This book is set for publication in August, 2019 and is focused on diagnosing and offering solutions for many of the most immediate socioeconomic issues facing our nation. I’ve included the table of contents and introductory chapter below. When available, there will be links to purchase the book on Amazon.
I began this book intent on re-framing our public dialogue. Most current discussions, even the better ones, don’t reflect the realities of the 21st century. There are deep underlying socioeconomic transitions that are well underway and basically unstoppable. Coal is not coming back. Neither are our manufacturing jobs. China will continue to grow. Our “isms” are 19th century relics. We need to stop looking backward and start building our future. Making that a great future for everybody was my strategic goal.
What I found as I studied our history and the details in the data and statistics was revelatory. The issues are deeper than most people realize. Data that is rarely in the public eye point to problems that are eerily similar to the years preceding the Great Depression, the rise of fascism and WWII. However, I also found answers. Good answers. There are strategies we’ve used in the past that worked and can work again. We can make this new economy work, not just for an elite few, but for everybody. We can use global benchmarks to create a “defensibly fair” tax policy. We can tame our runaway healthcare costs, restoring global competitiveness and making universal coverage possible with no increased tax burden. That’s right. None. I have the math. And, there is much, much more.
Make no mistake, we are in a crisis. Nonetheless, I see a potential future that would be compelling for all of us. I see it in the data. I see it in our history. My new book embodies that vision.
The Fifth Paradigm
Table of Contents
Introduction
Part 1: A Strategic Economic Tool Kit
Chapter 1: Strategic Concepts
Business and Economic Design
Value Creation, Capture and Concentration
Yin and Yang of Value and Power
People are People
Chapter 2: Ideologies and Conceptual Traps
The Dangers of Conceptual Traps – Lessons from Vietnam
Fading Fears of Communism
Neo-Liberalism and Ayn Rand
The Anti-Democracy Movement
Chapter 3: Piercing the Ideological Fog
Government and the Economy
Currency and the Great Inflation
Tax Cuts: An Act of Faith
Investments in infrastructure, science and innovation
Rules that Shape Markets
Part 2: The Road to the 21st Century
Chapter 1: The 19th Century – From Rural Agriculture to Urban Industry
Rural Agricultural Business Models
The New Urban Industrial Business Model
Taming the Economic Beasts
Chapter 2: The 20th Century – From Collapse to Glory
Hidden Fault Lines
Government Redesigns the Economy
The New Design Works!
Other Nations, Other Strategies: From Famine to Fascism
Thirty years of sustained, balanced economics
Chapter 3: The Disastrous Pivot to the 21st Century
The Pivot from Glory to Peril
The Real Purpose of Business – the Fallacy of Ownership
How Modern Corporations Work
Unions Fail the Power vs Value Game
The Economy Skitters Towards the Brink
The Slow-Moving Train Wreck of Employment
Chapter 4: Where Markets Fail
Healthcare Becomes an Economic Cancer
How Education Became a Debt Trap
Retirement: Insurance vs Savings
Chapter 5: Our Broken Social Contract
Identity – Fixed vs Created
Ethics – Power vs Value
Reality – Truth vs Stories
The New Story Tellers
Myths about Crime in America
Tragedy of Poverty
Chapter 6: China – The Billion-Headed Dragon in the Room
Chapter 7: Summarizing Where We Stand
Part 3: The Fifth Paradigm – A Way Forward
Chapter 1: A 21st Century Political Philosophy
What’s important to our society
Markets make everything possible
Government has a vital role
Revisiting our north star
Chapter 2: A New National Economic Strategy
Redesigning for the Twin Towers of the 21st Century Economy
Global Markets: The Innovation Opportunity
Global Markets: Bringing the World to America
A New Value Creation Opportunity: Personal Experiences
Transforming Personal Experience into a new Economic Tower
Chapter 3: Tackling the Wage Problem
Chapter 4: Building a 21st Century National Infrastructure
Rebuilding our Foundations
Leadership in 21st Century Green Infrastructure
New Principles of Digital Economics
Digital Commons: Escaping the Tragedy
Data: A Raw Material Bonanza
Artificial Intelligence: A Boundless Frontier
The Experience Market: A Platform for New Value
Chapter 5: Moving to a defensibly fair tax strategy
Global Benchmarks: Pointers to Fair Tax Rates
Tax Yields and Included Services
It’s Time to Tax Capital
Chapter 6: Fixing the broken healthcare and education systems
Chapter 7: Repairing the social contract breaches
Chapter 8: Global Considerations
Economic Value Creation and Trade
China and the Thucydides Trap
Chapter 9: Immigrants and our National Fabric
False debates and fears
Immigrants Role in our Society and Economics
A Basic Immigration Strategy
Our National Tapestry
Conclusion – Choosing a Vision to Guide our Journey
Introduction
Something is very wrong. We all know it. As the poet Yeats wrote in 1919, “… the best lack all conviction while the worst are full of passionate intensity.” The adjectives “hyper-partisan” or “polarized” characterize essentially every debate. Not only are those acrimonious debates filled with more heat than light, the only paths being offered are ones we all know lead to dead ends or create as many problems as they solve. The old paradigm of left vs right has been radicalized into socialist vs fascist expletives, with nobody understanding what those terms even mean these days. I will highlight many insights and answers in this book and literally none of them will be based on meaningless and useless debates about “capitalism” vs “socialism.”
The list of issues is daunting. Our healthcare and education costs have been spiraling out of control for almost four decades. Despite costing literally twice as much as any other developed nation we provide healthcare that can charitably be described as “below average.” During that same 40-year period the manufacturing jobs that brought middle-class living standards to millions have dropped by over a third. The communities surrounding those abandoned factories have been devastated in the process. Wages have been stagnant in real terms for nearly 50 years. There are 40-50 million Americans living in poverty who are forced to rely on the worst assistance programs in the developed world. Income disparity has reached levels not seen since the gilded age. Our roads, bridges, tunnels, airports, public buildings and other vital infrastructure are crumbling. They’ve been shamefully neglected for those same four to five decades. We’ve squandered our resources instead on a series of endless foreign wars with zero purpose and no means of withdrawal. Amidst all those failed programs, both public and corporate debt has skyrocketed.
If that list of real, concrete problems weren’t enough we have an equally daunting list of issues that have become hopelessly twisted through false assertions, alternate facts and conspiracy theory madness. Immigrants represent a tidal wave of crime and social burdens… Except, they don’t. Crime rates are out of control…. Except, they’re at the lowest levels since the 1950s. The freedom for people to sexually identify and associate as they prefer creates an enormous moral burden on traditional families…. Except, it does nothing of the kind. Globalization and trade are the cause of our economic woes… Except, they are absolutely vital aspects of our economy. Climate change is a hoax…. Except, it’s already having major impacts all over the world. We can’t even begin debating solutions because we have no shared understanding of what we’re even talking about.
Compounding matters, the institutions we rely on to help solve our problems are fraught with their own breakdowns. Trust in government has been in precipitous decline for those same 50 years. The decision by the Supreme Court in Citizens United to legalize domestic political bribery has made that bad situation even worse. Trust in business is at an all-time low and, considering the recent conduct of companies like Volkswagen and Wells Fargo, deservedly so. Our sources of information in the mass media and expert commentary have been split into camps living in different realities. Demagogues have seized the day promoting culture wars and social division to solidify their standing with followers. We’ve been infected by a culture of trolls, bent solely on causing anguish to others. The trolls themselves have been infiltrated by foreign actors and automated “bots” all seeking to split us asunder.
Where did all this dysfunction come from? Why now? What can be done about it? If all the known paths on the map are bad, what direction should we head? How can we tell what has real promise from simple wishful thinking?
I believe there are real answers to those questions. I spent over two decades as the Vice President of Corporate Strategy at IBM. In that role I dealt with countless issues and opportunities from all over the world. I spent much of my career finding the stories buried in mountains of data, translating economics into actionable insights, and understanding the deep human and technology drivers lurking behind market trends. Those experiences, along with the specific tools and methods of the strategy profession, have given me a unique perspective on the much larger challenges we face as a nation.
Business strategists see the world as a mosaic of complex systems whose behaviors are shaped by a medley of invisible forces. Adam Smith’s “invisible hand” is the most famous example, but the full combination is far larger. Our economies and society are driven by the beliefs, needs and desires of humanity, of people. Those are always evolving, responding to changes in the world around us and our own experiences. Personal identity, morality and perceptions of truth play a powerful role in shaping the way we see and react to the world.
That world is also in constant evolution. Science, technology and the innovations from businesses, people, government and other institutions continually reshape what is possible. The productivity gains arising from all of that activity are crucial to powering our overall economy. They are also highly disruptive, with the potential to dramatically shift employment patterns throughout our society. Strategists search for and focus on the deep structural shifts with enduring influence, the forces that really change the world. Few of us spend time hunting for fads.
The most important of those structural shifts are driven by the enormous spectrum of things we value both as individuals and in society. Every business must create value for its customers that is superior to its competitors. That value must be continually reinvented and defended for the business to endure. Understanding value and all of the forces and influences that surround it is the true heart of business strategy and people are the blood cells that course through that heart. Understood more broadly, our values are both shaped by and reflected in our social institutions including our businesses, governments, churches, and communities. What we value truly shapes our world, and the current shape of our world reflects our current values. And, that mirror on our collective souls is not offering a pretty picture.
Our social cohesion as a nation is under enormous stress. The design of our economy is failing the needs of our citizens. We are no longer a society where children can expect better lives than their parents. We are no longer a society in which life expectancy increases from generation to generation. We have not yet reached the level of inequality leading up to the French revolution, but we are at a level higher than right before the Great Depression. Those economic stresses are intensified by the deep philosophical core of what we each perceive as being “moral” and “true.” Our philosophical differences have always existed but have been magnified by the echo chambers of our tribal media and the coalescence of a particular faction with a deep worship of power. Understanding all these “behind the headlines” forces will provide an important layer of insights that are critical for our 21st century strategies.
One of the more distinctive aspects of the perspective that shapes this book is the combination of an ethical compass based on progressive human values with a deep, solid understanding of global economics, markets and business. Despite violent assertions to the contrary, from all corners, those values need not be in conflict.
Strategists know that people don’t behave the way economists assume and build that reality in their thinking and analyses. While economics and economic theory will feature strongly in the pages ahead it’s the strategic insights that will point to our answers, not economic theories. Key to those insights is recognizing that the modern world simply doesn’t work the way our established ideologies and pundits assume. The deep conceptual flaws of our existing socioeconomic paradigm are increasingly inescapable. Not only do those beliefs fail to reflect modern realities the data indicates it probably never represented any reality.
Before we can begin defining our strategies we must first escape those conceptual traps. The first half of this book is dedicated to that purpose. We need a new socioeconomic paradigm, our fifth as a nation. From our founding up through the Civil War we were governed by an agricultural paradigm with two distinct variants – the slavery culture of the South and the family farms in small communities found throughout the rest of the nation. After the Civil War and up until the early 1930s, our second paradigm was one aimed at enabling monopolists to exploit immigrants, citizens and smaller businesses. Our government resources were deployed to arrest or kill anyone who fought for a living wage or to resist the demands of those monopolists. When that system inevitably collapsed we set out to design a socioeconomic paradigm that fit the needs and opportunities across the nation, around the globe, and for the benefit of all our citizenry. That paradigm, our third, was the most successful in our history but was replaced in the late 1970s by our fourth paradigm, known to academics as neo-liberalism. Neo-liberalism has endured for the last 40-50 years and sits at the root of the four decades of decline noted earlier. It’s not a coincidence. The paradigm has dominated both parties and carries much of the blame.
This history plays several important roles in understanding all the issues and possible strategies on our plate. First and foremost, history is not passive. It is an inexorable propulsive force driving our economy, shaping our social and political beliefs and relationships between races, classes and tribes. It is also the source of endless lessons that are critical to understanding what’s happening and assessing possible strategies.
Many of our debates and ideologies are rooted in beliefs about the relative roles for government, markets, businesses and other forms of social governance. It is here where so much of what is assumed is so badly disconnected from modern reality and the lessons of the last 200 years. Many of the historical events shaping business, society, and economics have either been forgotten or rewritten to obfuscate the insights that are most critical to developing solid strategies for the future. That process has been driven by ideologies rather than the clear observation of what works, what doesn’t and why. These are complex systems whose emergent behaviors are shaped by governing rules that are under our control. Piercing the ideological fog will reveal clear, manageable interventions that have worked in the past and that provide patterns we can draw from for our future.
When our national history is viewed through this multi-fold perspective the insights are revelatory. The issues we face are deeper than most people realize. Data that is rarely in the public eye point to problems that are eerily similar to the years preceding the Great Depression, the rise of Fascism and WWII. Not only are the data patterns nearly identical, the social and political behaviors currently emerging are as well. We’re treading a path fraught with peril.
As we look to the future there are further changes underway that will challenge many more core beliefs. Modern businesses simply don’t operate the way they did in the 19th or even 20th centuries. The very nature of innovation, so crucial to the development and growth of society, is undergoing a shift as profound as that of the late 19th century. Both what people value and how the innovation process works have taken radical turns. One of the things we value is the health of the globe and our need to shift to a green future has become urgent. Digital technologies have also permeated everything we do in ways that are deeper than most realize. Even those who are familiar with the technology trends are often unaware of how many core economic principles are turned on their head in the digital realm. Finally, the reality of global forces, particularly the rise of China, are shifting the dynamics of economic power in ways our nation has never had to face.
All of these insights will provide essential guidance for the solutions to our current challenges. I believe the path that emerges is remarkable. It uses strategies we’ve used before or that other nations have proven can work. It’s a path with enormous promise for everyone in our society. It’s one we can all embrace and celebrate. It is a path based on knowledge, insight and the firm belief that our best days are in front of us, not in our rearview mirror.
It’s not enough to change our path for the 21st century. We must also change the entire belief system, the entire socioeconomic paradigm, of our society. We’ve had four in the course of our history. On average they’ve lasted 40-60 years so this latest is due for replacement, just based on longevity. As we will see in the pages ahead, our fourth paradigm has also been a spectacular failure both in its assumptions about the world and the results it has delivered.
It’s time for our Fifth Paradigm. Let’s go explore what that might be.
Cawley’s Aerie 