The market has a role to play in the energy transition but the market is not responsible for the transition. Technological improvements and our sense of purpose or mission does not come from the market – they are exogenous inputs. What is challenging about the market is that it does have a life of its own and there are always entrenched interests pushing against the direction of the mission that the world is on. It is not just about gaining buy-in to the mission but unraveling the interests vested in it.
That is a serious conundrum especially when we need to transition fast. The bigger the vessel, the harder it is to steer and change directions. So it is with the market economy. The most vested the market is with the status quo, the greater the reach of the tentacles of the market through the system across areas of life, the harder it is for change to happen. Or at least directed, meaningful change.
It is probably time to recognise that the market can help drive the demand for greener fuels and renewable energy if the incentives are put right. It is also critical to recognise that the economics around change can be arbitrary and a snapshot in time. Cracking the puzzle is not just about performing a cost-benefit analysis and saying whether to proceed with this or not. It is about identifying the pain-points, challenging the status quo, re-jigging incentives and rallying the champions.
We have done that before, with ushering more peace, with managing overpopulation, with feeding hunger, dealing with poverty. We can deal with the challenge of climate change and the transition of our economy. If we make it our mission to do so, rather than to wait for the market.
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?
There’s going to be a new kind of entrepreneurship; not necessarily one that is building businesses with an established revenue stream or for a current market need, but one that bets on the needs of a future that the world wants to be creating. And the upcoming green race might unleash this new breed of entrepreneur more strongly than before. In the post-pandemic era where people might have got sick of government stimulus allowing billions of capital to slosh around the system, risking inflation and simply making the richer rich, fiscal policy might be returning to the center-stage as the new means of keeping the public voting base satisfied.
The green race is going to drive new winners in the economy as entrepreneurs who have positioned themselves to make the critical investments needed for the economy. Especially the ones that going to create the very jobs that politicians plan to trumpet about. Being able to think ahead and consider the kinds of businesses desired both by the public sector in an economy that is highly pro-market will be rewarded. The risk is that the public sector decides to take on the direct investments themselves rather than to ‘incentivise’ the businesses to do so. This is why the pro-market orientation of the government is important.
For the markets where the government have the tendency to perform direct intervention or deem infrastructure investments way too strategic to be left to private sector, the green race may take those economy in a different direction. They may choose to create new state-owned and managed entities to make new direct investments or to use the existing ones. And the green jobs will be created within state-linked enterprises. Civil servants who are savvy in these areas will tend to gain within such systems.
Either way, there are going to be new ways smart people will be gaming the system.
Last year, I wrote a post about market leadership. And it is interesting to see the move by Home Depot to increase salary as an investment towards increasing market share and dominance. Retail and service are being automated more and more with the improvements in technology and rise of AI. It is not so much about the existence of the technologies as they had existed for a long time. But the investment made over the years have accumulated and mass acceptance have reached this stage where broad-based adoption becomes increasingly common.
In the situation where capital investment in machines and technology becomes a more level playing field for companies, the edge that companies can get from replacing humans with machines becomes smaller. But it takes market leadership to decide that the new basis of competition is probably not about having more automation than the competition but to be able to attract and motivate the best frontline workers serving the customers and making their day.
Market leadership is not about following what the rest of the industry is doing but deciding what is the next basis of competition and focusing on those parameters. Scale helps but more critical is the courage and strategic thinking of those in charge.
Each leap forward by technology is accompanied by fears around humans becoming or being mediocre. And most fears are basically exaggerated versions of reality as it turns out. So indeed, mechanisation has reduced the need for physical human labour and it has made majority of mankind physically less able than our forefathers but we’ve also been healthier and lived longer lives.
With the rise of AI, there’s fear of depending on it and concerns in schools about teachers losing their jobs or students outsourcing their work to ChatGPT. Lousy journalists who had been churning out mediocre pieces of work can be now replaced by AI, customer service representatives that don’t know their stuff can be replaced by chatbots and so on. The problem isn’t really about chatbots or AIs, or quality of humans. It is the issue around industrialization specifying standards, creating processes and expecting humans to fit into that.
We should begin to see all of the roles we humans can take as something relatively temporarily. That does not mean we shouldn’t invest in our craft and up our skills but that does put into question where is the boundary between human and machine in the work that we do. Measured in a single dimension, machines and technology can always be optimised to eventually deliver better performance than humans. The issue isn’t human’s mediocrity because there are mediocre workers and they’ve long been easily replaceable. Seth Godin recently talked about the matter on his podcast through two episodes (here and here).
The fact that AI frees us up from having to do the basic, minimum kind of work should present an opportunity for all of us. It might threaten some of us, but only if we allow it to.
So over the past 2–3 weeks, I’ve been pondering over our education system. It all started with that chat I had with my friends, and then the article I wrote, and then more thinking. I even thought at one point I want to start a podcast about education and go around interviewing people about how they want to change it. The truth is the majority of us have brushes with it and experiences with it — pleasant or not. And those were worthwhile voicing out, to augment and improve the system. You don’t need to be an educator or professional to do it. I was not just thinking about the system in Singapore but this whole industry of education, testing, whether it is about building up or just sieving out; whether it is implicitly defining merit rather than bringing up people to merit.
Now the recurring question I had in mind was whether education, which is supposed to be the great leveller, should be ‘sorting’ people with its system of testing and exams or ‘lifting’ people up to a certain level. To put it at another layer, it is also about whether education should be tuned to provide signals about a particular person or be tuned to develop a person. What underlies this difference is implicitly the ‘fixed mindset’ vis-à-vis the ‘growth mindset’ that the one tuning the system has about people, and the potential of the society at large.
Signalling Function: Separating or Pooling
Now the title of the article references this feature of systems that are set up to create signals. It assumes there are different ‘types’ in the environment and the system design can result in everyone signalling the same (ie. pooling) or signalling differently (ie. separating). In general, examinations are designed to create separating equilibria. We are taught to think that a test that results in everyone scoring A is pointless because exams are to help us differentiate the best from the rest. Or is it? Shouldn’t an exam or test be used to measure students/learners against a benchmark you want to train them up to?
So shouldn’t we be keeping the testing constant and adjusting the teaching and content to ensure we can ‘lift up’ everyone rather than ‘sort them out’. Because when we design exams to generate a ‘normal distribution’ outcome, then we are implicitly saying someone in the room deserves to be the last when it is just a natural outcome of a relative system. We can no longer trace ‘culpability’ back to the students’commitment and efforts because someone has got to be last in class — someone has got to be in the lower tail of that normal distribution. What a depressing way to think about education outcomes.
Therefore, this signalling function of education runs against the grain of all the effort, sense of purpose that we are imbued with as we try to develop our students into people worthy of our society, yet that is the way we design our assessment, which nowadays seem more like the end of school rather than just an instrument that the schools used to provide a means for students to check themselves against some kind of standards.
Competing with yourself
Now the way our assessments are designed also means that you are creating competition amongst students. Because results are somewhat relative, you can do better when your classmates do worse. At national level or in moderated standardised testing which is really used to perform ‘sorting’ at cohort population level, the result gives you your relative position within the society rather than your absolute standards.Well, people will say, that’s all that matters, isn’t it? Life is a competition and it’s about getting ahead of others.
As I mentioned previously, this is a recipe for a society-wide mental health disaster; especially if job options are strongly correlated with academic performance subsequently. Worst, the parents and society shares the idea that only jobs requiring those qualifications are worthwhile going for. In reality, the most important competition in your life is with yourself and it is important for you to be able to track your progress, to know you’re growing. Take for example when you measure the height of a child to see he is growing; you might look at the height percentile chart at any one point to say, oh he is 40th percentile, below average for his age, but we know he used to be 136 cm but now he is 140 cm, he is definitely growing. You don’t get worried that he used to be 55th percentile when he was a year younger but now at the 40thpercentile in height.
You might say because relative height don’t matter as much as academic achievement in life. But the same principle remains that having an objective way of tracking your progress of growth helps give you the encouragement to keep going. Our school testing and exam systems do not help us achieve that. They do not allow students to compete with themselves; at every test, they are just taking the same cohort, sorting them into grades/scores again and again with different combinations of topics and subjects. How this really helps the growth and development of a single child is anyone’s guess. It doesn’t matter so much when your parents, society at large and teachers focus on your attitude, your character and values more than exam results. But I have a feeling that we naturally gravitate more towards what is measurable and allow that to become the dominant yardstick.
By ‘pooling’ students into just a few ‘prestigious subjects’ (eg. the sciences) and ‘separating’ them into grades within these disciplines, we risk funnelling them further and deeper into intense competitions when we should be training them to find niches for themselves to escape competition. In business or society, when you encounter a red ocean (full of sharks, ie. competition), you run, and you try to define your own market, a blue ocean you can swim in. Yet in schools we don’t prepare students for a life that involves seeking blue oceans, we try to force everyone to swim in the bloody waters and create artificial bloodbaths.
An alternative: Sorting by strengths, Lifting up everyone
I thought long and hard about what the education system should really be separating and pooling instead of the traditional model. And I have an alternative to suggest. It will be aligned with the ideas I proposed previously. To prepare students truly for society, the system should be sorting students into various areas of strength/practice/disciplines that they are to be nurtured for rather than choosing a fixed set of disciplines and then sorting students according to their abilities in those disciplines. And be serious about nurturing them in the areas they are sorted into. Expose students to more things whilst they are young instead of specifying subjects and saying they ought to have headstart in those areas and drill them with content. Sort people horizontally across a spectrum of different areas rather than vertically along a spectrum of ‘abilities’ — help students develop their strengths and hone their craft.
A well-functioning society requires a good spread of people with head, heart and hands. You may say that we are exposed to the competition of the global market but price need not be the only signals we heed, quality matters, identity as fellow citizens matters. And these are values that we can cultivate when we sort people not by their ‘abilities’ in narrow areas of human endeavour, but by sorting them in a way where they see the value they can contribute to the society.
Why this is so important is because so much of Singaporean’s students’ lives are squandered meandering around the system designed to not so much to genuinely develop every student but to sieve out the top academics/intellectuals. Imagine you are cluelessabout your strengths but you know you’re not a study-type. And each year you try hard but you’re consistently sorted into the tail end of the distribution, for every single subject where there’s a test/exam. You score A for arts and you are told you draw well but none of those are reflected or considered when you have to select which school to go into. You’re continually told you’re underperforming, ‘doing badly’ — of course you try to deal with the feelings of inadequacy and being judged harshly by ‘rebeling’ against the system. And then the system tells you that you’re doing badly precisely because you’re behaving badly.
If we had an alternative system, I believe Jerome Yap’s story would have turned out differently. Of course, if I were him now, I wouldn’t want it to be any different because the adversity I went through mademe who I am. But under the different system, he would be ‘discovered’ at an earlier age, and his talents will be nurtured by his parents and teachers (who do not have to seem like they are working against the system); he might have already started his own successful design business by the age of 28 — with a degree or not. In fact, the degree won’t be what we are celebrating, it would be the fact that we have such talent from this small city state.
This is part of a series of republished articles from my Medium page because I am worried about the platform ceasing to be. A previous version of this article was published in here a while back.
When you deposit a recyclable item into the rubbish bin or down the chute here in Singapore, did you know that it means the item will actually never be recycled? It will definitely end up in the incineration plant where everything is burnt. Metals are sometimes recovered but that is just about all. This is because everything collected in the green waste bin by the licensed public waste collectors have to be sent to the incineration plants.
On average, incineration removes more than 90% of the waste matter, leaving a residue which is buried in our offshore landfill at Pulau Semakau. Soon, when the Integrated Waste Management Facility in Singapore is built, there might be more post disposal sorting that takes place after our public waste collectors retrieve the waste. But before that, despite the possible economic incentive of picking out suitable waste materials or matters to be recycled before incinerating the rest, the market is unable to respond to them.
Incineration keeps going and expanding in Singapore as waste volumes increase because that had been a proven solution that is difficult to challenge even when contending technologies and approaches works. If it ain’t broke, why fix it? Yet as our landfill approaches the point of its maximum capacity, we cannot keep kicking the can down the road.
About 81 years ago, Dorothy Sayer, a British writer penned these words:
A society in which consumption has to be artificially stimulated in order to keep production going is a society founded on trash and waste, and such a society is a house built upon sand.
Dorothy Sayers (1942), Why Work
In the article, I’m amazed by the clarity which Dorothy Sayers foresaw the world post-war, with piercing critique of the economic system we have created. The economics that she was schooled in was one of observations of the market, of history and of human psyche itself.
The second world war has ended for more than 70 years now; and as predicted by Sayer, we had immediately jumped back into the business as usual, where work and labour was valued only by money. And this is why we churn out more waste our planet can scarcely handle (both in terms of carbon emissions and lots of material wastage).
Sayer’s remedy has to do with appreciating our work in a different way and valuing it more. And much of it certainly sounds like echoes of the messages around ESG, corporate social responsibility and sustainability these days. Yet she also points to something deeper, points revolving around values of work, of the things we do in society, and value that is created to serve lives and human beings, not abstracted by the market in the form of price signals.
Her full essay can be found here. I confess of course that my shared faith with Sayers help me appreciate the essay in a deep way. If you do care about sustainability and our world, even if you are not a Christian, surely some of the points she brought up should give us a deeper motivation to drive us to live in a manner that is a part and yet apart from this market system?
There’s been loads of news of layoffs in tech and it coincided with huge investments made in Artificial Intelligence as well as the launch of a beta version of ChatGPT that somehow took the world by storm. The recency effect led people to think that the layoffs somehow might have something to do with the fact that AI might be taking away more jobs and so on.
For a long time, human labour have been relied upon to move good around, help with loading and unloading from transportation, stock-take and do records by hand. These jobs have gradually been replaced by machines though in rare instances, having a human do the job is still more efficient or effective. Switching human labour for machines is nothing new. And it has been a good thing because machines free up human to take on more challenging kinds of problems.
This is how the ratchet of progress takes place. We invest time and effort in developing machine solutions which would eventually be able to replace human effort. And once the solution is adopted across the board, there are so many people who are freed up to work on further solutions and the ball keeps rolling. From a fundamental perspective, the world is progressing and civilization advances.
It is strange that our economic system, the market system that we have lauded and embraced do not exactly work in the same way. It creates incentives and competition towards progress but the result is a lot of stress, anxiety, and pain when new solutions are adopted and manpower is freed up. This is because firms and businesses are not adapted in our system to focus on innovation for progress but simply innovation for profits. And when this is the case, unemployment is a logical approach towards the adoption of new solutions.
When firms and businesses cannot think broadly enough to embrace what is fundamentally beneficial to society and mankind, then individuals, talents and smart people like you and I, will have to develop the courage to step out and do the work that the world needs. Because in many ways, that is what makes us human. That’s what AI cannot replace.
Economics is not a discipline of the capitalist though they might think so. Because the communist had their study of economics and the manner of trying to deploy the calculations and understanding in central planning. But I digress. What I’m pondering over recently, is that intricate link between the market and capitalism. I wonder, if there was something apart from market capitalism. And as it turned out, there are ideas of alternatives around state-capitalism which is where the state tries to accumulate capital and operate an economy dominated by state-owned firms. But to some extent, that is what communist regimes have sought to do. So ultimately, the ideas of capitalism, when taking the notion of the market away, actually represents something very different from what we commonly believe to be capitalism.
In that sense, capitalism as we conceive it probably still has the market principles and ideals at the fore in the manner it is perpetuated. In that sense, the ills of modern capitalism isn’t necessarily the notion of capitalism per-se but allowing the (unguided) market to take the lead in too many of the things that actually matter. The idea of markets regulating themselves is honestly a little ludicrous to me. In an older world where there were many things in our lives that dominate including ideas around moral, characters, and virtues, we tend to be keen to govern the market and regulate it, seeing that there are higher laws to follow.
But in the world today, we increasingly allow the market to dominate our judgment of things, especially with regards to value of things – tangible or not. That means that what the society needs to care about, which might not be valued by the market properly, may just fall off the radar. It happened for the climate of the world; and who is to say that market capitalism is not coming for other things that truly matter to us as humans.
