Eras of rapid change come and go. Schumpeter, Kondratiev, Piatier and others, studied waves of fundamental innovations. We are in the middle of the 4th wave at the moment (comprising ICT, electronics, internet, biotechnology, molecular engineering and the applications of quantum mechanics, etc), still with new innovations being developed, some still growing, some already maturing and some even starting to decline.
Empathise with the banker, trader or fund manager looking after other people’s money, whose performance on their behalf is continually assessed and reported as the basis for a position on a league table. Two options are on offer.
1. Invest in a start-up widget manufacturer creating new employment but only offering a return of 10-15% pa and even that is at risk, or,
2. Invest in “Alternative Markets – Dedicated to providing established green sippable alternative investments. Guaranteed investment opportunities with ROI ranging from 60% to 398%. Purchasing carbon credits to offset harmful emissions is a popular carbon reducing option. Investors can invest in companies that provide credits for carbon emissions, through forestry plantations for example, which are then sold on.â€
See http://www.alternativemarkets.co.uk/carbon_trading.php
Assuming both options are perfectly legal, which way is investment likely to be made?
The end of the self-defeating miners’ strike in 1985 led to the somewhat fundamentalist right wing government imposing severe restrictions on the unions’ rights to engage in industrial action. Despite the 13 years of Labour rule, those restrictions were never undone. So it remains extremely difficult, within the law, for the union movement to mount any general industrial action. However, the wholesale nature of the current government’s expenditure cuts, presents a once in a life time opportunity for the unions to mount a hundred or more individual legitimate trade disputes, which could, to all intents and purposes, look very much like a general strike. The unions hope this will be the appearance of their London demonstration at the end of March, which they expect to attract a million supporters.
The pattern of technological progress has been found to be surprisingly consistent. New technology has to clear various hurdles before attracting funds for its commercial development. A successful project that gets fully exploited grows fast, all the time getting detailed improvements and added features. Eventually, progress begins to slow, returns from further R&D diminish and the technology begins to stagnate, before being replaced by something totally new and different which starts the whole process off again. The graph of this progression is the S curve, starting at the tail of the S, going through a rapid growth and tailing off, before being replaced by a new S.
About 30 years ago, when Friedman’s fixation on maximising shareholder wealth was beginning to be widely adopted, S curves were a trendy form of strategic analysis. They had been applied to many industrial sectors, studying the introduction, development and replacement of technologies, all following discernible S curve progressions. However, the idea was not then applied to theoretical development.
An article in the current issue of Harvard Business Review, by eminent Harvard Business School economist, Michael Porter, and his business partner, consultant Mark Kramer, claims to be showing ‘how to reinvent capitalism – and unleash a wave of innovation and growth’. The secret is “Creating Shared Valueâ€.
It criticises the ‘outdated approach to value creation that has emerged over the past few decades’. That ‘outdated approach’ might be summarised as short term shareholder value maximisation – the target of much criticism in other posts on this site. Porter and Kramer propose a “new conception of capitalismâ€. But, despite the rather breathless, teenage language, it all boils down to an increased orientation to the usual candidates: concern for the wellbeing of customers, employees, suppliers, local communities, and also for the firm’s role in depletion of key resources, especially water and energy, and its role in polluting the atmosphere and thus, probably, contributing to climate change. So what’s new?
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