"The Urgent Need for Resilience in a Hyper-Efficient World"

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Glasp

Jul 01, 20233 min read

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"The Urgent Need for Resilience in a Hyper-Efficient World"

Introduction:

In today's fast-paced and hyper-efficient world, our obsession with efficiency is jeopardizing our long-term resilience. This article explores the interconnectedness between efficiency, resilience, and the unequal distribution of wealth and power. By examining historical insights from Adam Smith and David Ricardo, as well as current economic trends, it becomes clear that a shift in focus towards resilience is essential for sustainable and equitable growth.

The Paradox of Efficiency:

Efficiency has long been hailed as the key to productivity and success. Adam Smith and David Ricardo's theories on division of labor and comparative advantage showcased the power of efficiency during the Industrial Revolution. However, as efficiency improves, it creates a high degree of specialization and concentrates market power in the hands of a few. This concentration of power leads to an unsustainable business environment, with limited returns going to a select group of companies and individuals.

The Rise of Pareto Distributions:

Economic outcomes, much like Instagram followership, often follow a Pareto distribution. The wealthiest few accumulate a disproportionate amount of wealth, while the majority struggles to keep up. As industries become more consolidated and profits concentrate in a handful of companies, the gap between winners and losers widens. Complexity scholars have identified factors that push outcomes towards Pareto distributions, such as pressure on the system and ease of connection between participants.

Efficiency's Dark Side:

While efficiency may seem like an ideal goal, it can have unintended consequences. The almond industry, for example, achieved remarkable efficiency by consolidating production in California's Central Valley. However, this efficiency came at the cost of redundancy and resilience. A single extreme weather event or virus could devastate the entire industry. Moreover, the most efficient player often becomes the most powerful, leading to a focus on short-term gains and extractive practices.

The Role of Resilience:

Resilience, characterized by diversity and redundancy, is often undermined by efficiency-seeking efforts. To counteract the risks posed by hyper-efficiency, we must shift our focus towards resilience as a source of competitive advantage. Resilient systems can withstand shocks and adapt to changing circumstances, offering long-term stability and sustainability.

Actionable Advice:

  • 1. Limit scale: Antitrust policies should be more rigorous to ensure dynamic competition and prevent excessive concentration of market power. This may require sacrificing short-term efficiency for long-term societal value.
  • 2. Introduce friction: Injecting productive friction into systems can enhance resilience. Lowering barriers to international trade should be balanced with protecting local industries and promoting diversity.
  • 3. Promote patient capital: Voting rights and incentives should be based on the duration of capital investment. This encourages long-term thinking and discourages short-term extraction.

Conclusion:

Efficiency alone is not enough to ensure sustainable and equitable growth. Our obsession with efficiency has led to a concentration of wealth and power, while undermining resilience and increasing the risk of catastrophic failure. By embracing resilience and incorporating actionable advice, we can create a more balanced and resilient economy that benefits all stakeholders. It is time to reevaluate our priorities and build a future that values long-term stability and societal well-being over immediate gains.

Resource:

  1. "Our Obsession with Efficiency Is Destroying Our Resilience", https://hbr.org/2019/01/the-high-price-of-efficiency (Glasp)
  2. "The internet needs better rules, not stricter referees", https://on.substack.com/p/new-rules (Glasp)

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