Innovation for Jobs

Innovation for Jobs

The Greek Lessons

aristotle(by Esko Kilpi) Dire economic outlooks typically lead to emotional reactions and social fragmentation. This always results in bad decisions and unnecessary confrontations. Then frustrations increase further as the established ways of doing things come under greater attack. Irritation over the perceived ineffectiveness of governance systems then creates the wish for a savior, a strong person, a proud party, to come and clear up the mess. This is how we create dictators; this is how populist parties come into power. This is how Hitler was elected. Leaders are then elevated to heroes, even to messiahs and celebrity replaces religion.

The same dynamic is still today inbuilt into our political and social systems and should be understood when we try to figure out what may happen next. Rather than trying to resolve situations through discourse, populist politicians do two things: they fall back on ideological preferences and whatever historical examples support them. Secondly, they increase tensions through ”us versus them” rhetoric in pursuit of support among their own kin. We face a repeating social pattern: with growing economic difficulties, the populist stance is talk about pride based on past fame and to blame “others” for the present situation.

Aristotle had interesting ideas to explain what was going on in the economy. He made a distinction between two kinds of value added — one that we get from nature’s resources to sustain our lives, and another that we create to facilitate our relationships and trade.

The value added in the latter does not begin from nature, but from us, our wants and the promises we make to one another. As an example, the whole financial system, even today, is only about promises and trust in those promises.

There are limits to what we can get from nature or utilize, but, according to Aristotle, since money is promises, there is no end to the amount of money we can aspire to collect. What is special about money, Aristotle says, is that its value is set by mutual agreement. It has absolutely no intrinsic use value, only an exchange value, and it keeps that value only as long as people agree to accept it in payment. As long as there is trust.

Therefore it is understandable if the expanding social dynamic can reach a point where promises are just not believed any more. After that limit is passed, the result is a sudden and deep crisis because there is nothing in between: either you trust or you don’t. If you don’t, the whole house of cards collapses because it is made of promises that don’t have any value any more. Fear replaces trust and fear, as we know, travels very fast.

At the moment, it does not take much distrust to cause solvency problems for highly leveraged and highly interdependent actors such as banks, or highly leveraged countries. This is why blame is so dangerous. Blame begets blame, distrust and fear and fear begets anger.

What is a fairly new phenomenon is that buying and selling are no longer confined to resources, to trading goods and services. The world economy mostly consists of buying and selling money. That is buying and selling promises according to Aristotle. This is why we are all so deeply interdependent and why we are even more dependent on building and sustaining trust.

The only way to sustain democracy in a totally interdependent world is to work together and share the burdens and the efforts — whatever happens — not only to us, but also to those “others”.

David Nordfors

David Nordfors is CEO and co-founder of IIIJ and the chair of the i4j Summit. He was previously co-founder and Executive Director of the Center for Innovation and Communication at Stanford University. He was one of the World Economic Forum Innovation 100 in 2009, and has served on WEF Global Agenda Councils. He serves on advisory boards of the Poynter Institute, Discern Investment Analytics and Black & Veatch. He is an adjunct professor at IDC Herzliya in Israel, a visiting professor at Tallinn University, the Tecnologico de Monterrey, and the Deutsche Welle Akademie. He was advisor to the Director General at VINNOVA, the Swedish Agency for Innovation Systems, where he co-initiated the national Swedish Incubator System and set up a bi-national R&D fund between Sweden and Israel for mobile applications. He was Director of Research Funding of the Knowledge Foundation, KK-stiftelsen, administering an endowment of $300MUSD, building a funding framework underwriting over a hundred innovation initiatives between universities and industry. He initiated and headed the first hearing about the Internet to be held by the Swedish Parliament. He has a Ph.D. in physics from the Uppsala University and did his postdoc in Theoretical Chemistry in Heidelberg, Germany.