Following World War II and the onset of the Cold War with the Soviet Union, the US undertook a series of measures to strengthen the resilience of the country. These included a significant expansion of government support for scientific research in universities and R&D labs, leading to product innovations from the private sector and better weapons from the defense industry, which contributed to making the US the most prosperous and secure nation in the world.
Another important measure was the expansion of educational opportunities, like the GI Bill which offered the nation’s 16 million WWII veterans payments of tuition and living expenses to attend high school, college or vocational/technical schools. By 1956, over 2.2 million had used the GI Bill to attend college or university, and 5.8 million had used it for some kind of job training program.
In the 1950s the government enacted the National Interstate and Defense Highways Act, which led to the construction of over 48,000 miles of the Interstate Highway System at a total price estimated at over $500 billion, - the largest public work in America . The Act had a dual purpose: facilitating the economic growth of the country as well as supporting the country’s defense during a conventional or nuclear war should it be necessary.
And, last but far from least, in the late 1960s the government launched ARPANET, the digital infrastructure that eventually became the Internet. ARPANET was supported by the Department of Defense to significantly enhance the resilience of the country following a nuclear attack by enabling computers to communicate with each other using a flexible packet-switching digital network.
But, this post-war focus on resilience has significantly waned over the past few decades. Let me explain.
From the 1930s to the 1970s, - a period that spanned the Great Depression, WWII, and the height of the Cold War, - the interests of business and society were closely aligned. Keynesian economics, named for British economist John Maynard Keynes, was the standard economic model during this period. It was a pragmatic, mixed model of capitalism, based on a predominantly private sector economy but with an appropriate role for government, such as the New Deal and the aforementioned government programs.
Keynesian economics started to fall out of favor with the ascent of the Chicago School of Economics in the 1970s, which advocated a near universal trust in markets, a circumscribed role for government, and a business model based on maximizing shareholder value as the overriding purpose of a corporation. These views influenced government officials over the next several decades, especially former US president Ronald Reagan, who famously said: “Government is not the solution to our problem, government is the problem.”
The ensuing decades saw a significant decrease in government support of R&D and education. A recent task force on Innovation and National Security noted that “Washington has failed to maintain adequate levels of public support and funding for basic science. Federal investment in R&D as a percentage of GDP peaked at 1.86 percent in 1964 but has declined from a little over 1 percent in 1990 to 0.66 percent in 2016.”
Educational initiatives by the federal and state governments have also been significantly reduced, despite the fact that education is more important than ever. A recent report on US Leadership in the 21st Century reminded us that the expansion of public high school education and state universities in the first half of the 20th century was a critical ingredient in the US becoming the world’s most successful economy. “The lack of accessible educational opportunities that are clearly and transparently linked to the changing demands of the job market is a significant obstacle to improving work outcomes for Americans,” said the report.
But it wasn’t only government that reduced its focus on resilience. So did business, as explained in The High Price of Efficiency, a 2019 Harvard Business Review article by Roger Martin, professor emeritus and former dean of the Rotman School of Management at the University of Toronto.
“Why would we not want managers to strive for an ever-more-efficient use of resources?,” asked Martin. Of course we do. But, an excessive focus on efficiency can produce startlingly negative consequences. To counterbalance such potential negative effects, companies should pay just as much attention to resilience, - “the ability to recover from difficulties - to spring back into shape after a shock… Resilient systems are typically characterized by the very features - diversity and redundancy, or slack - that efficiency seeks to destroy.”
Efficiency is fundamental to competitive advantage, higher company profits and lower consumer prices. However, a relentless focus on efficiency can also lead to serious problems, including the risks of catastrophic failures, which Martin illustrates with an example from agriculture, - monocultures.
In agriculture, a monoculture refers to the practice of growing a single strain of a high yield crop or raising a specialized, fast growing livestock breed in a farming system. Monocultures are widely used in industrial farming to increase the scale and efficiency of their operations. However, continuous monoculture can lead to a buildup of pest and diseases. If a disease strikes for which they have no resistance, it can quickly wipe out an entire population of crops or livestocks. Something similar could happen to a company or economy too dependent on a few products, industries, processes or business models.
Biological systems have long been an inspiration in the study of complex systems. High resilience in the face of an uncertain, changing environment is the essence of evolutionary biology and natural selection. Similarly, business resilience, is fundamental for a company to withstand major disruptions and survive an unpredictable, turbulent future.
One of the most critical post-pandemic priorities must be to restore and strengthen the resilience of the nation and the world. What will such a world look like? Some of the potential changes, the unknown unknowns, are nearly impossible to predict. But others are easier to anticipate because they’re essentially an acceleration of existing trends. Let me conclude by briefly summarizing a few of these.
Digital infrastructures. Fortunately, we never had to test the Internet’s ability to keep the US going following a military attack or invasion. But, who would have thought that 50 years after the launch of ARPANET, it would be a global pandemic that’s now been testing the Internet’s ability to fulfill its original objective of keeping nations and economies going during arguably the biggest shock the world has experienced since WWII. We can expect to accelerate the deployment of ultra-high-speed broadband bandwidth, 5G, IoT, and near-universal Internet access, as well as critical improvements to cybersecurity and data privacy.
Online e-applications. For years, many found all kinds of reasons not to embrace telemedicine, online learning, work from home, virtual meetings and other kinds of e-applications. But, necessity is the mother of invention. We’re finding that not only do these e-applications work remarkably well, but they offer a number of important benefits, like not waiting for a doctor’s appointment in a room full of sick people, or not having to travel to participate in a 45 minute meeting. In the coming years, we can expect a number of innovations in online e-applications, especially a superior user experience.
Digitization and AI adoption. A 2019 McKinsey study found that a quarter century into the digital age, even the world’s most advanced economies, - the US, Europe and China, - had only achieved around 20% of their digital potential. Another, recent McKinsey report on the state of AI adoption found that while AI is becoming more mainstream, “much work remains to scale impact, manage risks, and retrain the workforce,” in over 95% of companies. We can expect the rate and pace of digitization and AI adoption to significantly increase.
Automation and the Future of Work. Finally, we can expect that the pandemic will have a major impact on the future of work, as public and private sector institutions accelerate their embrace of technologies and automation. Recent future-of-work studies, like MIT’s ongoing Work of the Future, will have to be revisited along with their policy recommendations. Let us also hope that the social contract between institutions and individuals, - be it firms and employees or governments and citizens, - will also be revisited and significantly improved, including healthcare, education and other critical social safety-net programs.
As usual, timely and thought-provoking. The issues surrounding resiliency must also be considered though differently than the "physical resilient" aspects you start with in your BLOG. For example, how will AI resiliency need to be different than generic "digital resiliency"? While there is current focus on digital infrastructure resiliency, I might suggest what "feeds" that digital infrastructure needs to be considered differently: Are we as focused (or knowledgeable) about making all the end-to-end steps in a digital process as resilient as we did in a physical process (i.e. your interstate highway example)?
Hoping all is healthy and safe with you and your family. Thank you for making me “think differently”!!!
Posted by: Rick Fuchs | May 03, 2020 at 11:36 AM