When politicians and pundits talk about the economy, they usually do so in terms of numbers. Unemployment is too high or GDP is too low. Inflation should be at this level or at that. You get the feeling that somebody somewhere is turning knobs and flicking levers in order to get the machine humming at just the right speed.
Yet the economy is really about our well being. It is, at its core, our capacity to produce goods and services that we want and need, such as the food that sustains us, the homes that shelter us and the medicines that cure us, not to mention all of the little niceties and guilty pleasures that we love to enjoy.
Our capacity to generate these things is determined by our productive capacity. Despite all the hype about digital technology creating a “new economy,” productivity growth for the past 50 years has been tremendously sluggish. If we are going to revive it and improve our lives we need to renew our commitment to scientific capital, human capital and free markets.
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Marshal McLuhan, one of the most influential thinkers of the 20th century, described media as “extensions of man” and predicted that electronic media would eventually lead to a global village. Communities, he predicted, would no longer be tied to a single, isolated physical space but connect and interact with others on a world stage.
What often goes untold is that McLuhan did not see the global village as a peaceful place. In fact, he predicted it would lead to a new form of tribalism and result in a “release of human power and aggressive violence” greater than ever in human history, as long separated —and emotionally charged— cultural norms would now constantly intermingle, clash and explode.
Today, the world looks a whole lot like the dystopia McLuhan described. Fringe groups, nation states and profit-seeking corporations have essentially weaponized information and we are all caught in the crossfire. While the situation is increasingly dire it is by no means hopeless. What we need isn’t more fact checking, but to renew institutions and rebuild trust.
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A leader’s primary responsibility is to make tough decisions. If the issues are unimportant and the choices are clear, someone lower down in the organization usually deals with it. The stuff that comes to you is mostly what others are unable, or unwilling, to decide themselves. That leaves you with the close calls.
All too often, we buy into the Hollywood version of leadership in which everything boils down to a single moment when the chips are down. That’s when the hero of the story has a moment of epiphany, makes a decision and sets things going in a completely new direction. Everyone is dazzled by the sudden stroke of genius.
In real life, it’s rare that things boil down to a single moment. It’s more of a continuum. In fact, the most consequential decisions you make often don’t seem that important at the time and ones that seemed pivotal can turn out to be trivial. What is true, however, is that the decisions you make will define you as a leader. You need to learn to make them wisely.
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In Mapping Innovation, I wrote that innovation is never a single event, but a process of discovery, engineering and transformation and that those three things hardly ever happen at the same time or in the same place. Clearly, the Covid-19 pandemic marked an inflection point which demarcated several important shifts in those phases.
Digital technology showed itself to be transformative, as we descended into quarantine and found an entire world of video conferencing and other technologies that we scarcely knew existed. At the same time it was revealed that the engineering of synthetic biology—and mRNA technology in particular—was more advanced than we had thought.
This is just the beginning. I titled the last chapter of my book, “A New Era of Innovation,” because it had become clear that we had begun to cross a new rubicon in which digital technology becomes so ordinary and mundane that it’s hard to remember what life was like without it, while new possibilities alter existence to such an extent we will scarcely believe it.
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In 1997, when Clayton Christensen first published The Innovator’s Dilemma and introduced the term “disruptive innovation,” it was a clarion call. Business leaders were put on notice: It is no longer enough to simply get better at what you already do, you need to watch out for a change in the basis of competition that will open the door for a disruptive competitor.
Today, it’s become fashionable for business pundits to say that we live in a VUCA era, one that is volatile, uncertain, complex and ambiguous, but the evidence says otherwise. Increasingly researchers are finding that businesses are enjoying a period that is less disruptive, less competitive and less dynamic.
The truth is that we don’t really disrupt businesses anymore, we disrupt people and that’s truly becoming a problem. As businesses are increasingly protected from competition, they are becoming less innovative and less productive. Americans, meanwhile, are earning less and paying more. It’s time we stop doubling down on failed ideas and begin to right the ship.
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I started Digital Tonto in 2009, at the height of the financial crisis. I was living in Kyiv and it felt like the world was ending. As the country descended into chaos, it would elect the hopelessly corrupt Viktor Yanukovych as President, who would shatter whatever norms of decency were left and leave the country in tatters.
The past year, with a global pandemic, a sharp economic downturn and political turmoil not seen since the 1850s, has had a similar feel. Yet that earlier experience gave me a sense of calm and hope. In the end, Ukraine made it through and is, in many ways, better off for the experience. We seem to be pulling through as well.
You never really know what’s around the next bend. Just like few saw the financial crisis coming in 2009, or the pandemic coming in 2020, I had no idea about the community that would coalesce around Digital Tonto or where it would take me. All I know is that I’m grateful and looking forward to the year ahead. Here are some of my favorite posts from the last year.
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Every era contains a prism of multitudes. World War I gave way to the “Roaring 20s” and a 50-year boom in productivity. The Treaty of Versailles sowed the seeds to the second World War, which gave way to the peace and prosperity post-war era. Vietnam and the rise of the Baby Boomers unlocked a cultural revolution that created new freedoms for women and people of color.
Our current era began with the 80s, the rise of Ronald Reagan and a new confidence in the power of markets. Genuine achievements of the Chicago School of economics led by Milton Friedman, along with the weakness Soviet system, led to an enthusiasm for market fundamentalism that dominated policy circles.
So it it shouldn’t be that surprising that veteran Republican strategist Stuart Stevens wrote a book denouncing that orthodoxy as a lie. The truth is he has a point. But politicians can only convince us of things we already want to believe. The truth is that we were fundamentally mistaken in our understanding of how the world works. It’s time that we own up to it.
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In 1993, when asked about his vision for the failing company he was chosen to lead, Lou Gerstner famously said, “The last thing IBM needs right now is a vision.” What he meant was that if IBM couldn’t figure out how to improve operations to the point where it could start making money again, no vision would matter.
Plenty of people have visions. Elizabeth Holmes had one for Theranos, but its product was a fraud and the company failed. Many still believe in Uber’s vision of “gig economy” taxis, but even after more than 10 years and $25 billion invested, it still loses billions. WeWork’s proven business model became a failure when warped by a vision.
The truth is that anyone can have a vision. Look at any successful organization, distill its approach down to a vision statement and you will easily be able to find an equal or greater success that does things very differently. There is no silver bullet. Successful leaders are not the ones with the most compelling vision, but those who build the skills to make it a reality.
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The Covid-19 pandemic demanded we transform across multiple planes. Businesses had to abruptly shift to empower remote work. Professionals were suddenly trading commutes and in-person meetings for home schooling and “Zoom fatigue.” Leaders needed to reimagine every system, from storefronts to supply chains to educational institutions.
It was a brutal awakening, but we can now see the light at the end of the tunnel. In fact, a recent McKinsey Global Survey found that 73% of executives believed that conditions will be moderately or substantially better in the next year. Globally, the World Bank predicts 4% growth in 2021, a marked improvement over 2020’s 4.3% drop.
Still, while the crisis may be ending, the need for fundamental change has not. Today leaders must reinvent their organizations on multiple fronts, including technological, environmental, social and skills-based transformations. These pose challenges for any organization and research suggests that traditional approaches are unlikely to succeed. Here’s what will:
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Since the early days of the Industrial Age, there have been competing visions about the effects of technology. Mary Shelley’s Frankenstein monster has been the model for technology gone awry while, ironically, Karl Marx’s vision of techno-utopianism has been adopted by avid capitalists and Silicon Valley libertarians.
At the heart of the debate lies automation. When we use machines to perform tasks formerly done by humans we unlock multiple effects. The most obvious, of course, is that somebody is out of a job, less obvious are how technology affects productivity and creates new industries, which we hope will create more and better jobs.
Yet there’s no guarantee that technology will raise all boats. Markets are complex ecosystems and things can’t always be broken down into simple, linear relationships. What we can do, however, is get a better understanding of how automation affects our society. Only then can we build a consensus about what we want outcomes to look like and work toward them.
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