The study of economics is about human relationships and the relationship between humans, money, goods and services, ideas and opportunity.
Spontaneous association in business (people who don’t know each other getting together to make profitable business) is in itself an area of study and one described eloquently amongst the works of Francis Fukuyama.
Some societies and nation states have so little capacity for spontaneous association between strangers that, corruption aside, only people from the same family, tribe or village can work together.
In others entrenched cronyism and monopolisation of worthwhile opportunity is also a persistent barrier to spontaneous association.
Such nations states as these are unable to create sufficient economic surplus or new economic wealth to achieve anything much. Many are in or near basket case condition.
Similarly, some economies it could be said are increasing their propensity to spontaneous commercial association others such as some first world economies have rated highly in this regard but now appear to be going backwards.
Acceptance of risk
Arguably the most important aspect to creating ongoing sustained new wealth is the ability of any society to foster and create new socio-economic relationships where acceptance of risk and focus on success and the enticement of supra normal rewards is the norm.
That is, commercial collaboration by people who have never met before, are multiple degrees of separation from each other and go on to cooperate to achieve profitable commercial outcomes.
Typically people in this context are hired on the basis of merit and skills and productively perform tasks best suited to their skills, experience and knowledge.
The commercial trust required for such spontaneous collaboration is principally derived from shared goals, common aims and focus on success. A successful outcome is not guaranteed thus the uncertainty itself acts as a type of binding agent where pursuit of success creates many more reasons for unity than for petty disputation.
Thus an innovation and invention economy, if it is to maximise its success, must also facilitate the creation of the new people/commercial relationships needed to turn potential opportunity into new well-paying jobs and profitable growing businesses.
‘Strangled at birth’
In a society incapable of spontaneous association where only people who already know each other can do business and where patronage plays a prominent and increasing role inventions and innovations are often strangled at birth by various rent seekers, passengers, buddies grasping favours and sundry flunkies.
Over the past 12 months I have reviewed a number of start-up businesses in Australia.
With the exception of the most junior roles, I found that everybody was already known to everybody else – or if not known – at the very least they all knew the same people in common.
Few if any were even modestly qualified for the roles they held – all got their jobs through one form of patronage or another. A sense of entitlement was palpable.
If Australia is to develop a successful value add manufacturing economy we must develop an inventive/innovation mindset as well as the capacity for spontaneous association.
Without both these factors in train our innovations will be needlessly frittered away.