Carlota Perez has long been one of my favourite economists; not least because she is so disillusioned with the state of mainstream economics that she refuses to call herself an ‘economist’. Unlike most of her colleagues, she predicted the 2008 Crash not through some complex modelling but by studying that most unfashionable of subjects – economic history.
Perez’s analysis is complex but at its heart is the notion that economic change is driven by the emergence of new ways of doing business that have their origin in technological breakthroughs that offer major productivity gains. However, these shifts are about far more than a company balance sheet or a new piece of kit. They are part of a much wider shift of organisational culture across many spheres of human activity. For this reason she calls these disruptive practices ‘techno-economic paradigms’.
Interestingly, given our current situation, Perez argues that the period after financial crashes are the point at which these new paradigms step up a gear in both the intensity and the spread of their application.
Which raises the question of what exactly is this new paradigm that should now be growing in intensity and spread?
The question has been rolling around my head since a fascinating conversation on Monday with RSA Fellow Charmian Love who also happens to be CEO of Volans, a company founded by the corporate responsibility and sustainability guru John Elkington, which works with some of the most innovative and imaginative companies around.
I think Charmian would agree with Perez that sustainability is at the heart of any new paradigm both in the environmental and broader senses. However, one of Perez’s insights is that this new paradigm must work not just for the way firms view themselves but also the values of the consumers who buy their products. For me this means that sustainability needs somehow to tap into the shifting aspirations and identities of millions of people. For example, Perez shows convincingly how the rapid expansion of the mass production paradigm after 1945 was part of the spread of the aspirational ‘American dream’ of the nuclear family owning or renting their own new home and being keen to fill it with the latest convenience goods.
I wonder if the key to this is the concept of creativity. It seems to me that for some time now there has been a growing acceptance that the most effective companies are those that combine a rigorous, problem-solving imagination with agility in responding to rapid market movements and an openness to new ideas many of which may emerge from outside the company. This is a pretty good description of a highly creative organisation and indeed some of the most successful companies making use of the latest web technologies are often lauded for the way they deploy the inherent creativity of their staff.
But these characteristics may also have their analogue in the behaviour of consumers. The imagination of the company seems to respond to and inspire the desire of consumers to allow their own imagination to flourish. It is surely no coincidence that some of the most successful companies of recent years, such as Facebook and Twitter, are little more than blank slates which allow their users to express themselves.
Equally the openness to ideas reflects the desire of consumers to have more control over the creative process that leads to the product or service they buy. The open innovation movement is testament to this.
And consumers also seem more willing to experiment with different experiences and brands and to ‘shop around’ – a phenomenon that requires that agility on the part of a firm.
To put it another way, the Perezian paradigm may ultimately find its focus on the way highly creative companies breed highly creative consumers and vice versa.
So where does sustainability come in? As the mass production example above shows, these paradigms shape and are shaped as much by emergent social values as by simple buying behaviour. Could it be that our long-run obsession with defining status through the acquisition of resource intensive products could increasingly be replaced by a belief that status comes through creative self-expression? Winning the admiration of your peers and securing social mobility will be less about what you own and more about how much imagination you bring to bear on what you do.
It doesn’t necessarily follow that such a lifestyle is more sustainable. Apple, for example, is a highly creative company that appeals to creative people but has been criticised for it environmental record. But a world of consumers focused on doing and creating things for themselves seems to hold a greater potential for environmental good than one populated by people obsessed with owning stuff.
Why is UK productivity so low? Poor management, low employee motivation, low investment – or all of the above?