Adapting to change is crucial for a successful business. Markets are constantly evolving, and what was once popular may lose appeal. Even when producing the same product, businesses must continually learn and adapt to best practices. Our current changes require a shift in every aspect of the organisation. There is a growing awareness that the current models of success, such as capitalism and globalisation, are not serving us and contribute to societal divisions and unrest.
Both Nick Hanauer and Kate Raworth have given TED talk presentations in which they challenge contemporary economic thinking, arguing that current economic theory needs to be revised. They assert that rising inequality and political instability stem from flawed economic theory, specifically the fundamental assumptions of neoliberal economic theory. Hanauer emphasises the need for new economics for a more equitable, prosperous, and sustainable economy.
He highlights the following points:
1. People, not just capital, drive economic growth.
2. Reciprocity, not self-interest, promotes the public good.
3. Cooperation, not competition, leads to prosperity.
Neoliberal economic theory is based on false assumptions:
1. The market is not an efficient equilibrium system.
2. The price of something is not equal to its value.
3. The behavioural model of “homo economicus” is morally corrosive and scientifically wrong.
Hanauer suggests using the latest empirical research and natural science, which describes human beings as highly cooperative and moral creatures. Therefore, cooperation, not selfishness, drives prosperity.
He proposes five rules of thumb for new economic thinking:
1. Markets, like gardens, must be tended and regulated to solve human problems effectively.
2. Inclusion of more people in more ways leads to economic growth.
3. Corporations should benefit all stakeholders, not just shareholders.
4. Sociopathy is detrimental in an economy dependent on cooperation.
5. The laws of economics are social norms and constructed narratives, thus changeable.
Doughnut Economics
The view of society that dominated 20th-century thinking is that of the “rational economic man.” This view says man is self-interested, isolated, calculating, and competing. Unfortunately, this description is simplistic and flawed, leading to sub-optimal decisions in investment and politics.
Kate Raworth addresses this issue in what she has described as “Doughnut Economics“. She mentions Edward Bernays, the father of “retail therapy” and the ‘engineering of consent’. Edward Bernays said:
“The conscious and intelligent manipulation of the organised habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are moulded, our tastes formed, and our ideas suggested, largely by men we have never heard of…. It is they who pull the wires that control the public mind.”
Bernays was so successful that society is addicted to the idea that we are inadequate but can transform ourselves if we have something more, thus driving GDP growth and linking it to progress.
Raworth developed the doughnut graphic for economics out of Johan Rockström’s idea of Planetary Boundaries and first presented her Doughnut in 2012. Much has already been written about it, and numerous cities have developed new urban areas using the model in their plans.
Kate Raworth suggests seven ways to think that will help society move into the Doughnut, that comfortable place we want to be. With her team, she has prepared a series of fun animations presenting these ideas. Briefly, they are:
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Change the goal from GDP growth to providing a safe and just space where people can prosper while living within ecological or planetary boundaries.
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See the big picture. The economy is embedded in society and interacting with the environment.
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Nurture human nature. Rational economic man is a myth; humans are social, adaptable, approximating, and cooperative.
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Get savvy with systems. We must understand the old idea that market equilibrium is overly simplistic and symptoms are dynamic and complex.
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Design systems to distribute, not just grow, believing we will resolve problems in the future.
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Build regeneration into the system. It is cheaper and works better than a clean-up afterwards.
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Be agnostic; do not trust in growth. Everything has a cycle, and constant growth is an illusion. It is considered desirable because much, or even most, of the cost is deferred or hidden.