Sunday Story: Constant Growth is...bad? Why Capitalism has an Expiry Date

Welcome back to Sunday Story. At Authentik, we make no secret that we lead with our values first, and one of our core values as a company (and as people) is this: People Matter. And in that spirit, some of our family needed our time and energy over the past 5 weeks due to some health concerns, so we took a step back from writing to focus on being where we needed to be.

This is a moment of growth for me as a leader and a writer - in the past, I probably would have bent over backwards to try to fit it all in, and the end result probably would have been me doing a subpar job of both writing and supporting my family - that’s what happens when we stretch ourselves too thin!

We’ll be writing about more of these “invisible transformations” in leadership in the future - no doubt you have tons yourself that you can related to - but today we’re talking about growth in a different way - because growth is a good thing, right? We always want to be growing as people - learning more about ourselves and others, becoming a more fulfilled and well-rounded person. We always want to be growing as a society, like ensuring people are living healthy and free lives. And of course we always want to be growing our customer base, right? Because growth is what it’s all about.

Wait a minute. Let’s unpack that a bit, because frankly the idea that growth is what it’s all about is a load of unsustainable, harmful nonsense.

“Hey everyone, the leadership consultant is saying GROWTH IS BAD” (If I was any good at dancing this would probably be hook on the instagram reel I make about this hot take).

But actually, let’s refine what I mean by “Growth is bad”, because obviously it’s not a binary “good” or “bad” - it’s about the context. Personal growth is still very good, people, but we are asking you to rethink the idea of “Growth is Good” from the perspective of the economic system that governs our lives - capitalism - because that system is one of the most disruption-prone systems on earth right now.

We asked AI to generate an image based on this article and it came up with the above.

Current State

There isn’t a single citizen on earth who isn’t living under the influence of the system of Capitalism. Even non-capitalist countries like Cuba are significantly impacted by the system that dominates the global system. And it’s not inherently a bad system - we won’t get into the fact that there are about $700 _trillion_ (yes, with a ’T’!) worth of derivatives that will implode the global financial system if there’s another hiccup like the subprime mortgage debacle. Nothing to see here folks - these economic challenges are transient and temporary, after all (that’s sarcasm, to be clear).

Capitalism truly has done us a lot of good - It incentivizes productivity in ways that have led to incredible innovations and quality of life improvements for humanity. Science, technology, medicine, art, agriculture, and more have all benefited in some way from this system and often in highly significant ways. But like any system, it’s not perfect nor has it been unchanging over the years, though its purpose has remained consistent. The purpose of capitalism is simple: Take an investors money and use it to add value to the world, charge money for that value, and give it back to the investor they end up getting more money out than he or she put in.

There’s a few different ways to add value to a shareholders dollar, but this post isn’t about complex economic or fiscal policy, just basic principles, and from that perspective there are only two ways to increase shareholder value: reduce costs, or charge more money for a given product or service. For most of the 20th century, the amount of money that was being charged for things went up relatively steadily according to inflation figures (save for a few key periods). However, our species has really excelled in reducing costs - automation, offshore labour, and other tactics mean that the creation of goods and services is as efficient as it’s ever been. But both of these approaches have a limit (though AI automation will make a whole host of things cheaper, in the coming years)..

We’ve already made the major leaps in cost-cutting. The nature of offshoring labour, a key element of this cost cutting, tends to increase the standard of living in the country that has accepted the offshoring (see: China), and as standards of living increase, so too do expectations related to wages and benefits which closes the gap on the savings that incentivized the offshoring to begin with. To continue saving money, corporations will shift production to other nations where this middle-class-boost hasn’t happened, but eventually they are going to run out of cheap labour. What do they do then, when all the efficiencies have been found and exhausted?

AI and robotics will help, but under the current system, the only option is to charge more. But, there reaches a point where a product simply costs too much, and people stop buying it. It’s not about what the product costs to make, it’s about what people are willing to pay for it, and if it costs too much, fewer people will be able to afford it. So that’s another limit on driving shareholder value.

This is where the entire machine breaks.

So what is a corporation to do?

The only remaining option is to find more customers - this is a benefit to having the “cheap labour” countries develop and grow their own middle class; this ends up being a whole bunch of new customers.

But that’s not sustainable. Imagine making the world’s best frying pan - so good it makes every other frying pan obsolete and everyone wants one. There are almost 9 billion humans on the planet today, which means you have a theoretical maximum of 9 billion customers. Even if some buy two frying pans, you still have a ceiling on how many frying pans you can sell.

Future State

Capitalism says “That’s OK! Don’t worry about it - because that 9 billion people will soon become 10 billion, then 11 billion, then 12 billions, so you can keep selling billions of frying pans!”

Except that’s not how this is going to go.

Capitalism relies on two foundational concepts: Limited supply for a given demand, and continuous growth.

Regarding growth, Corporations are always looking for new markets to grow into, because new markets mean new customers, and new customers means more sales, and more sales drive profit, and profit drives shareholder value. But according to the United Nations, as a result of this offshoring of labour and creation of middle classes around the world, we’re creating another problem, because not only do middle class people tend to buy more things and consume more stuff, but they tend to also _have fewer children._ This is true around the world - as a nation becomes more wealthy, they stop breeding more customers. Most Western nations - currently the wealthiest in the world - are actually not growing their populations at all _except_ via immigration.

And the icing on the cake of this one: the United Nations has made it clear that population demographic studies show a plateau of the human population at around the year 2080, the global population will peak. By 2100, our global population will start to decline.

This isn’t a hypothetical - it’s the natural conclusion of a global trend of declining birth rates. Growth of the population will end, and most people reading this are likely going to be alive to see it thanks to increases in medical technology and life expectancy.

To be abundantly clear, the end of population growth means the end of the current capitalist system, and this is only one of three ways in which we could see the end of that system in the next hundred years. The other two - which we’ve written about before - are Artificial Intelligence and the UAP issue. Both of these represent a likely path to a completely different concept of resource scarcity. Remember how I said capitalism relies on both continuous growth _and_ limited supply for a given demand? “Limited supply” of any good exists because of resource scarcity, and our ability to harvest resources from the solar system instead of just the planet - once the realm of science fiction but now very much in the realm of reality, as companies are actively working on making this a reality even before the benefits of new frontier technologies are fully realized.

So there you have it: Three separate, but near-certain pathways that will result in our current capitalist system failing entirely. But what does this mean?

Post-Capitalist Leadership

Right now, if you are in a leadership position in private industry, your job is really clear: Lead your people to complete certain tasks or achieve objectives in order to provide value for shareholders. If you are in a leadership in the public service, your mandate may not be shareholder value, but odds are what you do is only one or two steps removed from that - for example, higher education professionals produce quality graduates so they can be productive members of the economy which…drives shareholder value. Put another way, odds are good that your job is closer to delivering shareholder value than it is to Kevin Bacon, and that’s a maximum of 6 degrees of separation.

What kinds of decisions does a leader make when leading to deliver shareholder value? Let’s take the example of a staff member who is simply not performing well. In our current system, the leader is expected to figure out a solution to the problem. But our current system doesn’t really incentivize the leader sorting out a leadership solution to this problem - it incentivizes a management solution, and a management solution is often some version of a PIP, performance management, or termination and replace them with someone who will perform. Within capitalism, a person’s worth is determined by the value they produce; if someone isn’t producing, and someone else can produce more, the system incentivizes making a change, and it doesn’t concern itself with the consequences on those who are perceived as having lower value. Many of society’s ills are based on this problem, as folks are inundated with harmful stereotypes about the productivity of others which translate into judgements about the value of others, contributing significantly to the marginalization of others based on how they look, how they move, or who they love.

A good leader in this situation will seek first to understand and figure out why the employee is not performing. They will employ strategies to help get to the root of the problem, and they will recognize the poor performance has a good chance of being a symptom of something else. They won’t shy away from understanding if a person’s personal life is impacting their work performance, and they’ll have healthy boundaries about what they can and cannot help with - we mustn’t set ourselves on fire to keep others warm - but they won’t leave the employee unsupported. They’ll refer them to resources. Accountability still matters - if the proverbial horse has been led to water but refuses to drink, of course the leader must make a difficult decision, but that’s not where the good leader starts. It is only a last resort.

Conclusion

We’ve defined in this Sunday Story that there are three major disruptors coming for our current economic system. These are not hypotheticals, nor are these things going to be problems for future generations to solve. These disruptors are going to create conditions that are incompatible with our current systems, and we’ll no sooner be able to use capitalism in a post-scarcity, growth-declining world than you would be able to plug your 8-track tape into your iPod shuffle. We’ll still need a system - but the one we’ll need will likely look a lot different than the one we have. There are a lot of people already working on this problem, which is why you’ve heard a lot more about things like Universal Basic Income over the past few years, and the reason folks are working on it is the same reason the Titanic changed course - we can see the iceberg, dead ahead.

Unfortunately, humans have a natural tendency to be reactive instead of proactive. The clock is ticking, but we have a lot of work to do to prepare our systems and structures for this shift away from our current state of capitalism, and there’s a good chance we won’t do it in time and will be forced to react to this shifting context.

But something you can shift right now is your leadership practice. Change the frame on why you lead - is it for shareholder value? Then you’re leading from the 20th century. The 21st century and beyond needs people to lead people, not profits. Disruption is coming, and disruption is hard for people to navigate. In these times they look to their leaders for guidance and support, and when problems arise, they need you to show up with a Leadership solution - not a management one. We believe our Values Based Leadership model is the secret sauce, and it’s incredibly simple:

1) Be clear on your core values.

2) Refer to them often when making decisions, and articulate why you are making the decisions you are in the context of your stated values.

3) Pretty soon, your people will start predicting how you will respond in a given situation - they know your values, they know your frames, they therefore can guess your decisions.

4) By consistently deciding based on your values, you validate and affirm the predictions of those you lead.

5) That predictability breeds trust, and trust breeds psychological safety.

6) Repeat.

Adopting this approach to your leadership isn’t a guarantee that everything will be fine, but what it does do is create a community within your context that is psychologically safe and resilient, and is staged to follow you - their leader - and work together to find solutions for the disruptive problems in our future. These are not disruptors like a power failure or the coffee shop you visit on your way to work closing for renovations. The disruptions we are facing in the future are major disruptions - Industrial Revolution or the discovery of agriculture kind of major - and there’s a bunch of them happening at the same time. By showing up as a values-first leader, you give yourself and your people the best chance of thriving during this disruption, and finding the pathways to make it a transformation instead.

Because when capitalism fails, transformation for our society isn’t a choice - it’s mandatory.

Thanks for reading, and we’ll see you next Sunday!