Weekly Digest #3 [ Fake News, Belief, Future of Work & Future of Firm]

A snapshot of article summaries that we enjoyed reading ( Nov 19— Nov 24)

“Newspapers are not made any longer by news or journalism. They are made by sheer weight of money expressed in free gift schemes. They serve not the interests of the many, but the vested interests of the few.”
— Oswald Mosley (Fascism: One Hundred Questions Asked And Answered)

Belief without Evidence: The central argument is why it’s morally wrong to believe without evidence. There are three arguments provided by Clifford as to why we should behave responsibly i.e. believe only what we have sufficient evidence for and what we have diligently investigated. The first argument is that our beliefs influence our actions. Our behavior is shaped by what we take to be true about the world. False beliefs about social facts lead to poor habits of action which in most extreme cases can threaten our survival. The second argument provided is that it is always wrong to believe on insufficient evidence as poor practices of belief formation turn us into careless credulous believers. Epistemic alertness is a precious virtue as there is a need to sift through conflicting information. The third argument is that it becomes our moral responsibility, as communicators of belief, to not pollute the common knowledge which exists and flows in the society through speech and writing. This common knowledge could influence beliefs which would be immoral. It could be farfetched to assume that every false belief we hold becomes common knowledge but in today’s world of Big Data, we truly have a global reservoir of belief. This reservoir is mined by algorithms to make decisions for us. This reservoir has power over our decisions. Wrong inputs into the data reservoir can cause flawed decisions and insights leading to a toxic output. Today is the time to ensure critical thinking is a moral imperative for the society

Fake News Campaigns: The term “fake news” should not be used to refer to something the reader dislikes or disagrees with. Modern fake news is carefully designed so that its intended readers will not be able to detect that it is false. As importantly, it is crafted individually for each group of readers, to resonate with those readers and to produce the strongest possible emotional response. We all think we are too smart to be deceived by fake news, but that is no longer true. Most of us can be manipulated by the fake news designed to deceive us as individuals. But how does it work? First, I need to decide what I want you to believe. Second, I need to know what your current grievances are; I need to know what makes you really angry. I need to know what you think has been taken from you, and what you want to regain or retain. I need to know what you do and don’t already know, and what you do and don’t already believe. Using these, I am going to construct an argument that explains how you were unjustly deprived of what you want, by people advocating the position I want you to oppose. And I have to construct this argument with supporting claims that I have carefully selected. The claims don’t need to be true. It’s merely essential that you do not now believe them to be false. A great thing about fake news is that it’s easy to design an effective lie for each target audience, but much harder to design a compelling rebuttal that resonates and is easily understood by that same audience. The first part of fake news is crafting a lie, backed up with a set of supporting arguments selected because they will convince the intended readers, not because they are true. The second part of fake news is getting each story to its intended readers and not to others. A fake news story sent to the wrong readers will produce a backlash, since many readers will be able to detect the false statements and deliberate misinformation in fake news designed for others. They will sense the intended manipulation, and react negatively to it.

Private Information & Fake News: Fake news has progressed beyond simple broadcast of lies. It now entails carefully constructed stories that are designed to produce the desired change in beliefs among their intended readers. Since they are carefully constructed to resonate with the beliefs and prejudices of their intended readers, and carefully constructed not to be detected as false by contradicting the readers’ knowledge and understanding of facts, selective targeting matters. The technique of resonance of fake news is based on having extremely accurate knowledge of the beliefs of target voters, their fears & desires and the limitations of their expertise. Experiments conducted demonstrate that the use of private and personal information is as important to the targeting of fake news stories as it is to their construction. With modern fake news, lies can be carefully constructed and carefully supported differently for each group of intended recipients. Likewise, they can be carefully distributed so each story goes only to their intended recipients. This will maximize the desired impact. It will also eliminate the backlash produced when groups of readers recognize the stories as false and determine that a disinformation campaign is underway. In summary, it is found that clumsy attempts to manipulate popular opinion can be counterproductive. This is consistent with what we digital optimists believe would be true in the age of the internet, with a fully informed public able to assess the accuracy of all information. However, it was also found that an idea that is not originally embraced by a plurality of the electorate can still win the majority of the popular vote with effective and well-tailored modern fake news techniques. More importantly, the ability to win with a fake news campaign increases the more it is tailored to the perceptions and limitations of individual readers, since precision tailored campaigns produce greater responses, can be shorter, and can be concluded before the opposition becomes aware of the campaign and before voter backlash occurs. In short, anyone who drafts different versions of a story on the same topic, and targets it at different individuals based on harvesting private personal information, is engaging in fake news.

Nature of future work: As technological progress has increased, it has not increased leisure and happiness in lives of people. The problem persistent in today’s job economy is that of reducing costs and not about making people valuable. Innovation doesn’t translate into making people valuable. The purpose of innovation should be a sustainable economy where we work with people we like, are valued by people we don’t know and provide for the people we love. A task centric economy places tasks and products at the centre of the value proposition instead of people. Economic growth is killed by companies that compete solely for profits. What keeps the economy from collapsing is the inherent limits of automating work. With a task centered mindset, innovation is set to kill economies. Internet entrepreneurship is the new bourgeoisie. Universal Basic Income proposed as a solution can provide basic security but it cannot replace work. Meaningful paid work is the glue which holds societies together. Sometimes, a lack of perspective causes confusion as ideas of the past which made things simple are the same ideas which are making the world unintelligible. A people centric view of the economy can help us simplify the innovation economy. People centric economy means people create and exchange value, served by organizations. The labour and consumer markets of a task centered economy are replaced by unified market where people have two kinds of services — one for earning and one for spending. We need more solutions to answer the problem of how people can earn in the new economy. We need as much innovation to help us earn as there is innovation that helps us spend. Some organizations which help offer a better living in meaningful ways, something that creates a job tailored to your passion, strength and interests. Tailoring jobs is a unique market to be explored by entrepreneurs, governments and investors. A huge market potential exists for matching underemployed and unemployed people devoid of opportunities to live to their abilities. Tailoring better ways to help people earn their livelihood is a huge market in the world. This is the beginning of a revolution in strength finding opportunities in a huge labour market.

Firms of the Future ( Part 1: Why firms are changing): The prevailing paradigm that has underpinned business for the past fifty years is under transition. Till now, firms existed to deliver returns on their shareholders’ capital — and the sooner they delivered it, the better it was. The change isn’t unusual as the idea of a business has evolved slowly but profoundly through a series of what we can now see as definable eras: periods when particular strategies, corporate forms and styles of management became the dominant norm. Transitions between eras play out over decades and the edges are fuzzy which become clear only in hindsight. Some elements of the previous era remain in place, while others evolve into something quite different. The current shareholder primacy era, for example, retained and enhanced several features of the previous period, including the importance of professional managers and the pursuit of scale to achieve leadership economics. Today, the shareholder primacy era is under pressure from multiple sources. Technologies, markets and customer expectations are all changing rapidly. Firstly, as the economy has become more service-oriented and increasingly digital, the importance of speed has increased dramatically. Those who can’t keep up fall by the wayside. Secondly, abundance of capital. Global financial assets are now 10 times global GDP, making talent and ideas rather than capital, the binding constraint on growth in most large companies. Thirdly, industries have become more winner-take-all. A Bain study of 315 global corporations found that just one or two players in each market earned (on average) 80% of the economic profit. Fourthly, the pursuit of shareholder value itself increasingly focuses on the short term, driven by shorter management horizons and greater pressures from activist investors. Many CEO's feel that it is becoming harder than ever to translate strategy into rapid and effective execution. Besides, firms have to deal with the younger workforce that wants no shackles and are happy to be part of the gig economy, looking for shorter corporate careers and wish to be associated with a firm that has a purpose beyond profits. The cumulative impact of these pressures has already set in motion another profound shift in eras, which will result in the biggest change in business since the 1970s. The fundamental goals of strategy will not change and companies will still win by achieving a lower or better cost position, delivering superior customer experiences, or controlling an industry standard. But virtually every element of how firms pursue these strategic goals will look quite different.

Firms of the Future ( Part 2: How the firm could look like): Overall trends across industries point to five emerging themes for leadership teams: Scale and Customer intimacy; Professional managers vs. Mission-critical roles; Assets vs. Ecosystems; Capital gets a reset; and Engine 1 & Engine 2. Under Scale and Customer Intimacy, there is a change in the long held belief of strategy — that you can be big and low cost, or you can be focused and differentiated — but not both. Today, new technologies and analytics are making it possible to minimize or eliminate the traditional trade-off. Underlying the historic trade-off between scale and intimacy is another real tension — this one between size and speed. For firms of the future, scale will still offer potential benefits but the dynamics of scale are changing. It is now possible even for small firms to access the benefits of scale without owning assets or capabilities themselves. The importance of speed relative to scale has increased across multiple fronts: time to market, time to gather and learn from feedback, time to make and execute decisions. Firms will combine big data, which will be pervasive, with human intelligence from frontline interactions with customers, and the resulting information will all be instantly visible throughout the company. The second shift of moving from Professional Managers to Mission Critical Roles, firms in the future need to first identify a clearly defined mission and then proceed to identifying roles that are critical to delivering that mission. Such roles should include people who deliver the benefits of both scale and customer intimacy — the two sides of the organizational matrix that typically come together only at the executive committee level. These roles will be at the heart of the firm of the future, and will be integrated much closer to the customer to shorten feedback loops and increase speed and agility. Most work will be project-based, with agile teams as the dominant organizational unit; such teams will blend internal and external resources to provide the right skills as needed. Teams will be self-managed, leading to a vast reduction in the number of traditional managers. Employees will have no permanent bosses, but will instead have formal mentors who help guide their careers from project to project. The third shift of Assets vs Ecosystems signals a change from the time when organizations built strong vertical integration and created an ecosystem under one umbrella. Today, there is no part of a business value chain that cannot be outsourced. The successful outsourcers offer scale, experience, methodologies and variable economics that they could not achieve on their own or that they simply prefer to hand off to others. This has led to the influence and disruptiveness of platform companies ( Google, Facebook, Apple,etc.). ‘Everything as a Service’ will be available on demand, from a mix of horizontal (cross-industry) and vertical (industry-specific) outsourcers, with the latter often set up as joint ventures by industry participants. The fourth shift of Capital Allocation is changing as previously, the shareholder primacy era evolved during the late 1970s in part from a conviction that management and shareholder interests had become misaligned — the classic agency problem. Over time, however, the pendulum has swung back, and today it sometimes seems that CEOs are highly skeptical about investing in their businesses. On one hand we have institutional investors asking for long term focus while on the other we have the activist investors who are pressuring the CEOs to have a short term agenda. Slowly we are moving to a trend where new vehicles are also emerging to connect investors to specific investments within a firm — investments that are suited to their risk profiles and that do not involve owning a share of the whole entity. Traditional equity and debt raising will continue to be vital to the firm of the future, but capital structures are likely to be more flexible, offering the potential to align investors more closely with the firm’s business strategies and time horizons, and to link different types of investors to different types of investments. For the final fifth shift, whether the threat is visible and imminent or invisible and theoretical, leaders of the firm of the future will be toggling between running their core — today’s engine — as efficiently as possible, looking for sustaining innovations there. They will also need to create a new business — tomorrow’s engine — that reflects new customer needs, new competitors, new economics or all three. This ‘Engine 1, Engine 2’ approach is what allowed Marvel to continue to develop its publishing core while simultaneously expanding the character licensing business that has become its new core. The two engines require different approaches as discipline, repeatability, small continuous improvements, careful risk assessment and conventional financial analysis are the hallmarks of Engine 1. Agility, creativity and leaps into the financial unknown with the expectation that only a few investments will ultimately pay off are the chief traits of Engine 2. Firms of the future will have to set up and manage Engine 2 under the corporate umbrella but will likely structure, staff and fund it separately. Resource allocation will be a point of integration across Engine 1 and Engine 2. Top talent will rotate through both engines, learning a balanced set of skills and fulfilling mission-critical roles on both sides of the business. This would be a map of the firm of the future.

Firms of the Future ( Part 3: How the leader could look like): Leading and working in a firm of the future will feel different. It will sometimes feel as if you are a venture capitalist thinking in terms of payback over five to ten years or longer. Venture capitalists expect many of their investments to fail and that they will make their money on the few that turn out to be home runs. They are relentlessly focused on mission-critical roles, and they naturally think about creating value through ecosystems. Other aspects will feel like a professional services firm. They mobilize teams of professionals to attack specific business problems. When the problem is resolved, the team disbands, and the people move on to another project. Examples include raising money from the right investors for specific programs, going all-out to hire and retain talent for the mission-critical roles and designing the organization around those roles. Putting all this in place will be a profound leadership challenge. At an organizational level, new capabilities will be needed: new technology assets and skills, new deals for talent, new and expanded types of partnerships, new managerial tools and metrics, new balance sheet approaches. At an individual level, leaders will need to evolve their own skills, shifting from management to inspiration and coaching, adding value through enabling the mission-critical roles rather than controlling information flows. To be able to oversee this entire entire successfully, here are 5 key questions the leader of the future must ask: a) What combination of scale, speed and customer intimacy do we need, and how can we deliver this better than current and potential competitors? This is partly about strategy (what is the relative importance of these elements for your business and how do you make investment trade-offs?) and partly about ways of working (how do you use technology and organization to minimize these trade-offs?) b) How close are we to getting full potential value from our mission-critical roles? Answering this question requires alignment around what these roles are, deployment of your best talent in these roles and understanding what you are doing to support this talent vs. holding it back. c) What type of company are we — platform outsourced service provider, or product and service provider — and how are we partnering across this ecosystem? As technologies such as cloud continue to evolve, as outsourcers develop more capabilities and as gig economy platforms expand, ecosystems will grow and present more partnership options than ever. d) What would we do if capital and investor requirements were not a constraint? Are we able to identify more good ideas than you are willing or able to fund? What are we doing today to position our business for 10 years from now? This question is not just about long-range scenarios but about how you build flexibility into resource allocation and develop the capability to see around corners. These leadership traits and behaviors would be required to successfully lead the firm of the future.

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