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TO EXPERIMENT OR NOT TO EXPERIMENT–THAT IS THE
QUESTION
Riel Miller
Vol. 39, Issue 2, Jun 2009
We are living a moment when the swirling clouds of evolutionary
complexity part, offering a glimpse of a landscape where three features stand
out and what needs to be done becomes clear. It is time to embrace
experimentalism.
The shocking
The first feature is that the emperor has no clothes. The financial system’s
detachment from the “real economy” is evident for everyone to see. This is
not an artificial divide due to malice of forethought or some particular form
of pernicious greed. It is a common event in the history of firms and sectors
that get drawn away, initially by innovation and the good profits that go with
it, to a point where the core role of what they produce is forgotten. There are
famous examples of firms and indeed even whole nations that lose sight of
the essential, focusing on doing things that end up being peripheral and
ultimately non-resilient.
The routine
The second feature is that every morning, when each of us wakes up and
starts about our own day, the “real economy” is still there. This is the
continuity of human activity that creates wealth in the form of useful output.
It is important, very important and not easy in these queasy days at the end
of the industrial era, to admit that wealth creating activity includes not just
the familiar physical objects that come off automobile assembly lines or the
“white collar” services offered by Wall Street brokerages but also the
“unique creation” that defines peer production, experience market events,
“do-it-yourself” craft, and co-produced relationships arising in fluid
networked communities.
The jackpot
The third feature is a jackpot of riches waiting to be created by reconnecting
the “real economy” with the financial system. We face a historically rare
opportunity. The emergent “learning intensive society” requires a financial
system – one that can do the traditional things a financial system does –
specialize in both the allocation of capital and the management of liquidity –
in ways that correspond to the present nature of what is being produced and
accumulated in the form of assets (capital). Without this essential system,
the new types of output and the new ways of producing this output,
including the emergence of new business models on a viable basis, cannot
happen.
Time to experiment
In this time of crisis the reflex of retrenchment, consolidation and refuge in
familiar routines is understandable. But it should also be self-evident that
financial system innovation is essential for developing the potential of the
present. History is replete with examples.
The invention during the Renaissance, over four centuries ago, of such
primordial ingredients of the financial system as double entry bookkeeping
and the then exotic financial instrument called a “bill-of-exchange” were
critical to enabling new business models and new markets to emerge. It is
easy to forget that instruments and institutions that we take for granted today
like bonds, stock markets and even central banks did not always exist but
had to be invented and refined through experimentation.
What to experiment on
Past experience shows that finding the right fit between the emergent system
of wealth creation and an appropriate financial system requires
experimentation in at least four underlying socio-economic sub-systems –
identity, property rights, transaction systems, and shared meaning. One
take<1> on today’s context suggests experimentation along the following
lines:
Identity. The emergent “learning intensive society” is characterized by
“unique creation” in highly fluid and diverse networks. If there is no easy
way to prove and own your identity in a practically useable form then there
are very high costs and low incentives to opening an account, making an
investment, accumulating assets or taking responsibility (recognizing
liability). Citizenship, birth certificates, social security cards and a panoply
of rights that we take for granted now need to be extended into cyberspace –
it is time to establish the infrastructure of cyber-citizenship.<2>
Property rights. The new relationship between property rights and finance
needs to be based on accounting systems that rest on clear and operational
property rights systems that validate and valorize two key asset classes: i)
creativity in all its cumulative and composite richness (copyleft), and ii)
human capital as the verified acquisition of competences – things you know
how to do – that can be deposited in a “knowbank.”<3> A willingness to
undertake creative experiments equivalent to those of 19th century, like the
daring decision to introduce universal compulsory schooling, could easily
establish the accounting and assessment methods needed to bring property
rights and accounting systems back into realignment with the emergent
systems of wealth creation.
Transaction systems. Composite creative works that are formed from a
collage of accumulated inputs and spontaneous teams that coalesce for joint
activities/joint production of utility (social, business, personal) can only
work if there is an easy way to measure value and make payments. For a
variety of reasons, including inadequate identity and property rights systems
as noted just above, the development of a state backed token that can be used
for peer-to-peer payments has not emerged. The problems are not
technological but institutional.<4> Central banks did not take initiatives in
this direction at the time of the dot.com boom for fear of destabilizing
financial sector business models. Now that the sector has to be rebuilt
anyhow what better moment to experiment with new forms of payment that
can help create new valuation markets and facilitate the viability of new
business models in a broad, global-local transaction economy.
Shared meaning. Language is an obvious enabler of networking but it is the
kind of standard that takes centuries and innovations like nation states and
compulsory public schooling to become ubiquitous. The equivalent
challenge today is to establish a more rapid, task and context specific ability
to arrive at shared meanings. This is a key enabler of a learning intensive
networked society. Already much grass roots experimentation is happening
with what some are calling the “semantic web,” a glimmer of what might be
imagined as Web 3.0. Now is the time to be more explicit in encouraging
experiments in achieving transparency (finding what you need not just what
you already know).
Resistance to experimentation
Collective action to introduce experimentation along these lines provokes
resolute and often nasty defensive reactions. This is a normal reaction since
the emergence of new systems that function on the basis of different logics
reshuffles the stocks and flows of capital and power.
A recent rather low key but costly example of this resistance to change
happened during the dot.com boom. This explosion of creative and risky
ideas both inflated too fast and collapsed because powerful interests not only
protected existing systems of property rights, payment, valuation, and
accounting – but also, maybe more importantly, stymied experimentation
with alternatives. During the dot.com boom experimentation was fenced-in
to a narrow range of “wild entrepreneurialism” that left institutions,
accounting practices and power untouched.
Some might say that the current context is different. Given the breadth and
depth of the failure of the existing systems the choice of experimentalism
may seem like a “no brainer.” Turning to experimentalism could even
appear like a good way to show some regret over how things turned out and
a willingness to try something new. “Hey, let’s run a few pilot projects to
see if they work. What have we got to lose?”
Fear of experimentalism
Plenty. Embracing experimentalism, as defined here, means abandoning
administration. This is a huge and frightening loss. Administrative systems
use simplification in conjunction with command and control to achieve
planned outcomes and manage risk. Administration has been brilliantly,
wildly successful, but at a price.
Using administrative methods to address the reality of complex evolving
systems entails a loss of information and freedom.<5> By resting on the
“Newtonian” world-view that the universe can be explained, predicted and
planned, the administrative approach – even in its most reflective mode –
contains two insurmountable limitations: first the premise of predictability
means that failure is due to inadequate planning and hence logically failure
is avoidable, failure is someone’s fault, and fear of failure inhibits learning
through experimentation;<6> and second the presumption that the future of
complex systems can be explained undercuts the modesty and imagination
needed to question the assumptions that limit our perceptions of the potential
of the present.<7>
To embrace experimentalism is to let go of the organizational forms and
practices of planning and administration that are logically at odds with
failure and hence, fundamentally at odds with learning. It is to take another,
more spontaneous, diversified, fluid and open path to achieving our goals
and managing risk.
The courage to do it
Today we look back at the crash of 1929, the immense costs of the Great
Depression, and denounce what now seem like pointless political conflicts,
obvious policy blunders and the excruciatingly slow pace of institutional
innovation.
Will history repeat itself? What will our epitaph be? Will hindsight’s verdict
in fifty years be that we systematically and purposefully sought out
experimentalism as a new way to take advantage of the opportunities created
by the complex evolutionary processes within which we live? Or will they
once again lament our inability to imagine changes in the conditions of
change and do something about it?
At least our choice is simple – will we embrace experimentalism or not?
Riel Miller is a member of the boards of the World Futures Studies
Federation and of the Association of Professional Futurists, a faculty
member at Sciences-Po in Paris, and founder of xperidox: scenarios that
change decisions today – www.rielmiller.com.
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