That the future of profit is purpose is the modus operandi of the YK Center, a self-proclaimed “for-benefit organization” striving to push the needle on a more sustainable economy.
The Center was founded by **Professor Yehuda Kahane **and executive coach Tal Ronen in response to the 2012 United Nations document “The Future We Want,” which created a call to action to promote sustainable development and “ensuring the promotion of an economically, socially and environmentally sustainable future for our planet and for present and future generations.”
It strives to promote what it calls the “New Economy” by serving as a collaboration hub for sustainably minded researchers, developing innovation labs, “Game Changers” Labs and city-state labs, and creating new metrics. The Center also strives to help initiate a new phase of grassroot activism to promote better business.
Here the Center’s co-founder, Professor Kahane (who spoke at New Metrics ‘15 about the 4D Economy), discusses how his organization aims to make the New Economy happen now.
Can you tell us more about the YK Center and what it does?
Prof. Kahane: YK Center is a for-benefit organization. We harnessed the experience of some of the leaders in the mentoring and coaching field, as well as leading global organizations and CEOs, to lead a paradigm shift towards the New Economy. We are guided by the belief, supported by strong scientific evidence, that although the current economic system leads toward remarkable economic achievements, it has strong derogatory impact on the environment and the society. The system has to be improved urgently in order to prevent an environmental and societal catastrophe.
We still have a short-term window of opportunities to bring about the required transformation, through a "reboot" process, to prevent this grand threat on human survival. Our models and programs suit executives and boards of global organizations, governments (countries and communities), firms and individuals. We run fast and effective laboratories (we call them labs rather than workshops, since we know to lead the processes but we have only superficial acquaintance with the participants). We support rather than replace consultants employed by the organizations.
How would you define "The New Economy"? How does it compare to the traditional economy?
Kahane: The New Economy differs from the traditional industrial economy mainly by the basic motivation. In the traditional industrial economy, people serve the economy. The New Economy has to serve and satisfy our set of values - in other words, it is a multi-objective, rather than a solely economically driven, system.
However, there are many other differences, just to name a few:
- The New Economy is based on new, and unlimited, factors of production like information, data, and communication. These are unrecognized in a traditional economy, which is based on the concept of shortage of the three traditional production factors (land, labor and capital).
- The Internet of Things leads to economy with nearly zero marginal cost of production in many industries.
- The basic concepts of the industrial era (mass production, mass merchandising, mass transportation, mass medicine etc) is replaced by a more personal system.
- New digitized monetary systems.
- The development of the "global person" that is connected to every other person and has access to almost any type of information through smartphones and Internet. This creates a rapid shift of power from governments and large corporation to the public, enabling creation of a sophisticated democracy.
- A welfare state, with lower level of economic polarization among people. (A high level of poverty and high concentration of economic power among the rich has to be avoided in order to restrain the development of destructive revolutionary forces).
Is the New Economy the same as the traditional understanding of sustainable business?
Kahane: The New Economy aims toward "Thriveability" – which is strongly related to environmental sustainability, but represents a broader, multi-dimensional, concept. Moreover, sustainability means "leave no footprint." In the New Economy, we must already leave a positive ecological footprint (as long as this is possible within the rules of Thermodynamics) in order to counteract the impact of damages that were created by the current economy. For that purpose, we must urgently move to a more circular production and marketing systems.
Kahane: The traditional economy is driven solely by economic motivation: the desire of each player to maximize her (material) wealth. Countries evaluate their performance mainly by GDP growth, and corporations evaluate theirs and their management performance solely by (short-term) financial gains. However, we know that the market value of traded firms is on the average about 7 times their "book value." This means that the economic indicators explain only a small part of the real story, and that represents a serious problem of metrics.
The dashboard to guide the New Economy is multi-dimensional - it includes at least four dimensions: Economy, Society, Environment, and Citizens' (Customers' and Communities) Consciousness (ESEC). The target is to maximize a broader definition of wealth consisting of economic capital, social capital, natural capital, intellectual capital, etc.
Establishing the new metrics is a complicated, yet crucial, issue, and we still don't have detailed and agreeable metrics. We get what we measure. Therefore, the same metrics serve also as guidelines for decision making, and for motivating and remunerating the participants.
In order to reach an overall optimal allocation of resources, goods and services in the economy, there is a need for a uniform set of prices that is theoretically an automatic result of the "invisible hand" idea. This could have been solved by extending the traditional capitalistic system by ensuring that "wealth" represents also the non-economic values, and thereby the supply and demand functions, and the resulting equilibrium prices would reflect also these values. However, most of the effects relating to non-economic values fall within three problematic areas:
- They are often regarded as "externalities" –irrelevant for decision makers at the firm level.
- They are often related to what is known as "the commons" (land, air, water, nature and cultural value, plants and animals, etc), which do not participate in the supply and demand functions, and therefore are not represented properly, if at all, in the pricing system.
- They are often connected to non-competitive segments in the economy (e.g., concentrated large industries that are related to major natural resources).
- There are still many unanswered issues related to the desired metrics and to the ways to handle the above challenges. At SB ’16 San Diego in June, we are planning to host an in-depth session pre- and during the conference to discuss the dashboard and metrics that will be jointly presented to the UN and relevant corporations.
What can companies do today to thrive in tomorrow's New Economy?
Kahane: As long as there is yet no set of uniform rules and prices, each company can try to make approximated steps towards what it regards as the future economy. The best way in my opinion, and I am biased here, is to start by having a reboot session of its management, to discuss the future while considering a multi-dimensional approach, to reach an agreement concerning the values and vision, and to agree on a general dashboard. Although most companies think that they can do it alone, I don't think they get even close to what could have been reached with the help of outside mentors.
In general, each company should set an agreeable dashboard, create metrics to incentivize its staff for long-term achievements and innovation. And in addition, establish a collaborative innovative atmosphere that relies and encourages employees to feel and behave like owners.
Knowing that there is no sense in cutting the branch of a tree that one sits on, it is important to strive to decrease the firm's dependency on non-renewable energy sources, and work towards the adoption of a circular system. It should incentivize its managers and employees accordingly, taking the long-term rather than just short-term indicators.
Can you tell us about the Innovation labs, Game Changing Lab and city-state labs?
Kahane: The Game Changing Lab bridges between the place we are standing today and the shores of the New Economy. It serves as a "Strategic Design Incubator” for large and impact-making human & social systems, on a global scale. Such large systems are global & local organizations, states & countries and cities. The Labs simulate a four-dimensional (ESEC) situation that allows accelerated conversations. During the Lab, participants move from "Individual Genius" through "Collaborative Group Insight" and use group wisdom to achieve the end outcome of "intended impact investment."
The Labs can be looked at as enlarged models of the Avatar film, where the participants are "introduced” to the "New world." In the Lab we get to see both the Old and the New from a newly created "Supper Position."
Once the 4D world is clear to all the Lab participants, Game Changing ideas start pouring in and lead to and pave previously unseen pathways in the "forests and Jungles" of the global transitions we are all in.
The lab uses a collaboration of disciplines that play out in harmony alongside the co-creation of every person in the room. It is happening magically when we bring a group of committed and aligned people to an "aha" moment. It is always causing Game Changing ideas to thrive.
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Founder & Principal Consultant, Hower Impact
Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.
Published Feb 23, 2016 3am EST / 12am PST / 8am GMT / 9am CET