Tuesday, June 28, 2016

Brexit as an innovation opportunity

I rise neither to praise the British exit from the EU or to condemn it.  There are plenty of people on both sides of the issue who will praise or condemn exceedingly well.  The British people have either fallen for a terrible lie or rid themselves of a burdensome bureaucracy.  This will either be excellent for the UK or terrible.  Right now the markets are asunder, because they hate uncertainty.  Once the rules and process are understood and the actual outcomes are clearer, things will revert to a more normal condition.  Which is what we as innovators should attempt to avoid.

In the US, many politicians are enamored of the saying that "you should never let a crisis go to waste".  They say that because most people don't especially like change, but a crisis may demand change.  And when the crisis demands change, politicians and their constituents should get all the change they possibly can, before the crisis ends or is simply part of the social fabric, and people no longer clamor for change.  No matter how much people may dislike the status quo, they often fear change even more, which is why real disruptive and discontinuous innovation is so rare.  It's much easier to rail about the things we don't have, the freedoms we lack, and so on, than it is to encourage people to adopt new ways of thinking and behavior.  Until a major crisis sets in and all the existing rules seem to be broken.

Innovators understand this implicitly.  The amount of energy required to convince people to try out new products or ideas, and further the amount required to get them to switch allegiance from one product to another is rather daunting.  Geoffrey Moore didn't call it "the chasm" for nothing.  Early adopters are easy to win, but represent less than 10% of the population.  The early majority, on the other side of the chasm, requires a lot more than a shiny new idea in order to switch.  So we either expend an awful lot of energy convincing the early majority to switch or we move the chasm and force the early majority to make decisions.  Which, perhaps unintentionally, is exactly what Brexit has done - moved the chasm and made the old rules and ways of governing untenable.

While the politicians and the established governing classes run around debating the future of the EU and what this means to the economic systems of the world, some really smart innovators should be waking up to the fact that now is an excellent time to innovate the way we govern.  The UK, by the way, is used to this disruption.  From the Magna Carta to the imposition of a Parliament to restrictions about the King's prerogative, the English have remade their governing bodies many times, often in the face of adversity or conflict.  In fact it should come as little surprise that Brexit happened, because it's kind of in the nature of the English to reject a distant, demanding governing body.  What we should be thinking about now is less how to put the broken eggs back together again, and more about how to use this instance to innovate the structure of government and how we intend to provide good governance to the people in the UK, in the EU, and more broadly what this event means in a global context.

There are a number of players involved, each of whom have opportunities to innovate.  Most clearly is the UK itself.  Where does it see itself on the global stage?  What role does it want to take?  How do the people want to be governed?  One could easily imagine that the people in the UK regain a lot of sovereignty that was delegated to the EU, and by gaining that further reject any involvement from the existing monarchy.  Or, we could see a continuing devolution, where more and more power is moved from London to the regions and to Scotland, Wales and Northern Ireland.  As Labor is in shambles, the Conservatives are without a leader and the UK and EU are without a plan, real innovation could happen in how the UK governs itself.  This is the time for divergent thinking, testing different ideas and innovating the governance.

While the UK is doing those things (which as I noted come more naturally to the English) the EU should be doing the same things.  As Einstein noted, doing the same things over and over again and expecting different results is the definition of insanity.  The EU was originally built to build closer ties between countries like Germany and France, specifically to curtail warfare and build a common market.  Much of that has been achieved.  Now the question is:  will Europe become a SuperState, much like the US, where the countries take on subordinate roles to the EU governance, or will they continue to enjoy free trade but regain some individual sovereignty?  Why should Spain and Italy belong to the same union, with the same rules, as the Netherlands and Germany?  Perhaps we'll see regional behemoths emerge, which same common culture - one could even imagine a Mediterranean country formed from Spain, Southern France and Southern Italy, while Northern Italy, Austria and Germany link up due to shared goals.  The EU need to consider its value proposition and innovate its governance models - now is the time to do it.  The real question is:  where are the people with creative, innovative ideas about what governance should do and what its structure and benefits are?

More broadly, all governments should look at the Brexit and begin to think about what it entails.  As people gain access to more information and more connectivity, they are able to compare their lives with the lives of others in other countries.  It's no wonder that people in Syria pick up and move to Europe, because the Europeans have lost interest in trying to help solve problems in the Middle East, and the Syrians and others understand the standard of living in Europe is much higher than at home.  This could suggest that increasingly arbitrary lines on a map drawn after the First War War (thanks Sykes and Picot) mean little to people who seek out a better life.  These places have rarely been governed well, and increasingly aren't governed at all.  People don't want to belong to these countries, but instead belong to tribes, clans or religions.  The "state" such as it is, matters when it can provide services and benefits that are more attractive than those provided by clans or religions.

In fairness there are some experiments underway, including the concept of universal basic income in some pockets in Europe, which is simply the state providing the funds it would have spent directing people to specific activities, instead simply providing the money and getting out of the way.  Both a bit autocratic and libertarian at the same time.  Following this train of experiments we can imagine countries that provide nothing to their citizens other than safety and a sound currency (what China is trying to do) or countries that basically offer a guaranteed floor of food, clothing and shelter (universal basic income) with little to no promise of advancement.   These offerings seem to lead only to an increase in inequality, but time will tell.

In the US, instead of innovators and experimenters, we've managed to reduce the race to a person who seeks to maintain the status quo in the face of significant change (Clinton) and a person with no fixed outlook or policy (Trump). The first will resist the change and innovation that is clearly necessary, and the latter will chase any emerging issue, regardless of its value to the populace.  At a time when we could dramatically rework and rethink our own governance and our relationships abroad, we have the two worst political candidates to take advantage of the emerging uncertainty and innovation opportunities.  This is a crisis that may go entirely to waste, when just a few innovators could make all the difference in how we govern each country, and increasingly how we stake out relationships across the world.
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posted by Jeffrey Phillips at 6:15 AM


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