By Herb Bowie
tags: value creation
Many of the Practopian Core Beliefs will seem rather straightforward to most people: Liberty and Equality, for example, are fundamental human values that should sound familiar no matter what your background.
The belief in the importance of Value Creation, on the other hand, may be puzzling to many. What do we mean by this phrase, and why does it deserve such focus? Let me try to explain.
First of all, what I mean by “value” in this context is anything that humans find worthy and/or useful. This could be something as prosaic as food and water, or as esoteric as the latest iPhone. It could be anything that some number of humans want or need.
Next, what I mean by “creating value” is an expenditure of human energy to make something of value available in a way in which it was not before. So if you and I are walking through an orchard and I reach out and pluck an apple and offer it to you, you might rightly think that I’m not creating any value, for you could have just as easily picked the apple from the tree for yourself. On the other hand, if I’m taller than you, and you could not have reached an apple on your own, then perhaps I have created some value in this instance. Or if I own the orchard we are walking though, and I have grown the apples, then again my offer to give you an apple may represent another form of value creation.
In an example like this, the idea of value creation seems rather straightforward. And so it was for our distant forebears when they were living the simple life of hunter-gatherers.
However, as human society has evolved, four elements have been introduced to make the idea of value creation a mite more complicated.
Specialization: it turns out that we can be much more efficient about creating value when individuals and organizations focus on each being really good at one thing, rather than all of us trying to be good at everything.
Scale: When a bunch of us work together to make a lot of something, to be shared with others, we again become much more efficient at churning out value.
Surplus: As we become more efficient, we are able to create more value than is currently needed, and so we face some choices about what to do with the surplus.
Population: As human population levels have grown, we have more people available to create value and more people wanting and needing valuable goods and services.
As we humans have been influenced by these four factors, our value chains have grown longer and more complex. As a result, we have regularly run into all of the following sorts of problems:
We produce something that nobody really wants;
We produce much more of something than people want;
We don’t produce nearly as much of something as people want;
We end up focusing too much of our energy and resources on producing one thing, and not enough on producing something else.
An invention of something new ends up making something else obsolete, or less valuable, resulting in waste.
Note also that, as our production processes grow more efficient – and more complex – the delivery of an end item to a consumer may only occur after many interim products have been created by many intermediate processes, meaning that decisions about how and where to invest surplus have to occur long before actual consumers get to make decisions about what they really want – thus increasing the risk of running afoul of one of the problems listed above.
And so we see that, in our modern world, the question of how to create the most value for ourselves and others is an important question, but not an easy one to answer.
And oh, by the way, this is why the term “value” is nothing new for most people in the manufacturing world today, since the concept is one of the linchpins of the Lean Movement. And why, similarly, “value” has become a much-used term in software development in recent years.
So now let’s look at the full statement of this particular Practopian belief:
It is in the best interests of society to encourage its citizens to engage in activities that will create value for themselves and others and society at large, and to allocate capital so that the greatest amount of it is available for use by those with the strongest likelihood of using it wisely.
We’re really saying three things here:
We want people to create value;
Since in most cases people are not creating value directly for themselves, they will probably need some form of encouragement (such as a reward system) to help motivate them to optimize their value creation;
We want to allocate our capital (i.e., surplus) so that it has a good chance of being used wisely (i.e., to create even more value, and to avoid the problems listed above).
In practice, this Practopian precept concerning value creation means that we’d like to discourage activities that destroy or waste value, things such as:
And while value is ultimately in the eye of the beholder, we’d like people to make decisions about relative degrees of value based on the best information possible. This means that we’d like to discourage the propagation of false or misleading information, and would like to promote transparency.
We’d also like to see systems that provide rewards to people that are commensurate with the amount of value they are creating.
Finally, let’s look at this ideal of Value Creation as it relates to other concepts.
If we combine the precept of Value Creation with our Practopian beliefs about Liberty and Property and Individuals, and then mix in our understanding of the role of competition within the workings of Evolution, then we can pretty quickly assemble these pieces to put together something strongly resembling capitalism.
Yanis Varoufakis recently explained in the prologue to his excellent book Talking to my Daughter about the Economy, “I chose to leave out such words [Capital and Capitalism] not because there is anything wrong with them but because, loaded as they are with heavy baggage, they get in the way of illuminating the essence of things.”
I couldn’t agree more. If I had to put together a modern list of words that immediately inflame and confuse any conversation into which they’re introduced, that list would include:
All of these terms have been overloaded with so many complex and often conflicting meanings – and used so often not to communicate but rather to declare sides prior to engagement in a pitched battle – that they can no longer be used to elucidate anything.
So the Practopian approach is to try to reach agreement on a set of more atomic beliefs, before we start arguing about what sort of molecules we want to make out of them. In that way, hopefully, we can lay the foundation for more constructive discussions.
Published 2018 Jul 24