Business Forum: Competitive Creation vs. Destruction

By Isaac Cheifetz
Published September 9, 2002

In the late 1980s, I worked one block from the World Trade Center. I took a train in every morning to the station directly beneath the twin towers.

During morning rush hour, tens of thousands of people would stride through the basement concourse. In any direction, one would see a streaming river of people. It felt faintly like an anthill yet was not unpleasant. 

The concourse was wide, clean and well-lit, and the people -- men and women from around the world heading toward jobs in government or finance -- buzzed with a quiet, determined energy.

One year ago, terrorists attacked the United States, the first serious foreign attack on the U.S. mainland since the War of 1812. In attacking the Pentagon, the terrorists were attacking the headquarters of our military. 

In attacking the World Trade Center, they were attacking a symbol of our economy and, in particular, a crucial financial and cultural hub in the network of global connectivity. The terrorists may have succeeded in destroying the buildings, but they did not destroy the network.

The trend of connectivity is accelerating and seems unstoppable. Indeed, the biggest impact of a networked global society, and the Internet in particular, is the increased speed at which dysfunctional organizations (whether countries, societies or businesses), stress and break.

In a previous column, I discussed the attributes essential to success for retailers, contrasting successful retailers such as Target and Best Buy with failing ones such as Kmart. Are there corresponding attributes for success in knowledge-based economies?

In 1998, Parameters Magazine, the U.S. Army War College Quarterly, published a strikingly perceptive analysis by Ralph Peters, a career U.S. Army intelligence analyst (now retired and a published author), titled "Spotting the Losers: Seven Signs of Non-Competitive States" (http://carlisle-www.army.mil/usawc/Parameters/98spring/contents.htm).

Peters does not describe the traits of success in a global economy but rather focuses on those cultural attributes that guarantee failure.

According to Peters, "that which provides the greatest psychological comfort to members of foreign cultures is often that which renders them noncompetitive against America's explosive creativity -- our self-reinforcing dynamism fostered by law, efficiency, openness, flexibility, market discipline, and social mobility."

The seven factors Peters describes are remarkable for how they transcend political differences in our culture. How many people reading this column wish to live in a society with any of the following attributes?

The Seven Factors

• Restrictions on the free flow of information. Totalitarianism, the most extreme structure of state control over the thoughts of citizens, seems impossible in a networked society. The Soviet Union collapsed because its totalitarian system slowed to a glacial pace competing against a global knowledge economy. 

But some countries still try, however inefficiently. Contemporary societies may view the free flow of information as the rapids of a river to growth, or as a flood threatening their institutional power.

In Peters' words, "those segments of humanity that fear and reject knowledge of the world (and, often, of themselves) are condemned to failure, poverty, and bitterness."

• The subjugation of women. 

Peters makes a practical rather than moral argument: "The math isn't hard. Any country or culture that suppresses half its population, excluding them from economic contribution and wasting energy keeping them out of the school and workplace, is not going to perform competitively."

• Inability to accept responsibility for individual or collective failure. This is not about ignoring external influences, or even oppression, but having the confidence to acknowledge reality and improve on it. 

Knowledge economies, and computing in particular, are based on an engineering mentality, or optimizing what works and discarding what doesn't. Individuals or societies that justify or deny their failures through conspiracy theories cannot compete or even communicate efficiently with those who learn from mistakes.

• The extended family or clan as the basic unit of social organization. Families and community tend to have informal, implicit structures based on custom and tradition. Corporations, contracts, patents and other foundations of complex economic systems rely on the objective rule of law, not family obligations.

• Domination by a restrictive religion. 

Peters hits the bull's-eye: "The more dogmatic and exclusive the religion, the less it is able to deal with the information age, in which multiple 'truths' may exist simultaneously, and in which all that cannot be proven empirically is inherently under assault."

A majority of U.S. citizens consider themselves religious, a significant minority deeply so. Yet a presidential candidate who were to advocate imposing fundamentalist Christianity on society would get insignificant support. Pat Buchanan, who in 2000 ran on a religious platform far more ambiguous, received the votes of less than a half-percent of the population.

• A low valuation of education. All cultures respect learning in some form. But if they lack enthusiasm and flexibility in the pursuit of new knowledge, they will limit themselves to transmitting accepted truths from the past.

In contrast, Silicon Valley grew from the world-class research centers at Stanford and UC Berkeley. India has built itself into a software leader through massive commitment to elite education. Both value ambition and brains above social standing.

• Low prestige assigned to work. Like the ant and the grasshopper, or the engineering student and the stoner, societies that prize work for its own sake, whether Calvinist, Confucian or other, have a tremendous advantage over those that associate work with oppression.

Valuing productive effort over speculation is another critical long-term advantage, one we as a society are ruefully relearning in the aftermath of the dot-com bubble.

Countries that do not suffer from these restrictions will compete with us economically and culturally, in a healthy manner.