Do as I say, not as I do

Source of two-headed image: Quora
THE HYPOCRITE IN ALL OF US

How many of us practise what we preach? While it’s easy doling out gratuitous advice to others, living by the principles and values we espouse is another matter. The hard truth is that many of us display glaring contradictions in our behaviour, adopting one pose in public and another persona in private.

In all domains of life, people put on false fronts. Examples of double standards include pious politicians promoting family values while secretly having an affair to two-faced parents telling their children not to smoke while doing so themselves. Inconsistencies between what we say and do abound as we often fail to meet our own moral code.

While most humans can be accused of duplicity, higher standards are expected of those who claim the moral high ground. Priests and other religious implore us to love our neighbour, yet (some) have committed unspeakable transgressions against children. Such unvirtuous behaviour is repugnant and has exposed the heinous moral hypocrisy of religious institutions.

Just as churches need to put their own houses in order before damning others, so do we. Everyone is prone to hypocrisy at one point or another in their life. Humans are not cold logical robots but fallible emotive beings, which is why we suffer from a misalignment between words and deeds, thereby making hypocrisy unavoidable.

High-status people are some of the worst hypocrites in society. These individuals are frequently admired by others and often occupy leadership roles. Yet, as author Peter Schweizer outlined in his 2006 book, Do as I Say (Not as I Do): Profiles in Liberal Hypocrisy, famous people are not holier-than-thou and also fall short in living their beliefs.

Schweizer conducted an investigation in to the private lives of a handful of prominent US citizens and found a long list of blatant contradictions. To quote the book’s promotional copy:

Michael Moore … claims to have no stock portfolio, yet he owns shares in Halliburton, Boeing, and Honeywell and does his postproduction film work in Canada to avoid paying union wages in the United States. Noam Chomsky opposes the very concept of private property and calls the Pentagon “the worst institution in human history,” yet he and his wife have made millions of dollars in contract work for the Department of Defense and own two luxurious homes. Barbra Streisand prides herself as an environmental activist, yet she owns shares in a notorious strip-mining company. Hillary Clinton supports the right of thirteen-year-old girls to have abortions without parental consent, yet she forbade thirteen-year-old Chelsea to pierce her ears and enrolled her in a school that would not distribute condoms to minors.

The business world is similarly guilty of hypocrisy with companies displaying a lack of coherence between talk and action. Consumer activists have long argued that most business models prioritise profits over people despite the assertion by firms to the contrary. The classic example is the rag trade where global clothing brands have been complicit in the exploitation of sweatshop workers.

Sweatshops are as old as the industrial age and were started by heartless businessmen. Modern-day consumers must be careful of being too sanctimonious about the plight of garment workers because they (as shoppers) have knowingly bought high-street brands supplied by factories which mistreat their workers.

One of the reasons that high-street clothing has been getting cheaper and cheaper for decades is that sweatshop workers do not receive a living wage. The suffering of these unknown workers on the other side of the world is easy for us as consumers to ignore, particularly as we have become accustomed to reaping the benefits of lower production costs.

Something else that we have become accustomed to is politics in sport and this was on full display during the Beijing Winter Olympics. The overwhelming message of the opening ceremony was about peace and togetherness. A giant LED snowflake sculpture was used to symbolise all people coming together and living in harmony.

Yet human rights organisations branded the 2022 Olympics as “the genocide games” and accused China of holding a million Uyghurs (a largely Muslim ethnic group) against their will in re-education centres. In response, many nations – including the US, Britain, Canada, and Australia – staged a diplomatic boycott of the games in protest at China’s repressive policies toward the Uyghur minority group native to Xinjiang.

Many saw the International Olympic Committee’s decision to award China the games as political hypocrisy. Having an alleged human rights abuser as host was called out as clashing with one of the fundamental principles contained in the Olympic Charter – a commitment to “the preservation of human dignity”.

Another international body which recently came in for criticism is the United Nations entity that supports and co-ordinates action on climate change. For nearly three decades, the UN has brought together almost every nation on Earth for global climate summits called Conferences of the Parties (COPs). The 26th annual summit – COP26 – took place in Glasgow last November.

As leaders from around the world made promises to tackle an existential threat to humanity, climate change activists and experts railed against the hypocrisy that accompanied it. As noted in a University of Southern California (USC) Annenberg Media report:

… a total of 400 private jets flew down to Glasgow from all over the world, carrying more than 100 leaders. This emitted 13,000 tonnes of carbon dioxide into the atmosphere. For comparison, the average person’s carbon footprint globally is 7 tonnes per year and the carbon footprint of an average American is 21 tonnes per year. The leaders have been called out by critics as “eco-hypocrites” for emitting a huge amount of CO2 while gathering for an event organized to curb greenhouse gas emissions.

Climate change hypocrisy also extends to members of the British royal family. On numerous occasions over recent years, Prince Harry and Meghan Markle have been criticised for flying around the world in private jets while lecturing the world about climate change. A former UK government minister told Newsweek:

It’s completely hypocritical for Prince Harry or other members of the royal family to lecture people about climate change when they’re emitting more carbon than almost everyone else on the planet. People using private jets are in the top one percent of carbon emitters in the world.

Many citizens understandably jump up and down about humanity’s need to take climate change seriously. These same people typically look to governments and businesses to find eco-friendly solutions, when the real power for change is in our collective hands. We support governments with votes and businesses with dollars, which means that we can choose who governs and where we spend our money. We need to put our votes and our money where our mouths are!

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“Hypocrisy is the natural state of the human mind,” according to Robert Kurzban, author of Why Everyone (Else) Is a Hypocrite. Kurzban argues that our behavioural inconsistencies are caused by the mind’s design, which consists of many specialised modules. These modules don’t always work together seamlessly resulting in impossibly contradictory beliefs and violations of our supposed moral principles.

Consequently, hypocrisy is everywhere and can manifest itself in countless ways. To pretend that we can live our lives without hypocrisy and contradiction is itself a form of deception. We must, therefore, exercise care before angrily lambasting others for their deeds, while doing the same ourselves. People who live in glass houses should not throw stones.

We’re all hypocrites, it’s just a matter of scale.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How our lives are shaped by the choices we make

Source: smartholistics.com.uk
LIFE DOESN’T JUST HAPPEN

Ever since Adam and Eve’s original decision to eat fruit from the forbidden tree in the Garden of Eden, humans have made some spectacularly poor choices. History bears witness to these monumental mistakes including the crew of the Titanic ignoring warnings of icebergs in their path, NASA proceeding with the space shuttle Challenger launch despite known problems with the solid rocket boosters, and engineers filling the Hindenburg with highly flammable hydrogen.

Bad decisions are part of life, though most do not have consequences that weigh as heavily as those just cited. Examples of non-fatal, flawed judgements include the 12 publishers who rejected J.K. Rowling’s first Harry Potter manuscript, the Decca Records executive who declined to sign The Beatles, and the Yahoo co-founder who turned down a US$44 billion takeover offer from Microsoft.

Hindsight may be 20/20, but risk is an inescapable part of every decision. We never know the outcome of a decision in advance – sometimes our choices turn out to be spot on, while on other occasions our judgments prove to be seriously flawed. In the words of the late French philosopher, Albert Camus, “life is the sum of all our choices”. History, by extrapolation, equals the accumulated choices of all mankind.

Our lives are defined by the series of choices we make every single day. They play out over a lifetime and ultimately determine our destiny. Our choices not only change our lives but the lives of others. We are not alone in our choices as we are part of a bigger picture – there is a chain of events associated with every decision we make. Thus, an individual deciding to buy environmentally friendly products can help change the world and make it a better place for everyone.

Some of the life-changing decisions that we make include where to live, how many children to have, and what career to follow. More mundane and routine choices include what to wear, and what to watch on Netflix. One of the paradoxes of life is that our bigger decisions are often less calculated than our smaller ones. We can agonise for weeks over what new car to buy but rapidly end a long-term relationship with little thought or deliberation.

Sometimes a snap judgment or instinctive choice is appropriate. Your emotions, though, can easily cloud your judgment, which is why most experts agree that the best decisions are made when there is a balance between logic and emotions. The invisible tug-o-war between the head and the heart is not a bad thing as you are more likely to carefully weigh the pros and cons of each decision before choosing an alternative.

When your emotions are running high, your logic will be low, which can lead to irrational decisions. To illustrate, anger makes you vulnerable to high-risk, low payoff choices such as the rash decisions made during a bitter divorce. Happiness, on the other hand, makes you confident and optimistic about the future but can cause you to overestimate your chances of success, such as believing that your winning streak at the casino will continue indefinitely (aka gambler’s fallacy).

Knowing how to make good decisions is one of the most important skills we can possess. Many people look back at some of the terrible decisions they have made and ask themselves: What was I thinking? We make endless decisions, so we are bound to regret some of them. A Cornell University study estimated that the average adult makes thousands of remotely conscious decisions every day.

Each decision you make is a trade-off as everything you say, do, or pursue has a cost and a benefit. In the language of economists, this trade-off is called an opportunity cost. The term “opportunity cost” is defined as “the cost of an alternative that must be forgone in order to pursue a certain action”. Put simply, it’s what a person sacrifices when they choose one option over another. An example will help here.

Let’s say that you have $100 in your purse and you can spend it on a pair of jeans or a meal. You choose to buy the denim jeans, so the opportunity cost is the restaurant meal you cannot afford. For everything you choose to do, there’s something else you won’t be able to do. Every day as consumers, we are forced to make such choices due to “scarcity”. Scarcity and opportunity cost are two interlinking economic concepts.

Economists view the world through the lens of scarcity. Indeed, without scarcity, the science of economics would not exist. Scarcity arises because, as a society, we have unlimited wants but limited resources. We all know that you can’t have everything you want – we have to choose and make trade-offs. Economics examines how individuals, businesses, and governments deal with the limitations imposed by scarcity.

Broadly speaking, economics is the study of human behaviour as it relates to money. When it comes to financial decisions, economists erroneously claim that humans are rational and unemotional decision makers. Psychologists, on the other hand, correctly contend that economists’ models bear little relationship to actual human behaviour. The harsh reality is that humans do not obey the efficient, orderly principals espoused by free-market thinkers.

The Global Financial Crisis (GFC) confirmed that we are far too emotive for rational economic models to accurately predict our conduct. Many people in the US bought houses at grossly inflated prices and expected their value to keep rising. In the process, borrowers saddled themselves with loans that they could not afford, which led to the subprime mortgage meltdown and ultimately the catastrophic GFC.

This “irrational exuberance” was not confined to the household sector. Borrowers, bankers, and brokers were united in the delusional belief that house prices never go south. Post-GFC, many people turned to behavioural economics to understand what happened. Behavioural economics combines psychology and economics to explain how people really make decisions when they spend, invest, save, and borrow.

Unsurprisingly, few people reach the level of expertise necessary to rightfully claim that they are an expert decision-maker. The development of genuine expertise in any field requires years of struggle and sacrifice. Still, you can be a good decision-maker if you choose actions that produce the best outcome for yourself and others. The trick is to make each decision with an open mind and be aware of your unconscious biases.

Cognitive biases distort thinking, influence beliefs, and sway the decisions we make every day, yet most people are unaware of them. Over the course of our lives, we all develop cognitive biases. Just watch the daily news, listen to talkback radio, or scroll through social media posts to witness biases in action as people argue over politics, climate change, and other hot topics. Everyone, of course, claims that their position is the right one.

Differences of opinion occur because we all have our own perspectives based on our preconceptions, past experiences, and the information we draw on in forming judgements. When it comes to gathering information, many of us are guilty of confirmation bias – readily embracing information and conclusions which align with our views and largely ignoring anything which contradicts our beliefs.

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The next time that you make a bad decision, just remember that it could have been worse. Imagine being the individual responsible for allowing the famous Trojan Horse to be brought inside the City of Troy, not realising it was full of Greek soldiers. And how would you have felt standing in Napoleon’s shoes after he invaded Russia, suffered a catastrophic defeat, and returned home with just a fraction of his once grand army?

You can minimise regrettable decisions by learning from your mistakes – history does not have to repeat itself. Humans have a tendency, however, of replicating the same blunders over and over (poor diets, dysfunctional relationships, impulsive buying, etc.) causing us to relive our errors. If you want a different result, you have to do something different – make better decisions!

We are what we choose to be.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why we fail to detect subtle changes

Source: hu-hu.facebook.com
PERILS OF SHORT-TERM THINKING

Humans sit at the apex of the evolutionary tree with the most complex brain of any animal, yet some believe that there is a design fault. Our brains have evolved to respond to immediate threats, so we are not wired to detect more gradual warning signs. That’s why we can duck out of the way of a cricket ball in a fraction of a second, but fail to react to repeated and serious threat assessments about a deadly new virus for which there is no treatment.

In the early phases of human existence, our ancestors faced an onslaught of daily challenges to their survival – from predators to natural disasters. Too much information can confuse our brains, leading us to inaction or poor choices and this can place us in harm’s way. Consequently, our brains evolved to filter information rapidly and focus on what is most immediately essential to our survival.

Daniel Gilbert, a professor of psychology at Harvard University, argues that threats that develop over decades – rather than seconds – circumvent our brain’s alarm system. To illustrate, he says that we take alarm at terrorism, but much less to global warming, even though the odds of a disgruntled shoe bomber attacking our plane are, he claims, far longer than the chances of the ocean swallowing parts of Manhattan.

Assessing and reacting to risk is one of the most important things we do as humans. Nonetheless, as Professor Gilbert points out, in our short-sighted world we don’t perceive long-term challenges which threaten our existence, which is why he asserts that:

… if alien scientists were trying to design something to exterminate our race, they would know that the best offense is one that does not trigger any defense. And so, they would never send little green men in spaceships. Instead, they would invent climate change, which produces apathy not action (bold text added).

“Humans are very bad at understanding statistical trends and long-term changes,” notes political psychologist, Conor Seyle. “We have evolved to pay attention to immediate threats. We overestimate threats that are less likely but easier to remember, like terrorism, and underestimate more complex threats, like climate change.”

Right now, humanity faces a number of risks, but they are not on our collective radar as they will not impact us for a long time – decades and longer. Some of these risks are called existential risks as they have the capacity to wipe out humanity. For instance, in about a billion years – give or take a few hundred million years – the increased brightness of the Sun will doom the Earth’s biosphere.

In the more immediate future – say, the next century – the greatest threat to humanity is ourselves. More specifically, according to an article published by online media outlet Quartz, the most dangerous threat to humanity is the human mind.

The defining characteristic of humans is our capacity for complex thinking and advanced reasoning. These abilities have allowed us to develop innovations that transform our lives and our world … (but these) … innovations have also created new problems, many of which threaten our existence .… Climate change, pollution, economic and social disruption due to emerging technologies, political polarization, misinformation, inequality, and large-scale conflict are all major challenges for humanity to overcome that have arisen from our own innovation.

We are unlikely to effectively solve these problems unless we truly understand their ultimate source: the human mind. In line with this thinking, the Centre for the Study of Existential Risk at the University of Cambridge believes that the four greatest threats to the human species are all man-made – artificial intelligence, global warming, nuclear war, and rogue biotechnology.

In his bestselling book, Sapiens: A Brief History of Humankind, historian and renowned author, Professor Yuval Noah Harari, states that humans “… have the dubious distinction of being the deadliest species in the annals of biology”. We are the most advanced and most destructive animal to have ever lived – making us brilliant and deadly. This lethal combination causes some to proffer that a man-made global pandemic should be added to the list of threats to humanity.

Experience has taught me that it would be wise to further augment the list with unknown unknows. We humans are sometimes too clever by half in believing that we have covered all bases. In reality, no one can say with absolute certainty that there is not an unknown threat lurking around the corner which will take us by surprise. Consequently, the greatest risks in the years ahead may come not from threats we’ve identified, but from those we haven’t.

It’s clear that our shortterm brains can’t cope with longterm perils. We are focussed on the here and now to the detriment of distant risks. Our inability to look beyond the current news cycle is reflected in a phenomenon called short-termism – the constant pressure to deliver instant results.

Short-termism has become endemic in society, and it pervades all aspects of our lives. We want quick-fix surgery to rectify imperfections IMMEDIATELY. We crave crash diets to lose weight FAST. We consume energy drinks to heighten alertness NOW. We expect politicians to respond to tracking polls TODAY. And we require companies to achieve a turnaround in earnings PROMPTLY.

In an article titled – The perils of short-termism: Civilisation’s greatest threatBBC journalist, Richard Fisher, paraphrases angel investor Esther Dyson: in politics the dominant time frame is a term of office, in fashion and culture it’s a season, for corporations it’s a quarter, on the Internet it’s minutes, and on the financial markets mere milliseconds.

The world is plagued by short-termism and our challenge is to look at things through a longer lens. Perhaps we should remember that when we feel like shrieking in anger at the need to don a face mask during a pandemic while ignoring the long-term benefits to humanity of controlling a deadly virus.

COVID-19 is the latest example of long-term success being held hostage to short-term thinking. The pandemic influenced many people to focus on short-term outcomes and instant gratification. Cleary, we need to reframe our thinking and develop a longer game plan for society.

It’s time for humanity to see the bigger picture.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why politicians are not qualified to run a country

Source: AZ Quotes
SPECIFIC TRAINING NEEDED

In every sector of society, qualifications play a critical role in determining the minimum level of knowledge and skills required for a given profession or occupation. Qualifications define what a person needs to know – and be able to do – to carry out a certain activity, but no such entry requirements apply to the group of people who are elected to run a country.

Around the world, politicians need no formal training before entering parliament. Those running for public office are elected by citizens, many of whom rate charm and charisma over ability and competence. Most voters in modern democracies do not make informed decisions about the capability of candidates or the efficacy of their policies.

Plato, the father of Greek philosophy, was one of the earliest to see democracy as a problem. He, like later critics, argued that democracy meant rule by the ignorant, or worse, rule by the charlatans who hoodwink the people. It would be much safer, Plato thought, to entrust power to carefully educated wise guardians who would decide upon matters on behalf of citizens.

Fast forward to the present and John Hewson, the former Liberal opposition leader, believes that Australia’s contemporary parliamentarians aren’t qualified to run the country. Writing in The Sydney Morning Herald, Dr Hewson lamented that politics is dominated by career politicians who concentrate on winning points rather than delivering good policy and good government. He states:

Unfortunately, the skill sets and experience required of a career politician essentially make them incompetent to govern effectively. Their career path is often from university, community or union politics, through local government/party engagement, perhaps serving as a ministerial staffer, to pre-selection, then election, and so on.

We would not let an unqualified teacher educate our children nor allow a physician without a medical degree to perform surgery on us. Yet, we place no job prerequisites on those seeking to become members of parliament (MPs). In Australia and elsewhere, it is not mandatory for MPs to take part in initial or ongoing education and training programs specific to their role.

While I’m not advocating minimum education standards for aspiring politicians, there is a case for introducing compulsory Continuing Professional Development (CPD) for all parliamentarians once elected to office. This happens in other professions (and many occupations) to ensure continued proficiency and capability in one’s chosen field.

As lawmakers, politicians – either directly through regulation or indirectly via industry bodies – compel professionals like doctors, lawyers, engineers, and accountants to undertake CPD as a condition of their ongoing professional registration. Politicians the world over, however, are not subject to defined education and training standards for accreditation thereby creating a double standard.

Like all CPD programs, the learning activities for politicians should include a combination of structured activities (such as training courses, online modules, and seminars) and unstructured activities (such as reading documents, articles, and publications). Any formal or informal learning activity which improves or broadens an MP’s knowledge or expertise can be included in the CPD toolbox.

MPs are involved in decisions that have far reaching consequences for the populace at large and deal with an almost unlimited range of subjects. As noted in one report, “those elected to public office are expected to possess indefinable qualities to accomplish an indescribable job”.

I am the first to acknowledge that developing CPD programs for politicians is a huge undertaking. Nonetheless, it should be done and the two subjects that I would place at the apex of CPD curricula are debunking economic fallacies and understanding game theory. Please let me explain each in turn.

One of the primary activities of modern governments is to determine economic policies. In every country, the government takes steps to help the economy achieve growth, full employment, and price stability. Given this, it’s vital that elected representatives be economically literate, even though many politicians display an astounding ignorance of economics.

Over recent years, for example, populist politicians have driven an anti-globalisation agenda by promoting protectionists and isolationists policies. Specifically, the peddlers of populism have challenged the undeniable economic benefits of free trade (which has lifted millions out of poverty) and immigration (which has increased the size of economies).

Economic ineptitude was also on display following the Global Financial Crisis (GFC). Politicians in many nations (including the UK and Greece) adopted fiscal austerity measures which proved catastrophic. Pleasingly, politicians in Australia and America implemented fiscal stimulus policies which gave their economies a much needed boost.

One of the reasons that governments adopted fiscal austerity measures post-GFC was to keep a lid on government debt loads in the mistaken belief that government debt is bad. This old chestnut is arguably the single biggest economic myth of all and is called the household fallacy.

Politicians fuel this fallacy by constantly drawing false parallels between household budgets and government budgets. Our elected leaders love trotting out the familiar line that governments – like households – need to live within their means. Yet every time they espouse this untrue analogy, they engage in unnecessary fear-mongering about government debt.

Around the world, ill-informed politicians claim that governments should somehow have a balanced budget year-to-year. Politicians show empathy with the electorate by promising to cut government spending in line with belt tightening by households. Governments that run deficits are erroneously accused of being poor financial managers.

In Fifty Economic Fallacies Exposed, Geoffrey Wood – Professor Emeritus of Economics – examines a range of popular economic misconceptions and explains how these mistaken beliefs misinform economic discussion. It should be mandatory for all politicians to read Professor Wood’s book. My recent post, Why it’s important to understand economics, provides a precis of three of the most common economic myths that we encounter.

Let me now turn to the second subject that I would include in CPD curricula – understanding game theory. Game theory is a framework for examining competitive situations where “players” have conflicting interests. It models human actions on the presumption that everyone tries to maximise their potential gain against everyone around them.

At its core, game theory – which is a special branch of mathematics – is used to study decision-making in complex situations. It examines how our choices affect others and how the choices others make affect us (so-called “games”). The “games” involve two or more opposing parties pursuing actions in their own best interest resulting in an outcome for each that is worse than if they had cooperated.

Game theory is applied in a number of fields and a classic example can be found in the arms race between two superpowers. Both countries are clearly better off when they cooperate and avoid an arms race. Yet the dominant strategy is for each to arm itself heavily. If a new weapon is invented that is more destructive than any in existence, acquisition of this weapon is seen as enhancing the security of one’s country. But if both act accordingly, everyone’s security is jeopardised rather than improved.

Game theory was used most notably during the Cold War. Both the United States and the Soviet Union quickly saw its value for forming war strategies. A balance was struck in which neither nation could gain advantage through nuclear attack as the reprisals would be too devastating. This became known as the doctrine of Mutually Assured Destruction (MAD).

MAD is founded on the notion that a nuclear attack by one superpower would be met with an overwhelming nuclear counterattack such that both the attacker and the defender would be annihilated. Given this lose-lose outcome, it is said that only a madman would engage in such a self-defeating strategy.

By this logic, Vladimir Putin has been labelled a madman given his recent announcement that his nuclear forces are on “high-combat” alert. He is playing the madman card, threatening the use of nuclear weapons to get what he wants out of his war with Ukraine. With 6,000 plus nuclear warheads, Putin can end our world as we know it.

While many suspect that Putin is unhinged, I believe that he is a cunning expansionist with dreams/delusions of restoring Mother Russia to her former greatness. He is a megalomaniac who is obsessed with increasing his power and will do almost anything to get his way. The dilemma the West faces is how to deal with Russia without risking nuclear war. As the UN Secretary-General, António Guterres, recently warned: “The prospect of nuclear conflict, once unthinkable, is now back within the realm of possibility”.

Putin’s actions in brandishing the nuclear option are reckless. If Putin and every other politician on the planet truly understood game theory, they would not threaten the use of nuclear warfare. Nuclear weapons are an intolerable threat to humanity. Instructing politicians in the nuances of game theory would teach them that a nuclear war cannot be won and therefore must never be fought.

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At the risk of sounding defeatist, I accept that studying game theory will not be made compulsory for world leaders let alone rank and file politicians. Equally, I’m sure that politicians will not be forced to study economic fallacies. This is disappointing as both of these educational initiatives would make the world a significantly better place.

One can only dream!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why we should send politicians to space

Source: scientificliteracymatters.com
COSMIC PERSPECTIVE FOR A BETTER WORLD

When astronauts return from space, many of them report that their outlook of life on Earth has been transformed forever. They experience a sort of spiritual awakening which leads them to ponder how we could all live better on our beautiful planet as one human fraternity.

A number of astronauts have suggested that world leaders should also orbit the Earth to feel the same overwhelming sense of oneness when taking in the whole planet in a single glimpse. This image produces a life-changing sense of awe for astronauts and should similarly cause politicians to see the world anew.

National borders are artificial divisions and therefore invisible when you are orbiting the Earth. Anyone gazing down at Earth from space sees a single entity, not 195 sovereign nations. This holistic view brings about a cognitive shift in awareness among astronauts – the so-called “Overview Effect”.

This psychological switch causes some astronauts to develop a global consciousness which alters their worldview. Seeing Earth from the vantage point of space is a profound experience that can inspire an overwhelming desire to protect our planet – from ourselves!

Tiny planet Earth is where we worship our gods, fight our wars, and destroy our environment. The fragility of our planet and the pettiness of territorial lines become blindingly clear when seen against the dark expanse of the universe.

Of course, very few of us will get to look back at Earth from a spaceship. Even so, a Dutch company is trying to replicate that experience for school children with an education program called SpaceBuzz. With the aid of some whiz-bang technology, the company wants to “send” 100 million kids a year to space using immersive 4D virtual reality.

Putting children in the footsteps of astronauts will hopefully enable them to feel the Overview Effect for themselves and see the bigger picture. SpaceBuzz is designed to give children a deeper sense of connection with the wonderous living system we call Earth and every living thing inhabiting it.

SpaceBuzz will help the next generation of adults become more Earth conscious by living sustainable and eco-friendly lifestyles. But how do we assist the current crop of adults to be kinder to the planet and each other? One way is to provide them with role models to emulate.

Unfortunately, those who should be examples to all of us – politicians – often fall short of the mark. Politicians the world over tend to focus on local issues to the detriment of global challenges. Global problems, though, can only be solved through shared, collective leadership.

The current day peddlers of populism appeal to the prejudices of voters by tapping into prevailing anti-immigration and anti-trade sentiments. Yet the populist framing of problems invariably leads to the wrong policy responses such as the desire to build walls and erect trade barriers.

That’s why all world leaders should experience a simulated SpaceBuzz virtual flight so that they – like astronauts – can look down at the Earth and its 7.8 billion human inhabitants and embrace a new reality. All humans need to see themselves as connected with one another and with the planet as a whole.

From space, nationalism, patriotism, and tribal behaviour have no meaning – you see just one planet and it’s the only home we have. On witnessing Earth from space, astronaut Edgar Mitchell proclaimed that it makes you:

… develop an instant global consciousness, a people orientation, an intense dissatisfaction with the state of the world, and a compulsion to do something about it. From out there on the moon, international politics look so petty. You want to grab a politician by the scruff of the neck and drag him a quarter of a million miles out and say, ‘Look at that, you son of a bitch.’

Former NASA astronaut, Ron Garan, poetically described how the spectacle of Earth suspended in space was an epiphany in slow motion.

From space, the planet is a constantly changing masterpiece and the sheer beauty is absolutely breathtaking. It looks like a shining jewel and you realise that it’s home to everyone who ever lived and everyone who ever will be. But another thing that hit me was a sobering contradiction between the beauty of our planet and the unfortunate realities of life on our planet. It filled me with a sense of injustice. It infuriated me.

On Earth, politicians are accused of not seeing the forest for the trees. From space, the reverse applies – they will see the forest but not the trees. As Einstein explained, the nature of reality depends on the position of the observer. Our frame of reference is flipped when viewing Earth from outside its atmosphere and this gives rise to an altered state of consciousness.

Hopefully, the sensations triggered by the sight of our planet from space would be sufficiently moving to cause world leaders to transcend borders in their decision making. Narrow-minded national government agendas must give way to collective action to tackle shared global challenges, such as the need to eradicate extreme poverty, improve health outcomes, create a sustainable planet, and foster world peace.

We have the capability to solve all the problems facing humanity including world peace. In space, American astronauts and Russian cosmonauts work side-by-side on the International Space Station (ISS), even though we cannot secure peace on Earth. This is ironic as the ISS emerged from the Cold War rivalry of the Space Race between the Soviet Union and the US.

On Earth, nations continue to butt heads, however, on the ISS, 15 countries work collaboratively in an orbiting laboratory for the good of all humankind. The ISS represents the largest peacetime cooperative effort humans have ever conceived and implemented. It is as much a political achievement as a technological one.

The ISS is a shining example of a common goal bringing a divided world together. It has become a beacon of peace for warring nations and proves that we can accomplish remarkable things together. The ISS has also demonstrated that the politics of nationalism must give way to a “one planet” ideology if we are to achieve greater social cohesion.

Regrettably, moving from 195 independent nation-states to one planetary civilisation is not on humanity’s radar, so it certainly won’t happen in my lifetime nor my children’s. But in the words of legendary astronomer and science writer, Carl Sagan: “You spend even a little time contemplating the Earth from orbit and the most deeply ingrained nationalisms begin to erode”. Space can heal what divides us.

Even though we need a cosmic perspective, most world leaders are either not ready or are incapable of making that paradigm shift in thinking. In fairness, viewing the world through a global lens has not pervaded the hearts and minds of most citizens either. So, for now, we will continue our journey through the universe aboard Spaceship Earth as a divided crew.

We are all astronauts – we just don’t know it.

Before you go…
I wrote this post shortly before Russia launched a full-scale military invasion of Ukraine and acknowledge that the war has strained international collaboration in space. The conflict makes it even more urgent for politicians to experience the Overview Effect and for our political leaders to embrace a whole-of-Earth perspective, particularly during times of geopolitical upheaval.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Two wishes for a peaceful world

Image credit: quotespedia.org
CREATE HAPPINESS AND HARMONY

We’ve all heard the various jokes about a person who stumbles upon a magic lamp, rubs it, and out pops a genie. Thrilled to be freed after many years, the newly liberated genie grants the person three wishes. People commonly wish for things that satisfy their selfish desire for money, power, or fame. But a higher salary, a loftier title, or a posher postcode do not of themselves make us happier.

As a young boy, I often thought about what I would ask for if I was offered three wishes. Believe it or not, I always came to the same conclusion: I wanted just one wish – world peace. As an adult, I understand that achieving world peace actually requires two wishes. Please let me explain.

World peace (outer peace) is impossible without people being at peace with themselves (inner peace) – one follows the other. So, any attempt to achieve world peace must begin with the individual (such as Vladimir Putin!), as it is the conflict in the individual mind that manifests as war. This interdependency is beautifully encapsulated in the Peace Poem which many credit to the ancient Chinese philosopher, Lao-Tse:

If there is to be peace in the world,
There must be peace in the nations.

If there is to be peace in the nations,
There must be peace in the cities.

If there is to be peace in the cities,
There must be peace between neighbours.

If there is to be peace between neighbours,
There must be peace in the home.

If there is to be peace in the home,
There must be peace in the heart.

We all have a part to play in world peace. Through our words and deeds, each of us should demonstrate kindness and forgiveness. One way to facilitate such behaviour is for all of us to adopt the Golden Rule, the moral precept that asks us to treat others as we would like others to treat ourselves. Thus, my first wish would be for the universal adoption of the Golden Rule.

Building sustainable peace requires positive reciprocity: I show you kindness and you do the same for me in return, multiplied a billion times over throughout humanity. Changing the behaviour of individuals alone, however, does not guarantee world peace. We must also change how international relations are conducted. Thus, my second wish would be for the adoption of a renewed form of global governance.

In theory, these two wishes would see a world full of people with inner peace living under one integrated global governance structure with no wars between individual nations. The end result would be world peace – people and nations united and working in collaboration to build trust at all levels of society. Trust is the foundation of all human relations and it begins one person at a time.

The challenges humanity faces – like climate change, global pandemics, natural catastrophes, international crime, and rampant terrorism – are increasingly transnational in nature, which is why they cannot be addressed by any single government. No individual nation-state is big enough alone to fix shared global problems. As outlined in an essay by the Dalai Lama:

In ancient times problems were mostly family-size, and they were naturally tackled at the family level, but the situation has changed. Today we are so interdependent, so closely interconnected with each other, that without a sense of universal responsibility, a feeling of universal brotherhood and sisterhood, and an understanding and belief that we really are part of one big human family, we cannot hope to overcome the dangers to our very existence – let alone bring about peace and happiness.

While peace has been defined in various ways, understanding it simply as the avoidance of violence is narrow in conception as peace is more than the absence of war. Peace is also the presence of fairness and justice. Furthermore, it is an internal state (of mind or of nations) to achieving happiness and harmony.

The independent international peacebuilding organisation, International Alert, believes that “… peacebuilding is done collaboratively, at local, national, regional and international levels. Individuals, communities, civil society organisations, governments, regional bodies and the private sector all play a role in building peace”.

The Earth is one but the world is not as the current governance system – which divides the planet into 195 sovereign nations – creates toxic political divisions. We are all part of one global village and need an overarching global governance structure to sit above nation-states. (Even though it’s an interesting thought, I have to accept that even a genie saying “Abracadabra” will not make nations disappear!)

In the absence of a single authoritative institution or world government, global governance is designed to bring together diverse actors to coordinate collective action at the level of the planet. To quote the Global Challenges Foundation:

The goal of global governance, roughly defined, is to provide global public goods, particularly peace and security, justice and mediation systems for conflict, functioning markets and unified standards for trade and industry. … The leading institution in charge of global governance today is the United Nations. It was founded in 1945, in the wake of the Second World War, as a way to prevent future conflicts on that scale. The UN does not directly bring together the people of the world, but sovereign nation-states.

According to leading human rights advocate, Suzanne Nossel, the world still needs the UN, which is why she believes that building a new global governance framework from scratch is a fool’s errand. In an instructive article she penned for the US foreign policy magazine, Foreign Affairs, she imagined a system of global governance that would require all nations to follow rules requiring them to refrain from the use of force, foster peaceful conflict resolution, uphold the rule of law, and enshrine respect for human rights.

Ms Nossel believes that nations truly working in co-operation would be able to “… avert crises and foster cooperation on issues including climate change, pandemics, and migration. Great powers would wield influence but be held in check by one another and a rotating cast of middle powers from every region”.

She acknowledges that creating such a system afresh in the 2020s would be impossible as major countries would never agree on objectives or values, much less concede to being legally bound by them. Ms Nossel acknowledges that:

The United Nations remains the closest thing to a system of global governance that the world has ever known and may ever achieve. And yet, as the COVID-19 pandemic makes painfully clear, the system can be paralyzed, distracted, and dysfunctional just when it is needed most.

… A strengthened system of global governance, if it is to be, will involve overlapping forums, institutions, and coalitions that collectively shoulder the world’s challenges. The UN has a central role to play within such a system. Any effort to reinvent global governance should focus on reinvigorating the body invented to serve as its linchpin.

… Reinventing the UN will require member states to renew their original vows to the ideals of international cooperation. … Ultimately, reviving the UN will require subordinating narrow national interests to the task of protecting the world’s best hope for solving grave global threats.

■      ■      ■

You don’t have to convince me that global problems need global responses. My sense, though, is that things will get worse before they get better as petty nationalism always seems to get in the way of global cooperation. Yet, in an era of climate change, pandemics, and Russian revanchism we need to reconsider what national security really means.

Sadly, worldwide peace and international solidarity will only happen when distant threats to humanity’s existence become an imminent peril to all of us. Until then, the sovereign nation-state will remain the main political actor calling the shots. Nonetheless, as I opined in a previous post, the power of the nation-state is slowly waning.

Meantime, let’s not forget John Lennon’s wish for world peace, as conveyed in the lyrics to his moving anthem, Imagine:

“I hope someday you’ll join us and the world will live as one.”

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How big corporations make billions from side businesses

HIDDEN BUSINESS MODELS

In business, things are not always as they seem. Take the ubiquitous McDonald’s – it’s synonymous with burgers and fries, yet it’s actually a real estate company disguised as a fast-food restaurant. Profits from menu sales at the golden arches are overshadowed by the significant bottom-line contribution the global chain receives in rental income from its franchisees.

While customers have been chomping on Big Macs, the brand has been sinking its teeth in to prime land. Globally, 93 per cent of McDonald’s 38,000 stores are operated by franchisees, but the burger titan owns the land and buildings beneath its franchised locations. This is McDonald’s real secret sauce – leveraging fast-food to lease properties to restaurant owners at large markups.

Being able to collect rents as the landlord to its franchisees insulates the McDonald’s Corporation from the ups and downs of the business of flipping burgers. When you break down the company’s multi-billion-dollar earnings, it boils down to real estate. Profit margins on food sales are slim, whereas the return on McDonald’s $38 billion commercial investment portfolio is lucrative.

McDonald’s controls one of the biggest property portfolios in the world. From Times Square in New York to Red Square in Moscow, McDonald’s owns thousands of iconic pieces of real estate around the globe. Each franchisee pays rent in addition to royalties on food sales and this enables McDonald’s to maintain inexpensive menu prices.

McDonald’s 2020 financial report confirms that rent contributes more to the company’s profitability than royalties. Out of the $10.7 billion McDonald’s collected in fees from restaurants in 2020, $6.9 billion came from rent and $3.8 billion was generated from royalty payments. Profit from franchise-operated stores stood at $8.5 billion (as it cost McDonald’s only $2.2 million to run these outlets) whereas company-owned stores recorded a profit of only $1.15 billion (as they are dearer to run).

Another company that makes billions from a seemingly non-core activity is Amazon. When you peel back the layers at the world’s largest online retailer, you discover that Amazon is a major provider of cloud computing services via its subsidiary, Amazon Web Services (AWS). AWS controls around a third of the global cloud market – substantially more than its nearest rival, Microsoft.

Amazon’s business is divided into three segments: North America, International, and AWS. AWS is Amazon’s largest source of operating profits and is growing at a robust pace. The commercially rewarding cloud computing arm supplies over 63 per cent of Amazon’s profits, making it an extremely important part of the Amazon empire.

AWS provides data storage and processing for companies that don’t want the headaches of running their own IT infrastructure. AWS has been very successful in selling its technology services and, as a consequence, has become a cash cow for its parent, Amazon. According to an article in The New York Times, AWS is ubiquitous online.

If you watch Netflix, that’s A.W.S. If you have a meeting on Zoom, there’s a good chance that’s A.W.S., too. If you check Pinterest, that’s A.W.S. If you spend any time scrolling through Twitter, well, A.W.S. provides “global cloud infrastructure to deliver Twitter timelines.” These examples are just a few of the thousands of A.W.S. customers big and small (including The New York Times).

AWS was launched in 2006 with little fanfare as a side business for Amazon and has since morphed into a highly successful enterprise in its own right. Before it was AWS, it was just Amazon’s backend technology. Amazon developed expertise in building state-of-the-art technology infrastructure for itself and ultimately decided to rent those services to other businesses.

Today, AWS provides a low-cost infrastructure platform in the cloud, which is highly reliable and scalable and powers hundreds of thousands of businesses in 190 countries around the world. While Amazon has helped revolutionise the way people shop, AWS has disrupted the technology industry by making computing services accessible through the web.

Like McDonald’s and Amazon, Google is another behemoth that, at first appearance, deceives many. While it has always portrayed itself as a tech company, its main business line is online advertising. Even so, most people understandably believe that Google is a web search engine which provides free access to searches, Gmail, Google maps, and other online tools.

Of course, all of these complimentary services must somehow be paid for and that’s where advertising enters the equation. The bulk of Google’s multi-billion-dollar revenue is generated from its proprietary advertising service, Google Ads. Google makes money by selling ad space with its search results – and it processes a staggering amount of search requests.

Roughly half of the world’s population, or 3.8 billion people, use the Internet every day. Most users rely on Google to carry out their daily searches, making Google the most visited website in the world. It is estimated that in 2021, 5.5 billion searches were undertaken per day using Google – this equates to a mind-boggling 63,600 searches every second.

Each search provides an opportunity for Google to display ads and make money. You see those ads each time you search on Google – they are displayed alongside the search results. The ads are paid for by advertisers on a pay-per-click (PPC) basis. If you do not click on a link, Google does not make any money directly from your search.

Advertisers submit ads to Google which include a list of keywords relating to a product, service, or business. The price for a particular keyword or keywords depends upon the competition among advertisers for that/those word/s. Google uses an auction system, so the company which outbids other competitors wins the right to use the relevant word/s.

Google could not attract advertisers without readers – and it needs lots of them. The more readers it attracts, the more interest that is generated from advertisers. Google lures in users, collects their data, and then sells access to eager advertisers across the planet. The more Google knows about an individual, the better it can target ads, and the more it can charge for ad space.

Demand for Google’s services surged in 2021 as the pandemic forced people to spend more time online. This was a financial bonanza for Google and its parent company, Alphabet. By the numbers, Google is an ad company, and it is getting bigger all the time.

■      ■      ■

The outstanding success of McDonald’s, Amazon, and Google is testament to what corporate strategists have long known – businesses should focus on what they do best. Corporations that concentrate on a few core businesses, based on their core competencies, invariably do better than those that try to be all things to all people.

History shows that when most companies diversify in to new markets, their profitability is diluted, and acquisitions are subsequently unwound. They quickly discover that they do not have the experience and capabilities needed to expand beyond their core business. So, the challenge is to find “business adjacencies” in adjacent markets.

Adjacency is about identifying new markets that intersect with what a business already does. It is a strategy where a business leverages something they are good at to develop a new product or service in a related market. No technology company exemplifies adjacent innovation better than Amazon. As one technology strategist noted in an online article:

While Amazon.com was becoming a retail juggernaut, Amazon’s technical teams were optimising internal cloud operations and building a world-class technology infrastructure to serve their own retail business. In 2006 Amazon launched Amazon Web Services (AWS) – yet another adjacent business – for cloud-computing services that has evolved into an enormously profitable product on its own.

It’s been said that Google’s core competency is matchmaking – pairing Internet surfers with advertisers and taking a cut along the way. As the digital world continues to evolve, Google has taken a multi-pronged approach to maintaining its dominance in the search and ad business. Search continues to migrate across mediums with users increasingly moving from desktop to mobile devices. As outlined in a research report:

To maintain its foothold and protect its main source of revenue, Alphabet (Google’s parent company) is positioning itself to dominate adjacent sectors – such as digital commerce, branded hardware products, and content – and attempting to integrate its services into every aspect of the digital user experience.

McDonald’s also utilised an adjacent innovation strategy with the introduction of the McCafé in 1996. This enabled the chain to move beyond burgers into premium coffee – competing directly with Starbucks. McCafé coffee outlets act as an adjacent or related product to McDonald’s main menu. McCafé is based on the company’s core competency of standardisation – every coffee has precisely the same taste and texture.

■      ■      ■

McDonald’s, Amazon, and Google prove that masquerading as one thing but doing another can be very profitable. All three have followed the same broad playbook to gain market share and cultivate a world-beating brand. Their hidden business models are profit machines which have made them juggernauts.

It pays not to be a one-trick pony.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why gigantic numbers baffle the mind

Image credit: Shannon M. Lutman/Getty Images
A SMALL PROBLEM WITH BIG NUMBERS

Our ancient ancestors had no need to understand excessively large numbers as their everyday dealings were with single-digits, such as two fish or three spears. Unlike us, they did not live in a world comprised of millions of streets, billions of people, and trillions of debt. And they certainly never encountered a Rubik’s cube with 43 quintillion possible configurations (that’s 18 zeros)!

In contrast, today’s news broadcasts often report absurdly huge numbers as businesses, scientists, and governments increasingly think in terms of millions (of dollars), billions (of stars), and trillions (in bailouts). These mathematical names are tossed around with casual disregard, thereby sealing their place in common parlance. Still, many of us do not have a visceral grasp of their size.

Understanding giant numbers is far from second nature – they perplex the human mind which is yet to latch on to the modern world’s explosion of massive numbers. As noted by one leading anthropologist, as a species we have evolved capacities that “… are naturally good at discriminating small quantities and naturally poor at discriminating large quantities”.

While getting a solid handle on incredibly big numbers isn’t easy, it’s not a problem for Google founders, Larry Page and Sergey Brin, who both grew up fascinated with mathematics. So, when they registered the name of their new Internet search company in 1997, they chose the mathematical term, googol. Googol is the label for 10 raised to the hundredth power (10100) or 1 followed by 100 zeros.

Our young tech entrepreneurs thought that googol was an appropriate name for their search engine as it was going to index an unfathomable number of Internet web pages. However, due to a typographical error, the name was incorrectly typed as Google; the name stuck and Google Inc. was born.

Big numbers befuddle us – and not because we misspell them. Numbers as large as a googol are hard to comprehend and referring to them by name doesn’t help. There is not a googol of anything in the universe as the number is so mind-bogglingly mammoth it has no practical application.

Of course, smaller numbers used to quantify commonplace things – such as 2 dogs, 25 people, and 1,000 cars – are easy to comprehend. But when we encounter larger numbers, like a quadrillion, it becomes increasingly difficult to conceptualise them. Such numbers are so abstract, our eyes glaze over.

Consider a trillion – it effortlessly rolls off the tongue. Yet, when we express it in exponential format (1012) or its full format (1,000,000,000,000), we start to get a sense of how gargantuan it is. One trillion is a thousand billion, or comparably a million million. Whichever way you look at it, there are too many noughts to make sense of, so let’s put this number into perspective.

If you had spent $1 million a day since the birth of Jesus Christ, you still wouldn’t have chalked up $1 trillion in purchases. If you travelled back in time by a trillion seconds, you would end up circa 30,000 BC. And if you were to spend $1 million an hour, non-stop for 24 hours a day, it would take you 114 years to burn through $1 trillion.

In August, 2018 Apple became the first company in the world to crossover in to the four-comma club when its market capitalisation surpassed $1 trillion. Two years later, Apple’s market value doubled, making it the first publicly traded US company to pass the $2 trillion threshold.

World Bank data reveals that only seven countries have annual GDP figures greater than Apple’s $2 trillion value. With this amount to spend, you could buy Australia and New Zealand and still have a pocket full of change. You could also end world hunger many times over according to the United Nations.

Investopedia calculated that to equal Apple’s $2 trillion market cap, you would have to combine the net worth of the world’s top 24 billionaires. This provides a nice segue to our next humongous number – a billion. Using scientific notation, this number is expressed as 109 – the superscript tells you how many zeros there are after the one.

After discussing a trillion, a billion might sound small – but it’s not. Each billion is equivalent to a thousand million. Could you live on a billion dollars for the rest of your life? Well, spare a thought for the world’s richest individuals who each face the challenge of surviving on personal fortunes of over $100 billion.

In March each year, the American business magazine, Forbes, publishes a list of the wealthiest billionaires in the world. The 2021 Forbes list shows that Amazon founder, Jeff Bezos, is the world’s richest person, with a net worth of $177 billion.

Entrepreneur, Elon Musk, rocketed into number two spot with a $151 billion fortune*. French luxury goods tycoon, Bernard Arnault, took third place with $150 billion under his Louis Vuitton belt. And rounding out the top four in the centibillionaire club is Microsoft co-founder, Bill Gates, whose riches swelled to $124 billion.

The number of billionaires on Forbes 35th annual list exploded to an unprecedented 2,755 people who are collectively worth $13.1 trillion, up from $8 trillion on the 2020 list. Just to provide some perspective to this staggering wealth, Oxfam International reported that prior to the pandemic the (then) 2,153 billionaires in the world had more wealth than the 4.6 billion people who made up 60 per cent of the planet’s population.

If we drop down one notch on our scale of large numbers, we arrive at a more digestible number – a million – which has a power-of-10 notation of 106, where 10 is the base and the 6 is the exponent. A million is a thousand thousand, and while it’s the smallest of the big boys, a million remains the classic benchmark for other massive numbers.

As a million sits at the bottom of the “illions” ladder, it’s easy to view this as a paltry amount, but is that really the case? When was the last time you encountered a million in your daily life? Do you own a million of anything? Have you ever driven a million miles? Do you work in an office with a million employees?

When I was a boy, a millionaire was a very wealthy person whereas today that is considered to be a modest level of wealth. Nevertheless, a million is still a large number and anyone reading this post would be thrilled to strike it rich with a seven-figure windfall. Also, die-hard social media users work overtime trying to rack up a million plus followers.

Humans are visual creatures, so a common strategy for comprehending big numbers is to devise visual representations which provide a sense of scale. You can put a million into perspective by saying that one million acres is the size of 16 million tennis courts. Or that planting one million trees would cover an area of more than 15,000 football fields.

The trick to thinking about large numbers is to relate them to something that is meaningful – even something as simple as seconds. A million seconds takes almost 12 days to elapse, a billion seconds is about 32 years and a trillion seconds equates to around 32,000 years. In a similar vein, you could say that counting to a million would take days, counting to a billion would take years, and counting to a trillion would be impossible in one lifetime.

Telling a child that you could line up 109 Earths across the face of the Sun is far more comprehendible than clinically blurting out that the Sun’s diameter is 1.392 million kms. Equally, reporting that a destructive bushfire has rapidly burned an area equivalent to the size of a football field every second is easier to visualize than saying that millions of acres were destroyed.

■      ■      ■

Mathematics is the universal language of humanity and it connects all of us. Around the world and across civilisations, anyone with an elementary education can understand tens, hundreds, and thousands, but many of us struggle to quantify millions, billions, and trillions. So, instead of hurling brain bending numbers at each other, we should break them down so that they make sense for our own experience.

What’s next – getting our minds around a quadrillion (1015)?

*During 2021, Elon Musk passed Jeff Bezos as the richest individual on Earth. According to the Bloomberg Billionaires Index, Musk had a net worth of $220 billion as at 30 January 2022.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why GDP is a flawed yardstick of human welfare

Source: medium.com
MEASURE WHAT MATTERS

It’s a deceptively simple number which captures headlines, makes or breaks governments, and dominates public discourse. Gross domestic product (or GDP) is used to measure the size and health of a nation’s economy and the prosperity of its citizens. Each country’s economic performance is ranked and judged using this common top-line metric.

GDP measures the economic activities of individuals (personal consumption), businesses (private investment), and governments (public outlays). It also factors in the difference between the value of a nation’s exports and imports. GDP became the prime economic indicator during the Second World War to monitor war production and measure a country’s economic progress.

Workers and businesses are generally better off when an economy is expanding as growth drives profits, jobs, and wages. Still, money isn’t everything which is why an increasing number of economists and politicians believe that GDP is a poor gauge of societal well-being. As a macroeconomic index, GDP has limitations and many are pointing out its deficiencies.

That GDP is not a perfect metric has been known for decades. It’s a measure of raw economic activity, not a complete picture of human progress. As Senator Robert Kennedy famously articulated in a 1968 election speech, GDP fails to capture a lot of what actually goes on in life.

… the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile.

GDP is the market value of goods and services produced in a year in a nation – its domestic production. GDP is derived by counting up the dollar value of all new goods and services produced, and includes things such as smart phones, cars, taxi rides, haircuts, music downloads, computers, steel, apples, university education, and cups of coffee.

Most goods and services are produced for sale, so the money spent by individuals, businesses, and governments buying these outputs is used to measure production. GDP only recognises goods and services that pass through official markets. Therefore, production that is not bought or sold does not get counted as GDP works by measuring market price.

So, volunteer work or domestic work – like caring for an aged relative or knitting a jumper – does not get counted in GDP as it is “unpaid production”. Yet most would agree that family caretaking is of enormous value to society and should be included in GDP calculations. (To be clear, if a family hires someone for childcare, that counts in GDP accounting.)

The GDP framework also takes no account of leisure time. Two countries might have equal GDP but one has workers toiling for 12-hours per day while the other only eight hours. Likewise, GDP is not adjusted for pollution costs. If two economies have the same GDP per capita, but one has polluted the air, the well-being of citizens is different, but that’s not captured by GDP per capita.

Another metric not included in GDP is the state of the environment. Economic growth is largely fuelled by consumerism and the rampant rise in household spending is depleting the Earth’s natural resources. Scientists warn that perpetual growth on a finite planet is not sustainable and is causing environmental calamities such as climate change.

A further criticism of the embattled GDP is its failure to reflect inequality as it doesn’t measure the distribution of growth. Income and wealth disparities in society have grown exponentially and extreme inequality is evident in many nations. The rich are getting richer and this skewing of wealth has created universal inequities in accessing education, health care, and finance.

The shallowness of GDP thinking is further evident in the way it counts catastrophes and natural disasters as economic bonuses. When assessing a tragedy such as a bushfire, GDP treats the rebuilding of homes destroyed as a positive economic impact. Yet, it does not capture the negative social consequences on regional tourism or the trauma suffered by townspeople.

Most glaringly, GDP is unable to account for the full impact of technology on our lives. Most of us could not get through the day without utilising digital media. But as GDP assigns a zero value to goods with a zero price, complimentary services like Google searches, Facebook posts, and app downloads go largely uncounted in official measures of economic activity. Similarly, the vast amount of knowledge that Wikipedia provides free of charge is worth zilch in GDP terms.

It’s clear that GDP does not incorporate many of the negative effects of economic growth and misses the main pillars of a progressive society. Certainly, it does not reflect the quality of life or happiness in any given country which is why there is a concerted effort to find alternatives to measure the wealth and welfare of nations.

A CBS News article, quoting The New York Times’ journalist, Catherine Rampell, provides a precis of some of the possible replacements for GDP including:

… China’s “green GDP”, which attempts to adjust for environmental factors; the OECD’s “GDP alternatives”, which adjust for leisure; the “Index of Sustainable Economic Welfare”, which accounts for both pollution costs and the distribution of income; and the “Genuine Progress Indicator”, which “adjusts for factors such as income distribution, adds factors such as the value of household and volunteer work, and subtracts factors such as the costs of crime and pollution”. Finally, there are more direct measures of well-being such as the Happy Planet Index, Gross National Happiness and National Well-Being Accounts.

Half a century on from Senator Kennedy, the world is still obsessed with increasing GDP at almost any cost. Indeed, our economies have become structurally dependent on growth. Governments pursue economic expansion as a primary goal, with rising GDP providing ever more taxes. From GDP’s perspective, bigger is always better – but not according to an article in the Oxford Business Review which states:

GDP is no longer an appropriate goal by which to measure economic and societal success …. It is paramount that something must replace the goal of infinite GDP growth. After all, growth for the sake of growth is the ideology of a cancer cell.

Growth as a metaphor for prosperity is deeply imbedded in our language – we like to see our children grow and gardens too. Growth equates to progress, even though too much can be cancerous. At a UN climate-change summit in 2019, Swedish environmental activist, Greta Thunberg, declared: “We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth”.

I reject the notion that growth is always synonymous with improved well-being and therefore accept that the current fixation on perpetual economic growth is not sustainable. But that does not mean that I embrace the other extreme – promulgated by the “degrowth moment” – which calls for advanced countries to adopt zero or even negative GDP growth.

As sometimes happens, I find myself in the middle of an important debate – on this occasion between economists and environmentalists. To be clear, I believe that the economy should not be forced to stop growing or even shrink. Nonetheless, it should be required to adopt more environmentally friendly practices and aim for a slower growth rate.

As I outlined in a previous post, which explained the benefits of sustainable capitalism, we all have a vital role to play as consumers because:

If we don’t like what a company is doing, we can stop buying their products and services and force them to change. Consumers drive markets and sustainable consumer choices can change corporate behaviour. But we all need to take a stand and, for many of us, this will require a lifestyle overhaul, particularly with regard to saying “no” to unnecessary and/or environmentally unfriendly household items.

While I believe that the world-renowned abbreviation, GDP, remains a valuable tool for economic discussions, it does not tell the real story of human well-being. There is more to life than buying and consuming stuff which is why economic and other data would be better presented with a dashboard of broader indicators rather than a single GDP number.

We can have our cake and eat it if we are prepared to change our ways.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

“Night Before Christmas” 2021 – pandemic year in review

Source: pymnts.com
A COVID SPIN ON A CLASSIC POEM

‘Tis the week before Christmas after a year of precaution,
Masks are off, yet there is still much caution.
The holidays are approaching, but not for the pandemic,
The virus remains a threat, it’s not academic.

As people the world over nestle snuggly in their beds,
Memories of lockdowns dance in their heads.
The hope of families, a Christmas that’s virus free,
The best sort of present, under the tree.

Stay-at-home restrictions generated such a clatter,
Yet keeping the sick isolated really did matter.
Containment measures, the order of the day,
Zoom meetings and home schooling, little time to play.

A surge in e-commerce, our behaviour shifted online,
Our lives became very different, we did just fine.
We found everything we needed, nothing to fear,
A fleet of Amazon trucks, delivering some cheer.

Long before Christmas my shopping was done,
No last-minute rushes, ’cause that’s not fun.
My grandchildren are fine, and exceptionally nice,
Their presents are coming, they won’t have to ask twice.

Now, EMMA! now, JESSICA! now, OSCAR and ELIAS!
On, HARRISON, on, ABRAHAM, on, NAYAH and EMILY, there’s no bias.
Granddad loves you all, you bring such joy,
You each deserve a gift, perhaps a big toy.

Santa’s arriving, with eight socially distanced reindeer,
And he’ll be kitted out, in personal protective gear.
His sleigh will be sanitised, and wiped thoroughly clean,
It will sparkle and shine, fit for a queen.

For a while it seemed gifts would be delivered by drones,
Without clearance to travel, Santa was to be replaced by drop zones.
The Christmas supply chain, held together by the elves,
They did a marvellous job, so we can enjoy our festive selves.

But before letting down our hair to celebrate another year,
Let’s remember those who suffered, and those no longer here.
Many succumbed to COVID, the pandemic’s tragic cost,
Celebrating Christmas without loved ones, makes us feel lost.

Infection rate suppression, remains the name of the game,
Until we defeat COVID, life won’t be the same.
Vaccines are our best hope, to keep the virus at bay,
Be sure to get a jab, so the world can come out and play.

Pfizer, Moderna, AstraZeneca, each a household name,
They’re also scientific heroes, a virus they did tame.
Prevention measures remain important, they’ve acted as a tether,
The dream of unrestricted movements, requires us to work together.

Christmas must not be, a super spreader event,
Let’s do the right thing, another outbreak to prevent.
In this season of goodwill and kindness to others,
Be on your guard, protect our sisters and brothers.

For now our thoughts turn to the season of goodwill,
And the excitement that comes from stockings to fill.
It won’t be long before Santa’s on his way,
If you listen carefully, you’ll soon hear his sleigh.

As I sign off for Christmas, I thank all readers of this blog,
I hope my fortnightly posts have left you agog.
May the spirit of the season fill your home with cheer,
As I say “Merry Christmas to all and to all a good New Year.”

Before you go …
This is my final blog post for the year. I hope that I’ve kept you informed and entertained during 2021. I’m taking a short break from my blogging duties and will be back on-line on Sunday, 30 January 2022. Have a great New Year.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting