President Obama said in his inaugural address;
“Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished”.
This is true; so what changed?
Mr. Obama’s statement is profound; in a single stroke, he divorced human knowledge, talent, creativity, and intellect from dependency on the financial markets. In one short statement, he reversed the old world order where economic growth drives relationships rather than relationships driving economic growth. Mr. Obama has made people tangible as financial instruments in their own right. The language needed to change, only then could the relationships change and therefore, the economics.
Calculus: The Science of Change.
Change is everywhere. The only thing certain is change itself. We vote for change we can believe in, we are aware of climate change, and we see the world constantly changing all around us. Each of these sentiments is an expression of the mathematical discipline of Calculus
Calculus got a bad rap with most of us in High School. Calculus has boring charts, funny symbols, strange sentences, and objects flying around in a frictionless space – nothing could be further from reality, so it seemed. In reality, however, nothing could be simpler. Early civilization noticed that seasons change over time. Farmers noticed that plants changed over time. Isaac Newton noticed that the speed of the apple changed over time as it fell. Copernicus noticed that the location of the planets changed over time, etc. We all notice and respond to change.
Economics: The science of Incentives:
Bankers noticed that the value of money could also change. To lend money out for future repayment, there is a likelihood that something will change; good change, bad change, or no change. So, in order to avoid bad change and to keep good change, the lender charges “interest” on the money. Interest represents the change of money over time – but not the reality of the change itself. Consequently, the change of money induced incentives for people to behave differently and this changed reality. For better and worse, reality reflected the incentives rather than the incentives reflecting reality.
The Language of Change:
Today our language is changing at an incredible speed – most words associated with the human condition have changed in definition over only a few decades ago. The words “relationship”, “society”, “marketing”, “innovation”, “media”, “democracy”, “productivity”, and many others, all have expanded meanings. Now we need to create new words to describe new realities; Computer enabled society, Social Capitalism, Web 3.0, relationship economy, innovation economy. What is the incentive?
Relationship: The Science of Communication
Now here is where Calculus gets complicated: If words are changing and communication is connected to the words, then communication is changing too. If communication is changing, and productivity is connected to communication, then productivity is changing too. If productivity is changing, and the economy is connected to productivity, then the economy is changing too.
The Relationship Economy:
Just like money, the change in our relationships induces an incentive or disincentive to behave a certain way. For better or worse, incentives will reflect reality rather than reality reflecting the incentibes. That’s a game changer.