Getting into the Flows

‘Flows trump stocks.’ That was the conclusion of a 2009 Harvard Business Review article by John Hagel III, John Seely Brown and Lang Davison. It used to be that stocks of knowledge — something you knew that nobody else did, like Coca Cola’s proprietary formula — were the ultimate source of value, they argued. But that economic model is now coming apart at the seams as a whole suite of critical flows speeds up. To understand where value comes from in our accelerating world, we need to let go of the crumbling pillars of the old order and tune into the flows.

As we’ve argued elsewhere, the global economy is today in a transitional phase, as we move from a fifth to a sixth long-wave economic cycle since the Industrial Revolution (see figure 1 below).

Figure 1: Long wave economic cycles (Volans, 2016)

From this analysis, a crucial question arises: what will be the characteristics of Wave 6? In particular, which flows will be most important in tomorrow’s world? And how can we optimise those flows to ensure the Wave 6 world is one in which society, nature and business all flourish?

Flows of tomorrow’s economy

We’ve identified four key flows — you could also think of them as currencies — that we believe will define tomorrow’s economy: money, data, carbon and genes. (This is not an exhaustive list: there are a multitude of other flows that will also be important in the Wave 6 world — water, electrons, people and ideas, to name but a few of the most obvious.)

None of these is inherently good or bad, but the nature of flows is that they often get disrupted or misdirected, which can lead to systemic failures: breakdown. On the other hand, if well directed, they are key to delivering value and productivity for the whole planetary, societal and economic system: breakthrough.

Alluvial Fan in southern Iran. Image from NASA’s Terra satellite

1. Money

A September 2016 UNEP report estimated that, to achieve the Sustainable Development Goals (SDGs), we need to mobilise $90 trillion of public and private finance globally between now and 2030. Reading numbers like that, it’s easy to be overwhelmed by the scale of the challenge. But it’s important to remember that we’re talking about a mere fraction of the money that already flows through the global financial system. The challenge, therefore, is one of allocation — of better directing investment and capital to support breakthrough innovation and sustainable, inclusive growth.

Too much investment in today’s financial system is misdirected — supporting short-term profits at the expense of long-term value creation and incentivising incremental innovation at the expense of the breakthrough innovation we need.

Both investors and (potential) investees share a responsibility for this misdirection of financial flows. A recent UBS white paper highlights a dearth of information about available investment opportunities and inconsistency in the way non-financial impacts are measured and presented as critical barriers that need to be overcome.

A growing number of initiatives are looking to make it easier to channel money — public and private; philanthropic and for-profit — towards sustainable development. The Better Business, Better World report, published last month by the Business & Sustainable Development Commission, picked up on this theme. It highlights three critical areas of action to unlock the trillions of dollars of additional investment required to achieve the SDGs:

Reporting — create ‘an open-access and standardised system for companies to report on their performance on the Global Goals’.

Blended finance — ‘to share risks between public and private investors’.

Regulation — ‘aligning financial regulation with the Global Goals … to make sustainable asset classes more investible at lower cost.’

Others are already beginning to act on elements of this agenda. For example, in blended finance, the Sustainable Development Investment Partnership, a public-private partnership involving many of the world’s largest banks alongside governments and NGOs, aims to mobilise $100 billion over five years.

Another emerging example is Align17, an SDG-related investing and philanthropy platform proposed by WEF Young Global Leaders and named after the 17th SDG of “partnership to meet the goals”. Stakeholders as diverse as the Gates Foundation, the SDG Philanthropy Platform, PwC, TPG Growth and UBS have expressed interest in working with Align17.

Importantly, initiatives like Align17 hold out the promise of a better coordinated approach to tracking and sharing opportunities and impact — making it more feasible for today’s investors to respond to tomorrow’s market needs.

2. Data

The last few years have seen an explosion in the quantity of data generated worldwide. People have long talked in terms of having to drink at the fire-hose — and the problem has only got worse. Data’s value is derived from its very abundance and our nascent ability — as a result of exponentially increasing computational capabilities and the emergence of Artificial Intelligence (AI) — to process it, analyse it and mine it for insights.

There are tremendous upsides to this data revolution. Think for example of what Google’s AI venture — DeepMind — which has enabled Google to reduce the amount of energy used to cool its data centres by 40%. If such gains can be replicated more widely to optimise performance and reduce negative impacts, AI could become a game-changer for sustainable development.

One promising initiative in this regard is The Curve, which aims to become a “TripAdvisor for energy”. Launched in 2014, already The Curve represents the largest collection of user-generated, real-time data covering more than 650 energy projects, with a combined investment value of over £500 million. Companies are able to use The Curve’s data-set to draw on the experience of their peers to enhance their own energy efficiency.

But, as has become increasingly apparent in recent months, Big Data also poses new kinds of threat to society and democracy. Consider the work of a company called Cambridge Analytica. During 2016, it was hired by both the Vote Leave campaign in the UK and the Trump campaign in the US.

Here’s how Jonathan Albright, an assistant professor of communications at Elon University in North Carolina, describes what Cambridge Analytica does (quoted in a December 2016 Observer article):

‘Every time someone likes one of these [political] posts on Facebook or visits one of these websites, the scripts are then following you around the web. And this enables data-mining and influencing companies like Cambridge Analytica to precisely target individuals, to follow them around the web, and to send them highly personalised political messages. This is a propaganda machine. It’s targeting people individually to recruit them to an idea. It’s a level of social engineering that I’ve never seen before. They’re capturing people and then keeping them on an emotional leash and never letting them go.’

Whether or not you approve of Brexit and Trump, this level of manipulation should be a cause for concern. When it comes to power and control, data is fast becoming one of the most valuable currencies to deal in.

3. Carbon

As William McDonough wrote in Nature last November, carbon is not the enemy. Indeed, carbon atoms are the building blocks of life. Climate change, he writes, is fundamentally the result of a ‘design failure. Anthropogenic greenhouse gases in the atmosphere make airborne carbon a material in the wrong place, at the wrong dose and for the wrong duration.’

For this reason, a focus on ‘decarbonisation’, while welcome in many contexts, is ultimately misleading.

This is very much the spirit of the ‘Carbon Productivity’ campaign we are co-evolving through 2017 with Covestro (formerly Bayer MaterialScience) and a growing consortium of partners, including SYSTEMIQ, the Future-Fit Foundation, Futerra and Innovation Arts.

In the same way that previous waves of innovation and investment have boosted the productivity of labour, finance and resources, boosting the productivity of the carbon we invest in our businesses, supply chains and customers will be a central challenge — and opportunity — in Wave 6.

Covestro CEO Patrick Thomas now talks in terms of the “Return on Carbon Employed”.

4. Genes

The sustainable development industry had mixed feelings about the wave of innovation that erupted several decades ago in fields now known as biotechnology and genetic engineering. But, with the dawn of new fields like synthetic biology and CRISPR, it’s clear that we are only just getting started in re-engineering life to suit our needs.

Consider two stories about gene editing, published by the MIT Technology Review on consecutive days last February.

The first appeared under the headline ‘We Have the Technology to Destroy all Zika Mosquitoes.’ Using the gene-snipping technology CRISPR, the article explained, US scientists had worked out a way in which they could — at least theoretically — drive Aedes aegypti, the species of mosquito blamed for spreading the deadly Zika virus, to extinction.

The following day, another story about gene editing appeared under the headline ‘Top U.S. Intelligence Official Calls Gene Editing a WMD Threat.’ The official in question was James Clapper, director of national intelligence, who is responsible for producing an annual worldwide threat assessment report. Here’s what the 2016 report had to say about gene editing: ‘Given the broad distribution, low cost, and accelerated pace of development of this dual-use technology, its deliberate or unintentional misuse might lead to far-reaching economic and national security implications.’

With the development of gene editing technology, we are on the brink of an unprecedented capacity to “play God.” As the Zika story indicates, the potential upsides for global health are huge, but so too are the potential risks of misuse and abuse.

Breakdown or breakthrough?

There is nothing pre-determined about how the potential inherent in any of these four currency flows will play out over the coming decades. To set ourselves on a breakthrough (rather than a breakdown) trajectory, we are going to have to get much smarter about how we optimise each of these systems.

When we began interviewing breakthrough thinkers and innovators last year, we weren’t (yet) thinking about the flows of tomorrow’s economy. But, in retrospect, it’s clear that everyone we spoke to had tuned into a way of seeing the world that privileged flows over stocks — enabling them to see abundance and opportunity where others saw only constraints and challenges.

That’s certainly true of ‘super-optimist’ Peter Diamandis, who told us that the unprecedented access — to capital, to information, to processing power — we each have at our fingertips is what makes the present a golden age for entrepreneurs. This same realisation — that access matters more than control — underpins Philips Lighting’s innovative ‘pay-per-lux’ model and the growth of the sharing economy that Rachel Botsman and Robin Chase champion.

Meanwhile, Planet, whose co-founder Robbie Schlinger we spoke to, is an enterprise that only makes sense in an age of accelerating flows. Planet operates the largest constellation of imaging satellites and its mission is ‘to image the whole world every day, to make global change visible, accessible and actionable.’

Over the months (and years) ahead, we’re committed to doing the following:

1. Creating a space for thinking and conversation about each of these flows — to deepen our collective understanding of how we maximise the whole system value derived from money, data, carbon and gene flows.

2. Convening key players to co-create pathways to breakthrough for each of the money, data, carbon and gene systems.


To find out more or to share ideas, get in touch at r.roberts@volans.com