Feedback on the New Enlightenment
One great thing about my job is the feedback I get from Fellows. I particularly enjoy being challenged. One of my fiercest critics has been Australian Fellow John Montgomery who thinks I am a soft headed, jargon spouting, leftie.
John and I have been sparring on and off since I joined the RSA. He has just sent me an essay entitled ‘A New Enlightenment’. It’s a powerful and basically reactionary piece (I say this not to be disparaging but because the central thrust is a call to react against modern ‘isms’ in favour of older certainties).
Sorry, John, but I can’t give you the full response the piece deserves (it’s the pressure of last minute work before my holiday).
However, the starting point for my disagreement is that the old truths haven’t simply been displaced by modern fashion but by more profound changes in the world and our understanding of it.
Globalisation, climate change, complexity, technology and the web, new science from quantum physics to neuroscience; these all challenge aspects of the Enlightenment world view.
Moreover the Enlightenment itself helped to unleash forces which have created a hollowed out sense of the good society and the good life, which would horrify the authors of the Enlightenment.
I wonder why right of centre thinkers like John want to lay so much blame for modern problems at the feet of a few French philosophers whose theories are unknown to the vast majority of citizens, and so little at the door of consumer capitalism and the hubristic myth of the separate autonomous self, all of which are ubiquitous aspects of modern life?
The path to civic innovation
I have been spending time recently with some amazing social innovators. Last week it was Oli Barrett, creator of the Catalyst Awards among many other things. In just a half hour conversation Oli came up with some great ideas for Fellowship engagement.
On Monday it was Bobby Fishkin, another of the new breed of the hideously talented, young, ambitious American social technology pioneers.
What I got from Bobby, apart that is from an inferiority complex and a sneak preview of his exciting new web widget, was this:
- The US is about five years ahead of the UK in the scale and scope of social innovation
- The problem with social capacity is not an aggregate lack of commitment, time or effort but that the available capacity is massively under-utilised. We don’t use people’s skills effectively, we don’t collaborate as well as we should and we don’t learn from what works (and what doesn’t).There are some amazing organisations trying to address some of this (for example Ashoka) but too much blood sweat and tears are still flowing down the drain.
- In countries, cities and neighbourhoods we aren’t combining social interventions effectively. Too much is marginal, short-term and disconnected. From sustainability to tackling social exclusion new ways of joining up interventions and innovations are vital if we are to get to a critical mass point.
- The RSA’s history is both a help and a hindrance. On the downside we are trying to change a very established organisation. It’s a bit like IBM going from selling computers to being a high level consultancy (a process which nearly killed the corporation).Where we used to offer Fellows status and membership of a club we are now offering membership of a network of thought leaders and civic entrepreneurs. Getting buy-in from Fellows to this new offer is the key challenge facing our new Director of Fellowship Belinda Lester.
On the upside the RSA’s brand, the willingness we meet when we ask people to work with us and our reasonably robust financial model mean we can stay the course.
In innovation failure is as essential to learning as success, but for new initiatives mistakes in planning or application can be fatal. The web is full of abandoned experiments in social innovation. Our new networks platform will have learnt important lessons from the too clunky nature of version one.
Talking to Oli and Bobby confirmed to me we are going in the right direction. It also underlined how far we have to go before we the RSA is genuinely a hotbed of innovation. But most of all I was encouraged by their willingness to offer us advice and support as we try to fulfil the new mission agreed by our Trustees and Council.
The era of investor activism
We are entering an era of investor activism. There are at least three broad shifts that will compel investors to enter the market as more than merely consumers.
First, the failure of free markets to live up to claims made on their behalf. Milton Friedman and his mentor Freidrich Hayek told us that the market was free and fully rational. It turned out to be neither. The debacles of Russia and Argentina showed the folly of the first claim. Long tails and speculative bubbles put paid to the second.
Second, the growing realisation that central control cannot keep the City in check. Freidman and Hayek were right about this. Regulation, the product of a few bounded rationalities, can never out-perform the multiple mind of the market.
This second point is relevant to the current political situation. As the fall-out from the sub-prime affair continues, we are bound to get more and more calls for regulation. This is not necessarily a bad thing. Some regulation can be beneficial. But we would be kidding ourselves if we believed that regulation was the final answer.
The City is the very crucible of innovation. The men and women there, incentivised to create, will always be one step ahead of the regulators. As Michael Lewis describes in his book Liar’s Poker, mortgages were first packaged up and sold as bonds by a trader at Salomon Brothers, looking to steal a march on his rivals. It was a minor innovation that became a way of doing business. An army of independent watchdogs could not have stopped it.
The third reason for the rise in investor activism I pointed out yesterday. It is the catalogue of mismanagement attributable to that once-storied British institution, the joint stock company.
What does the rise of investor activism mean for companies?
In his recent RSA lecture, marking the launch of our project Tomorrow’s Investor, David Pitt-Watson heralded the arrival of the new regime.
Companies, however, can be excused if they are not so sanguine. They need to distinguish between engaged activist investors, who may tell them uncomfortable truths they don’t want to hear but have the long-term interests of the company at heart, and ‘drive-by activists’, who may whisper seductive tales of optimising shareholder value but whose real interest is in extracting cash from the company now, even if that leaves it debilitated and unable to cope with tough times in the future.
Investor activism can also be tricky ethically. Hugh Fearnley-Whittingstall’s attempt to improve the lives of Tesco chickens, for example, splits people down the middle. We discussed this at the Tomorrow’s Investor deliberative forum; about half the participants supported the “rights” of chickens, half the “right” to cheap food. There are no easy answers on ethical questions.
One way to get around – or at least ameliorate – this issue is to have broad participation from across the population. Then, hopefully, companies will behave in the interest of the many, rather than the few.
This more general citizen activism is what we are currently investigating in our Tomorrow’s Investor project. Check out the web page for more details.
The end of the corporation
The idea that the multinational corporation would one day replace the state as the focus of global power was always a silly one.
The people who put it about believed that markets could survive and thrive outside the state. But they let their beliefs get in the way of looking at the facts.
When the “Washington Consensus” was put into practice – in Russia, in Argentina and, most recently, in Iraq – it was a disaster. The lesson was clear: markets need the support of institutions, above all the state.
The demise of the neo-liberal dream has been accelerated by the utter incompetence that resulted in the credit crunch.
However, as Jonathan Guthrie notes in today’s FT, recent defeats by no means spell the end for the joint stock company. He writes:
In part, at least, this is true. Companies, the wealth-generating engine of any economy, will be around for a while yet.
But I wonder whether they are, in truth, efficient at marshalling people and capital.
Adam Smith, a Fellow of the RSA, disliked the idea of the joint stock company. Once managers take control of capital, he said, they will act in their own interests. The shareholders will forget to manage their investments.
Today, it could be argued, Smith’s dystopia has come to pass. The capital investments of millions of ordinary people are being controlled by what Paul Myners, speaking at the RSA, called “a self-appointed managerial elite”. This group works for itself, not the investor. Excessive remuneration is only the most visible sign of this dislocation.
The RSA’s new project, Tomorrow’s Investor, is investigating these issues. We held a deliberative forum here on Saturday with 24 ordinary investors – people who have invested in the stock market mainly through their pensions.
Around 70 per cent of the UK equity is owned by pension companies and other funds. Yet, by and large, people have little consciousness of their role as owners.
Like the political system, the financial system relies on active involvement from ordinary people. Managerial capitalism is good for no-one: it reduces profits for business and diminishes value for the shareholder.
Tomorrow’s Investor is investigating the role citizen investors should play in the economy. The Washington Consensus had a name for this: “democratic capitalism”. It may turn out to be the best thing that failed ideology ever produced.
Do school children and students know how to research?
This was the question raised last night at the RSA, where Encyclopaedia Britannica were sponsoring a talk. Their Managing Director, Ian Grant, emphasised the difference between ‘search’ (a list of results) and ‘research’ (a broader and deeper process of inquiry).
The debate featured a spat between me and Professor Stephen Heppell, one of the world’s leading commentators on learning and technology. Stephen is profoundly critical of the way Government is running our schools. Indeed, he asserted that every example he had seen of innovation and experimentation in schools had been a success, if for no other reason than that it couldn’t possibly be worse than what it replaced.
I have a great deal of sympathy for Stephen’s analysis and even more for his progressive vision for schooling. We fell out when I asked how a more devolved, innovative, child centred approach could ensure success in ‘average’ schools.
My argument was that while visionaries like Stephen tell inspirational stories about what is possible when great schools and teachers aim higher, policy makers will always be obsessed with how systems ensure steady improvement at the average and action to tackle under performance.
I am all too willing to recognise that the current structure of school and student appraisal could be improved, but that doesn’t mean we don’t need a system. The goal is systems that are light touch, that encourage local adaptation (as with the RSA’s Opening Minds curriculum framework) and that provide useful information to practitioners and students as well as to regulators.
The themes of this discussion were picked up again this morning in the debate about the Government’s plan to give doctors an annual competence test.
I remember from my own time in Whitehall shocking statistics showing massive variations in costs, treatment rates, and performance of hospitals, departments and primary care practices. So I support the initiative but – returning to yesterday’s theme – it is important to avoid the obvious dangers in a policy like this.
The first is over-regulation leading to a loss of autonomy and blind conformism – this is what some critics mean when they warn of the danger of ‘defensive medicine’
This is certainly what seems to have happened to much teaching practice over the last decade.
The second is a system which is easy to manipulate, leading to doctors being rated not on their actual performance but on their ability to do well in the competence test. This is what some local authorities would say has happened over time with the star rating system for council services.
This second problem should be seen as an endemic weakness reflecting the powerful impact of Goodhart’s Law which states that the relationship between two performance variables will start to disappear as soon as one is used at a proxy for the other.
The oft-cited example here is that the relationship between academic excellence and having articles in refereed journals started became weaker as soon as the Research Assessment Exercise used the number of articles as the basis for scoring academic performance.
Not only did lots of Journals of questionable quality spring up but academics tended to focus on low value, specialist, incremental research, just about good enough for a journal, rather than bigger bolder more accessible work that took longer to pay off and with a higher chance of failure.
So, however good the new system for doctors it will need over time to be continually reformed as these various policy tendencies take effect.
RSA Pamphlets
RSA Vision
RSA Animate
RSA Comment
- Twitter @RSAMatthew
RSA Bookshop
The RSA Bookshop, in partnership with Blackwell's the UK's leading academic bookseller, offers Fellows and friends an opportunity to purchase books and to explore our speakers’ ideas in greater detail. Visit the RSA Bookshop.