Barry Schwartz was onto something when he wrote The Paradox of Choice: Why More is Less. Reading his insightful book before the near collapse of the global capital markets, I was struck by the ideas that resonated with my own interest in the Buddhist concept of attachment. In fact Schwartz seemed to be saying that by letting go of the "more" in our modern consumerist society, we'd reduce the noise that short circuits our brains and make better choices.
Well, Schwartz is at it again.
This time with the concept of the defects inherent in a hyper-liquid, frictionless economy.
http://www.nytimes.com/2012/02/19/opinion/sunday/the-danger-of-too-much-efficiency.html?pagewanted=all.
In this recent Op-Ed column, he makes the case that the economy may well need a little friction, to prevent what he calls "frictionless" transactions from exceeding the speed of human judgment. In the first piece, the volume of choices makes us miserable by short circuiting our capacity to use good judgment. In the second, it's the speed at which decisions come at us that gets in the way.
An unrelated piece of interesting work, "Price is a Social Thing: Towards a Material Sociology of Arbitrage" seems to portend this outcome. In it London School of Economics Professor Daniel Beunza explores the relationship between faster transaction technology and shrinking price differentials.
www.sps.ed.ac.uk/__data/assets/pdf_file/0013/3415/arbitrage.pdf
Whenever perfectly rational people ask, "What good are derivatives anyway? Why not just restrict or even prohibit them now that we've seen what these complex financial innovations can do?" experts answer that they serve to increase market liquidity. In other words, they reduce friction, keeping money flowing as swiftly as possible.
We might have learned from the debacle of 2008-9 that no amount of transparency or disaggregation can make up for good old friction. Perhaps to get back to more sustainable markets it's simply time to step on the brakes and slow down.
Monday, February 20, 2012
Saturday, February 4, 2012
Happy Anniversary to Creating Shared Value---a Harvard Business Review "Big Idea."
Last month marked the first anniversary of the publication of Michael E. Porter and Mark R. Kramer's big idea "Creating Shared Value: How to reinvent capitalism---and unleash a wave of innovation and growth."
http://hbr.org/2011/01/the-big-idea-creating-shared-value
A year after its publication, I continue to marvel at the "shared value" frame. The authors make a case for replacing the outmoded and ideologically-charged concept of corporate social responsibility (CSR) by encouraging companies to commit to creating shared value (CSV). In summarizing the differences, the article explores the business drivers that move beyond doing good and challenges companies to make decisions based on assessing the economic and societal benefits of their operations relative to broadly defined costs.
Porter and Kramer do not disparage goodness made manifest in corporate citizenship and philanthropic efforts; rather they challenge companies to rethink the relationship between innovation and societal benefit. In one example, they contrast the good intentions of the fair trade movement, with companies who view their entire value chain as an opportunity to create value for society---beyond simply redistributing income. I was reminded of the role that economic power plays in ensuring a just and sustainable world and Martin Luther King, Jr.'s reflection on power and love came to mind.
“Power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love.” Rev. Dr. Martin Luther King, Jr.
Given the noble goals of the fair trade movement, I wonder if companies could accelerate societal benefit, and therefore justice, if transformational corporate practices made it possible for even the most vulnerable farmers to participate in innovation, augmenting good intentions? Could the practice of fair trade be "sentimental and anemic" without a commitment to CSV?
Creating Shared Value. Corporate Social Responsibility.
Either/Or or Both/And?
http://hbr.org/2011/01/the-big-idea-creating-shared-value
A year after its publication, I continue to marvel at the "shared value" frame. The authors make a case for replacing the outmoded and ideologically-charged concept of corporate social responsibility (CSR) by encouraging companies to commit to creating shared value (CSV). In summarizing the differences, the article explores the business drivers that move beyond doing good and challenges companies to make decisions based on assessing the economic and societal benefits of their operations relative to broadly defined costs.
Porter and Kramer do not disparage goodness made manifest in corporate citizenship and philanthropic efforts; rather they challenge companies to rethink the relationship between innovation and societal benefit. In one example, they contrast the good intentions of the fair trade movement, with companies who view their entire value chain as an opportunity to create value for society---beyond simply redistributing income. I was reminded of the role that economic power plays in ensuring a just and sustainable world and Martin Luther King, Jr.'s reflection on power and love came to mind.
“Power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love.” Rev. Dr. Martin Luther King, Jr.
Given the noble goals of the fair trade movement, I wonder if companies could accelerate societal benefit, and therefore justice, if transformational corporate practices made it possible for even the most vulnerable farmers to participate in innovation, augmenting good intentions? Could the practice of fair trade be "sentimental and anemic" without a commitment to CSV?
Creating Shared Value. Corporate Social Responsibility.
Either/Or or Both/And?
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