Irving Wladawsky-Berger

Capitalism Beyond the Crisis

In September of 2007 I was working on a blog about the kinds of problems that companies inevitably encounter when their underlying technologies, competitors or business models change.  I wanted to make the point that any company, no matter how powerful its position, will likely get in trouble when the environment in which it once flourished changes significantly.  While searching for the right words to convey the notion that the marketplace is much more powerful than any one company or industry, I came across and ended up using the concept of the invisible hand.
 
And that is when I first started learning about Adam Smith, the 18th century Scottish philosopher and economist, who is generally considered the father of free-market, free-trade capitalism.  Smith coined the metaphor of the invisible hand in The Wealth of Nations and other writings.  He used it to indicate that, “in a free market, an individual pursuing his own self-interests tends to also promote the good of his community as a whole,”  and that "the free market, while appearing chaotic and unrestrained, is actually guided to produce the right results by this so-called invisible hand."

The more I read about Adam Smith, the more impressed I became with his life and his work.  For years, many thought that Smith had been advocating a right wing ideological approach to open markets, reflecting a kind of survival of the fittest competition in which anything goes.  As I discovered, nothing could be further from the truth.

Gender-based Differences in Behavior

In the last few months, I have been thinking a lot about the potential causes of our global financial crisis.  I have done my best to capture my thoughts in various entries in this blog as well as in seminars I recently gave at Imperial College and MIT.  While doing research on the subject, I came across a few interesting, perhaps somewhat far-out articles that took my thinking in intriguing directions.  Let me share some of them.       

Gender diversity and the financial crisis

Is testosterone to blame for the financial crisis?, asks a Scientific American Science blog, as it writes: “High levels of testosterone are correlated with riskier financial behavior, new research suggests.  Men with more of the sex hormone made riskier investments than guys with lower levels, according to a study published online yesterday in Evolution and Human Behavior.”

An article in The Guardian reports on a separate study of traders in a London bank.  “They found that those traders with higher testosterone levels in the morning were most likely to make money on the day's trading.  One trader hit a six-day "winning streak" during which he made more than double his daily profit.  During that time his testosterone levels went up 74%.  The team also found that cortisol levels among the traders increased when their takings became more volatile and the market generally was less stable.”

Blogging and Writing

One of the biggest differences between an academic and a business career is the importance of writing and publishing.  In business, a CV (Curriculum Vitae) will generally emphasize a person’s career history and work experience, including key professional achievements and education.  Business resumes are typically no longer than two pages.  In academia, the CVs will tend to be much longer because they include a complete list of journal articles, conference papers, books and other publications.  Publications are among the most important aspects of an academic career.

Given my 37 years at IBM, about thirty of them in management positions, I have a typical business resume, long in work experiences and short on publications.  But, as my post-IBM distributed career is now about half in business, with IBM, Citigroup and others, and half in visiting academic positions at MIT, Imperial College and SUNY’s Levin Institute,  I have been thinking a lot about what I should do concerning publications.    

In fact, I have been writing a lot for close to four years, namely this blog, which I started in May of 2005.  Ever since, writing a new blog entry week in, week out, has become a major part of my life.  I have not missed one week yet.  Thinking about the subject I want to write about, writing and revising the entry, editing it up until I actually post it, and then seeing what people say about it, both through comments in my blog as well as mentions in their own blogs, takes a considerable chunk of time each week, let alone quite a bit of mental energy.

Design, Innovation and Organizational Systems

I was back at Imperial College in London in the last week of February.  I gave several seminars and held a number of meetings, but the main reason for my visit was to once more participate in a STIR lecture sponsored by Design London. 

Design London is an initiative launched about two years ago between Imperial College and the Royal College of Art.  It aims to bring together the disciplines of design, engineering, technology and business to address jointly the challenges of innovation in an increasingly global, competitive economy.  As part of its many research and educational activities, Design London offers the STIR (Simulator, Teach, Incubate, Research) lectures, which cover a wide range of subjects from widely different personal experiences and points of view.

Our STIR lecture - CROSS OVER:  how a new approach to architecture is inspiring a new architecture for business - aimed to “explore not only how a radical approach to design has inspired a new genre in the built environment, but also how this approach can be applied to designing a new architecture for business.”

Services, Jobs and Related Subjects

The services sector is by far the largest in the world’s economy.  Services comprise 64 percent of GDP overall, about twice as large as the GDP of the industrial sector.  The services sector represents over 70 percent of GDP in advanced economies and close to 80 percent in the US. 

Jobs exhibit similar statistics.  According to the 2008 World Factbook, about 40 percent of all the jobs in the planet are in services.  The numbers go up significantly in the more advanced economies.  About two thirds of the jobs in Brazil, Japan and the European Union are in services.  In the US, UK and Israel the percentage of such jobs is around 80 percent.  

It is interesting that while constituting such a large portion of GDP and jobs in the world, the nature of services remains vague - a kind of hard-to-measure dark matter.  It is easier to define the services sector by what it does not include:  it is not agriculture or fishing, and it is not manufacturing, construction or mining.  Just about every other job is in services.  Perhaps the one definition everyone can agree to is one attributed to The Economist: a service is “anything sold in trade that cannot be dropped on your foot.”