Where history is a better guide to the future is on the nature of change. It reminds us that we are a stubborn species: one that is deeply resistant to making profound changes in our behavior and habits, even when it is clear that we need to do so. But it also reveals that when change is forced upon us we are astonishingly versatile. We are able to quickly adapt to new, often very different ways of doing and thinking about things and in a short time become as habituated to them as we were to those that preceded them. This being so, while automation and AI have made it possible for us to embrace a profoundly different future, it is unlikely that it will be the catalyst that causes the dramatic changes in “social customs and economic practices” that Keynes envisaged. Far more likely catalysts take the form of a rapidly changing climate, like that which spurred the invention of agriculture; anger ignited by systematic inequalities like those that stirred the Russian revolution; or perhaps even a viral pandemic that exposes the obsolescence of our economic institutions and working culture, causing us to ask what jobs are truly valuable and question why we are content to let our markets reward those in often pointless or parasitic roles so much more than those we recognize as essential.

Here are two reasons why this might happen. First, perhaps, as political economist Benjamin Friedman argues, people are more morally motivated in times of economic growth. When the economy is growing, everyone can be better off than they were in the past. This means, Friedman argues, that citizens will worry less about how their life compares to the lives of people around them and will be more supportive of generous, open, and tolerant social policies. And if you look at the historical record, he claims, countries tend to make moral progress—becoming fairer, more open, and more egalitarian—during higher-growth periods, and they tend to morally regress during periods of stagnation.

A second reason ties back to our earlier discussion of cultural evolution. When technological innovation is possible, there are great economic gains to be had from critical thinking and scientific inquiry; and since economically successful cultures gain more members, cultural evolution currently selects for traits conducive to science. As a side effect, so this argument goes, we apply our critical capacities to moral issues, too, and therefore make moral progress. In a stagnant world, the economic reasons to engage in critical thinking and scientific inquiry would be much weaker. Instead, other values would be selected for, such as those favouring hierarchy and conformity, which have guided so many societies in the past.

Such co-evolution— of people and their foodstuffs, of science and technology, of social, political and economic institutions— is the history of economic development.

In business, in politics and in our personal lives, we do not often solve problems directly. The objectives we manage are multiple, incommensurable and partly incompatible. The consequences of what we do depend on responses, both natural and human, that we cannot predict. The systems we try to manage are too complex for us to fully understand. We never have the information about the problem, or the future, we face that we might wish for.

Satisfactory responses in these situations are the result of action, but not the execution of design. These outcomes, achieved obliquely, are the result of iteration and adaptation, experiment and discovery. Re-engineering— ‘tossing aside old systems and starting over’— is called for only when systems are seriously dysfunctional. And in almost all cases. The best means of re-engineering is not ‘going back to the beginning and inventing a better way of doing work’ but trying models that have been successfully tested elsewhere. This is equally true of our personal lives, our corporate organisations and our social and economic structures.

PART 8: The Best of Times, The Worst of Times

32: Ambiguity is a Feature, Not a Bug

“Adaptation with selection, the basic mechanism of evolution, is the process through which collective intelligence develops and the means by which successful firms find products and business processes appropriate to the needs of their customers. Disciplined pluralism, which allows freedom to experiment but is quick to end unsuccessful experiment, is inseparable from economic progress.

The focus on the firm as a collection of capabilities gives a different and more illuminating perspective for understanding the extraordinary diversity of business organisations and of businesspeople over geographies and over time. The core ideas in this book – collective intelligence, radical uncertainty, disciplined pluralism, relational contracts and the mediating hierarchy – have been extensively developed and discussed by earlier writers, though much of that work has been outside the context of business organisation. The relevance of each to the argument of this book arises from a belief that in the modern world successful commercial relationships are not simply instrumental and transactional; they are social and are embedded in a wider framework of communities and teams. That transactional view was both incorrect and unattractive. This book is written in the hope that a better account of how business and its stakeholders flourish will point the way not just to a better understanding of business but to the better conduct of business itself. In a successor volume I will try to explain some of the implications of that understanding for both business policy and public

Policy.