What is there beyond wealth?, 21/03/2024

RTL Today - The Lisa Burke Show

Prof. Subi Rangan from INSEAD business school talks about the evolution of capitalism from an output to outcome economy.
Prof Subi Rangan was invited to Luxembourg to make the keynote address to celebrate INSEAD Luxembourg Alumni’s 50th anniversary on Thursday 21 March, entitled “Expansion - Evolution - Engagement”.
Philippe Osch, President of INSEAD Alumni Association in Luxembourg, hosted Subi ahead of their anniversary evening celebrations.
Subi Rangan is Professor of Strategy and Management at INSEAD Business School in Fontainebleau Paris, and the Abu Dhabi Crown Prince Court Endowed Chair in Societal Progress. His educational background includes an MBA from the MIT Sloan School of Management and a PhD in political economy from Harvard.
Subi’s research focusses on the evolution of capitalism; how all economic actors and enterprises can integrate for better performance and progress; and he is developing a curriculum to deepen competence and character of business students and executives.
In 2013 Prof. Rangan initiated the Society for Progress, a fellowship of eminent philosophers, social scientists and business leaders ( www.societyforprogress.org) He also directs INSEAD’s top executive seminar AVIRA: Awareness, Vision, Imagination, Role and Action.
In this conversation, we begin with a short history of capitalism. Below are some of the thoughts of Prof. Rangan discussed in this conversation.
Subi speaks about the ‘iterations of capitalism’: to maximise wealth for oneself, for a company and for all. From subsistence economy to bartering; how the Protestant reformation allowed the pursuit of wealth; to the work of philosopher Adam Smith to enhance welfare for all, resulting in a better standard of living for all. This paradigm required a division of labour to increase productivity and drive specialisation. We were no longer self-sufficient. Institutional theory then grew with the notion of private property rights to incentivise people to create value and the patent industry. Communism did not have this incentive alignment - and therefore failed.
This burgeoning innovation and the dedication of people meant that money was made through the sale of the surplus - profits. At the end of the 19th century we have, for the first time, formal economics with people like Pareto. Who should allocate resources? Then we move to Kenneth Arrow, the mind behind modern economics, on a spontaneous, decentralised system, which can work to produce more welfare more than command and control methods. This was so far an Anglo-Saxon idea. But in the 70s and 80s we had the Asian tigers - government having a less marked hand allowing the market to flourish. This gave rise, in the 1980s, to deregulation and liberalisation.
The modern economy is self regulating, self-correcting and decentralised. If this doesn’t work by the invisible hand of markets, then the visible hard of regulation or government comes in. It has worked on a global scale, if the goal of the economy was to produce wealth. Absolute poverty has been reduced. However, what are the goals of the economy today?
What is there beyond wealth?
“More than income we are now looking at impact; more than performance we look for progress. There are new dreams for humanity. This is goal innovation.”
Prof Rangan talks about the ‘Chronic dilemma of interdependence’ in our interconnected world.
Jürgen Habermas, a 20th century German Philosopher talks about communicative rationality. In deciding what is good, we need to talk with one another. If we are born equal then we must practice communicative rationality. Subi calls it ‘consultative morality’. Language is the way in which we can regulate interdependence, and we certainly need it to be non-violent. Adam Smith had the same idea in the theory of moral dependence.
Output to outcome economy
We are moving from an output centred economy to an outcome centred economy. And here, who has the power? Prof. Rangan suggests the greater the power the greater you need to be engaged with your scope of expertise.
We’ve had regulation of power now we need to educate power. Subi believes that education should be literacy, numeracy and decency; moral and social philosophy. Consumers, investors and employees now also assess companies.
He believes we need a changing definition of success - to be rich and respected. Prof. Rangan also mentions a conversation he had with a Nigerian recently who spoke about redefining what a millionaire is - not someone who has a millionaire dollars but someone who has transformed the lives of a million people.
MBA - Master of Better Alternatives
Subi is wonderful at breaking down ideas into bullet points and alliterative headings in order to remember things. His talk for the INSEAD Alumni of Luxembourg Anniversary was entitled ‘Expansion - Evolution - Engagement - Education’.
Through this, his main themes were:
(1) Wealth and wellbeing
(2) Evolution in the way we allocate resources and interact with one another
(3) People and planet
(4) we all need to Engage at the individual level in our choices based on information and our moral identity; interest beyond self-interest
(5) Educate
I hope you enjoy the wisdom of Subi and the mix of economics and social philosophy in this conversation. Please do get in touch with your own views and experiences.