The role of language in business varies from culture to culture. And as the economy goes through greater prosperity, marketing takes hold at generating more interest and demand, even for goods we don’t fundamentally “need”.
Just recently, while in a bookstore section where they sell little gifts and trinkets, my wife mentioned to me “the thing I love about bookstores is this section where they sell such beautiful things”. To which I responded “that’s exactly what I dislike because they have such nice little things that makes you feel like buying them but they are completely useless!”
We had spoken perhaps too loudly because the lady beside us let out a huge laughter and said, “Spoken like a true man!” We all had a big laugh together and I proceeded to the books section. Where I picked up The Big Con.
Part of modern capitalism is marketing and it can have the same effect as what Mariana Mazzucato is describing about big consulting firms “hollowing” out governments, creating dependencies and weakening the public sector capabilities. Modern consumerism “hollows” each of our lives out by getting us to focus on our ability to earn the most money, purchase or outsource everything else, stifling our abilities to seek and generate the very happyness we are pursuing that the economy tries to sell us.
The very thesis of Mariana can be generalised further into the other product and services markets. The question maybe is about restricting our purist economic thinking to only certain domains and not others.
Continuing on the theme of business models, hacking the target audience in multiple dimensions, and also incentivisation by government for social objectives. More governments can learn from this but with the clear objective of advancing social good and making sure that the help they render to the populace lands in the right hands. And that people are behaving in the socially desirable direction.
This is different from the typical incentivisation that is driven by cost-benefit calculations of corporates, and enabling companies to cross certain cost hurdles to invest in certain activities in an economy. The sort of incentivisation that we are operating on here deals with longer term, more strategic directions that the government is driving at – not just trying to hit GDP growth targets or stimulating the aggregate demand of the economy.
And these strategies also gets at cultural shifts and change. Done properly, they create a new, better culture that treasures the future. That does not claim the present or the short term at the expense of the future. Parts of this incentivisation could be about a mixture of regulation that creates demand while subsidisation that buffers the costs of compliance. For example, applying a hefty carbon tax while subsidising decarbonisation technologies and programmes.
It’s not about sticks or carrots but sticks and carrots.
What is interesting about the coffee stories I shared is that entire cultures can be reshaped by business models and the slew of marketing that is fueled from the leverage investors allows. I’ve always shared the example of how Grab overturned the culture of hailing cabs off the streets in Singapore. Singaporeans don’t even hop on the cabs at the taxi stands anymore.
This has implications for government incentivisation and the manner by which incentives are doled out and the behaviours they are trying to change. Singapore government had been quite skillful in this area, having a smaller market to government and being able to impose ‘tighter’ controls. There are often careful checks and balances to prevent individuals and corporations from gaming the system to extract benefits from the system without abiding by the desired behaviours. And there’s also a big theme of maintaining consistency. This was why for the longest time, the government only allowed married couples to purchase public housing directly from the authorities; and even today, singles are only allowed to own these flats if they are aged 35 and above. The government wants to promote family formation and hence maintaining some consistency in the policy of public housing subsidisation.
Those elements recur in the position of offering tax breaks, providing further direct grants to new parents, priorities in public housing and so on. Businesses can learn from the same by ensuring that they steward the limited resources they have to reward those customers behaving in the desired manner (eg. referring other customers, posting about using their products) while making it harder for the ones whom the business do not desire as customers to consume the products.
When I was doing my masters in New York, I was drinking about five cups of coffee a day. On occasion, it could be five cups of double shot. I had this coffee subcription app that allowed me to order unlimited normal brews at $45/mth and those specialty coffees at $85/mth from a base of nice cafes around New York city.
I came from a coffee drinking culture in Singapore. I’d order my Kopi C each morning with breakfast and in those days, these drinks were less than $1.50 (USD) a cup, unlike the >$5 barista coffees in New York city. But strangely, I consumed more coffee than I ever did in Singapore because of the business model.
Business models are interesting and in some ways, they hack our demand curves, taste and preferences by targeting aspects of our preferences that the economists were not able to incorporate into broad demand analyses. And there are entrepreneurs, marketters who thrive on coming up with such hacks.
The issue about hacks and short term profits is that they accomplish little worthwhile in the longer term. And there are far too many short term studies in the social sciences that gives us a lot of “scientific results” which may be spurious correlations or short term correlations which do not persists. We need to engage our talents is more long term thinking and challenge them to deal with the longer term problems of our economy and societies.
Chanced upon Mariana Mazzucato’s The Big Con in the bookstore today and took the chance to read a bit of it. I first heard of the book from the media and my curiosity was piqued, not least because I’m a consultant myself. The firms highlighted by the book are the usual big consulting groups and Mariana’s main area of attack was on their work for governments enfeebling the public sector and exercising undue influence on the decision and politics of countries.
Being focused on the energy transition, I thought perhaps that my work is less implicated by Mariana’s attack but having been a public servant myself, I do wander if the government contracting out work to the consulting industry is a problem in itself. I think for Singapore, we can safely say that Mariana’s attacks don’t have teeth because the public sector in Singapore maintains a lot of the critical capabilities and information even whilst drawing upon consultants to help drive forward its work.
The Big Con then has in mind very specific governments as targets and in some sense, cherry-pick specific stories, case studies and situations to make its argument. Nevertheless, I still empathize with what the authors are driving at and the change they are hoping to make. Mariana Mazzucatto also wrote The Mission Economy and while I have not read it, I understand the underlying ideas and how The Big Con interacts with some of those fundamental notions. I do think that governments and more actors in the economy needs to get together to galvanise the economy and wider society to collectively embark on the joint mission for a future that is worth creating.
In school, the guy who raise his hands to answer a question gets praised. The one who puts up his hand to ask a question feels like he might have disrupted the flow of a lesson or wasted everyone’s time on something that no one seemed to be interested in besides him. Besides, there never was a quiz by the teacher where credit was given to a student for asking questions.
Yet the older I got, the more I realised that having answers is overrated. The ability to ask the right questions and discover new ideas or thoughts from there is so much more important. The journey of discovery starts with questions and not knowing what to discover. The incentives that our education system designed was more about ease of creating robust, scientific measurement without necessarily aligning with the needs of students going through the system.
There has always been a question of whether schooling and the education system is ultimately about training and uplifting people or just measuring and sorting them. I’ve previously pondered over this quite a bit – whether we intend for the system to produce a pooling or separating equilibrium. It is still a question on my mind and I think it’s a conundrum for systems all around the world.
As Singapore steps into the prosperity of modern society, we recognise increasingly that our prosperity and success isn’t about us as individuals but something we need to develop as a society. And that is driving the whole Forward SG exercise: the idea around reworking our social compact. Prime Minister Wong declared, “Here I have a plea to all: For a new definition of success to become a reality, all of us – as consumers – must be willing to bear a higher cost for the goods and services we consume. We must recognise the important work that our fellow citizens undertake to keep our society going, and do our part to uplift and boost their wage prospects.”
For this plea to work, it is not just about consumers and cultural mindset changes, the whole economic engine of the government including our policies on trade and industry. Essentially, our government needs to develop new ways to think about inflation: that it may be part of the consequences of uplifting the wages of our fellow Singaporeans and tradesmen. And the mechanisms around public sector procurement might need to change too if the PM himself is suggesting that consumers must be willing to bear higher cost?
We all are consumers, taxpayers, employers or employees somehow; the whole economy works such that we have these overlapping roles and what we fail to spend through consumerism, can be spent by the government through taxation. If the government genuinely wants to uphold certain principles of social distribution, it would be really hard to do so by moral suasion and avoid damaging the pro-growth stance.
The small firm is the original basic unit of analysis of business in economics. It is one who is more or less a price taker, trying to somewhat differentiate themselves but having a pretty short cost curve and goes up somewhat quickly. These firms are supposed to proliferate in the market, not grow. In fact, typically in economics, there isn’t really a real motivation for growth in firms other than technical or management progress that changes the cost curve such that the minimum efficient scale changes.
Now on to the real world; there are plenty of small firms, differentiated and there are interesting markets that support them. There are those places culturally oriented towards “local, independent, small” type of firms. And therefore these firms proliferate. It is not because of market competition that they spread but rather the diversity of preferences.
Where preferences somewhat tend towards a kind of homogeneity, small firms tend not to have an edge; it is scaling difficulties that keep firms small. Likewise, it is scaling difficulties that lead to proliferation of firms. The new entrant can typically be a small firm and it needs to determine what is the minimum efficient scale and rapidly work on the areas that can shift its minimum efficient scale more and more towards higher quantities of goods and services.
When I first penned the blog post on hydrogen ecosystem, I had a couple of ill-fitting ideas that I thought could come together but I did not successfully pull them together beyond putting them in a single blog post. What I really meant to say is that the government will need to do more work understanding and studying the nuances of the ecosystem and industrial value chain that makes sense for green hydrogen and then perhaps take action to ease the struggles of the market in developing projects.
The thing about green hydrogen is that it is something that requires quite a fair amount of new infrastructure. And the situation is uncertain because governments are thinking that maybe electrification will be more dominant and want to avoid investing in white elephants. Or they think that it is all a zero-sum game due to budget and resource constraints and that investing into transmission and distribution which meant favouring electrification would naturally be inconsistent with investing into more gas infrastructure.
In reality however, green hydrogen is made from renewable energy and hence the alleviation of electricity grid issues that foster more wind and solar can also support the development of a green hydrogen sector. The key here again is that the government needs to have better knowledge of how different parts of the value chain works and the value they are contributing.
Only in appreciating that, the governments can make the right moves.
I had a bad memory and in school I was never quite able to cram for examinations. I found memorisation a complete chore and my mind really strained trying to remember things. Most of the time, the harder I try, the more difficult I find it. Subsequently, whenever I had to remember something, it was important that I found something already in my memory to associate it with so as to bond the materials better to my mind.
It turned out that this exercise from young did two things for me.
One is that it caused me to develop an interest for learning and genuine understanding when confronted with something new. Since I wasn’t able to retain much in my mind, what I did, I kept them for much longer than everyone else. And I had to develop my own reasons and purpose for wanting to put something into my memory since they were usually stored longer term.
Second, it gave me a method that increased my memory capacity as I learnt more. This requires a bit more explanation. When I recall things by associating the new information with something already in my mind, I’m actually causing the web of my knowledge to be denser. When a piece of information stands alone, it is easily forgotten. But when you connect it with other information, it suddenly becomes more memorable.
Take for example you meet a guy and he tells you he is 23 years old, then says nothing further. Your memory of him is reinforced by how he sounded, his clothes, hairstyle and perhaps handshake. But if he also tells you that his Mum is a widow, and he had gone to college in Boston, you might actually take all these pieces of information, form even more associations and once you meet him, you’d be able to recall him better than if he had not shared the additional information.
In other words, we actually have a slightly mistaken analogy for our memories. We tend to think there’s some kind of limited shelf space such that trying to remember more things means we need to forget some old things or remove some of the existing memories from the shelf to accommodate the new.
After years of experience trying to deal with that poor memory of mine, I noticed that our memory are more like webs. When we don’t have much in our memories, it is as though there are many gaps within our web and most materials that comes our way just fly through these gaps rather than getting retained. But as you are able to catch hold of more using what you already have, then you naturally hold on to even more memories that allows you to capture more.
Our understanding and what constitutes deep knowledge from repeated practising creates new contexts for us to absorb further new information and knowledge. This is incredible because it means that our memory capacities are not being consumed but rather expanding. Capturing more and richer information enhances our ability to compress new information and knowledge further, drawing upon what is already in the mind.
This is part of a series of republished articles from my Medium page because I am worried about the platform ceasing to be. A version of this article on the same idea was published in here a while back.
