GUEST POST from Greg Satell

We live in an automated age. From the news we read and the items we shop for, to who we date and what companies we choose to work for, algorithms help drive every facet of modern life. Such rapid technological advancement has led some to predict that we’re headed for a jobless future, where there is no more need for humans.

Yet in their recent book Radically Human, Accenture’s Paul Daugherty and H. James Wilson argue exactly the opposite. In their work guiding technology strategy for many of the world’s top corporations, they have found that, in many cases, the robots need us more than we need them. Automation is no panacea.

For over a century, pundits have been trying to apply an engineering mindset to human affairs with the hope of taking a more “scientific approach.” So far, those efforts have failed. In reality, these ideas have less to do with science than denying the value of human agency and limiting the impact of human judgment. We need to stop making the same mistake.

The Myth Of Shareholder Value

In 1970, the economist Milton Friedman proposed a radical idea. He argued that corporate CEOs should not take into account the interests of the communities they serve, but that their only social responsibility was to increase shareholder value. While ridiculed by many at the time, by the 1980s Friedman’s idea became accepted doctrine.

In particular, what irked Friedman was that managers would exercise judgment with respect to the objectives of the organization. “the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation … and his primary responsibility is to them,” he wrote.

The problem is that boiling down the success of an enterprise to the single variable of shareholder value avoids important questions. What do we mean by “value?” Is short term value more important than long-term value? Do owners value only share price or do they also value other things, like technological progress and a healthy environment?

Avoiding tough questions leaves significant problems unsolved, which may be one reason that, since Friedman’s essay, our well-being has declined significantly. Our economy has become markedly less productive, less competitive and less dynamic. Purchasing power for most people has stagnated. By just about every metric, we’re worse off.

How The Consumer Welfare Standard Undermines Consumer Welfare

In 1978, the legal scholar Robert Bork published the Antitrust Paradox in which he argued against the rule of reason standard for antitrust cases that required judges to use their discretion when deciding what constitutes a practice that “unreasonably” restricts trade. In its place, he suggested a consumer welfare standard, which would only take into account whether the consumer was harmed by higher prices.

Much like Friedman, Bork didn’t like the idea of depending on subjective human judgment. How could we trust judges to decide what is “reasonable” without a clear and objective standard? If the government is going to block business activity, he argued, it should have to prove, through stringent economic analysis, that harm is being done.

Yet as Lina Kahn pointed out in a now-famous paper titled Amazon’s Antitrust Paradox, consumers can be harmed even as prices are lowered. If Amazon is allowed to control the online retail infrastructure, including logistics, hosting, marketing, etc., then trade is restricted, free markets are undermined and the consumer will be harmed.

To understand why, you only need to look at the recent baby formula shortage, in which only three firms dominate the market and, the leader, Abbott, is the exclusive supplier in many markets. Not only is it highly likely that the lack of competition contributed to lax quality standards at Abbott’s plant in Sturgis, Michigan, but once it went offline because of contamination, there weren’t enough suppliers to fill the gap.

These aren’t isolated examples, but indicative of a much larger and growing crisis. An article in Harvard Business Review details how the vast majority of industries are concentrated in just a few dominant players. A more extensive analysis by the Federal Reserve bank shows how the lack of competition leads to lower business dynamism and less productivity.

“Great Power” Politics

In early March, the prominent political scientist John Mearsheimer gave an interview to The New Yorker in which he argued that the United States had erred greatly in its support of Ukraine. According to his theory, we should recognize Russia’s role as a great power and its right to dictate certain things to its smaller and weaker neighbor.

Today, the idea that America should have left Ukraine at the mercy of Russia seems not only morally questionable, but patently absurd. Not only has the brutality of the Russian forces horrified the world, their incompetence has laid bare the fecklessness of the the Putin regime. How could such a respected expert of foreign affairs get things so wrong?

Once again, the failure to recognize human agency is a key culprit. In Mearsheimer’s view, which he calls, “realism,” only “great powers” have a say in world affairs and they will work to further their interests. He believes that by not recognizing Russia’s desire to subjugate other nations in its orbit, America and its allies are being silly and impractical.

Hopefully, we can learn some lessons from the war in Ukraine. Strategy is not a game of chess, in which we move inert pieces around a board. People have the power to make choices. Ukraine chose to undertake tough reforms and arm itself. Russia chose an autocracy which rewarded loyalty over competence. That, more than anything else, has driven events.
The Real World Isn’t An Algorithm

A joke began circulating in the late 1970s, often attributed to management consultant Warren Bennis, that the factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment. Today, even with offshoring, about 10% of Americans work in factories.

When you scratch below the surface, the joke has less to do with technological advancement than it does with derision and control. Bennis wasn’t just any business consultant, but a renowned expert on leadership, who wrote books, published articles in top journals and even advised presidents. That he would promote the view, even as a joke, that leaders should deny agency to employees is as troubling as it is telling.

If you believe that human judgment is a liability rather than an asset, you manage accordingly. You treat employees as cogs in a machine rather than partners in a shared enterprise. You invest in offshoring rather than up-skilling, schedule shifts without regard to people’s lives, deny benefits such as parental leave. We’ve seen where that’s gotten us—lower productivity, worsening mental health and a society that is more unequal and less just.

We need to get back to the business of being human. Our economy should serve our people, not the other way around. The success of a society needs to be measured by the well-being of those who live in it. If we increase GDP, but our air and water are more polluted, our children less educated, we live unhappy lives and die deaths of despair, what have we really gained?

— Article courtesy of the Digital Tonto blog
— Image credits: Pixabay

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