Sunday 25 January 2009

Windfall profits

In old films produced when it had not yet been trendy to be uniformly indivudual there was a character who seems to have died out by now: the crank, mostly dwelling in a village society, ridiculed, eccentric, at best jovially tolerated. But then, out of nowhere, some danger threatens the cozy rural company - be it a natural disaster, a band of gangsters, an alien reconnaissance patrol ready to conquer. Helplessness everywhere. The local elites fail one after the other. And then, when the plot reaches its climax, of all characters the crank begins to utter sharp directions, grabs the rein, only legitimated by the resignative insight he will not make things worse. As usual the crank turns out to be a genius disguised as a village idiot and gets rid of the problem of his own. Whether he will later obediently guide the elites out of their hideout or develop dictatorial ambitions remains an open question, for the film ends here.
This is of course mere fiction, but nonetheless there is a true core to it - a social system must live by its own ignorance. It must save a rest of unused competence to be eruptively set free as soon as the environment critically changes - qualification on the waiting list, as it were. Now, the point is that the system rather unconsciously cultivates this reservoir, for letting potential intentionally go to waste contradicts the organizational self-image. In other words: just by trickig itself an organization is capable of surviving crises. Necessity is the mother of invention, because it motivates creativity.
The Bible knows this principle, too; somewhere in the New Testament we are told about the stone the construction workers dismissed turning into a corner stone - quite a fitting image, for it implies organizational structures must know the difference between constance and rigidity. But we need not resort to exterrestrials or Bible words - the principle applies to everyday life, too. The elder people are avoided until the own children need low-price baby-sitting. And suddenly the death-bound methusalems over 40 actually can be useful.
Economics calls this cornerstone phenomenon windfall profits - unexpected chances virtually brought by the wind no strategy regardless how sophisticated it might be can take into account. Of course orgnaizations try to take chance into consideration, for instance with the aid of looking out departments; these departments are meant to generate the necessary sensitivity to environment as a kind of early warning system. However, this creates the problem of facing a paradoxy - namely generating a crisis by waiting for it to no effect at all for a long time. (It is the classical example of the risk insuracne.) At the age of small budgets the point of mere precaution investitions is less and less obvious. Opportunity costs become a luxury nobody will want to afford if that means one has to lower one's salary expectations. And after all does the inccalculable emerge not unexpectedly?
The general situation is that bad because all those who love to regard tehmselves as the elite have shut down their shutters and decided to lock out the windfall profits in order to lament the loss of profit inside. Not till the plight will have become big enough, innovativeness will be an evolutionary factor. Then the before exluded groups will gain access to the companies - not to the factory buildings, but where they in turn will lock themselves off later, as soon as they are saturated.
Recognizing windfall profuts in time is that difficult because the routine formula Since X, no Y suddenly turns into Just because X, necessarily Y. This is highly irritating, just as if black was white, the hero the coward, the fool the sage. In contrast, other cultures, be it the Ancient Rome, bei it Japan, windfall profits even have had their special day reserved - when the waelthy were to serve the slaves, when the employees are to give their employers a piece of their minds. And here? Well, we do have the carnival. But windfall profits require a conscious craziness - not a fuddled one the dawn will make forgotten.

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