The Medieval Institutions Need to Change

Credit: Sloan Management Review

“However, there is another kind of power, one that is more appropriate for the new paradigm — power as empowerment of others. The ideal structure for exerting this kind of power is not the hierarchy but the network, the central metaphor of the ecological paradigm. — The Systems View of Life Fritjof Capra, Pier Luigi Luisi

A friend asked me how we fix the U.S. political systems. The symptoms of failure in the political system are everywhere:

· Washington has become dysfunctional with the two parties unable to agree on almost anything.

· Presidents since Clinton have focused more on expanding the power of the Executive Branch to serve personal agendas rather than serving the citizens.

· The press openly advocates for their own agenda rather than the traditional unbiased reporting of the facts

· Voters have become entitled consumers interested only in satisfying their personal self-interest and leaving the problems to Washington.

· The U.S. has surrendered its position of moral leadership, exhausted by a series of small wars of no real consequence and a senior military today that is more politicians than guardians of the country’s values

On top of this disarray, the U.S. and the world face a very serious set of problems:

· The environmental situation is approaching an apocalypse; we can argue about the timing — 30, 50, 75 years in the future — but the problem is imminent, and the consequences are catastrophic. (I would also like to remind everyone that sustaining biodiversity is an important part of resolving environmental problems.)

· Wealth inequality is actually nothing more than another example of the Pareto Principle, the unequal distribution of resources found throughout nature; this is no comfort to the millions of people in the U.S. living in or near poverty and the billions of people in the same circumstances around the world. Many would say this situation has been brought about by the self-interest of multinational management.

· The population is aging rapidly, making healthcare an increasingly important and expensive problem; underappreciated is the negative consequences for human health from a deteriorating environment.

This situation is further complicated by two factors:

1. The digital transformation of modern life makes greater information available to everyone with a cell phone, but this connectivity adds to the complexity and black swan events by constantly introducing new variables and more and more information from “bad actors” from Russia, Korea, China, Iran…

2. China is trying to emerge as history’s next world power, but its centrally controlled, top-down hierarchical system stifles innovation and conflicts with the individual empowerment inherent in a successful economic system. Nevertheless, the U.S. will be forced to spend trillions of dollars for defense while the U.S. budget is further strained by environmental and social spending.

Eric Beinhocker at Oxford University believes that society goes through a “phase change”, similar to how the physicist might describe water turning into gas. A phase change in modern society would manifest in a combined period of social, economic and political chaos. According to Beinhocker, the eventual outcome will be a new information system that efficiently and economically deals with the coincident new technologies and the significant social, economic and political changes. While I think that history shows Beinhocker to be correct, I think his approach begs the question. In other words, what will be the outcome of the current phase change? Where is modern life in the U.S. going? That is the purpose of this article, to provide an answer to where we need to transition modern society and the U.S. political system.

In 2018 a friend invited me to work on a strategy study for a European client. The special challenge in the assignment was that the client wanted a strategy for the next three hundred years. The U.S. has had no social, political or economic strategy since the 1980s when the Cold War ended. The strategy for the European client and the U.S. I think are very similar. Either entity needs to be socially responsible, economically viable, environmentally proactive at scale and ethically rather than politically motivated. The challenge turned out to be how to imagine the world in 300 years. Fifty years ahead is easy, three hundred years is not so simple. In the end, I adopted what I came to find out is a Jeff Bezos principle — focus on what will not change. For example, Bezos says people always want lower prices. I focused on what will be unchanged in society in three hundred years and that is the basis for a U.S. strategy to address the current problems and remain a viable democracy.

I determined the following fundamental principles that should always be true:

1. Digital transformation

2. Urbanization

3. Health, healthcare and life science

4. Panarchy

5. Social Entrepreneurship

1. Digital Transformation — Since the time of John von Neumann and Claude Shannon the world has been in a transition from a two system view of the world — biological (adaptive) and physical systems — to a three system view that includes digital systems. As we begin the 21st century a new technology paradigm is emerging with an impact that will surpass even electricity. This paradigm leverages the natural availability of networks that we find in all natural and human systems. The paradigm is artificial intelligence (AI), cloud computing and IOT (Internet of Things). These technologies accelerate the creation of economic and social value, speed up collaboration and therefore innovation and facilitate a change in scientific, engineering and medical research from empirical approaches to computational discovery. The approaching commercialization of quantum computing will only accelerate the importance of the digital transformation and other technologies will only enhance data capture inside the human body, from a vast array of corporate satellites and for DOD needs. Research shows that digital technologies have an exponential growth rate of innovation that exceeds other technologies, which suggests that digital transformation will only accelerate for the foreseeable future.

2. Urbanization — The United Nations estimates that the population living in cities will increase from a current fifty-five to sixty-eight percent by 2050. Digital Transformation will only increase the percentage beyond 2050 as more people seek better economic opportunities, better healthcare and better quality of life. Cities exist in order to facilitate collaboration, the exchange of information and economic efficiency. In fact, it is widely documented that a city is not a political subdivision but rather should be thought of as a network for information exchange. Cities have existed for thousands of years and their natural efficiency will support their continued existence as a critical component of the social system. The digital transformation only accelerates the benefits of cities.

3. Health, healthcare and life science — What COVID has reminded us of is how fragile life is, how powerful the new technology paradigm underpinning digital transformation is and how inept the governments of the world are in managing a widespread biological challenge (of any sort). We are moving toward personalized medicine that addresses health problems based on each individual’s genetic makeup both to cure but also to prevent disease and further extend life expectancy.[1] As the environment deteriorates, I expect an increase in pandemics and new diseases we have not seen before. Sadly, medical science may be able to treat the individual but not the population as a whole. Like the mountain does not care about the hiker, the Earth does not care about us.

4. Panarchy — The study of complex social-ecological systems [panarchy] is more simply understood as the relationship between natural and manmade systems with the purpose of establishing and maintaining resilience. Resilience is the ability to successfully adapt to inputs into a system. The connectivity between manmade and natural systems and the failure to acknowledge that planet earth is a limited system are the simple reasons that we have the current environmental emergency. The lack of willpower by the government and the self-interest of corporate management explain much of the failure to respond. Given their history, I would plan for panarchy to be a constant issue.

5. Social Entrepreneurship — “entrepreneurship directed at social problems” might more meaningfully be understood from a three hundred year perspective as “capitalism redefined”. Capitalism has shown dramatically, especially since the beginning of the digital transformation (with its lower capital requirements), that entrepreneurship is the most efficient and effective method to create economic and social value at scale. However, since the 1980s real wages have not increased in the U.S.[2] and the U.S. Gini Coefficient[3] shows increasing wealth in the hands of a smaller percentage of the population. Capitalism and entrepreneurship must address these issues and provide solutions to match the political, economic and social conditions that continue to evolve. It is time for social entrepreneurship to become the concept of entrepreneurship and to update our understanding of capitalism. Programs such as ESG[4] requirements for corporations are a beginning, but the self-interest of management and shareholders needs to be directed equally toward economic, social and environmental impact. Failing all else, perhaps the obvious market opportunities matched with the newly available technology will attract venture capitalists and startups. Perhaps these new companies rooted in greentech, urbantech and biotech will point the way.

The issue we must still address is how we motivate people, corporations and governments to change their behavior to adopt these five principles. To make long-term changes in a society such as the U.S. I think we need to consider four factors as the means to reshape motivations for the benefit of all people and reverse environmental degradation. Not a simple task, but a fair statement of the real problem.

1. Jobs — The digital transformation will replace, automate or substitute robots or autonomous vehicles for most hourly and clerical jobs. Even professional positions such as certain medical doctors, lawyers, researchers and engineers will be eliminated or replaced by automated tele-(file in the blank) managed by AI. The jobs that remain will be for those who pick and prioritize the problems still to be solved and probably the people that design the initial solutions. There are two solutions to this impending scarcity of jobs for humans: I) some form of social system that pays people a middle-class wage (provided they provide assigned social services to their community), or II) we aggressively reshape the education system to prepare people to work in this world of digital transformation.

2. Education — Starting in elementary school we need to start teaching the fundamentals of the digital transformation — programming, statistics, mathematics, data analytics and machine learning (a form of AI). In middle school we can introduce information theory and quantum computing to complement the traditional natural sciences. By high school students should be adept at predictive, prescriptive and cognitive analytics. In such a curriculum students would be qualified for well-paying jobs upon graduating high school or they could continue their education at university (at the equivalent of a current Master’s or Ph.D.) What about the artists, they could participate as creators in the Metaverse. Social scientists, their science will be as computational as biology within twenty years. Ministers and philosophers, they can help us to identify and resolve all the new ethical issues that the digital transformation will produce. Everybody needs to learn the fundamentals of digital transformation and fortunately online there are all the resources to do so. Schools need to recognize their current shortcomings and pivot to a system that prepares people for the 21st-century digital transformation, the Creator Economy and Web 3.0. At best, schools today are teaching for 2006.[5] We need to develop online solutions to make up for teachers not ready to teach statistics or data analytics. (Every child in public schools should be given a free laptop and school connectivity to the Internet 8 am-5 pm. After 5 pm schools could offer free connectivity to anyone outside the school building, which might be attractive in certain neighborhoods.)

3. Government — Representative government probably dates from the Roman Republic in ~500 BC. This central government, hierarchical structure was adopted in large part because it was an efficient way to manage information. Network theory shows that small, disorganized networks adopt hierarchical structures. However, today thanks to several relatively new technologies, we no longer need the hierarchy to manage the scope of affairs defined in the U.S. in the late 1700s. Today digital connectivity allows for large, decentralized self-organizing networks. This approach is prompting corporate reorganizations around the world. Such an approach fosters better customer experience because information and decision-making are available locally in real-time. Many would say that the best government response to COVID was at the city level. Of course, the city government is best positioned for real-time response and therein lies the path for how we need to reform government. The federal government needs to be substantially reduced in scope to defense and certain securities law, law enforcement and intelligence functions. State government should only provide services where there are economies of scale (such as intrastate roads) and cities should take on the principal responsibility, especially where we find limited economies of scale such as education, healthcare, law enforcement, and the environment… Cities today have the best available information, the local knowledge to use it well and more motivated citizens to address local problems. All we have to do is find politicians that are not only self-serving and can serve the people. I believe that a transition to reliance on local government at the city or even community level is the most challenging principle to achieve but critical to any sustained change in the national value system.

4. Partnerships (Aggregation) — BCG, the international consulting firm, says that business models are changing to reflect the advances in digital platforms. Today a company can provide seamlessly a buffet of services where they provide certain services and APIs allow other service providers to offer complementary services to enhance the customer experience (aggregation). Steve Blank, the noteworthy developer of Hacking for Defense and the NSF I-Corps program to commercialize university research, believes that the threat from China requires the DOD to partner earlier with high-tech startups developing necessary technologies. Such an approach accelerates technology development, eases capital constraints and accelerates battlefield readiness. Jennifer Doudna, a chemistry Nobel Prize winner, uses exactly the same logic to urge university researchers in biology and medical science to partner with corporates. In the case of both Blank and Doudna, partnership accelerates real impact. Partnership is probably the best model to solve any complex, “wicked”, impossible problem (unless you are an Einstein). Changing the traditional mindset of decision-makers is probably the critical path to adopting a partnership approach more consistent with network theory.

This article is by design futuristic and by my definition optimistic. In simple terms, countries like the United States need to develop a comprehensive strategy for the future — a 300-year future! The complexity of the modern world requires more examination of fundamental values, beliefs and practices over a much longer time frame. The time frame is critical because the new technologies are accelerating the rate of invention and innovation. COVID, Ukraine, and China all demonstrate the tragedy of a lack of real strategy. Each example shows a failure due to hierarchy and top-down control. The U.S. government still does not know how to deal with an epidemic, Russia’s inherent hierarchical system was not designed for a war running on real-time information and China struggles constantly to continue economic growth without jeopardizing its centrally controlled communist government. The international consulting firm IDC describes the solution well.

“In such a fluid model, it’s important to design policies that create positive incentives for technology innovation, support effective governance mechanisms, involve citizens in decision making, ensure digital and data will be applied in a trusted and transparent manner, and help to nurture the local innovation ecosystem.”[6]

Much of the change brought about by the digital transformation is really just reinforcement of man’s natural behavior. Evolution shows us that man flourished from a starting position of an individual, a community and cooperation. Much of the industrial revolution since the late 18th century has been devoted to information technologies — telephony, radio, photography, recorded music, internet, social media, marketplaces and data platforms. These technologies all foster communication, cooperation and shared cultural values, but instead self-interest has become the rule. The increasing self-interest is in part due to the lack of a strong message in favor of cooperation. We have not had such a discussion in the U.S. since the 1960s and President John Kennedy’s epic point — “Ask not what your country can do for you; ask what you can do for your country”. Such a discussion is long overdue if we are going to save the environment and the U.S. A single point from the famous Harvard sociobiologist EO Wilson frames the challenge well. To paraphrase:

“ The real problem of humanity is [that] we have paleolithic emotions, medieval institutions, and God-like technology. A positive exponential future will depend on how effectively that trio handles society.”[7]

It begins with a discussion of values, values that have been true since we lived in clans and tribes.

[1] Jennifer Doudna, Nobel Laureate and inventor of CRISPR, predicted individualized treatment and preventatives in the next 10–15 years (in a speech I attended recently in New York City).

[2] https://www.brookings.edu/research/thirteen-facts-about-wage-growth/

[3] https://data.worldbank.org/indicator/SI.POV.GINI?locations=US-CA

[4] http://www3.weforum.org/docs/WEF_ESG_Letter_Klaus_Schwab_and_Brian_Moynihan_2021.pdf

[5] http://www.cs.cmu.edu/afs/cs/usr/wing/www/publications/Wing06.pdf

[6] https://blog-idceurope.com/smart-policies-for-european-smart-cities/

[7] https://www.supermind.design/

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Director StartUP FIU-commercializing research. Entrepreneurship Professor FIU, Ex IAP Instructor MIT. Ex CFO One Laptop per Child. Built billion dollar company

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Robert Hacker

Director StartUP FIU-commercializing research. Entrepreneurship Professor FIU, Ex IAP Instructor MIT. Ex CFO One Laptop per Child. Built billion dollar company