrained to ethnic minorities in circumstances involving illegal drugs, i.e., a minuscule proportion of the US population.

Yet, these uncomfortable observations, along with the groups that are suffering the most, are simply ignored and excluded from the discussion altogether! Instead, the problem is presented as impacting everyone equally. Consider that swimming pools in back yards kill more children than guns do. There you have a direct problem with an obvious solution that would see immediate and clearly measurable results. Yet, I’ve never seen a campaign against private swimming pools.

I am not using this sensitive and controversial topic to make a statement on either guns or swimming pools but to demonstrate how what we deem as morally right is often inextricable from what we perceive as being factually correct. By the same token, our concept of ‘wrong’ can distort our thinking, as our minds often fail to distinguish between being factually and logically incorrect with something that is morally wrong or unjust.

Despite living in an information age where the average person has attended college and consumes hours of news each day, we are more incapable than ever to apply rational and critical analysis. Therefore, an idea that is presented as morally normative in the eyes of the public can be sold off on that basis alone as scientific truth. 

The scariest part is that studying how blind spots function doesn’t help a person that much in trying to avoid them in his or her own thinking. My guess, and safest bet, is that if you instinctively feel that something is right and the people around you generally share in this feeling with you, assume that you are suffering from some form of delusion or another! Clearly, Oscar Wilde was onto something when he said: ‘Whenever people agree with me I always feel I must be wrong’.