What happens in economics when technological innovation happens? There’s a bit of dilemma between technological progress and economics because technology needs to progress to a stage when it upend the economics of an established technology – yet the incumbent is often enjoying scale economies as well as other effects such as network economies that can make it incredibly difficult for the new comer even if it is superior to existing technology at the scale that the incumbent operates.
In the Innovators’ Dilemma, that was being described and the strategy as well as the market approach is always for the new technology to chip away at the market of the incumbent technology by being appealing enough to a small group in the market to help it grow its scale and challenge the incumbent on more fronts gradually. Can the new technologies that we are trying to cross over towards make their way through this path in order to break the dominance of the incumbent technologies?
They probably won’t be able to move fast enough. And that is probably the justification for government to intervene and encourage developments. Yet governments do not want to be seen as favouring particular technologies. There is also a concern about creating inefficiencies in the market by distorting prices or forcing the taxpayers to shoulder the wrong costs.
Yet in reality, for the world to create a better future, there’s no real ways around it. The modern world was not built by shielding taxpayers from the wrong technological investments nor from carefully betting on the right technologies to take off. The complex problems around climate issues today are not so different from the public infrastructure challenges that people faced in the time before government had the kind of powers they have today. They are more complex, and we probably need more talented people working on them, both in the private sector as well as in government. In fact more so in government than ever.
The challenge remains the cost-benefit paradigms and all the free-market type principles to government and what intervention should be like. Without more mission-oriented policy-making principles and a system that is properly leveraging talents and passion, it will be difficult for governments around the world to assume the kind of role and leadership it needs to lead the transition.
Despite the bad press for EY in Germany and PwC in Australia; the big four and their sprawling professional services activities continues to grow. Accounting and audit services aside, advisory services appears to be in demand across the international business world. Overall across the economy, as best practices across the industry spreads, companies becomes more competitive and efficiency goes beyond just market prices and matching of customer demands. Innovation takes place as well.
Consultants, through advisory services helps information and knowledge work themselves out in the market. Mariana’s Big Con argument about economic rents however, might still somehow stand in the sense that the fees they attain may be somewhat outsized compared to the value created. And I’m referring more to generic type of business consulting as compared to technical advice or consulting that augments capacity of businesses during special situations such as a transaction or some kind of innovation project.
Yet I would say that the bigger con that is present in the market is the financialisation of our economy and everything that the financial industry abd banking does to generate rents. The issue is that the labour of financial industry keeps serving capital, and capital, with its sustained bargaining power (as pointed out by Thomas Piketty), continues to direct rents towards the financial industry.
The main force that can change this will be the government and regulators; there has to be more research and thinking around the manner we are setting up our economies.
There are imposters around us; they pretend to be doing their work but are actually creating problems for their coworkers to solve. They are starting fires around workplaces that we all have to put out. The only issue is that companies are trying to get people to practise teamwork and they are not trying to sniff out imposters who are just pretending to be teammates. Unless you start playing office politics and all that.
What this means is that if you have been doing well, and keep doing well even though you didn’t seem to have previous experience or built any credentials around it, you’ve already proven yourself. What this means is that if you have some suspicion about yourself as an imposter, consider your intentions rather than your qualifications. What makes you an imposter is when you have drastically different intentions from the rest of the team.
It’s not just your qualifications that gets you there. It’s your intentions as well.
Professional services are inherently somewhat personal kind of service that depends a lot on the team delivering the service – not just because of the expertise required and involved but also the extent the team actually understands and care about the problem that clients have.
When one enters a professional service environment, it becomes easy to sniff out industrialism when you note that the bosses are just acting as managers, thinking about how they can increase more sales, upsell customers and mainly care about the metrics involved for sales but not delivery. And then when it comes to delivery, the culture is about doing the minimum, leveraging irrelevant previous work, failing to live up to promises.
We have all seen the big consultancies deliver such stuff. Perhaps especially the big four. Mariana Mazzucato talks about it in the Big Con. Workers need to sniff out industrialism in this sector and learn to opt out of it – by leaving or changing the way they serve. Clients need to sniff that out by walking away. The reason why such industrialism perpetuates is because clients sign up for them – they put procurement departments, try to boil everything down to basic metrics and uni-dimensional issues, and negotiate lower prices, driving vendors to cut back on service.
We’ve had decades of doing more, extracting more productivity out of our assets, workers and even vendors. Like the big fossil, you might think you’re winning, until you realise you’ve just driven the world to its end.
I’ve been based out of Australia for almost three months now. The transition was smoother than I had expected and as a Singaporean who have studied abroad both in the US and UK, Australia is an easy environment to fit into.
Yet there is one cultural element in Australia that makes it so radically different from most of the other places I’ve been and lived in. It is the respect and remuneration that is given to heart and hand labour. Vocational skills, trade skills are properly valued. Plumbers, technicians, work men are well respected and rather well compensated. It is a place where I have seen the most female construction workers at work sites. The work environment for these people labouring with their hands are generally good.
Same goes for heart labour. The caregivers; the nurses, those social workers. They are given great deal of respect and these jobs are not looked down upon. It is markedly different from Singapore in that sense. Last year in Singapore, Lawrence Wong made a speech about valuing heart and hand labour more in Singapore. The government was concerned about pay gap and inequalities but as a culture, there is a lot to learn from Australia when it comes to respecting the trade skills.
One could argue the prices would rise; food in Singapore may no longer be cheap. And it might cost way more to get someone to deliver goods or to fix stuff around the house. Well, we do pay a lot more to our corporate workers, and we do pay a lot for tuition teachers – why should head labour necessarily earn more? The government could lead the way by setting higher standards when it comes to some of these trade work. They can also pay more for the services they procure in the heart and hand sectors.
Probably for the first time in the history of my personal blogging, I’ve brought together all my writings under a single site. Since migrating kevlow.com to a self-hosted platform (though you probably won’t be able to tell), I’ve pulled in some of the even older pieces of writing I’ve put out on the internet. This includes blog entries written from as far back as 2005.
Looking through my entries, there was the period of 2011-2013 when I wasn’t so active probably because I was busy in LSE. It was probably a bit of a shame because those were some really formative years as well in terms of the development of my academic thinking and also integration of my faith into my intellectual identity. Perhaps I had wanted to keep things a bit more private. I would like to point out that those were also years when Tim Keller’s writings engaged my mind so much more.
The focus of my writings has certainly evolved significantly especially with the addition of topics around energy and climate. My passion for education and learning was more dominant earlier in my writing though I wouldn’t consider it to have died down from then. My interest in other topics had expanded.
I could have continued to keep my writings in different niches and have them separate but I realised that in some sense, they were reinforcing one another and were all products of my principles and conviction that drove me. After years of refinement, my conviction is still towards this broader theme of trying to create a future that we all want to live in. Whether it’s energy, education, sustainability or economic development, I am future-oriented and all for investing in what is to come.
One of the things we learnt early on in economics is that allocative efficiency which the perfect competitive market seem to move towards is efficient in terms of maximising social welfare even if distributionally it is skewed. In other words, by using the ability to pay as the final arbiter for who gets the goods and services, the society moves towards high levels of efficiency about what gets produced and who gets what goods/services without questioning whether things are really ‘fair’ or if in the first place, the ability to pay is properly distributed.
This is a problem that we seem to ignore because it is convenient to think we are already in the best of worlds. The idea of Pareto optimal is powerful – that you stop moving things around as long as you cannot make someone better off without having to make someone worse off even if the one who is slightly worse off is not much more worse than the amount of betterment you can create in another. That comparison isn’t objectively possible anyways.
But by sweeping it under the carpet, economics close itself off to a lot of interesting philosophical debate that really matters and tries to consign itself to an amoral science. Yet championing for markets is not exactly amoral, it is taking the stance that the market approach is morally superior and already deferring to the market in the work of economic justice. Michael Sandel writes and lectures extensively on this and as we ponder over how we marketize various things from infrastructure to healthcare, we can go back to consider those ideas.
For some reason most people forget that energy markets were created through a combination of business activities and government regulation. There would be a push of some kind towards energy access, electrification in the beginning of any modern country’s development. There wasn’t that much public consultation around these topics – that was simply how development takes place and everyone sort of aspired towards that. Or so we thought; but systems were built to drive countries and societies towards those directions.
Today, in the struggle to set up an orderly energy transition, policy leadership from government is more important than ever. The challenge is in determining what are political choices and what are really policy-choices that is to be determined through more rigorous research and analysis. There is always the search for market-based solutions even though we might actually have seen in history that a lot of big dislocations are resolved or handled through public sector decisions and investments.
The idea of seeking the market for solutions is a new idea. And while the market appear to have been terrific in generating a whole load of choices and new options, the fundamental innovations are still pulled together by a greater sense of mission than market competition. We probably need to mature further to appreciate this.
We might not realise it but governments have a huge role in creating markets. This is because markets do not spontaneously emerge out of nowhere especially in highly developed economies. One of the reasons is that markets actually requires structures, institutions and frameworks such as rules and regulation can encourage players to step forward more boldly and grow the market.
Today, in Australia, despite the multi-dimensional benefits that bioenergy brings, and synergises with the traditional economy, there’s still little recognition of the low-carbon identity of bioenergy. And it is a shame that methane produced from biological processes are still seen as not too different from natural gas that is extracted from the ground. There is no forward direction by the government to stake the space and define the standards for biogas production, upgrading into biomethane and regulations around treatment and handling of the digestate, which itself is a by-product of the process that can be made useful.
There is perhaps a clear path to create a market not just through regulatory clarity but also enforcing demand. Market for audit, market for inspections, even market for many public services are created by regulations. Sure, there’s a need and the market contributes positively to society and so regulations support that. Why can’t we do the same with clean energy? One that displaces directly the fossil fuels in our system?
When you try to sell your house, you take reference off the market price. You determine essentially the ‘market value’ of your house and then try to sell your house for that price. When you do eventually meet an interested serious buyer who makes an offer, you then haggle until you agree upon a price. This price is of course somewhat anchored by the market value you seem to have developed but then it would likely be different, complicated by the specific situation you and the buyer is in.
Do you value your own home based on that market value? Does it matter that your neighbour bought his house at a certain price? What is the basis of that price? Ultimately, while we can deconstruct these prices into locality, the quality of the build and other attribute, it is still a bit of a mystery. Is the value of something based on our subjective eyes and preferences, or is it intrinsic to the thing itself?
When we pay an artist to perform for 1 hour; is it the performance that is worth the money or the time spent by the artist? Do we allow the market to value us or do we value ourselves? Which market are we talking about anyways?