By Ian Pearson
Sustainability is one of the big issues of our time. Here Ian Pearson discusses future economy and governance, and argues that sustainability can only be properly understood when looking at the whole system.
Sustainability is one of the big issues of our time. We must achieve sustainability, but we must do so in such a way that the means of achieving sustainability is sustainable too, system-wide. Sustainability can only be assessed properly when looking at the whole system.
True sustainability requires that we look at the full impacts of an action across the full system and the full life cycle. As part of that full system, we have to account for social and political effects, human reactions and likely behavioural responses to it as well as the various physical and biological environmental feedbacks. Then we have to consider the ongoing effects of those actions too.
Sustainable Economic Recovery: The Need for Proper Leadership
The economic crisis is really one of confidence. Things were working fairly well before the banking crisis (even if massive debts were building up), and the decline was mostly caused by reduced confidence. The economy was fundamentally strong and there was no need to enter decline, but lack of confidence caused it to fall apart. It still needs a strong injection of confidence before things can improve. Confidence that the rest of the economy will improve will be self-fulfilling, but can only really be created by a well-led government. We don’t have anything like strong enough leadership currently. The lack of effective leadership is now a major and potentially persistent problem for the economy. People have to be able to believe their leaders and want to follow them before we can get moving again. That doesn’t look terribly likely at the moment.
An important ingredient in a rapid recovery is a sound tax base that encourages entrepreneurs but is conspicuously fair to all. There are probably a number of ways this can be done, but a key factor is that all must pay and pay according to their total income, regardless of how they get it. Also, a central issue is that the rich are becoming ever richer, even during the recession. Some rich people pay their dues properly, but some avoid paying taxes by roaming around the world, never staying anywhere long enough to incur local tax demands, or owning companies that navigate paths through a series of poorly designed national tax systems to avoid paying anywhere. It may be too hard to introduce global taxes, or to stop tax havens from operating, but we must find tax systems that are simple, fair and watertight.
The most obvious solution to getting money flowing instead of piling up is to introduce a tax on capital. Some other countries have one, so it is not without precedent. Taxing money left in the bank encourages people or companies to spend it, whether individuals or companies, helping to get the economy moving again.
Most of us would agree that welfare should provide a dignified but basic standard of living as a safety net. At the moment, it is something of a lottery, where those who know how to work the system get much more than those who don’t, and it could reasonable assumed that the latter are those who are most in need, since the former group have demonstrable skills that should be put to more productive uses. Complex systems full of means testing and thresholds are unfair and deter people from seeking work. The costs of administering such systems are around one third of their total costs to the taxpayer, so if admin could be simplified, then up to 50% more generous payments could be made. One way of doing this would be to give everyone a basic living allowance without any means testing and then to levy tax on total income regardless of source. A well designed tax system will still ensure that everyone contributes according to their ability, and if everyone receives the benefit, it could still all be perfectly fair.
If the degree of polarisation is reduced and everyone can feel that the system works fairly and that all contribute and all get a fair reward, then society can prosper, the economy will grow, and everyone will be better off. It is in no-one’s interest to keep a system where people are treated differently. When some are badly treated, they won’t contribute, their resentment grows, the economy doesn’t thrive, and everyone suffers.
Sustainable Executive Pay Policy
In the vast majority of situations, and at every stage of promotion, a number of candidates apply for the job. With only a few exceptions, there is very little to choose between the shortlisted candidates, and the job goes to the one who performed marginally better in the interview. What is then usually forgotten is that although the job has been filled, there are still several almost equally good people who could do it, maybe even better ones who just didn’t perform well in the interview. If the winning candidate were to move on for higher pay elsewhere, one of the others could easily pick up the baton and do just as well. It is therefore nonsense that the pay for the job has to be a lot higher than the grade below. If it were just 5% bigger than the lower grade, it would still be filled by someone just as competent. Most people would still want the more senior job simply because it is more senior and therefore carries higher status and power. Pay is actually one of the lesser incentives.
If each grade were paid 5% more than the grade below, wages would be much flatter. Typical blue chip companies have seven layers of management, and even this number is open to question. That means that the top job only really needs to pay 40% more than the lowest grade. If an executive performs far better than expected, they could be rewarded by bonuses, just like any other staff. If such a remuneration policy were to be implemented, it would save companies a great deal of money.
Of course, experience should be rewarded too and a wage scale within each grade is still useful to reward people who stay with a company as they become more useful. It would be reasonable to implement a bigger differential between the top and bottom of a scale than between scales. A higher grade might mean more responsibility or longer hours, but doesn’t necessarily need significantly more talent, and usually the job could be done by any number of people at the layer below. Therefore, promotion should be rewarded less lucratively than progress up each pay scale according to experience and tenure, which does correlate very highly with being more useful. Too often, someone who is excellent at their job is promoted to one where they are much less excellent, and the company suffers (as does the person). Rewarding skill and experience within the job is usually a better idea than promoting someone.
Clearly, some people do deserve to be paid much more than their colleagues. In many fields – design, leadership, research, engineering, teaching, law, medicine and so on, there are a few high fliers who are so good at their job that they produce many times the value of their lesser colleagues. A top engineer might invent many of the key products on which the company depends, whereas many others perform at levels where they are easily replaced or outsourced. A top designer might make a product so appealing that it sells far better than it would otherwise. Companies should try hard to keep such people since they generate a disproportionate amount of income. But even here, pay is only one of a range of incentives that appeal to people, so companies should spend more effort looking at a person’s individual goals and desires and target them more accurately. Bonuses and pay can be used if that is appropriate, and pensions don’t have to be linked to pay. In this case, there is no good reason why a top designer should not be paid more than the CEO.
So, the problem is not that some people should not be paid more; it is that it isn’t always necessary or appropriate to pay more. Just beating a few other candidates at an interview does not in itself guarantee that a person is much more valuable than others who also applied. In most cases they aren’t.
So, how does an organisation identify those that should be paid more? Simple! Top people really stick out. If they don’t really stick out, that’s because they aren’t top people. Top people don’t get discovered from nowhere at job interviews. If a product is hailed as having a wonderful design, find the people who were responsible and reward them. If a team performs well ahead of expectation, first reward them, and then ask them why they did so well. If they think that excellent leadership was a key factor, then reward the leader too. But don’t always jump to conclusions and reward the people who happen to be in charge at the time something goes right. It may well have happened anyway, or they may even have been an impediment and it may have happened in spite of their involvement. I can think of a several examples of the latter and probably so can you.
One of the big problems that many companies are now discovering is that top people no longer want to work for them. Often those people have found that thanks to the net, they can work freelance on a contract-by-contract basis for the highest bidder. Some of them can’t now be bought at any price as permanent employees, others will respond to higher offers. The result will be a highly rewarded elite, and a large majority who are simply easily replaced commodities, whose skills can be acquired at low cost either locally or from other countries.
Women in Business
Just as power tools have reduced the economic advantage of being physically strong, so future artificial intelligence (AI) will reduce the economic advantage of being smart. What will be left is essentially emotional skills where traditionally women dominate.
The consequences of AI are mainly influenced by the fact that few jobs are 100% information processing or intellect. A proportion is usually interpersonal interaction. Administrators will find that the pen-pushing and decision parts of their jobs will decline, and they will spend more of their time on the human side, the emotional side. Professionals will find that they spend more time with clients dealing with the relationship. Managers will spend more time on motivation, leadership and nurturing. Interpersonal skills, emotional skills, empathy, sympathy, caring, leadership, motivation – these are the primary skills humans will provide in the AI world. The information economy will gradually be replaced by the ‘care economy’. Although men can and do offer some of the skills in this list, it is clear that many are more associated with women, so the clear conclusion is that women will acquire an increasing dominance in the workplace.
Another trend in favour of women is that with increasing restructuring of businesses around small cooperatives of complementarily skilled people, networking is an increasingly important skill.
However, the free market is essentially gender neutral and customers generally don’t care whether a business is run by men or women. Turbulence accelerates levelling of the playing field. By contributing to accelerating change, IT thus acts in accelerating the downfall of a patriarchal business environment in favour of one based purely on merit, as it always should have been.
This article is excerpted from Total Sustainability by Ian Pearson. Copyright 2013. All rights reserved.
About the Author
Ian Pearson is a full time futurologist, tracking and predicting developments across a wide range of technology, business, society, politics and the environment. His inventions include text messaging, the active contact lens, and active skin. He was BT’s full-time futurologist from 1991 to 2007 but now runs Futurizon, a small futures institute. He has written several books and made over 550 TV and radio appearances. He is a Chartered Fellow of the British Computer Society, the World Academy of Art and Science, the Royal Society of Arts, and the World Innovation Foundation.