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Winning in the Age of Bohonomics

Archive for the month “August, 2015”

Dynamic Capitalism, Bohonomics and Future Singularity Circus

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Big shift of capitalism

A major shift towards an entrepreneurial economy has been a key phenomenon in the global economy. About a quarter of a century ago Bruce Kirchhoff (1989, p. 161, Kirchoff 1994) presented his analysis of this big shift: “There is growing interest in dynamic modeling of capitalism as recent experience has demonstrated the importance of innovation in shaping the structure and growth rate of capitalist nations”. A managed economy with large multinational enterprises is today a dominant model of organization in the global economy.

The inventions of the division of labor, economics of scale, economics of scope, paid labor and the fine-tuning cooperation between man and machine has led to the rise of multinational enterprise. In previous history, there was better balance between “big business”, “big government” and “big labor” than today. Some scholars say that “golden age of capitalism” was in 1945-1975. Stability, continuity and homogeneity were cornerstones of managed economy. Now we are observing more instability, non-continuity and heterogeneity in our societies. The years of financial crisis have been a big demonstration of long-lasting instability.

Because of long-lasting instability in financial markets many scholars have started to hesitate the “Price Is Right” and the “No Free Lunch” principles of capitalism. Critical thinkers have noted that capitalism can include fundamental inefficiencies like old historical Soviet planning economy thinking included. In all cases markets do not reflect available information and accurate signals for resource allocation, which lead to fundamental inefficiency. In the global landscape many trends seem to unbalance economies and cause non-continuities for organizations and institutions. Some authors like Frederik Berend Blauwhof (2012) consider that capitalism can either grow or collapse. Obviously, these two scenarios are main scenarios of development of capitalism.

We can note that stable managed economy have been replaced by the entrepreneurial economy. The entrepreneurial economy is defined by as an economy where economic performance is related to the emergence and growth of innovative start-ups and distributed innovations. In most developed countries this kind of replacement of economic activity has happened. It did not happen only in Silicon Valley or in the US Research Triangle in North Carolina. There are many dynamic innovation clusters with innovative entrepreneurs all around the world.

This shift of capitalism towards entrepreneurial economy involves a move towards a more dynamic form of capitalism. Many experts have noted that actually technological change is the crucial element of the explanation why shift from managed economy towards entrepreneurial economy has happened. The big shift has been embedded in a myriad of supporting factors, including increased globalization, increased knowledge production, new scientific breakthroughs, corporate reorganization and higher levels of prosperity. Accumulation of material and immaterial capital and more uneven distribution of wealth has been one key element in this change as Thomas Piketty (2014) has shown to us. Nobel Prize winner Joseph Stiglitz (2015) has noted that inequality has increased in the Western world. Professor Stiglitz has also noted that inequality is a choice – the cumulative result of unjust policies and misguided priorities. As sharply noted by professor Ha-Joon Chang (2010) “making rich richer does not make the rest of us richer”. Joseph Stiglitz says that our choice is not between growth and fairness; with the right policies, we can choose both. How we could be smart enough to do it?

The only policy solution is not “taxing the rich and subsidizing the poor”, but in very unstable economic conditions policymakers obviously will select this straightforward policy option. In Europe, and in especially Greece we have already seen strong signals about this kind of countervailing economic policies. In Greece the Coalition of Radical Left (SYRIZA) has started a counter-neoliberal mobilization. The trinity of liberalization, deregulation and privatization was not seen a grand solution to the economic problems of Greece.

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“Singularity Circus” and AIRo approach

How people can live in unstable and highly unpredictable capitalist economy where “big business”, “big government” or “big labor” cannot any more provide good answers to citizens? One good answer will be better understanding of technological development of disruptive technologies. Second good answer will be to give more attention to bohemian change makers and radical entrepreneurs. Of course we must also understand dynamics of globalization, knowledge production, scientific breakthroughs, corporate reorganization and higher levels of prosperity.

However, there is one major variable, which could help us in all these fields of vital change: It is AI and robotics (AIRo) together. So called “singularity circus” is in many ways based on these fast and disruptive technological developments. In spite of fast AIRo developments, it is important to take human beings into consideration because they are really playing roles in the turbulent world of “singularity circus”, where AI and robotics boost many economic developments. Ordinary people have still something to say about wealth and prosperity, entrepreneurship, knowledge production, corporate reorganization and the use of novel technologies.

If singularity with modern AIRo means such great unlimited smartness for citizens and firms, we can expect that singularity developments will surely have some potential to solve wicked problems of new dynamic and unstable capitalism. One good idea would be the use of modern technologies to build up better stability of future developments in the global economy and local societies. Abundance vision (Diamandis & Kotler 2012) must be taken seriously, because the smart combination of technology, people and capital can meet any grand challenge of our time. This kind of systemic development would mean new kind of capitalism, where people are still winning in the age of smart machines. In the book “BohoBusiness – Winning in the Age of Bohonomics” (2015) we call this kind of economy: Hybrid Bohonomics Economy. This kind of economic thinking is not questioning the role of market economy, but it reminds us that there also other ways to organize economic activities than relying only on markets.

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Strong AI: The Element of the Next Society

Strong AI refers to a machine that is approaching (1) human intelligence level or over; (2) a machine that can make typical human matters; (3) a machine that can be used to analyze extensive background information, (4) a machine, with some kind of consciousness, the so-called machine consciousness. Our outstanding inspiration expert and AI specialist Monica Andersson sees that, in the future, the development of intuitive Artificial Intelligence will be possible.

The book “Age of Spiritual Machines” is a non-fiction book about artificial intelligence and the future course of humanity by inventor and futurist Raymond Kurzweil, published on January 1, 1999. In this book, Kurzweil outlines his vision of technological progress during the 21st century. The idea of intuition in the AI applications was presented a long time ago; now we are approaching the new frontier of AI development. Technology visionary Raymond Kurzweil believes evolution provides evidence that humans will one day create machines more intelligent than they are. He has presented his law of accelerating returns to explain why, in the future, key breakthroughs will happen more frequently as time progresses.

Kurzweil also explains why the computational capacity of computers is increasing exponentially. He notes that this increase is one key ingredient in the creation of strong artificial intelligence. The other ingredients are automatic knowledge acquisition and algorithms like recursion, neural networks, and genetic algorithms. Once robots evolve to be smarter the roles of humans and robots could likely change, obviously not a desirable situation for human beings. The development of robots will depend on the development of strong AI, Artificial Intelligence generally referred to a machine/automaton equipped with artificial intelligence.

The form of Artificial Intelligence is assumed to be a computer program, set to think like humans do, in fields such as accounting and decision making. At the moment, Artificial Intelligence applications include natural language generation and identification of specialized systems, expert systems, robotics, and entertainment applications. The definition of Artificial Intelligence is still very controversial, because the concept of intelligence is difficult to define.

Key future challenge is to create synergy between dynamic capitalism and smart, AIRo driven “singularity circus”. For this purpose we need to understand the concept of hybrid economy and Bohonomics. Human beings and companies are already now living in hybrid economies, where the rules of Bohonomics are the actual economy. Capitalism needs an updated reality-check.

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Hybrid Economy and Bohonomics

Hybrid Bohoeconomics are activities in broad hybrid economy includes four principles: (1) The principle of market economy,(2) the principle of exchange economy, (3) the principle of subsistence economy and (4) the principle of creative economy. It is very important to underline that this kind of economic thinking is not questioning the role of market economy, but it reminds us that there also other smart ways to organize economic activities than relying only on markets. Bohoeconomics are activities in this broad hybrid economy. In Bohonomics we realize the existence of these four economies and create smart combination of technology, people and capital, which can meet any grand future challenges in a better way than current linear market focused thinking. Bohonomics includes the popular idea of sharing economy, where people perform and share Do-It-Yourself (DIY) capabilities. The idea of Bohonomics includes also the idea of “garage capitalism”, where production is not very capital intensive with garages, basements, ground-floor flats, entry halls, common and other ad-hoc premises in buildings.

One key problem in modern societies is that legislation, the tax system and real politics have not taken real economy, hybrid economy and Bohonomics into serious societal consideration. This is one of the reasons why current systems are lagging behind the real economy, i.e. the hybrid economy. Technological progress, novelties and growth of Do-It-Yourself movements require more flexibility and political and tax reforms in order to create a real living economy and social activity in the future. Bohonomics requires more attention from political and economic elites. In many societies key attention of politics is focused on market economy leaving exchange economy, subsistence economy and creative economy without serious recognition. In the global setting new economic thinking cannot work by this kind of one-dimensional approach. Managerial responsibility and civic-market compromises will be needed instead of one-sided industrial-market compromises.

The new Bohemian economic system is a systemic innovation including social, technological and business innovation in strong mutual synergies. It would be important to focus in particular on the social innovation field to find new solutions to the challenges or problems. We should analyze social phenomena and life from new perspectives, and find new needs for new equipment, services, policies, procedures, networks, or a smart combination of these. We should develop things bearing in mind the future, not history. This would be a new perspective in politics where old ideological border-lines do not make sense any more.

Wealth can be increased in the future, but we need new kinds of practices, management styles and attitudes. We need also new leadership. It is very likely that we cannot meet the challenges of the future on the basis of the old “isms”. We need a new economic system of innovation; we need a more innovative societal policy, which will not be a copy of the Nordic welfare state model from the 1960s. Nor can it be a copy of the 1800s American Industrial Capitalism. We cannot move Silicon Valley and California to everywhere, but we can develop your own innovative societies with the free attitude of Bohonomics. The new economic system should take into account the formation of new mechanisms of wealth, including the technological singularity scenario.

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New Wealth Creation in Bohonomics

In May 2012, Wired Magazine (Goetz 2012) asked eight of the world’s leading foresight and innovation specialists, how they see the future of innovation and what key issues they will pay particular attention to assessing the development of innovation in enterprises and in R&D organizations. Each expert emphasized different aspects of innovative activities and their adoption. In response to the key question, they presented the seven key principles of innovation:

  1. Pay attention to the transferability of ideas across disciplines and interdisciplinary industries.
  2. Watch for exponential processes carefully, for example, Moore’s Law, in accordance with the processes.
  3. Avoid tyrannies of thinking and unnecessary restrictions, and think positively on the business models.
  4. Let ́s give value of courage and bravery.
  5. Place a priority on openness and open systems.
  6. Demand a thorough design and engineering know-how and execution.
  7. Take the time with idle people and let you be idle to a certain extent.

This list gives a strong indication of how wealth is created in the creative economy, in Bohonomics. Wealth creation requires right kind of values and attitudes like entrepreneurship and openness. If the organization does not give space for new procedures, it is very unlikely that they would be able to generate significant added value and wealth. Of course, they can provide good “business-as-usual” results. Dynamic capitalist economies require new firm entry and growth to assure that innovation does not become the mechanism of “winner takes it all”, where increased concentration of industrial and economic activity will be boosted.

There are many obvious structural and world-view differences between the old and the new system of capitalism. Evolution towards Bohonomics type of economy will take some time, but there are many technological and social trends with wicked problems, which require new solutions. Avoiding systems of big failure requires novel thinking and new innovative approaches. Hybric Economy with Bohonomics is such a new innovative approach.

Jari Kaivo-oja

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References

Andersson, Cristina & Kaivo-oja, Jari (2015). BohoBusiness – Winning in the Age of Bohonomics. Talentum, Helsinki.

Blauwhof, Frederik Berend (2012). Overcoming accumulation: Is a capitalist steady-state economy possible? Ecological Economics. Volume 84, 254–261.

Chang, Ha-Joon (2010). 23 Things They Do Not Tell You About Capitalism. The Benguin Book, London

Diamandis, Peter & Kotler, Steven (2012). Abundance—the Future is Better Than You Think. Free Press, US.

Goetz, Thomas (2012). How to Spot the Future? Wired 04.24.1 Web: http://www.wired.com/2012/04/ff_spotfuture/

Kirchhoff, B.A., (1989). Creative Destruction among Industrial Firms in the United States. Small Business Economics 1(3), 161-173.

Kirchhoff, B.A., (1994). Entrepreneurship and Dynamic Capitalism: the Economics of Business Firm Formation and Growth. Praeger, Westport, CT.

Piketty, Thomas (2014). Capital in the Twenty-First Century. Belknap Press, Cambridge, MA.

Stiglitz, Joseph E. (2015). The Great Divide. WW. Norton & Company. New York.

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