- [Lois] Hello and welcome to
the Massachusetts
Institute of Technology's
"Systems Thinking" webinar series,
sponsored by the MIT System
Design and Management program.
My name is Lois Slavin,
and I'm the Communications
Director for SDM.
It gives us great pleasure to
introduce Professor Nicholas,
Nicholas, excuse me, Ashford,
who will be speaking today on;
"Transforming The Industrial State,
"the ultimate complex system challenge".
If you have any questions,
please enter them in the chat,
and send to everyone.
And with that, we turn it over to Nick.
- [Nicholas] Thank you, Lois.
Today I'm going to be talking about
work that we've done
over the last 10 years,
in the publication of a new
book by Yale University Press,
called "Technology, Globalization,
"and Sustainable Development."
With the subtitle, "Transforming
The Industrial State",
which of course, is the
subject of the webinar today.
The book was written with
my PhD student, Ralph Hall,
who is now a professor at Virginia Tech,
and this has been a long and difficult
pathway to this work
because of course we live in
a very complex world.
Start by saying,
what exactly is the system
that we're talking about?
And the system is represented
by this multicolored overhead.
At the upper-left, you see
that all industrial systems,
or industrializing systems,
have a number of
industries and activities.
Extraction industry for minerals,
materials and/or energy.
Manufacturing, agriculture,
transportation,
energy, the so-called
service industry, housing,
and information and
communication technology.
This is what the economists
call the supply side
of the economy.
And on the demand side of economy,
the products and services
are required or demanded
by individuals, by industrial actors,
and by the government themselves.
The typical approach of
classical economists is to
argue that supply and
demand are to be in balance,
we should have neither a
surplus, nor a deficit,
of the goods and services that we need.
Now we'll come back to how well
this model works in practice.
But what we finally have
come to realize is that
the industrialized and
industrializing system,
has created a number of
challenges to sustainability.
And that encompasses a number of factors,
the first is that,
while there may be plenty of goods
and services produced for some,
there is an inadequate supply of,
and access to essential
goods and services.
Translating that into plain English,
it means some people do not
have enough food, enough oil,
and fuel, not enough access to housing,
and so a substantial amount of people in
both industrialized and
industrializing countries,
do not have an adequate
supply of the things that
the industrial state produces.
And then there are a series of problems
which are appropriately in green.
These are the environmental
safety and health problems.
Toxic pollution, climate
disruption, resource depletion,
and biodiversity or ecosystem challenges.
You would think that the only
environmental problem today
is climate disruption, but of course,
there are many other
problems following into
the other three categories
which are also related to
the workings of the industrial state.
Notably, toxic pollution
and resource depletion.
And that last item in that
set of green sustainability challenges,
is environmental injustice,
which reflects the fact that
poor people, and poor nations,
have a disproportionately high level of
problems in the environmental area,
they're also often the
last to be given attention
to be cleaned up.
And then finally,
the third element of sustainability
problems has to do with
the fact that employment and jobs,
which do not create
sufficient purchasing power,
to give people the necessary
goods and services,
are now a major issue facing
all industrialized economies.
While I have certainly claimed
to be an environmentalist,
and somewhat concerned
with health and safety,
the issue which is likely to
dominate the next two decades
is gonna be jobs with purchasing power.
Because if people do not have enough money
to get the essential goods,
it creates both political
and economic instability.
Now we'll be addressing
solutions to those problems
throughout the rest of this talk.
They fall into five categories,
the first, which is on
everybody's list of course,
is Education and Human
Resource Development.
Those two are not quite the same.
Human resource development means
we need to have enough
physicists, enough engineers,
enough economists to run
the industrial state.
And education reflects the fact that
people in their election
of public representatives,
and their pressing for certain policies,
have to be educated well
enough to understand both
the source of the problems and
the nature of the solutions,
in order to really be able to
contribute to those solutions.
So for the general population,
education and human
resource development is key.
Industry, which very
often has contributed to
the increase of the problems,
of course has also argued
they are also part of the solution.
And certainly technology-based enterprises
are part of the solution,
it's not clear, however,
that the industry that caused the problem,
is gonna be the industry that
contributes to the solution
at the end of the day.
And before the economic meltdown,
and I'll be talking a
lot about that today.
The issue of government
intervention and regulation,
has been put on the back burner,
people are now beginning to
realize that government regulation,
certainly of the financial institutions,
but also of global climate change,
health, safety and environment,
and labor markets,
once more turns out to
be a very major issue
in the United States, in
the election campaign,
which is warming up.
We find one political party arguing that
regulation has been the problem,
and cannot be the solution,
and the other political party arguing that
we need government
programs and regulation.
And I will hope to persuade
you that the latter perspective
has more going for it than the former.
Stakeholders have trusted neither
the government in the past, nor industry,
and so they are increasingly involved.
The most recent example being
the Wall Street protests,
where people want to have their
voices heard with regard to
the insufficiency of policy responses.
And then finally, the set
of solutions which is,
if you are going to transform
the industrial state,
there has to be financing
of those efforts.
And the question about where
they're going to come from.
So this is essentially
the picture of the system,
and while, you know, on a smaller scape,
people talk about the
manufacturing system,
or the transportation
system, or the energy system.
This is the mother of all systems.
This is the system of the state,
which needs to be addressed
in terms of coordinating policies.
Now, to this overhead,
I will add a couple of other additions.
And one is that while
it has been assumed that
supply and demand are independent factors,
in fact, Kenneth Galbraith,
the Canadian economist,
and economic advisor to
both Kennedy and Johnson,
was quick to point out that actually
we don't grow up necessarily wanting
the things which the
private sector produces,
but there is an enormous
producer-created demand
through advertising and other
kinds of influence which
mean that the consumption
is not an independent factor
of the people who actually
produce the goods and services.
So producer-created
demand is one way in which
markets can be influenced
for good or for bad.
Secondly, the whole issue of finance,
and people involved in finance activities,
has greatly influenced the
working of the markets.
There is the traditional
appreciation that subsidies,
for example, oil
subsidies, food subsidies,
and subsidies to production
distorts the market.
And then the realization
since the 2008 meltdown,
that giving credit for
both production expansion,
and for individual consumers to buy
more than they could possibly pay back,
has created an enormous crisis,
and from home ownership to energy.
And this has occurred because
government was not watching the store,
and banks were leveraging
their lending capabilities
far beyond the traditional factor of six,
and individuals were
encouraged to buy things which
they probably would never
be able to pay back.
And so the system has
been influenced and gamed,
and now the question is,
we are here now in 2011,
what do we do about that problem?
Probably useful to ask,
what the major system problems are,
and what their origins are.
And they are numerous problems.
One is the fragmentation
of the knowledge base,
and the resulting inadequate solutions.
We educate people
differently in engineering,
and in science, and in law, and economics.
We educate people as sociologists
who are not educated in technology,
and technologists who are not
educated in human behavior.
And we end up, not only in our cities,
but we end up in the government,
separating departments of
industry, departments of commerce,
from departments of
environmental protection,
from human resource development.
And in the industrial firm we have
the divisions of product development,
divisions of marketing,
divisions of environmental compliance.
This Balkanization of the knowledge base
continues to plague us.
So that the solutions that
we suggest and work on,
for example, such as biofuels,
which might make us energy-independent,
but which have enormous
air pollution deficits,
and then up the price of land so that
food is extraordinarily expensive.
It's simply a reflection that
we're only working on part of the problem.
We also have an inequality of access to
economic and political power,
which is reflected by the fact that
we have the petroleum industry
and the energy industry
dictating our energy policy,
and the chemical industry arguing that
we should not regulate
greenhouse gases and ozone.
We also have, because we are
in aging industrial systems,
and we have many aging industrial systems,
a tendency towards a term I
coined called gerontocracy,
which means governance by the old,
which leads to a major
defect in the problem
which is both technological lock-in,
and political lock-in.
We are stuck in ways of doing things
which continue to have bad outcomes.
And this lock-in is usually
but not always accompanied by
concentration of economic
and political power.
The economists among
us would first be quick
to mention that we have
market imperfections,
we do not internalize
the cost of production,
so we have an inadequate pricing.
Energy is under-priced,
goods are under-priced,
and they do not incorporate
the cost that we really suffer.
But even perfectly working
markets have their limitations,
because things occur in
different timeframes.
We have to spend money now,
in order to get benefits later,
and because of the problem with
discounting, one can argue,
and in fact the criticism of
the Stern report on global warming,
argued it just wasn't worth
controlling global warming,
which occurred much, much later.
There's also a delay in
recognizing problems which,
whose work through "The Limits
of Growth" was pioneered
by Jay Forrester here with
the System Dynamics group,
which indicated that by the time
you realize that certain problems occur,
you will have reached
the tipping point that
it either becomes very expensive,
or impossible to reverse
that, and of course,
we're seeing the tipping point
with regards to global warming,
global climate change, the
melting of the glaciers.
And we also have tipping points
with regard to the extent
to which water supplies are
compromised by pollution.
Once you've put a toxic
material in a water system,
it is virtually impossible to remove it.
And so this limits the growth,
which has been nationally
ignored and poo-pooed,
even by MIT economists.
We've finally come to a
stage where people realize
we have reached the limits to growth,
and there is even a group called Degrowth,
or a agrowth society in which
we have to learn to live,
at much lower levels of consumption.
This all has led to
inappropriate production
and consumption patterns.
And aside from the limitations
of perfectly working markets,
we have increasingly failed to
engage individuals in the society to
realize their human potential.
If 30% of our industrial
plant goes unutilized,
we are crying,
"Well look, we're wasting our resources."
But we seem to be content
to waste as much as 70%
of human resources by not
engaging them in the society,
in a productive capacity.
And that's something which a few years ago
I might not have had on my
slide when talking about
fully-industrialized system
because the assumption was
corruption was a third-world problem,
but we realize that corruption is actually
well, doing very well at home, thank you.
And it's not just a question of
putting your finger into the till,
it's a question of not
meeting both social and
private sector responsibilities.
The corporation, the modern
business corporation,
is a construct of law.
And the argument for giving
corporations limited liability,
and low tax rates,
was they did two things for the society.
They endowed us with a
variety of goods and services,
which was not possible for example,
under socialist economies.
And they also created jobs.
But the quid pro quo,
the creation of jobs,
seems to have been forgotten
in the grand scheme of things,
because corporations find it
to their interest to relocate.
And so the jobs and corporate welfare,
have not been an even quid pro quo.
We had a high-throughput
industrial system.
We in the United States, for example,
use more resources per capita,
and energy than any other nation.
And it converts materials and energy
into products and services,
which now are beyond our
capacity to purchase.
And then finally, an addiction to growth.
A dominance of GDP,
gross domestic product,
and productivity as
metrics of economic health.
Forgetting for example, that
you can have a growth in GDP,
without it benefiting the society.
If we have increased
hurricanes and snow removal,
it increases the GDP,
but it does not benefit the society.
And productivity, which is
defined as labor productivity,
output over labor hour
input, or labor dollar input,
is another one of these
metrics that I'll come back to,
which is a misfit with regard to measuring
economic health and welfare of a nation.
And then finally for years,
a failure to deal with employment as
a fundamental issue and challenge,
which has now come home to haunt us,
since jobs seem to be the
most often discussed issue,
along with financial collapse.
So those are the major
systemic problems that we have.
And then this slide, simply
it's a representation that
the three major legs of
sustainable development,
the economy, the environment,
health and safety,
and work are all connected.
What occurs in one corner of the triangle,
affects things in the other
corner of the triangle,
I'll come back to this.
And both the corners of the triangle,
and the relationship between the economy,
environment and work are affected by both
technological change and innovation,
and by globalization.
Both of those forces work to
influence the relationship,
albeit in different ways.
Now, we live in a globalized world,
one in which trade becomes essentially and
increasingly important
as a source of revenue,
and globalization means a
number of different things.
First of all, what we
produce and what we sell,
is now global.
That knowledge and information
is universally accessible.
That money can travel in
an instant between markets,
and between buyers and sellers.
And in fact, it moves so quick,
that much investment is tied
up in currency speculation,
and not in the traditional
areas of venture capital,
where research and development
develop both economic health and jobs,
because it's been suggested by
the former Nobel Prize
winner, James Tobin,
that we assess a tax to the transaction,
financial transactions
to slow the machine down,
which is basically money chasing money,
not engaged in productive activities.
And then finally, the
issue of labor mobility,
both the importation of good
brains into industrial systems,
and the reverse side of the coin,
the pressures of immigration
of people wanting to
move from one area to another,
because they cannot make it in
the economy in which they sit.
And these globalized trends
have an enormous impact
on what is produced where,
and what kinds of investments we make.
Returning to the triangle,
which is these three corners
that we talked about,
now is to talk a little
bit about the relationship
between what goes on in the economy,
and what goes on
environmentally and job-wise.
The first thing we see of course,
is the repetition at
the top of the triangle,
of the four major kinds of
environmental challenges,
noting that the economy is
related to those problems
through three different activities.
One is just industrialization.
The more you produce, and
the more energy you use,
and the more materials you convert,
the more the environment is affected.
Secondly, the more
investment that you make,
either domestically or globally,
the more industrialization is affected.
And finally, the more trade that you do,
the more both investment
and development is affected.
So through these three really
somewhat independent forces,
we find that there is
a relationship between
what goes on in the economy,
and what happens to the environment.
The economic activities
are improvements in
competitiveness and productiveness,
and the use of physical,
natural, and human capital,
improving the industrial
working of the state.
The economic changes that
result from labor replacement,
or displacement,
and capital relocation to other areas,
and finally the kind of financing which
finances growth and development.
And they work by changing what's called
the international division of labor,
changing what is made where,
and changing the nature of work.
The automation of workplaces,
the automation of the service industry,
which affects some very
important features of employment.
The skills that are used and needed,
wages, purchasing power, job
security, health and safety,
job satisfaction, and the number of jobs.
Both wages and the number of jobs
is receiving prime
attention at this point,
and the argument is, well,
you've got then concerns about environment
at the top of the triangle,
concerns about employment.
If you decide,
that really the issue that
you need to address is employment,
you've got to get people
working at least right away,
temporarily through turnkey projects.
We realize that if you do that,
fixing potholes and painting bridges,
and increasing industrial activities,
will increase the environmental footprint.
So we're going to sacrifice
some environmental quality
in order to get people working.
On the other hand,
people have argued that we're gonna get
green jobs out of the environment,
that environmental and energy
improvements will create,
or change the nature of employment.
And this is probably
one the biggest promises
that cannot be met under the
current way of doing things.
We will create green jobs, but
we will destroy brown jobs.
And at the end of the day,
whether you're talking
about global climate change,
or toxic pollution,
it turns out it's pretty much of a wash.
Because whenever we
modernize industrial plant,
industry takes the
opportunity to shed labor.
We automate and we replace labor,
and the real wages in the United States
have gone down about 20%
in the last 20 years,
and continue to go down.
People who get jobs
who've been unemployed,
get jobs at a fraction of the
wage that they used to have.
Now, we need to regulate toxic pollution
and climate change causation,
and people have argued,
"Well, that's going to have an effect."
It's going to have an effect on (typing),
I'm stuck here, let's see, hold on.
Sorry, everybody.
Because the regulation of
health, safety, and environment,
will affect economy and growth.
The typical conservative perspective is
regulation hurts jobs and growth.
The work done at MIT,
and by Mr. Porter at the Harvard Business,
show that regulation
properly designed actually
creates jobs through the
stimulation of new technology.
We'll come back to what's
called the Porter hypothesis
and the work done at MIT.
But this triangle now which
has taken some time to explain,
has really shown the
inter-relationship between
the economy, environment, and work,
and should convince you you cannot
work at one end of the
triangle without really doing
an accounting for what's happening in
other parts of the triangle.
Now let me say a little bit
about why work is so important.
There are the typical
economic reasons which is that
when it's combined with
natural and physical capital
to produce goods and services.
You will always need a
certain amount of workers,
to produce the products
for an industrial state.
It's the place where labor and management
exchange their relative
comparative advantages.
It is the means by which
we distribute wealth
and create purchasing power,
which at the moment is in crisis.
We don't have enough
of the consumer demand,
even though we have the capacity to
produce more goods and services.
Aside from the economic analysis
of why work is important,
which should not be new
to anybody listening,
are the social consequences
of why work is important.
It is the means of
engagement in the society.
People who are not working
have difficult home lives,
marriages break up,
spousal violence increases
when people are not working,
and engaged, and feel as
if they have a purpose.
It is the mechanism by which
we enhance self esteem.
If you meet somebody from
some other country or place,
besides their name and where they're from,
the third question you
ask is what do you do?
What do you do for a living?
And of course there's work
which is not monetized,
like taking care of children and parents,
which is extremely valuable,
which does not show up
in the GDP statistics.
Finally, industrial and economic policy,
environmental policy, trade policy,
all of these policies have
important consequences for employment.
We see this now with the
attention towards China,
in terms of an undervalued currency,
which of course advantages the location of
production facilities
out of the United States.
I join with other people that believe that
manufacturing can be brought
back to the United States.
When you think about it,
it makes absolutely no sense
to send steel to China,
and to bring back refrigerators.
I mean, if you would say
that's what I'm going to do,
say 20 years ago, they'd
say, "You're crazy."
But that's because energy is under-priced,
and we don't pay the full costs
of that particular activity.
So work is important for
a variety of reasons.
Now, labor productivity is a ratio.
It is defined as output,
or the cost of outputs per
unit of the cost of labor.
So it is the number of goods
produced per labor hour,
or per labor salary.
Now that says nothing about
how you improve productivity,
but nations with high labor productivity
are regarded as desirable,
or sectors of the industry.
But how do we improve labor productivity?
Well, you could increase worker skills
without changing technology
or anything else.
What you're doing in
increasing labor skills,
is improving labor productiveness,
as well as labor productivity.
The productiveness of labor increases,
and the labor content,
and the rewards to workers are increased.
In industries where
labor is highly valued,
you find salaries going up
higher than the inflation rate.
On the other hand you could
develop better hardware,
software, better manufacturing systems,
automate the systems.
You're increasing the
productiveness not of labor,
but you're increasing
capital productiveness.
As a statistical artifact,
you happen to improve labor productivity
because it's only a ratio.
You increase the productivity
that you have divided by
the number of labor hours,
even though labor isn't
doing most of the work.
So you improve capital productiveness,
by basically shedding labor,
and that's where the major
source of labor productivity
has to come in the United States.
Well, labor cannot claim the
kind of salaries that it did,
since machines are doing most of the work,
and so labor productiveness goes,
even though if it stays the same,
capital productiveness
increases, salaries go down,
and by the way, demand on the
part of consumers goes down.
So rather than looking
for domestic consumption,
to satisfy the productivity improvements,
we now are pressed to
sell our products abroad,
and to the emerging middle
class that can afford it.
There's one more way that you
improve labor productivity,
and that is to externalize the cost of
manufacturing onto the consumer.
You must have noticed that
if you assemble your own bookcase,
that you buy it from IKEA,
you're doing the work.
The bookcase may be cheaper
than one that was assembled,
but your time is regarded as nothing.
And many hours do you
spend on tech support,
and getting your ticket
from a travel source?
All your time is now
basically externalized,
so yes, this is called
Gresham's Law of externalities.
If industry and the service
industry can externalize
the cost of productiveness
onto the consumer,
it looks as if you're
getting a cheaper product,
but you're not.
So all of the preoccupation,
which improving labor productivity through
the three bottom entries on this slide,
are all done at the
expense of the consumer,
and the expense of labor.
That is where we have gone in
terms of the industrial state.
Well, we've talked about the problems,
what are the solutions?
Well, we need to have a transformation,
through four different
kinds of innovation.
One is technological innovation.
By the way, which is
not the most difficult,
or burdened barrier that we have.
And a lot of technologies
which could be applied
which are not.
We need organizational innovation,
which is the way the firm is organized.
We need institutional innovation,
which means we need the proper laws,
and the government institutions
to implement those laws.
And we need societal
and social innovation,
to rethink how they are
satisfying their human needs,
whether it's through energy,
or consumption of physical resources.
All these transformations have to occur,
if we're going to find
ourselves in a better place.
Now, I've indicated to you that
jobs are the crucial
pressure point at this point.
How can we improve the earning capacity,
and purchasing power,
and improve livelihoods?
And there are a number of
ways that this can be done.
We can just transfer money
from the rich to the poor.
Well, I'll leave you with that,
and you can decide
whether that is something
that's gonna be high on anybody's list.
We could argue that we need
more Keynesian spending,
which Paul Krugman has argued,
to jumpstart the economy.
These will create jobs,
with regard to improving infrastructure,
painting bridges, fixing the potholes.
It'll probably take about a year between
the money that has to be
invested to start these jobs,
and the actual jobs.
So it's not gonna happen right away,
and it has very little to do with what
the equilibrium situation
is with regard to
creating jobs on a long-term basis.
We could try to spread
out the existing work,
and France experimented
with a shorter workweek.
It wasn't very successful,
and there are people who are in
what are called the new economics,
that argue that people who are
working ought to work less,
so others who are not
working can work more.
That's an income transfer
within the workplace.
That's not an income transfer
from producers to workers,
or from the tax payer to the workers.
It's nice if you can get it,
and it would certainly yield
some pressure reduction,
but it's not gonna solve
the basic problem that
work has been designed out
of the economic system.
You could prohibit the
elimination of jobs,
which is the German regulatory situation.
Germany's very interesting.
While we had a less than a
percent growth in our economy,
Germany had a 9% growth.
Because when the workers were not fired,
because you couldn't eliminate the jobs,
when demand increased again,
both domestically and foreign,
the workers were right there to pick up
the demands on inventory increase.
It takes you only a few
months, or a couple of years,
to go into a depression and a recession.
It takes you 10 years to grow out of it.
Creating jobs which you have destroyed,
takes an enormous amount of time.
And Germany is an interesting
case that did not allow that,
as a result of not being
able to fire workers easily.
We could increase labor's claim on
profits from production services,
by designing work back into
production and services.
Reverse the trend of automation,
and we at MIT and then in the
European engineering schools,
know how to design work out of production.
Do we know how to design work back in?
That's a skill that used to
be called sociotechnique,
which needs to be relearned.
We could learn to meet our essential needs
in a different way,
by sharing for example, cars,
by having Xerox, which they do
lease reproduction services.
But there's a limit to
how much that can do,
we can change the way money is spent.
Not only by meeting essential
needs in a different way,
by spending money not on stuff,
but on people.
Rather than buying your
kid another Nintendo game,
you might consider giving
him Chinese lessons,
which would employ a person,
which has a large leveraging
effect on the economy.
But all the forces in
the society move towards
decreasing labor not
increasing the role of
people in the economy.
And there's a reason for that.
The corporations don't own
people, they own machines.
You could change workers into the owners.
My brother, Robert Ashford,
has talked about two-factor economics.
Making workers into owners,
and not just through
stock ownership plans,
but allowing them to have part of
the capital investment privileges.
At this time when we don't have
a lot of capital investment,
it seems that this will not
yield an immediate recovery.
But these are the options you have,
and the government has, and in terms of,
increasing earning capacity
and sustainable livelihoods.
Now, government is essential.
And you know the list,
a supporter of basic education and skills,
a provider of physical
and legal infrastructure,
investing in the science
and technology that
the private sector will not invest in.
As a facilitator or arbitrator
of competing interests,
so that the process of
readjustment is fair.
Becoming a trustee of worker
and citizen interests,
as well as the trustee of new technology,
against the incumbents
that do not want to change.
And as a force to integrate,
not just coordinate policies.
And you need to have this
word that was considered
to be off the table before,
you need the regulation
of finance, antitrust,
safety, health, environment,
labor markets and trade.
There is no substitute for
creating the targets of
a transformation which
require legal responses.
A free-for-all, and a
deregulatory history,
both in banking and in manufacturing
has been responsible for getting us into
the mess that we are in.
And yet we don't seem to be able to
really get the regulation
requirements back on track.
In fact, Obama basically
retreated from ozone regulation,
people are arguing that
regulation costs jobs,
even though the data show otherwise.
Now here is a slide which
really shows how regulation
can improve the technological responses,
which is the third column.
You can just have end-of-pipe
control for toxic materials,
which doesn't get you much more
than an end-of-pipe device.
But serious, stringent regulation
can require new products,
product services or processes,
which the regulated firm actually
may not be able to give you.
It may be new products,
and product services,
by new producers and providers.
An example,
is Monsanto chemical company
made the traditional PCBs,
which filled transformers and capacitors,
but it took Dow Silicone,
an entirely different
corporation to come in
with a much better dielectric fluid.
Regulation shifts the
nature of production,
and encourages new entrants.
Rather it's the financial industry,
or it's the manufacturing industry.
And Mr. Porter at the business schools,
talked about the Porter hypothesis,
which shows that people
who respond to regulation,
save money by resource saving,
and by new, efficient production methods.
And that occurred some 15 years later than
the work that was pioneered at MIT,
where we showed not only
does the incumbent industry
stand a chance of doing better,
but you can actually restructure industry,
by having stringent regulation,
and this is an area which
deserves a great deal of attention.
Now the academic, or the policy analysts,
will ask three questions.
What are the causes of
unsustainable industrial systems at home?
I too have imparted for
you, what those causes are.
Then, what are the visions
for a sustainable future?
And you have to reopen,
or open the design space,
a problem space to achieve multiple goals.
You've got to design
energy and manufacturing,
and labor market policy,
and trade policy together.
And you have to fix the
carrots and the sticks,
so that makes sense.
Now you might think that these
are the only three questions.
What are the causes of our problems?
What does a sustainable system look like?
And what carrots and
sticks should you use?
But there is a missing question,
and it's a political question.
Who or what is standing in your way,
of achieving that future?
So you not only have to
open up the problem space,
you have to open up the
participatory and political space.
Because if Enron dictates
the energy policy,
if the petroleum industry
dictates the energy policy,
you will not have new technologies.
The incumbent industries game
and gain from the system,
and do not want to change.
So solutions will require
opening up the problem space,
which is by the way, an
observation made by Tom Allen,
of the Sloan School, years and years ago.
People have to look at
the problems together,
and design joint solutions.
You have to open up participatory
and political space,
so that multiple voices are heard.
And you need not a bigger government,
but a stronger and integrated government,
to look at these issues together.
If you look at what government does,
they do a variety of these activities,
and they address environmental problems,
economic problems, and
social development issues.
It's done through a number
of different departments
in our federal government,
from the Department of Energy,
to the Environmental Protection Agency.
But it is fragmented.
These things need to be integrated,
you need to have a vision,
which you are not trading
off jobs for environment,
but you are working together to
have mutual gains in the system,
and that is what has to
be stated, let me see.
I don't seem to...
I'm stuck here.
Let's see.
Take-home lessons, thank you, okay.
One of the take-home lessons.
Everything is connected
to everything else.
There are many more ways to
address the problems
incorrectly than correctly.
You can point to government failures,
and in fact it's very interesting that
I point to this energy firm,
which everybody was
arguing was a giveaway,
an incorrect choice.
You don't look at one example
of success or failure,
you look at a portfolio.
Because if you want to have
high-benefit industrial activity,
you've got to take some industrial risks.
And that means that some
of your choices fail.
So you have many more ways to do it wrong,
than to do it right.
You need mutually-supportive goals,
what I call co-optimization.
It's not a question of balance,
it's a question of mutual gain.
And you need government intervention to
counter lock-in and capture.
And you need a national
sustainability initiative
for the economy.
Many of you may know this
painting by Magritte.
It says, "This is not a pipe."
No, it's a picture of a pipe.
That was his comment.
Well, here's the book we produced.
Yes, it is a textbook,
but it is not just a textbook.
It is a formulation based on
the work of many other people.
Took 10 years in the making of
how we need to address the economy,
the environment, health
and safety, and the jobs.
It is a thoughtful compilation
of hundreds of books,
and people's thinking,
and we believe that we have some of
the answers to this problem.
So let me stop here, I think
I've taken exactly 45 minutes,
and we can open up to any
questions that you might have.
Okay, great.
- [Interviewer] If
anybody has any questions
for Professor Ashford,
please feel free to enter
them in the chat window,
be sure to address them to everyone.
Our first question comes
from Ted, who asks,
"What is the role of
experimentation in working out
"the role of possible solutions?
"Or do we have to get it
right the first time?"
- [Nicholas] Very important question.
Experimentation is absolutely crucial.
Demonstration projects, experimentation,
I'm reminded by the way of a question
that was asked of Thomas Edison.
They said, "You have a lot of patents,
"but very few commercial successes.
"How do you feel about your failures?"
And he said, "Failures?
"I've never had any failures,
"I learned from everything I ever did!"
So I mean, I think that says it all.
We need to experiment,
we need to sometimes
experiment on a regional basis,
or on a sectoral basis.
You know, may a thousand flowers bloom.
I mean, we need...
There isn't one way to do things,
experimentation is absolutely crucial,
thank you for that question.
- [Interviewer] Okay again,
feel free to use the chat window to
ask questions of Professor Ashford.
The chat window can be found
at the top of your window,
there should be a little dropdown,
and you can open the chat window.
- [Female Audience Member]
I'd like to ask a question.
Can you share some thoughts
on the role of the media
in creating these new options?
- [Nicholas] Well, the media
are extraordinarily important.
And giving equal space to
unequally meritorious ideas,
is a real disservice.
I mean, it isn't a
question of the one hand,
but on the other hand,
and you give equal space to nonsense.
The media has not exercised
an editorial function,
which is to separate the
good ideas from the nonsense.
It also promotes ideas
and political pundants,
who really do not deserve
the space that they get.
And the media also, they're subject to
the very economic forces
through advertising,
and I'm sure there are many views that
I've presented in this talk today
which not would not fit primetime funding.
The realities are,
we are in a very serious state of affairs,
that the present incumbent
industries gamed the system,
and gained from the system,
and want to continue the past.
The truth of the matter is,
we can never return to where we were,
because the growth and the
benefits of that system,
were an illusion.
I think it's pretty clear
from the 2008 meltdown,
that we were living in a bubble,
both mentally and physically.
- [Female Audience Member] Thank you.
- [Interviewer] Our
next question comes from
Joseph Azzarelli, who asks,
"What types of organizational
innovations are envisioned
"as being more sustainable alternatives
"to what already exists?"
- [Nicholas] Well,
thanks for that question.
Just as I indicated that
the fragmentation of
the knowledge base has permeated not only
government and education
but the industrial firm,
separating production from
environmental concerns,
from labor market concerns,
from human resources,
this Balkanization means
that you do not look at
simultaneously improving products,
and employment options.
You basically concentrate on one thing.
The industrial firm needs
to be much more integrated.
There used to be a concept
called matrix management,
where you attempted to
integrate the various aspects
of management functions.
But we need to view the activities
of the industrial firm holistically.
And that means health and safety,
that means product safety.
The organizational Balkanization
of the industrial firm,
disserves the long-term
interests of the industrial firm.
- [Interviewer] Great, another
question from Ted, who asks,
"Do you see more progress in
some industries versus others?
"How do we use those in the forefront to
"help other industries make advances?"
- [Nicholas] Well, some industries
are more at the forefront
by virtue of the fact that
they're much more
technologically flexible.
I mean, one can argue
that certain aspects of
the high-tech industry
have not become rigidified.
And therefore management may be
more receptive to new ideas.
I mean, one of the
greatest review barriers
to innovation in the firm,
is the fact that they don't want changes
that changes what they do,
they don't have direct
access to outsiders.
I mean, you've got to bring outside views,
and people and ideas into the firm,
and encourage basically,
changes from within the firm.
I mean, it's recognized
for example in Europe,
that the greatest drag
on European productivity
is a lack of organizational innovation.
And where we have had
increases in employment
in the United States,
it has been the result of
looking at organizational change.
- [Interviewer] Adam Wolfe asks,
"Service industries such
as health care seem to be
"a significant part of the solution,
"as their employment is
difficult to relocate.
"Can you comment on the role of healthcare
"and the access to healthcare,
"in relation to sustainable development?"
- [Nicholas] Well, of course,
I mean, there are two
different kinds of healthcare.
One would be preventative,
and one would be basically palliative.
I mean, the fact that we have disease,
and a lot of anthropogenic disease,
is an index of the failure
of the industrial system
to prevent, let's say,
asbestos-caused disease,
or stress on the job or what have you.
Healthcare ought to be directed
much more towards prevention.
It is not.
Obviously the healthcare
system in this country,
thrives on the fact that
an awful lot of activity is
tied up in the management of healthcare,
rather than the delivery of preventative.
So I would say of course, as
the population becomes older,
there will be more and more
health services that are needed,
care of the elderly,
this is unavoidable.
But there are ways to care,
and there are ways to care.
I mean, the healthcare
system is dramatically
in need of restructuring,
as everyone knows.
- [Interviewer] Our next question is,
"How would you suggest developing
"a knowledgeable citizen regime?"
- [Nicholas] Well, that
requires a number of things.
First of all, we need desperately
to improve the school,
the K-12 school.
People don't know how to balance a check,
they don't understand
how the economy works,
they don't understand
how government works.
I have to tell you,
the two most important
classes I ever had in my life
were in high school.
One was on civics, which
probably isn't taught anymore,
and the other was on propaganda.
And I think between the two, you know,
it begins to sensitize
you to what you need.
We need to educate people so that
they are capable of critical thinking.
The lack of critical thinking
in this society is enormous.
Correcting it at the university
level comes very, very late.
The fact that we believe
in a lot of nonsense,
and cannot separate
the truth from fiction,
means that our society
is really ill-informed.
The media does its own
share of misinforming.
And we really need to
look closely at the media,
in terms of the kind
of misinformation that
continues to get permeated.
- [Interviewer] Great,
our next question is,
"Is the rate of change or
incentive to improve of incumbents
"increased due to the
information technology,
"or rate of technological developments,
"or public awareness, say
from 20 or 30 years ago?"
- [Nicholas] Well, ICT technology
is an enabling technology.
It allows you to do things faster.
You can do accounting faster,
you can do input-out analysis,
but if fundamentally what
you're producing hasn't changed,
but simply you're enabling
you to do it faster,
this is not the kind of
innovation that leads,
in the Schumpeterian sense,
to products being replaced
by other products,
to incumbent firms being turned over.
I mean, Schumpeter talked about
the waves of creative destruction.
You need to have turnover,
that the belief in the
networked, learning,
morphing corporation, I think,
is tremendously overblown.
In organizational theory
in the business schools,
you talk about changing the corporation,
very few people learn about replacing,
or displacing the corporations.
Dinosaurs don't fly,
and you need constant replacement.
And if you allow the
incumbents to game the system,
you will get incremental change.
- [Interviewer] Our
next question comes from
Dr. Nazrul Islam, who asks,
"Technological education remains core to
"the global, sustainable development.
"Could you please comment
on citizenship restrictions
"in most of the universities
in the USA, UK and EU,
"and others with regard to
entry and securing scholarships
"at higher-level education.
"What is your comment
on such contradictions,
"especially in the field of
biomedical and public health,
"considering my area of interest?"
- [Nicholas] I'm not sure I completely
comprehend the question.
One thing, if you're talking about this.
Let me put it this way,
the access of higher education
to the better institutions
is not adequate for people with
a low socioeconomic rate/rank.
I don't think we teach
citizenship in the high schools,
grammar schools or university.
I mean, corporate social
responsibility from my perspective,
as practice is an oxymoron.
I mean, there is no coming
to grips with the fact that
sometimes what a corporation produces,
and the services that it renders,
can really have a
tremendous antisocial value.
But what determines survival
in the marketplace or markets?
Promotion, advertising, and
a lack of citizen education,
as to what kinds of products
and what kinds of services
satisfy their real interests,
is totally lacking.
I mean, there's an interest in selling,
but whether the sale is good
or bad is a different issue.
- [Interviewer] Great, our
next question comes from
Susan Anderson, who asks,
"How would you suggest
developing a longer-range view of
"costs and benefits in
our political system,
"and in our industrial systems?"
- [Nicholas] Well I think you've got to
educate people more interdisciplinarily.
I think that producing
people who are only educated
in one dimension means that,
to a person whose only tool is a hammer,
everything looks like a nail.
And that's the Balkanization,
and the specialization of education,
in my view has outlived its usefulness.
We need more transdisciplinary research,
we need to encourage in the university,
people who are transdisciplinary.
We give lip service to this,
we do not really do it.
I think the educational
challenge is enormous.
Absolutely enormous.
- [Interviewer] Ralph Hall says,
"90,000 jobs are destroyed
each day in the US,
"and approximately this
number are created.
"250,000 people change
jobs each day in the US,
"hence the employment market is dynamic.
"We have an opportunity to focus on
"the creation of the new 90,000 jobs,
"towards more sustainable
forms of employment.
"How to do this will be one of
the major future challenges.
"What could institutions
like MIT do to reintegrate
"the concern for employment into
"its educational and research programs?"
- [Nicholas] Now that's a
really crucial question.
I think we need to bring together
both the social scientists
and the engineers and material
scientists to find a way to
design labor and work back
into production and services.
I mean, the trend which
is to replace labor,
to displace labor, to
make labor less valuable,
of course, is pursued because
the owners of capital own,
and they gain from the
rent of physical artifacts.
The question of making
industry more labor-intensive
is something which requires
concerted effort on the part of
both social scientists
and physical scientists.
- [Narrator] Great, we've
got a question from Amir Ali.
Who asks,
"What is the key behind more rapid
"corporate displacement process?"
- [Nicholas] Regulation.
If you want to,
if you believe that a product
which is on the market
is not a good product,
one ought to regulate that product that
creates the opportunity
for market penetration.
We have countless numbers of examples
from the work done by the way, at MIT,
where stringent regulation has forced
a displacement of the industry.
If industry is not capable of
meeting the new challenges,
then they need to be moved out of the way.
Because our industrial growth and health,
depends on more profitable,
and environmentally sound technology.
Green jobs may not be
created by new industry,
but a green environment can
be created by green industry.
- [Lois] Okay, well thank you everybody,
for your participation today.
Professor Ashford, thank you,
this has been a wonderful session.
For those of you who are interested,
we will have a recorded
version of this presentation
on the SDM website.
We'll be sending out a notice
of that later this week.
And our next webinar
will be on October 30th,
delivered by Mark Moran, of John Deere,
who will be discussing
the overall topic of
how to help an established company
think and work in new ways.
Thank you again for joining us,
and have a great day.
