Umair Haque: Capitalists Who Make vs. Capitalists Who TakeMay 11, 2011
What’s the difference between productive wealth and destructive wealth? What if Gross Domestic Product made a fundamental distinction between the two — between making money by producing real value for others, versus just making money by exploiting others? What if GDP quantified the growth of productive capitalism, and separated that from the type of “wealth” created through extraction, manipulation and exploitation?
We find ourselves at a point in the world where the main tool to measure economic success and progress — Gross Domestic Product, or GDP – is outdated. Do we need a new set of rules for our economy to effectively begin to measure real, productive growth? Umair Haque believes it’s critical to the future of our country and our global economy. Here’s his conversation with Dylan.
Umair Haque is the author of The New Capitalist Manifesto: Building a Disruptively Better Business. He also founded Bubblegeneration and is the Director of the Havas Media Lab. He blogs at the Harvard Business Review, and you can follow him on Twitter at @umairh.
DYLAN: Welcome to Episode 55 of Radio Free Dylan. Today’s conversation, one that I am extraordinarily excited to have, I’m extraordinarily excited to give all of us the opportunity to explore in an environment that has no time restrictions, that has no production restrictions, that is purely a journey and an exploration into the mind of someone who I believe fundamentally sees the root, structural problems, not just in America but in the earth and the dysfunction in the very tools that we use to measure ourselves and our competitors and our economy, everything from employment to GDP and beyond, and how the -- not only the structural dysfunction and the tools, the wrongness if you will of the tools, the inappropriateness -- the incorrectness I guess is the right word of the tools that we’re using to measure our “progress,” really find themselves at a point where not only they need to be reviewed uniformly, but they need to be reestablished and restructured in a way that we are just making a fundamental distinction between making money by virtue of producing value for others and making money by either exploiting others and or exploiting a relationship that you have with government institutions or whatever it may be to effectively collect rent, whether it’s inside of the banking sector or elsewhere.
And right now we don’t really make that distinction as to whether value is created by transferring something a value -- creating something a value for other individuals or millions of other individuals if you’re so fortunate to be able to do something like that, and those who accumulate money not through productive capitalism if you will but through extraction, manipulation and ultimately an exploitation of us, something that we talk about so much here of the unholy alliance between business and state that really dates back to the Magna Carta. We were able to sort of get framing to separate church and state and immediately it was business that stepped into that role and we all now suffer whether it’s through the health insurance monopolies, the too big to fail banking system, the incredibly inefficient energy sectors, the rig trade that exist through the total abject failure to invest uniformly and globally and something like education.
So without further ado I bring to you someone who I have learned much from myself and I admire greatly Umair Haque. He is the author of The New Capitalist Manifesto, the title -- the complete title “The New Capitalist Manifesto: Building a Disruptively Better Business.” He also founded Bubblegeneration which is an agenda-setting advisory boutique basically around these types of strategies. He’s also the director of the Havas Media Lab, a think tank that specializes in these types of studies. You can check out his blog at the Harvard Business Review and we’ll link all of these of course at Dylanratigan.com and if Twitter is your thing, he is very active there and uses it incredibly well @umairh, U-M-A-I-R-H.
So with no further ado -- and let’s bring him into the conversation. And Umair at your foundational point when you are making decisions, when you’re evaluating data, what are -- or give us a few of the planks upon which you build your value system and such that you have a lens to gaze at the world through.
UMAIR: Well, thanks for that fantastic introduction Dylan. I think that -- you know you summed it up very eloquently. We have a problem -- you know, what is this crisis really about? Is it a debt crisis? Is it a liquidity crisis? I think it’s deeper. It’s a crisis of real value creation and we seemed to kind of have hit the limits of our ability to create real value. And for me, real value is what I call “thick value.” And that’s a little bit analogous to what Michael Porter has recently called “shared value.” For me there are three pillars of real value. It has to be sustainable. It can’t go up in a puff of smoke next year like it happened with the banking crisis. It has to be meaningful, that is, it has to reflect real tangible benefits to people on the other side of the transaction of the relationship. And I think that it has to be authentic.
Well, it can’t be counterbalanced by harm or hidden costs or you know all these little business model gains and tricks that our economy is so right with. You know none of that stuff is real value. And I think when we look -- take a hard look at our economy, it’s very difficult to see today who is creating that higher level of value if you like. So it’s very easy to create, you know what the bean counter has called “business value,” right? Which is to pump up your near term income by some kind of accounting trick, and then pump up your stock price but it’s very, very difficult to create that level of value, and how do we know? Well, there’s an existence proof in front of us the size of Jupiter which is that our economy in our country is undergoing a great painful stagnation, right?
And so we know that -- you know, living standards haven’t really risen the way that we would want them to if arguably they’ve risen at all for the middle class, for several decades now. We know that educational attainment is slowing. We know that, you know trust on many different levels is kind of breaking down. So we have real problems in terms of creating thick values.
DYLAN: Well, how do we make that distinction though? In other words, in the measuring tools that we now use GDP, employment, quarterly profits those -- none of those make a distinction as to whether --
UMAIR: None of them do.
DYLAN: -- you made the money because you’ve got a tax loophole with the government or because you’re able to sign basically off balance sheet liabilities associated with energy extraction, let’s say to the government. And those who actually are out there who may have invented -- I don’t know, let’s say a spaceship that is allowing people to go back and forth to outer space, and there’s no distinction in any of the tools, and it frustrates I think a lot of people that that doesn’t exist. Politicians don’t make a distinction between businesses that create value and businesses that extract value. It permeates us, this -- in distinction.
UMAIR: Exactly. And I think you hit the nail on the head here. So to me, this is a crisis that is about failing to create real value, but it is a crisis that is of our institutions, okay? And it’s a crisis that is of things like GDP and corporate profits, and the ways in which we measure and conceive of income. And so to really get to grips with this crisis, I think we have to begin by taking a cold hard look at those things. And for me one of the lynchpins of this crisis is very much the idea of GDP. And one of the theses in my book is that institutionally, we kind of undercount real costs, and we overcount real benefits. And when you take a look at GDP, that’s exactly what it does.
Now, that’s what it does maybe not by design but maybe by a historical accident, right? So if we go back into history for a second and we think about GDP, when was it created? It’s a human creation. You know today we kind of think that it’s been there forever and it’s eternal, and it’s -- you know, maybe ordained in some way. The truth is it was created. In the 1930s -- I’ve got a very interesting sentence for you here from the Bureau of Economic Analysis, and then this is kind of from the history of GDP. It says, “One reads with dismay of Presidents Hoover and then Roosevelt designing policies to combat the Great Depression on the basis of such sketchy data as stock price indexes, freight car loadings, and incomplete indices of industrial production. In response to this need in the 1930’s, the Department of Commerce commissioned Nobel laureate Simon Kuznets to develop a set of national economic accounts.” Okay, so that’s kind of a setup of GDP. That’s kind of the story.
DYLAN: So the argument was, we don’t really know what’s going on to the American economy. We know the economy is screwed up and we need to conceive a better way to measure it so that that way as we spend the stimulus money, as we restructure our economy in the 30s we have a better handle on whether in fact it’s working.
UMAIR: Exactly right. Now, put yourself back in the 30s for a second. What really mattered to an economy was very much the volume of output that this economy could produce, right? We’re still an industrial economy. We’re still about churning out mass produced widgets by the billion.
DYLAN: Actual physical things. Can we produce more stuff?
UMAIR: Actual physical things, right, and though we may have had an inkling that real prosperity was more than that. It was about much more than that. That it was also about things like you know the environment and trust in one another and the fabric of our community. At that point the discipline of economics I think was very much grounded in the idea that an economy was just a sum of stuff. You know actual physical stuff, and so that’s kind of the historical basis for GDP and that’s how it got created. So now, fast forward about 80 years, right -- three quarters of a century and here we are, we’re stuck with an aging software for human exchange. We are stuck with an institution that was built in the 30s and we haven’t really updated it since then, even though they know that prosperity is about more.
DYLAN: So let’s stop for one second and just address, how relevant is GDP today to policy decisions and capitol allocations in our own country, in America and around the world? How influential is that now?
UMAIR: Well, see -- right. So I think this is an essential question, right? And so we know today that GDP has many flaws, right? So for example it doesn’t factor in what economists call externalities, right? So let’s take the example of the Japan earthquake, right. All of the rebuilding that is going to go on in Japan is going to boost GDP, but that doesn’t mean by any stretch of the imagination that Japan is going to have a hugely healthy economy for the next two years. It just means that they’re going to have a lot of rebuilding to do.
DYLAN: They’ll have to deal with a lot of stuff for a couple of years.
UMAIR: Exactly! They’ll have to deal with a lot of stuff. In the same way that in the states, if we go out and spill a super tanker full of oil off our Gulf Coast, that clean up then has to sum back into GDP. But the harm that has done is not subtracted from GDP necessarily.
DYLAN: And that’s simply because the formula that was built to measure economic output was built to measure the movement of dollars for stuff that was never built to measure for instance the pain that one might feel when you break your arm, it’s just built to measure the dollars that gets spent at the emergency room paying the doctor and the cast.
UMAIR: Exactly. And you know this is funny, this is exactly what I wrote on Twitter last week. I said, “Hey, you want to boost GDP? Go and break your neighbor’s arm.”
DYLAN: You know that was one of my favorites. I told my whole staff that if you want to help the American economy today, break each other’s arms. They haven’t done it yet. I don’t think they’re that patriotic.
UMAIR: Well, you know so that’s one of the big problems with GDP. The other big problem with GDP is that it is what we call a “flow,” right and you very accurately said that. You said, “It’s a way to track how much money is flowing back and forth between different sectors in the economy this year for stuff,” right? But it’s not a stock. It doesn’t tell us how much of that stuff actually is in our economy. So for example GDP can tell us what the flow of financial capital is but it doesn’t really tell us what is our stock of something like -- hmm, for example social capital, right? Relationships. How much do we trust each other? And historically how was that level of trust in growing or declining over time?
So GDP have two problems. One is that it’s a growth measure and it doesn’t factor in many kinds of cause and many kinds of harm. The other one is that it’s a flow measure, not a stock measure. And let me tell you why the second one is really important, okay? Because GDP was often confused with the measure of wealth, right? But if I was to ask you Dylan, “Hey what is your wealth?” You wouldn’t confuse it with your income, right?
UMAIR: Your wealth is very different. And so GDP is a measure of income but it’s not a measure of wealth because the wealth that you have is actually a stock, right? It’s how much stuff you have accumulated overtime.
DYLAN: It’s a retained asset of some kind that has some variable -- some degree of permanence.
UMAIR: Exactly, exactly. And so GDP is often confused with the measure of wealth but it’s not, and it’s often confused with the measure of welfare but it’s not, because it leaves out many different kinds of harm and as you know there’s a -- you know, it’s quite a famous quote that’s doing well these days but the men that created GDP, Simon Kuznets said as he created it, two things. He said, “Listen. Guys this is not a measure of the welfare of a nation.” But today we use it. We misuse it as an index, as an indicator of both level of wealth and as an indicator of the level of welfare and it is neither one in actuality.
DYLAN: And if you would have to renovate GDP you would have to achieve two things. One, to make a distinction between money that moves around because of tornadoes in Alabama, nuclear disasters in Japan and my staff breaking each other’s arms, and other individuals who perhaps may cure cancer or advance energy efficiency in a manner that is a consequential contribution, and the distinction between somebody who invents a long lasting electric car battery and somebody who collects a lot of money cleaning up the Gulf of Mexico after the oil spill. GDP is agnostic at this point to both of those and that is perhaps one of the most tragic and risky, dangerous framings for -- not just economic life but for human life that one could really think of, particularly considering how dependent we are on government policy to influence which businesses flourish and fail.
UMAIR: Absolutely. And you know it’s lethal because what it does is that it poisons incentives, right. And so we have an economy now that is full of perverse incentives because we haven’t made a differentiation between sort of fundamentally extractive and creative activities in the institution. We have an economy where you have the incentive to go out and you can profit by extracting value from someone else instead of actually creating it for someone else. And this is what we -- and this is a pattern. We see an industry after industry today, right? So whether it’s finance, whether it’s energy --
DYLAN: Health care.
UMAIR: -- you can go down the list, right? And that pattern is there fundamentally because it is hardwired into our most foundational institution. It’s the thing that we use to gauge our wealth and our welfare. And the health of our economy says “Guys, you can profit by harm, by destruction, by exploitation,” and there’s no incentive for anybody to do anything but, right? There’s very little incentive.
DYLAN: And for that matter it’s easier to make money in the short-term through exploitation and the extraction and much more labor intensive with a higher failure rate and a much greater degree of challenge to actually advance and create something that is new and different and differentiates in its creation of value.
UMAIR: Absolutely! Now, let’s go back to our unemployment crisis for a second. We have a historic unemployment crisis in this country. And part of the reason is because GDP undercounts cost. And when we have an institution that undercounts cost, what it means is that companies and organizations of all kinds don’t have to pay people the cost that they would otherwise. So if I don’t have to pay a cost, there’s no cash circulating in the economy. If there’s no cash circulating the economy, there’s no basis for jobs to exist in the first place, right?
And so take the simple example of -- and GDP actually counted some level of environmental damage, then we would probably see companies saying, “Oh, shit! We don’t want to -- have to pay for those costs. So let’s hire a lot more people that are kind of environmental managers or environmental risk managers, environmental auditors, blah, blah, blah, blah, blah, blah and that would create jobs.” But we also have -- but we have an unemployment crisis today because we don’t count those costs. And so that money can just be sub-sealed back onto the corporate bottom line and the result is we see corporations hording trillions in cash with very little jobs to go around. But this stuff is all connected.
DYLAN: At the end -- yeah, I know 100%. At the end of the day, if you look at the fact that the -- it’s as if you have the measuring tools. If the measuring tools that you’re using to evaluate an unfamiliar environment are giving you bad data --
DYLAN: -- and you are making decisions as to whether to put more in or take more out of any -- whatever the resource maybe based on bad data, you are inherently going to have bad results. If you layer on top of that, the unholy alliance of business and state, where there is an explicit ability for businesses to manipulate policy in a way that benefits them uniquely on top of which the tools that you’re using to measure are incorrect. It begs the question -- and I don’t know whether you have the answer to this or not -- it begs the question as to whether the use of the bad measuring tools, GDP, et cetera is an accident that is being exploited, is not even understood in the halls of economic and political power the way that it should be or the way that -- clearly you do or is a known problem that is simply being taken advantage of.
UMAIR: Well, you know I’ll tell you what. Let me flip your question on its head for a second, right. And so remember today it’s a big world, right? And America is not the only player on the stage anymore. And what we see today is that -- you know there may be many causes for America’s reliance on an aging, obsolete software for human exchange. But guess which country announced about 3 or 4 months ago that they are going to update GDP for the 21st century? India. And guess which country announced and actually tried to do it from 2004 to 2007 and now it’s bogged down in political infighting, but you know there is some willingness to grapple with this issue there. That country is China.
So we have two of our fiercest emerging rivals on the global stage understanding the importance of updating these institutions. Because you know I can kind of see what those guys are thinking. They’re thinking something like this, “Listen. If we don’t update GDP” -- and they want to just update it in a minor way, to include environmental cost. And I can guarantee you that their policy advisors and their policymakers are sitting around and saying “Listen. We need to build the export industries of the 21st century.” And you know what? Nobody on the global stage is going to want to buy dirty, belching, wheezing industrial aged junk for much longer. So how do we set the incentive in an economic level for people to make lean, clean, green stuff? How do we create the incentives for a green export based?
And so let me answer it straight forward. Let’s make a green GDP, because if we do that the incentive across the entire economy shift. No longer can corporations in those countries get away with playing a game of pass the book back to society for environmental damage. And they have to make green stuff. And so we face a game of global competition today, and it’s not a game of global competition just for making slightly better product or services, it’s a bigger game. It’s a game for updating our fundamental institutions and on that score, we are losing.
We have just spoken about index at my lab to track the progress of different countries and it’s not done yet, but we have preliminary results. And unfortunately for us, the States comes in near the bottom, and so we have a lot of work to do. And you know we can argue, is the cost because we don’t want to take it on, and it’s a sort of an accident? Is the cost because -- you know there are lobbyists and I think it’s kind of unholy alliance in a way? And you know I think the truth is that this is equal parts of both and then maybe many more causes as well. But a deeper truth is that unless we can master the challenge we are not fit to compete in the 21st century.
DYLAN: How would one begin? Because there are people who obviously are attracted to the type of conversation you and I are having. There are people who recognize some if not all of the variables that you’re discussing. There are people who consume your publications voraciously. There are people who look to all sorts of outlets that go to this basic conversation and yet as a fundamental problem -- and I go through this with folks that I run into who watch either the television show or some of the other media that we publish on my end, and there’s not a shortage of comprehension on a broad swath of the population as to what some of the core problems are as you’re discussing them here.
There is however an incredible frustration in the sense of disempowerment that exists among individuals who are observing or hearing us and they listen to you, “Yeah, he’s right. He’s right. That’s great.” They end up feeling worse because they now know more; they have more intimate detail, more granular understanding of the core dysfunction and now feel more powerless. And so I would be interested to hear from you as you reference deeper truth. What it is that you would suggest any individual who is concerned by these things. What productive ways exist for them to channel both their anxiety, fear and frustration about the very dynamic that we’re discussing and measuring and debating and analyzing, and turn that into a something that actually, at the very least is not so disempowering and anxiety provoking. and at the very best is actually impactful in some way?
UMAIR: Totally. So, I think there’s two answers to your question okay. And I think that the first one begins with how we think about our great national debate. And today we’re having this great debate okay, and the debate is one that many countries have had at many points throughout history and it goes something like this, “Do we need to cut the budget and impose some kind of severe austerity or do we need more stimulus and bailouts and the rest of it?” Okay? And it’s a dilemma, right? Because both of these options have equally bad downsides and actually terrible downsides. I think it’s very important to recognize that that debate is a dilemma. And what we are talking about here is neither one of those options. We are not talking about cuts nor are we talking about stimulus and bailouts.
In fact what we’re suggesting here is that both of those are probably equally inadequate to take on the challenges of the 21st century. What we need to do is begin thinking of a third way, and it’s something that’s bigger. And we need to recognize that this is a country today in dire need of a new set of moonshots, okay. But those moonshots are probably not stuff like building high-speed rail networks, although one can argue that that’s very important. Those moonshots probably are beginning to update these fundamental institutions first, okay? And when is say “moonshots” that means that this is not something that’s going to happen overnight, okay?
It took Kuznets a decade to come up with GDP okay. So this is a serious moonshot. It’s going to take a lot of people -- a lot of smart people working probably something close to a decade to get something like this going. And there are people, you know at various universities that would put forward different kinds of proposals to make this thing happen, and the BEA has been studying some of this stuff for the last 10 years, okay. So if you’re feeling disempowered, I think you’ll have to recognize two things, but first is that the debate we’re having is not a productive debate. And if you get bogged down in this debate and if you say, “Well, I’m going to choose the left, I’m going to choose the right, I’m going to choose this, I’m going to choose that.” You’re basically choosing into a set of options that have gotten us where we are today.
And so I want people to think bigger first of all. Okay, now what can you actually do to begin doing some of this stuff? You know, my thesis is that if a quarter of us -- a quarter of the people on this country were to change their consumption and investment decisions tomorrow, and by change, I don’t mean a transient one off change, change them for a day. When you change their habits, change the ways in which they consume and invest, over long periods of time, permanently. We would see this economy fundamentally alter okay. So I think that we also as citizens of this country have to bear some degree of responsibility for what’s going on.
DYLAN: The only thing that I get -- and I don’t disagree with you. However, knowing full well that consumption and investment both on the margins and at its core is largely driven a lot of the time if not all of the time by price and understanding that because we have allowed this unholy alliance between business and state --
DYLAN: -- that everything, whether it’s the cost of credit through the subsidies of credit default swaps through the bailouts, whether it’s the cost of energy through the off balance sheet accounting for the military industrial complex to secure those resources or the environmental damage, or the cost of virtually everything else in this world, or excuse me the price - it is different - that the price of everything is fundamentally manipulated in wrong on some level.
DYLAN: And that without price integrity it is unfair to look to the consumer and say, “Well you should switch to this other thing,” with the knowledge that the consumer is being controlled by virtue of price manipulation that’s effective both with the tax code, off balance sheet liabilities that are pushed to the government, et cetera, et cetera. And so I -- well, I completely agree with you that if you are to get a shift in some meaningful percentage in the behavior, I do not see how that shift would ever happen until we are able to reestablish some form of price integrity in the market play.
UMAIR: Yup. Yeah, I think that these things are interdependent to a degree. I think that where we need to be smarter about our consumption and investment decisions is where we are shown a price. But that price is not the full price, okay? And the real price of that thing is a hidden cost being passed back on to us at some point in the future -- maybe tomorrow, right. And I think in those immediate cases, it’s very worthwhile for us to think about our consumption and investment decisions a bit more carefully, right? And we’ve learned to do this in some product categories over the last decade, right?
So in things like fast food for example, we’ve learned that it’s probably not the greatest decision in the world to have a Big Mac all the time, right? And so we need to be a little bit smarter about that stuff in the categories where we do have some power. I agree with you, those are not all the categories in world but you’re absolutely right that these things are interdependent. And so my final point to people is I would say listen, look for -- whether it’s you know political representatives or companies or different kinds of organizations who are supporting real institutional reform and real institutional change, and get behind that because you know we have to build some kind of critical mass for reform to happen here. And the truth is, if we are mired down in the same old debate about left and right, I don’t think it’s going to happen.
DYLAN: I have been working effectively since I left the financial universe after 15 years and I sort of stepped into the political universe to effectively try to make the point you just offered up, which is that the two choices are both wrong and that both are deliberately or accidentally or unintentionally, depending on your views and the time and situation that you’re looking at. But the third option is never debated. Now, we all know that any engineer in this world who has to solve a problem knows an engineer can’t solve a problem if the engineer cannot correctly identify the root of the problem.
UMAIR: Yup, yeah.
DYLAN: And what has frustrated me as I’ve moved again from a financial conversation to a political one over the past couple of years. When I was in the financial universe and Google’s stock would be up $10 and I could sit with a group of analysts and say, “Google’s stock was up $10, why do you think that was? Will it perpetuate itself? Is it because of China? Is it because of the phone? Is it because of any myriad of potential reasons?” And you can debate with those reasons are and how sustainable it is and all that.
The political universe is the only place that I’ve ever been -- where you can come into the room and say, “Listen Google’s stock was up 10 points. Let’s debate why that is and how, and whether that -- is that a good thing? Is that a bad thing? Can that perpetuate itself?” And the opponent says, “No, actually Google stock was down $10.” And Bill Clinton said this to me recently at a charity event, where he basically asserted -- and this is neither an endorsement nor an indictment of Bill Clinton, but it was a smart statement by somebody who has some foundation in understanding the nature of a political discourse in the west right now. And he basically said, “As soon as we suspend our fundamental acceptance of arithmetic and facts, we no longer have a democracy.”
UMAIR: Yes, exactly. And you know what? I think that that’s the critical point. And I think that it is incumbent upon us to wise up a little bit, right. Because we see -- you know as you say, a great deal of manipulation going on in the economy and it will behoove us to wise up a little bit to it. You know the other thing that we find in our -- in this index that we’re building of how competitive nations are, how prepared they are for the 21st century is that -- you are absolutely right, that these issues are interdependent. They do not -- we shouldn’t be discussion them separately but we often do. So to give you a very simple example -- you know it’s not just that you probably couldn’t have an update GDP in today’s -- in America’s political climate today. It’s probably also the case that if you manage to push one through, it would probably get decimated in the next two to three years even if you did it, right?
And so what we need to see is different levels of institutional reform kind of going hand in hand in hand. And so in our index, we map out different categories of reform, different institutions, new kinds of voting institutions, new kinds of parliamentary procedures, new kinds of rights that work together as a fit. And our thesis is that it’s not as simple as just kind of taking on one of these moonshots. And this is what makes this juncture in history probably a little bit different for many others. It’s probably the case that you’re going to have to take on several of them at once. And the only analogy that I can use for this situation is actually the Great Depression, and what really ended the Great Depression was not the war. It was actually the Bretton Woods conference where they laid down a new kind of financial system and monetary architecture for the world. And so they built a new set of institution, and that was very kind of topped down, right?
Today I think we’re going to need to see a new movement, a new force for bottom line institutional change and it’s going to have say, “Look guys, we have to take on many of these challenges at once, otherwise the state we’re in is a state we’re going to continue to be in.” And it is my hope over the next couple of years; we will see a lot of that kind of activity, a lot of that kind of awareness beginning to emerge. Because as I say -- you know, it is a big world today. And there are countries who are beginning to take this stuff on not just, you know out of marketing spin or hype but because they understand these are the building blocks of 21st century societies. And we have to get serious about building them and you know more than that I think we have to get serious about demanding them.
DYLAN: How would you express that demand?
UMAIR: I would express that demand by saying, “Look, you know we’ve talked today about GDP okay, but let’s relate it back to a bigger set of institutions. And we know that without serious reform of the relationships between kind of the lobbyists and politicians, it’s probably not going to happen, right? With the level of grid-lock in the senate, it’s probably not going to happen. With the ways that corporations are allowed to account themselves, it’s probably not going to happen. So what has happened in my view, very effectively, a little less 20 years in American politics is that by confiding our choices to left and right, people have been left unaware that the way we -- that the choices we have, the businesses choices we are offered are not the only choices we have, okay.
And so I would like to see people demanding a very different set of choices which is why we’re turning this index into a book and we’re going to say, “Listen. The choices that were being offered are light years away from the choices that other countries are making,” right? I don’t hear anybody going to the American people and saying, “Hey guys, do you want to update GDP?” Like, do you want to build a new system with national accounts? I’m in London right now. Over here they’re having a referendum on should they change their system of voting, it’s not just a binary system of voting, but it’s a system where you can express different preferences for each candidate on the ballot.
DYLAN: Which is sort of an idea that I love as you probably know so…
UMAIR: Yeah. It’s fantastic! It’s a fantastic idea! Because what it does is it begins to dislodge this idea of two-party politics right, this endless tedium of left versus right. And so these things go hand in hand. And hopefully what my next book will be able to say to people “Listen, we need to think bigger,” and it’s not just about piecemeal changes like okay -- “you know let’s stop the bankers from having bonuses and you know let’s get some corporate execs the perp walk.” That is a much bigger thing that we have to imagine today and not just like during the era of the moonshot. We have to think really big.
Today we have to think really big about our society and recognize that a lot of these stuff that we’re left with, this software for stuff, whether it’s human exchange, whether it’s political participation, whether it’s social organization these things are accidents of history or they are accidents of history that have been locked in cynically by people manipulating them for their own gain. I think we have to wake up and say -- and we have to do things in a very different way. And I’ll give you a very tiny example of this, okay? So I talked to you about India and China and their initiatives for green GDP. The country that passed the law last month I believe -- the first country in the world to give its natural assets legal protection, okay? Do you know which country it is? It’s Bolivia.
DYLAN: So walk me through the -- what’s the distinction between a national asset with legal protection or without.
UMAIR: Well, I believe the Bolivian law says only the natural assets in this country are legally protected, a.k.a they have some economic value, okay? And if you want to -- I don’t know, chop down a -- you know buy a -- for instance chop it down to make trees, you have to either probably maintain that forest in perpetuity or you probably have to give society a payment for it, right? To earn the right to do that, okay. So this is another country, a very, very unlikely contender to begin grappling with 21st century issues.
And so what I want us to recognize is the choices we’re being offered are probably not the only choices we have, and they’re probably not the best choices that are around. And I think part of the problem today that we have in America is that we don’t have a great level of awareness about what the rest of the world is doing in these terms. And so when I talk to people about India and China and green GDP, a lot of them are frankly quite amazed, right. It’s very hard to stomach that these guys could be better in something that we built 75 years ago.
DYLAN: At the end of the day the immediate task is clearly that of education of ourselves and of every other individual with whom we interact such that there is an ever expanding pool of people who not only are able to see past the lefty, righty, the two-party proposition, but are able to see past in a way that is not simply an emotion or a rejection of a frustrating process, but as an embrace of the knowledge through this education that there are direct and clear ways to address these issues if only enough of us educate ourselves to that very fact.
UMAIR: Exactly right. I think what I’m not -- and you’re exactly right. I think that we’re not saying is that there should be emotionally based rejection of left and right. A part of the -- what I hope is interesting about my next book is that for each of the new institutions that we talk about, some of which sound very, very sci-fi. There’s a country in the world that’s actually doing this stuff. And so what I would like us to see is that, you know it’s not about saying left and right we hate you. It’s something left and right, there’s a better way and we have to get serious about making these steps and forging that better path today.
I think that is very much what has to happen, and that is very much a process of education and awareness. And frankly, you know it’s not just an American thing but I think -- I spent a lot of time in Europe, I spent a lot of time around the world, many different countries are struggling with these ideas that in the way that we do things yesterday, is the only way we can continue doing them today, right? But I think it is a process of education. I mean, take the example of the British voting referendum, right? How many people today in the States really know what it’s about?
UMAIR: And I bet if you told them, they would say something like “Wow! That’s cool. I never knew we could vote like that.” And so I think that we really have to really wake up in that sense.
DYLAN: In that observation. I could not agree more. I want to draw this conversation to a conclusion. One, I hope that we’ll be part of an ongoing dialogue between the two of us as we explore all of this. Umair, I really appreciate you’re making the time for us to have this conversation however today. Thank you very much for it.
UMAIR: Thanks for having me Dylan.
DYLAN: Umair Haque, director of the Havas Media Lab, author of the New Capitalist Manifesto: Building a Disruptively Better Business. And always check out his blog at the Harvard Business Review. We’ll link to it on our end. And you can follow him on Twitter at @umairh.
It is time that we all understand that there is a better way that starts at its core with the tools that we use to measure our environment while simultaneously acknowledging the dysfunction in the process itself. This will end up being if we solve it, the ultimate in killing not just two birds with one stone but 6, 8, 10, an infinite number of birds with the simple simultaneous engagement of understanding that individuals behavior is directly related to the way that we incentivize their behavior and at the same time how we measure it.
And if we are measuring and incentivizing destruction and extraction as equal in value to creation, with the knowledge that destruction and extraction is significantly easier than creation, that ultimately it will be destruction and extraction that will ultimately prevail, and we obviously can’t have that.
I appreciate your time today and we will talk to you next time on Radio Free Dylan.