In his book When More is Not Better, Canadian management professor Roger Martin explains the consequences of decades of efficiency optimization in companies and societal management.
When places and people become an abstract data factor, maximizing profit for the short term can have long-term consequences long term:
“We will be in trouble if we convince ourselves that we have to start big—arguing to ourselves that it is a big problem and only big solutions will get the job done. Once again, that is delusional in a complex adaptive system. Complex adaptive systems don’t generally take well to big step-function changes—a bit like the dinosaurs attempting to react to dramatic climate change. If we knew for sure that a big step-function change was in the right direction, it might work. But with a complex adaptive system, not even the smartest mind can know with reasonable certainty—if any certainty at all—what the best direction is. In this context, big is definitively not better.”“When More Is Not Better: Overcoming America’s Obsession with Economic Efficiency,” Roger L. Martin, Harvard Business Press, 2020; Chapter 10, “Starting big versus starting small.”
With extreme climate events rising, energy and insurance companies are trying to navigate the new scenario by maintaining their influence and avoiding damage—from liabilities to negative externalities—as much as possible.
Preparedness goes mainstream
At the same time, practices pioneered by traditionalists, counterculture purists, and preparedness heads are abandoning their cultish niches and becoming mainstream as individuals and collective entities acknowledge the value of having a strategy of applied resilience (from disaster protocols to maintenance and adaptation plans) in place.
As not only cars or homes but also roads and entire factories can be wiped out by climate events, a paradigm shift is taking place in front of us; only we don’t see it yet.
Those mocking the preparedness attitude of some rural communities as backward or outright fringe-religious have to come to terms with the fact that a cult-like belief in efficiency, taught for decades across the board (from the most prestigious business schools to lobbying by think tanks and powerful companies making modern management the holy grail of our times), made countries weaker and less resilient, as corporations streamlined their operations by offshoring and outsourcing the productive economy they boosted from mature industrial areas in wealthy countries to, especially, China.
Consequently, whole ecosystems of steel production, car and aircraft manufacturing, shipyards, pharmaceuticals, or high-value petrochemical production (associated with manufacturing electronics, advanced chips, solar panels, etc.) closed their doors in advanced economies. In contrast, a select group of Asian corporations headquartered in Taiwan, South Korea, or China, reinforced their ties with Western companies to concentrate the world’s manufacturing.
Modern management’s dirty secrets aren’t much of a mystery: slashing higher costs at home meant embracing procurement and slashing inventories by coordinating offshore providers on-demand, a model praised by some of business school icons, from Daniel Kahneman’s behavioral theory to the business and investment “wisdom pills” of the Warren Buffett/Charlie Munger tandem, GE’s Jack Welch, etc.
The risk of banking it all on efficiency
With anti-monopoly laws losing their former clout, the business mantra of the 90s and early 2000 saw new investment flowing into technology (a sector less reliant on a gigantic, concentrated worker base), and mature companies closed factories, laid off workers, and presented a long-term vision paradoxically stuck in the short-term: growing fast at all costs—even in a slow-growth economy—so investors and stockholders get rewarded. Few followed up on the consequences of such policies, not only for millions of workers but also for entire regions.
As “eliminating redundancies” became the most precious objective of management science and the world became more interconnected, depending on a complex network of procurement backed by the Internet and the economies of scale of concentrated offshore production and container shipments, countries lost their effective powers to rein in a grey-zone of lower-cost foreign production that became de facto subsidized by the markets where the goods were sold.
Foreign direct-investment liberalization, deregulation, privatization, and redundance-fighting corporations and governments benefited from the short-term economic gains of efficiency. It took a pandemic and a series of lockdowns that disrupted production and container shipments worldwide to make the world realize that the business-school cult that fought redundancies and product inventories like religious zealots made everybody dependent on the same components stalled in some Chinese production hub.
Major events affect the way we produce energy, food, and goods. Ongoing phenomena show a world drifting away from the decades of direct-investment liberalization, frictionless international commerce and reverting to a multilateral reality. Not only climate turns more uncertain and supply chains will need to adjust even for corporations that have already turned into de facto sovereign entities, holding their own international policy, whether the trumpeted US-China decoupling happens in reality or not.
Ripple effects in an interconnected world
We all are a part of a big human experiment of interdependence, as if the so-called butterfly effect, which describes how a small change in one place can later affect larger phenomena, were playing in real-time in front of us. Those more prone to suffer from inflation or disruption of international food and goods markets will need to pay more for less.
Several events are already affecting millions of people, though their long-term consequences are likely to be much larger, affecting the lives of a considerably bigger part of the world population than current data acknowledges regarding, for example, the Russo-Ukrainian war, the economic uncertainties that China faces due to an acute credit bust linked to real estate excess borrowing (which in turn affects internal consumption), the rise of AI tools—that could transform entire businesses and even diminish the formerly rosy prospects of having a computer science major—, or instability in Asia due to Chinese aspirations in Taiwan and the South China Sea.
In a corporate world that disproportionately rewards efficiency, any approach destined to reduce potential breaking points by increasing redundancy and establishing any comprehensive strategy of resilience would have been considered as “waste.” That is, up until recently.
But the increased unplanned risks associated with a warmer temperature that holds more moisture and dislocates weather patterns, pouring water in some areas while scorching previous temperate areas are finally transforming the long-held business school dogma that read the world as a frictionless, mostly deregulated business arena ripe for consolidation and technological acceleration, as described by Thomas Friedman’s non-fiction bestseller The World Is Flat, some sort of follow up argument of Francis Fukuyama’s The End of History and the Last Man (1992).
All it takes is a black swan event to prevent the world’s car and smartphone manufacturers from lacking the advanced chips or rare earth materials included in their core components. As climate surprises establish themselves as the new normal, resilience could evolve into the ultimate competitive, long-term skill.
Risks in a globalized food system
Instead of depending on a highly efficient system to produce goods that let others organize the economies of scale of production and distribution, a more complex world both in climate and geopolitics will give an edge to those countries and organizations capable of creating their own strategic networks. However, there’s no haven if the costs of extreme weather events make damages so high that insurance companies abandon entire markets, and producing or shipping things also turns too expensive and unpredictable.
Governments in States like California or Florida, or entire countries and regions (say, the US or the European Union) can afford to take over markets where no private insurers are willing to take the risk to enter, which would increase costs for taxpayers and premiums for customers.
If weather patterns turn more erratic in temperate areas like the upper part of the Mediterranean basin and extremes increase in the fertile monsoon intertropical zones across the world, modern agriculture could face its biggest challenge since the start of the Green Revolution after World War II, once modern fertilizers and genetically modified crops multiplied food production with intensive agriculture —at a high environmental cost with a loss of soil and varieties difficult to measure in its whole extent and potential ripple effects.
The world has used a reductionist model to quantify produced goods, commodities, and foods as if they were predictable assets that can be finetuned for maximum efficiency. When it comes to food production, this mental model has relied on the same rationale that saw the rise of affordable furniture, luxury products, electronics, household appliances, branded clothes, or cosmetics.
When food is less nutritive (and how to revert it)
Like all these markets, strategic food production is globalized and traded or transported similarly, with added challenges (heat effects on food, higher energy costs to justify refrigeration, short optimal lifespan, etc.). Ever since Chicago and Buenos Aires transformed the global meat industry once modern transportation, packaging, and refrigeration justified sending fresh food across the world, food production has risked a decrease in quality and nutrition value due to the “commoditization” of food systems: when agricultural goods for sale are combined in large, interconnected logistic centers, they become a commodity for sale at large and not something perceived as food for home consumption.
There are studies trying to measure the interconnection between environmental decline and nutritional decline of main food staples. One study by Chunwu Zhu (expert in soil science, Chinese Academy of Sciences) states that higher CO2 levels “alter the protein, micronutrients, and vitamin content of rice grains with potential health consequences for the poorest rice-dependent countries.”
The debate about a lack of resilience in interconnected markets, especially when black swan events disrupt mechanisms of arbitration and transportation with few redundancies, shouldn’t be one that believes in only two possible systems: one with exclusive localized food systems; and another that bets on a greater global coordination and considers food, first and foremost, as a commodity like rare metals or oil barrels.
The local-global debate mercantilizes food and forgets about ecological impact, food varieties, cultural significance, or food security during disasters (a matter already mastered by the first heavily centralized civilizations, like those in the Fertile Crescent and Egypt, which would store a part of staples in centralized and protected silos). Resilience, defined as the ability to respond, adapt, and transform when faced with a black swan event, could consider ecological systems and people’s culture and rights, and not only whether food systems are local or global.
Modern agriculture could learn from traditional systems to gain resilience, some of which have been used for millennia, like qanats, Persian underground aqueducts interlinking aquifers and wells, a survivalist adaptation when floodplains in Central Asia faced desertification at the beginning of the Bronze Age. A study by Iranian researchers Masoud Saatsaz and Abolfazl Rezaei published in Nature explains the fascinating history of “the technology, management, and culture of water in ancient Iran from prehistoric times to the Islamic Golden Age.”
In the high Andes, several rural communities are recovering pre-Hispanic water management systems. The Incas dug “qochas” in the soil (lakes or ponds of natural or artificial origin) during the rainy season (December to March). It was a technique to “plant water” for the dry months to be able to manage agricultural systems at lower altitudes for the rest of the year: as the qochas gradually filled with water, it would slowly filter through the earth, powering aquifers that reached crops in lower lands.
Water harvesting in the Andes contrasts with the waste and damage of water runoff after heavy storms, an increasing phenomenon as higher temperatures trigger bigger moisture concentrations in storm formation. Traditional water management advocates, like Tucson-based Brad Lancaster, are raising awareness about the opportunity of gathering storm water, diverting it into street vegetation, gardens, and urban food forests. Kevin Lane, a researcher from the McDonald Institute of Archaeological Research in Cambridge, published a study about the sophisticated ancient water technology in the Andes, which could inspire similar system across arid mountain regions subject to monsoons and tropical storms.
Ancient hydroponics and milpa
Different cultures in tropical and subtropical environments across the world developed ways to reach high yields by creating floating gardens at large scale, like those in the districts of Gopalganj, Barisal, and Pirojpur in Bangladesh, or the Aztec “chinampas” in Precolumbian Mesoamerica. The Aztec capital, Tenochtitlan, was a prosperous city with an estimated population of 140,000 inhabitants on the lake Texcoco. Food production in chinampas were an ancient way of producing food and land reclamation.
Aztecs on lake Texcoco created artificial islands by laying woven mats of reeds covered with mud, lake sediment and aquatic plants. The beds, an ancient precursor of hydroponics, were productive and versatile, producing the main Mesoamerican crops, later adopted by the Spanish and distributed across the world during the so-called process of the Columbian Exchange: corn, beans, squash, fruits and vegetables.
Several regions of the Precolumbian Americas developed crop-growing systems that achieved consistent yields by combining several crops at once in fields that didn’t require intensive plowing, pesticides, or fertilizers. In Mesoamerica, the “milpa” consisted of a field with up to a dozen crops at once: maize, avocados, several types of squash and bean, melon, tomatoes, chilis, sweet potato, jicama, amaranth, and mucuna.
As Charles C. Mann explains:
“Milpa crops are nutritionally and environmentally complementary. Maize lacks the amino acids lysine and tryptophan, which the body needs to make proteins and niacin; (…) Beans have both lysine and tryptophan (…) Squashes, for their part, provide an array of vitamins; avocados, fats. The milpa, in the estimation of H. Garrison Wilkes, a maize researcher at the University of Massachusetts in Boston, “is one of the most successful human inventions ever created.”“1491: New Revelations of the Americas Before Columbus,” Charles C. Mann, 2005
Yet, for some reason, low-impact crop systems like the milpa, capable of self-regulating and attracting animals and insects that guarantee pest control, have only survived residually in some areas of Southern Mexico and Central America.
In Hombres de maíz (Men of Maize), Guatemalan Nobel Prize Miguel Ángel Asturias depicts the remains of the ancient cultural memory of the descendants of the Mayan people, and their belief that human flesh was made of corn, as depicted by the Popol Vuh, one of their sacred books.
A butterfly effect on the positive side
Inspired by oral tradition and old myths affected by the syncretism of the Columbian Exchange, Men of Maize also depicts the milpa as the sacred plot that gives and regenerates life.
During the last decades, amid the expansion of intensive agriculture depending on monocrops (often genetically modified to maximize their outcome) and chemical fertilizers increased yields and expanded food security across the world, a different phenomenon worried experts: the loss of biodiversity, as well as excessive use of water and a fast deterioration of soils affected by runoff.
Some renegade biologists and farmers became advocates of the early organic movement, inspired by the counterculture call to return to the land and achieve self-sufficiency in publications such as the Whole Earth Catalog. Bill Mollison in Australia and Masanobu Fukuoka in Japan promoted non-intensive ways of promoting more sustainable, high-yield agriculture modalities they called permaculture and no-till natural farming, respectively.
Such methods have proved their positive effect on regenerating soils and preventing desertification, although they remain on the fringes, adopted by small farms and DIY enthusiasts but marginal in commercial agriculture. Perhaps they are about to abandon their relative marginality, embraced by former naysayers who now experience unprecedented environmental calamities in front of them. Once thing is clear, nonetheless: the time to remain cynical is over.
The butterfly effect could also revert some of the damage by amplifying some of the best practices embraced by ancient and modern natural farming methods.