Politics Snippet - Western Democracy in Danger

Western Democracy in Danger

Brexit and Trump's election win have shocked the world, especially given the narrow margin they won by and the failure by the polls to detect those margins. However, the underlying trends are more worrying than the fact that the Brexit camp, the Trump camp and other extreme right groups across Europe are on the rise.

Utilising the "Why Nations Fail" framework, we now understand that democracy such as separation of executive, judicial & law-making powers and universal suffrage are only mechanisms; the key is the recognition of pluralism in a society and a consensus to protect pluralism. The democratic mechanisms are then manifestation of such a consensus, and the details of the mechanisms will be based on the consensus and nature of the society.


What we are now witnessing in the US, the UK and Europe is the adherence to the superficials of the mechanism and an erosion of the pluralism consensus. Using Brexit as an example, the vote itself is a democratic outcome and a revelation of the citizens' preferences. It is the simplest case of pluralism - there are two camps, one 'for' and one 'against'. What happens following this revelation is the test for pluralistic tolerance - how will the state treat the result, how will the winners behave and how will the losers respond?

Half a year on and we have done a poor job. The 'win' result has become a holy baton for the Brexiters, such that everytime a free trade deal was mentioned ("Soft Brexit"), they would charge and yell "Brexit is Brexit", with no intention of assessing the realistic situation and understanding the motivations and anxieties of the Remainers and why they preferred remaining. The public is not ignoring the referendum results, but asking that amid the "win", the complexities and anxieties that have surfaced through the referendum are also considered and addressed in subsequent moves.

With the Brexiters trying their best to remember only their victory and not the fact that 48% of the population voted to Remain, and the government siding with this singular mindset, it is little wonder that the Remainers would resort to the independent judiciary to effect a parliamentary vote, to give a formal stage for the pluralistic views to be voiced, recorded & reflected upon.

People often speak of "Tyranny of Democracy" when the winning party takes all and the dissenting views are happily brushed aside and not considered in policy-making. The Parliament exists exactly to counter such tyranny - even if a party has gained a clear majority, that party must still put policies on the table, allow the opposition parties to voice the pluralistic concerns and pressure the ruling party into amendments, and likewise a voting procedure is in place so that the enacted policies represent a genuine consensus from the society.

If the 'Brexit' mentality has been brought into formal political mechanisms, then there need not be a parliament, just a regular vote on which party/politician should rule the state for next 5 years, and allow them to make policies without parliamentary votes, for "a Tory win means Tory rules" or "a Labour win means Labour rules". Even a parliament in which all voting members come from the winning party would not be necessary, for that would mean potential dissents and breakaway from the original promises set out in the election campaigns.

Another manifestation of fading pluralism is the rise of Right Wing politics. There is nothing wrong with expressing concerns over rising number of migrants and the squeeze on welfare & state finance. Voices should be let out, changes to policies should be advocated, and consensus should be reached with other parties who see the migrants from a different angle. The core issue is that the dissenters are giving up their own pluralistic character and instead of focus on their common single identity - their ethnicity, country of birth etc, and allow a singular view to emerge. The far rights groups such as UKIP, Trump's core support groups and Tea Party are dangerous because they encourage their supporters to ditch their pluralistic values and become a 'singular, united' group, and this reduces the plurality of the society. As a singular group, they may exploit their size advantage to pass discriminatory laws, support covert racism in workplace or on the street, and pressure minority groups into submission. Sounds too distant and improbable? The Nazi's attitude towards the Jews was a classic example, but so is China's popular attitude towards the Xinjiang ethnic minorities, and Malaysia's popular attitude towards the ethnic Chinese.

The US and Europe are proud of their democracies and ability to reach consensus for the entire nation to move forward. Now everything is in danger.

Life Snippet - helping people who are passionate about their job

Helping people who are passionate about their job

My previous blog post was about how UK is following Hong Kong's path into an over-competitive, leisure-less society where people are forced to spend excessive energy in preparing and competing for highly paid jobs, sapping time from hobbies and activities that shape individual characters and breathe souls into lives.

But it's not all lost in the UK, for there is another phenomenon that is showing green shoots that can counter this still-not-set trend. In my current and previous workplaces, I have been witnessing colleagues who are passionate about their job roles and the expertise & intellectual depth accompanying the job. Just a few illustrations:

A) Working in a supermarket chain, I have met a supply chain manager who told me 'supply chain optimisation is my life-long passion, it just so happens that I am also a manager', and we discussed at length what the latest technologies could help him solve some of his problems and make the backrooms in supermarkets efficient

B) Working in a digital transformation team, the engineers have their own side projects to explore the latest code bases, and they use their work as experimentation grounds on new ways of doing things. Hackathons and 'exploration days' allow them to use their skills & knowledge on mini projects or work-related improvement that truly interest them (as opposed to the main bulk of work that needs to be aligned with strict business needs).

In the HK path, people are turning 'education certificate hunting' and investing into their passion and hobby to cope with the competition; the above UK trend shows the reverse of pursuing interesting work that become their passion & hobby, allowing individual characters to be developed. The result is mutually beneficial - my colleagues enjoy more from their day job, they savour challenges and new work, they cope well with autonomy, and the company have a productive team.

But this doesn't come free free or naturally - the companies need to recognise that the jobs are people's passions & hobbies as much as a 9-to-5 money-earning activity, and modify job roles as such. This means:

Re-package job roles to make them wholesome to the worker. A traditional company may have accounting, payroll, marketing, operations, business development, central office etc. However, if work is infused with passion, this kind of vertical dicing may have to change - for example, give accounting & procurement responsibilities to the people in charge of supply chain, so that they can go into exploring the new external suppliers and the benefits, and also be responsible for the decisions made. In effect, they now run the end-to-end project just like participating in their own hobbies

Re-distribute power & responsibilities. This is related to the first point but the 'cutting angle' is different. Give people autonomy in work and move away from strict command-and-control work organisation. Instead of the senior managers making decisions accompanied with detailed plans, then asking the team to execute with detailed methods & steps, turn around and give people the target state to be reached and resource/time constraints, then allow them to make decisions & co-ordinate with other teams to hit those goals. If this turns out well, allow the team to participate in target state-setting

Re-define work time and off time. Including myself, passionate people will spend their leisure time looking into work-related issues. It can be spending their time to work on the project, or getting themselves educated about trends and knowledge in those fields. If they are blurring work and leisure time, then the strict 9-to-5 contractual working hours should also be blurred - if they want to read about not-strictly-work-related articles or spend some time doing errands during 'working hours', so be it. As long as people are dedicated and focused, time flexibility should be granted

Re-shape career development & support. A traditional company that dice work in strict functions and decision vs. execution hierarchies have lots of layers, and career development would mean working up the layers. In a passion-infused work environment, 'career development' can take many more forms - opportunities to take up a wider scope (e.g. making procurement decisions), leading bigger projects, attending conferences, overseeing a number of projects and co-ordinating the colleagues to ensure the projects are aligned etc. Their job descriptions and titles may have changed little, but the impact of their roles on project progress, team formation and direct value-add to the company are expanded exponentially. Development paths must be re-shaped to give a clearer guidance on what progression means as they are no longer carved in stone or in formal hierarchy charts; this will then impact on what courses and learn-on-the-job goals they should fulfil. With a new workplace organisation, a new support structure is required.

Re-engage external groups and work associations. When a person pursues their hobbies, they tend to utilise like-minded people heavily through hobby groups and associations. They may interact directly - conventions, conversations, group meets, common projects, competitions; they may also interact indirectly - books, magazine, web chat forums, exhibitions/concerts. Such an environment should be created within the companies and across companies, so as to allow individuals to flourish and break from the confines of the projects offered at work - if they are forced to work on the same project in strict business confines, the narrow scope will bore people as autonomy and exploration are very much reduced. This can be overcome by allowing them to interact with other people on different projects, or being able to explore a range of topics through the project they are working on (hackathons or learning days), or empowering them to take on side projects.

to summarise, as a new work-life trend emerge, it is a good time to jump on it and give it the best chance to succeed. If changes are required, then we should make way for such changes to take place

Life Snippet - the dangerous parallels between the UK and Hong Kong

The dangerous parallels between the UK and Hong Kong

Having lived in the UK for over 10 years with frequent travels back to Hong Kong and a close eye on what's happening over there, my wife and I came to the conclusion that UK is following the "Hong Kong path" with a 5-10 yr gap but it's closing in. And that is worrying.

The "Hong Kong path" is characterised by a squeeze on life through rising property prices and diminished opportunities leading to excessive competition, a focus on money & "prep to win". These all add up to take time & energy away from cultural, leisurely and intellectual pursuits and the little time that people have for leisure are reduced to blind TV watching, mobile gameplay and eating (not cooking or becoming a food connoisseur). These social changes will then brew inter-general tensions and resentment on life.

The first warning sign was of course the rising house prices in the UK. It is OK for house prices to go up, but when the prices require a couple's working life incomes to be handed over in exchange for a small flat, the mindset and preferences of the people will become dominated by the house. To start with, people will fight for higher-paid jobs instead of trading salary for better lifestyle - you either have a nice house to enjoy life in, or you can only rent a very small and shabby bedsit to feel miserable in despite having a 'lifestyle job'. Then the stress of saving every penny to catch up with the price hikes means all leisurely activities are out of the question, and people can only fall back to 'basic enjoyments' like eating or watching TV. The society is at risk of becoming boring and un-creative, with an emphasis of having a good job that pays well.

The trouble starts with the adults but then propagates to the teenagers and children. As money becomes the only way of securing a decent property and having a good life, they cannot afford to be distracted from academic work or any 'officially sanctioned' activities that will contribute directly towards job-market competitiveness. You must do well in school, and you must get into a good school. If you test results are not great, we will get you a private tutor. It is good to play football, but please join a club and make it into the squad, so that you can write about it in UCAS and on your CV. Leisure reading and fooling around is a waste of time, you can spend the time instead of something you can write about or demonstrate directly - revising, club football, or fancy activities like Model UN. Again, creativity and self initiatives are taken out of life, and recognising your own strengths & weaknesses and tuning your life towards them are not encouraged.

Both the adult life and childhood becomes that of 'making sure you can earn money', and your liberties are taken away - leisure time is requisitioned to invest in the future, and you develop yourself into a better work machine rather than a better all-round individual. You have to learn to love hobbies and subjects that are somehow related to earnings such as stock investment. Gradually, the society becomes monotonous as the variety of hobbies are no longer practised, while schools are turned into 'exam results factories' instead of places where the young generation grow into confident & capable individuals.

The impact of the above cannot be under-estimated. Without the wild energy being expressed in a multitude of lifestyles and pursuits, the society become more conformed and practical, rather like all those high streets that look the same. People are not excited about life, and they will just 'work, eat, sleep, spend money, do nothing'. It's a dull society. Worse still, it is one in which money's power become compounded - if you have more money, you can live in a much better property, you have more money to 'buy' what you do not have time pursue at leisure. This re-inforces the vicious cycle of squeezing out leisure time, abandoning leisurely pursuits in favour of spending all the time to invest in the future for a high-earning job.

The capstone (or tombstone) in this cycle is the inter-generational tension. The older generation (in HK they are the baby boomers, in the UK it will be the generation born in the 70s and 80s) managed to secure properties when they were cheaper, and they could afford to choose their lifestyle - the mortgage is low and so they can decide to work part time in order to have free time to do what they like; they also lived in a time when competition for school places and jobs are less fierce and so they had free time to build their hobbies and individual characters. In contrast for young generation, they spend their childhood competing with one another, then working to death to earn the down payment, and leisure time is either catching up with rest or thinking what next to learn in order to 'keep up with the market'. Good life vs. no-so-good life, and conflicts ensue.

It's not a positive picture, but the endgame is currently being played out in HK (and also China, Taiwan, Singapore, Japan etc). The UK is following along the same track, but there is time to break out of it. Not acting is not an option, for time is running out.

Work Snippets - The role of digital product owners

The role of digital product owners

In my work experience and from conversations with other digital product owner practitioners in other companies, we all 'sigh' and realise that few people understand the role or value-add of product owners, and give us the due respect.


A common mis-conception is that 'product owner' is a fancy term for good old 'project manager', and question the attempt by product owners to position product vs competitors or direct marketing and commercial efforts. In a lot of workplaces, there is a constant tug-of-war between UX (user experience) designers and product owners, both believing that they should control the product roadmap and product definition.

This kind of struggles or mis-conceptions come from the rather hazy definition of product owners' role. An outside observer may find the product owner managing the progress or meeting development deadline; at other times they may be testing out competitors' products and identifying features; other times they may be configuring marketing campaigns or SEO. It's very varied, almost impossible to pinpoint a 'typical day'.

I used to put product owners as 'trustee of the product', the main person who understands the product and purveys the desirable states for the product to be in, then sets out the corresponding actions. While this description helps to explain the wide scope of work, it failed to set out how product owners' work relate to/ separate from other participants in a product such as marketing, UX, commercial, engineering and project managers (scrum masters).

Upon deeper thought and recent experience in the workplace, a product owner should be viewed as the 'perspective definer of product'. At any given time, different stakeholders have different view on how a product should look like/ behave/ perform/ relate with other products/ position amongst competitors. A stakeholder may have a string of opinions that bleed beyond their own field of expertise (e.g. a marketer may have thoughts on the pricing schedule or user interface design), and importantly these different perspectives may either contradict each other, be based on incomplete understanding of the product's situation and challenges, or over-emphasise their own field's needs (e.g. engineers will want a product free from even minor technical bugs).

With opinions floating around, what should be THE PERSPECTIVE for the product? There needs to be ONE perspective which then set the direction of the product and the contribution required from different fields, so that the product is aided by their inputs instead of being torn apart. The last thing you want is for the marketing department to sell the product as a niche competitor, yet the UX designer decided to put a premium feel on it and the business expects its client base to be the mass public.

This is the job of a product owner - gathering the different perspectives and their drivers/motivations, gathering market info and internal data, forming a vision for the product, then generate THAT ONE PERSPECTIVE to unite efforts. A product owner thus needs to be knowledgeable about the product, have a view of the market, understand the company's priorities and corporate strategies, work well with different stakeholders, be able to assimilate new information, and be able to express the perspective back to stakeholders and help them move from their own perspective to this united perspective.

This is why product owners spend so much time in meetings and thinking, and also helping out on a multitude of tasks - from reading through T&Cs to expressing an opinion on technical architecture, and challenging UX on their designs - perspectives cannot just be expressed in words, they also need to be demonstrated; at the same time, the same perspective is subject to stakeholders' own interpretation and adjustments are needed to correct their interpretations. Hence all these involvements.

Reading Snippet - Why Nations Fail (14)

How I would abridge this book

I would start with the concept pluralism, meaning that each person is a unique individual as opposed to singular identities in which certain attributes are used to put people into broad segments, ignoring all the other numerous attributes. Because each person is unique, the ideal society and rules and policies is different for each person. This gives importance to 'freedom/liberty' so that people can express themselves and be themselves without being interfered, but at the same time there must be common rules to control this freedom and ensure one person's freedom does not encroach other people's freedom.

This 'freedom dilemma' leads to the concept of 'government', and the importance of having a centralised government that can enact laws and provide administrative services - these laws and administrations allow individuals to live in close proximity with each other and have the conflicts resolved.

The next concept is that of human nature, i.e. the tendency of being greedy and wanting more economically (income, assets). The Central government positions become attractive due to the official power and privileges they confer, and the ability of apportioning economic benefits via such powers - this links political power with economic benefits. People with political power would use the power to gain economic benefit, while economically privileged people would try to gain political influence to secure their economic privileges. This can come in the form of revoking property rights, granting monopolies, heavy taxation, slavery etc.

If this kind of situation is un-mitigated, a small 'elite' with extensive political and economic power would emerge, and the intricate linkages would make it hard to break. This will lead to divergence in society in the powerful 'elite' and the powerless 'commoners', and the elite would find it easy to extract economic values from the commoners. This reduces the incentives for the commoners to work or innovate as any gain would be taken away. A stagnant society results.

In this type of society, either the elites try to steal power from each other to become more powerful, or some commoner groups attempt to revolt & replace the elite. In the former case, the civil wars would destroy what's left of the government and removes all the fruits of people working together; in the latter case, the society repeats itself. This is an easy path and world history is littered with examples.

To break away from this mould, the society needs to re-distribute the power, so that the government is centralised but not absolute - they must be empowered to provide administration, but there must be effective checks & balances to prevent abuse. This means the mechanisms of democracy - constitution, independent judiciary, administration & civil service, law-making group, and universal suffrage.

However, 'democracy' is a set of mechanisms, and itself alone would not prevent falling back to the historical cycles - again, there are numerous historical examples. Education & literacy alone wouldn't solve the issue. The key concept here is the society's recognition of pluralism, so that there is little incentive for people to form into factions and try to gain absolute power for their own faction. Only with this concept embedded in mainstream society and reflected in political institutions, would democratic mechanisms serve their purpose - creating an inclusive society that would uphold individuals' liberties without creating a lawless & messy society.

The historical examples such as Glorious Revolution, French revolution, Meiji reformation are good illustrations, especially when compared with their preceding revolution attempts. All these changes require a broad coalition attempting to make a change, without attempting to out-win each other afterwards. This is a rudimentary manifestation of pluralism.

Finally, to explain why some countries broke from the mould faster than the rest, we can introduce the concept of 'critical juncture', which are opportunities for fast and upside down changes to happen. However, caveat that history is not pre-determined and any gains could be reversed.

Reading Snippet - Why Nations Fail (13)

The Tragedy of Charity

To demonstrate the detrimental impacts of extractive institutions, the authors raised how charitable efforts are wasted due to these institutions being counter-productive.

The common complaint regarding international aid is that very little funds actually get to the people in need due to corruption. Under the extractive regimes, there is no incentive for the government officials to allow the masses to benefit and raise their standard of living; in fact, such improvements may mean harming the elite's existing preferential status. As a result, even if there isn't much money to gain from, they would not help aid organisations do their job.

This is particularly the case where national-level assistance is provided, such as those from IMF or World Bank. They may stipulate macro-policy changes such as freeing up the market or granting independence to Central banks, but the elites would either pay lip service or secretly crawl back after initial implementation - purely due to incentives and the high stakes associated with the extractive organisations.

There are some 'micro charitable' efforts that aim at delivering local benefits, such as operating local clinics, and using local creativity to overcome incentive issues. An example raised is to demand local staff to clock in and out to avoid absenteeism in a clinic, but the staff quickly founds ways round it such as damaging the clocking machine and then the head office refusing to have it replaced. While such stories sound like 'local laziness', it is actually due to the political and economic extractive mechanisms removing all incentives for people to work and be productive; as a result, their incentive becomes that of avoiding work. Unless the extractiveness of the society is addressed, local creativity would be countered by the adverse local creativity, and money would be wasted.

Reading Snippet - Why Nations Fail (12)

What we have learned from this book

The most important takeaway from this book is the connectedness of political and economic fortunes. If citizens of a state desire long term economic prosperity, then they cannot detach themselves from politics, ensuring their wills could be expressed and have a fair chance of being considered in policy-making. 

A good political framework is one with centralised, strong government, such that policies could be enforced in all corners of the state, preventing governmental voids that encourage local elites to exploit and extract. However, a strong government runs the risk of becoming being dominated by a small party of incumbents and their friends, and so it should be subject to elections for contest and also restrictions in other aspects of power. There needs to be a constant voice from different interest groups within the state to steer the government - the parliament/congress. An independent judiciary comes into the scene in the same way as a parliament does, namely preventing any faction from becoming too dominating and interpreting the laws to their sole advantage. Fair election or democracy is to allow all citizens to have an equal right in giving them a voice, either by running for governmental or parliamentary office, or simply giving support to the candidates that represent their points of view. Hence democracy is not about 'voting' as this will mean weak and disjointed policies, but a functioning government that ensures all citizens have equal rights to voice out and influence how the state should move forward. 

An hidden concept for such a political state is that of 'pluralistic' society. This contrasts with a more 'singular' or 'simplistic' society where people gather around a very limited number of identities such as race, origin or wealth. Under the 'pluralistic' banner, people can be more of themselves rather than making one small part of their identity the whole of self. When a society is pluralistic, people will want their identities to be respected and have little motivation to force the others into specific identities; furthermore, when no two people are the same, respect and consensus will be negotiated rather than assumed, and formal mechanisms to bring out such consensus will take paramount importance - inclusive society becomes a necessity for all.

It is pluralism that resulted in inclusive societies, as the French, American and UK revolutions demonstrated, and it is the lesser pluralism in the Meiji reformation that resulted in backward movements to militarism by mid 20th century. However, this book also demonstrated through historical cases that forward progress should not be assumed and results are not pre-determined. There are times when inclusiveness turned sour like the aftermath of French revolution or the period following US Civil War, but what distinguishes a successful state from a failed state is the existence of 'virtuous circle', namely the existence of a pluralistic society. If pluralism is recognised, then it is more likely than not that the critical junctures would incentivise inclusive society, vice versa.

Reading Snippet - Why Nations Fail (11)

Why extractive states persist

When the author reviewed world history, it's not hard to identify that most historical states were extractive in nature, and their institutions are too sticky to shake off.

A noteworthy discussion is why so many ex-colonial states are extractive, despite being given independence and free votes at the start. The authors' exploration suggested that the colonies were extractive in nature, such as the Africa white colonies which blatantly discriminated against the natives and removed their property rights and kept them as cheap labour; the setting up of 'marketing boards' which forced farmers to sell their produce to government agencies at rock-bottom prices; the sale of mining rights to monopolies which prevented the people to enjoying the windfall; The Spanish colonies' forced labour policies against the natives. When independence was granted, the natives replaced the colonial masters as the new elite, and preserved these extractive institutions. New masters, same tricks.

Another stickiness comes from ex-elites' hold on the political and economic institutions, allowing them to maintain the privileges and extractions. The authors raised the example of Southern US states, in which the landowners started by successfully unwound the policy of giving ex-slaves land and animals for establishing greater economic parity. When the opportune moment appeared, they introduced discriminatory policies that subjected the blacks to poor education and convoluted access to politics (literacy tests for voting rights). These were possible as they retained their economic prowess which gave some leverage into politics, allowing them to wait by the side and for  political opportunities.

Yet another reason is the insufficient centralisation of government. The authors quoted Columbia, where the central government's traditional power base did not extend to the rural areas, allowing the local elites to build up extractive political and economic institutions that introduced forced labour and discouraged tenant farmers from owning land. When insurgent groups were formed, counter-insurgent groups gained central and local government recognition and solicited collaboration. However, this in turn gave these groups confidence to muddle with politics, such as forcing voters to back their candidates and forcing governments to pay 'protection money'. In this way, the counter-insurgents have effectively taken over the regional governments and extracted political and economic powers from formal institutions.

As seen above, there are multiple ways for elites to inherit extractive institutions, persist their existing extractive power, or seize opportune moments to gain extractive powers when formal government is weak. Furthermore, elite factions would try to out-manoeuvre each other to gain pole position and then further concentrate the power, leading to even greater extractiveness and coupling or economic and political power. This leads to more warfare and faction wars, making inclusiveness even more remote.

Reading Snippet - Why Nations Fail (10)

How to persist an inclusive society

Once the seed of inclusiveness and equality among all citizens has been planted and germinated, the question of why some states managed to build and develop equality rather than reversing back to extractive society became the big item for the authors.

A number of aspects need to advance for inclusiveness to stay. The first is the rule of law - not just that laws are clearly set out and enforced, but also that the law is equally applicable to all members of the state. It also requires change of law to be based on people's want rather than arbitrary desires of a small group of elite. In this way, law could not be abused to give political and economic favour to a small group of elites, nor could they easily change laws to cement their power or tilt the playing field. But this also means that the administration must be centralised enough to enforce law.

The second is to transfer political power to the wide base of citizens and ensure they could exercise their political powers freely. This power includes the ability to vote and choose legislators and administrators, but also the ability to petition and receive information, so that they could act according to best judgement instead of manipulation. By having this broad power base, the elite risks being de-selected if they do not satisfy the broad population.

The third is to de-couple political and economic powers as much as possible. Anti-trust laws in the US prevented businesses from becoming too big to leverage their size over politics. In Southern US, the plantation owners remained rich and powerful even after the civil war, and they were actively trying to gain influence over politics to maintain their economic power (over the black population). This means that de-coupling is not just about changing the law (the plantation owners could still exploit loopholes), but also enrich the general population so that they had sufficient economic power from selling their political power to feed themselves; the extent of political power should also be clipped so that political power in one field could not easily translate into economic favours. The de-coupling also reduces the incentives for people who want to get rich to get into politics - you do not need to join politics to get the favours for economic gains.

The fourth is obscure but arguably the most important - people must be allowed to exhibit their individual colours, such that a multi-faceted and pluralistic society emerges. In the first British revolution, the rival groups magnified their intra-group commonality and were quick to distribute favours amongst the 'similar' people. In Glorious revolution, the revolutionaries recognised their intra-group differences (MPs, merchants, rich landowners etc) and were keen to preserve and respect their diversity. In this way, the constituents were keen to voice their own concerns and negotiate a way to accommodate each other - if they decided to displace the other sub-groups, the fear is the others may one day gain power and do the same, and their hard-won power would perish altogether. By winning rights through a coalition (i.e. exposing the differences instead of similarities), there is incentive to preserve the coalition rather than start in-fighting.

These aspects need to advance together to maintain inclusiveness. It is a hard maintenance.

Reading Snippet - Why Nations Fail (9)

Why inclusive societies could emerge

The authors had expended large sections of the book on examples from North American colonies, Australia, Great Britain, France and Japan on how they attained inclusive societies and maintained it. Be it revolution (France), threat of low productivity among the commoners (North America and Australian), mutiny amongst the wealthy (Great Britain) or threat of sub-ordination by another world power (Japan).

The mechanisms played out in history may differ across nations, but there seems to be an underlying common link - the realisation that you either replace the incumbent as the next exploiter that extracts from a dis-incentivised base, or open up incentives to the masses by giving equal rights & obligations, so that all citizens enjoy greater power & prosperity and you dwell as one of them.

The former is a classic pre-industrial setup all too familiar in Chinese history, in which a small group of elite would overthrow the previous tyranny, set up 'good government' which distributed land and created a not-so-corrupt administration system. However, as time went, the political power would be translated into economic power in the form of monopolies (rice export, salt production & trading, wine-making & sales) while large landowners emerged and forced tenants into serfdom with the blessing of the government (the government officials were large owners themselves). The political and economic elites joined force and was preserved at the top, and factions started to fight against each other to get into that prized position. Then history repeated itself.

The latter is a recognition that either power is concentrated amongst a few and warfare ensues, or the power become more distributed and everyone is better off. This is exemplified in the Australia case - the British authorities could have exploited the prisoners by forcing them into hard labour without pay, or allow them to finish their compulsory work and then do extra fee-earning work with their 'free time'; prisoners could also own properties bought with their savings. The first scenario is analogous to a small elite (the local government) assuming great power, which would lead to low productivity among the masses and potential rebellion down the line; the second scenario (which the government eventually chose) is closer to inclusiveness and equal opportunities for all inhabitants.

This transformation in mindset is significant. If power is absolute and concentrated amongst a few, those few have little incentive to conduct creative destruction which is a risky affair - you may experiment with destructions without bearing fruits, or creative destruction may come from the masses and you become deposed. Why not enjoy the current cushy lifestyle when the others are doing the work for you? There is also little incentives among the masses as any gain would only be expropriated by the elites, so why try so hard? The hardest they would ever try was to topple the elite and replace them.

When power is centralised but not absolute (checks & balances in place and participation from everyone) and the distinction between the powerful 'elite' and the powerless and exploited 'masses' is busted, then there is no such thing as 'topple & replace the elite'. Economically, the moving away from 'absolutism' refers to the ability for citizens to enjoy the fruit of innovation or experiments - if you invent a new machine, you could profit from it; if you find a new way to farm, you could keep the extras. This gives incentives to the previous 'masses' to improve, while the previous 'elites' suddenly find that despite their loss of economic dominance over the 'masses', the greater incentives mean economic improvement and  a 'bigger pie with smaller share' which gives a bigger slice.

The former elites may have lost 'power' with the transformation, but they can also do away with the threat of being toppled; meanwhile, the 'power' is now un-entangled from economic benefits (no power, but bigger slice of the pie) and so incentives for elites to hold on to power just to protect their wealth.

In Australia, the officials realised that exploiting the prisoners to enjoy all the fruits of a small economy was inferior to opening up the rights so as to enlarge the economy and enjoy a smaller share of outcomes. When the Spaniards arrived in South America, with the wealth of precious metals and sizeable indigenous population, their calculation was different - the existing economy was large enough to live a comfortable life through exploitation, and so they did not hesitate to enslave the masses and condemn them to hard labour.

Reading Snippet - Why Nations Fail (8)

How to create a modern extractive state

To illustrate how vulnerable the modern inclusive states are to a reversal of fortune, the authors raised the example of South Africa.

When slave trading was made illegal, the African colonial governments encouraged the locals to turn to farming and manufacturing as a substitute. Education was encouraged and property rights were reformed so that the locals could privatise lands from collective tribal ownership. The policies went well and the local community started to thrive through more productive private lands, skilled workforce and entrepreneurship. The impact was direct competition to the white community in skilled work, rising costs of unskilled work (as supply decreased) and lower prices fetched for merchandise as supply increased. This posed issues with the white settlers - their farms were not as profitable, while their mines could not operate cheaply.

To resolve these two issues, the white government decided to create a two-tier society, allowing the white settlers to extract from the local communities. To achieve this goal, policies were implemented to push the locals from prosperity to subsistence. Education was banned (except for elementary education so that they had the basic skills to survive) and land was confiscated and re-distributed to white settlers. The black accounted for 80% of population but was only given 20% of land, which was barely enough to keep people alive. Furthermore, property rights was discouraged and the land reverted to tribal ownership which lessened incentives to improve productivity. The locals were not allowed to operate business in the 'white' land while any service provision could only result in wage but not dividend or productivity-related bonus.

These policies had a string of impacts - the locals were forced to leave their land and seek employment in the white areas, but they could only work in the unskilled sector. This means there is a burst of supply of unskilled labour, suppressing their salaries. They could only earn productivity-unrelated wages and so their incentive to produce was lessened, justifying their low wages. For any black lucky enough to accumulate a small fortune, he/she could not set up business in the more profitable white area and could only sell to the blacks, meaning a low return on capital and thus low incentive to invest in entrepreneurship. Overall, incentives to participate in creative destruction or to invest productivity were wiped out. They were therefore condemned to poverty.

The main message of this story is that governments do not need to enslave the population out-right to be extractive. They can create a set of economic policies that alters people's incentives, thereby moving them from investment & creative destruction into low-incentive subsistence lifestyles. People are not poor because they are lazy, they were forced to be lazy as industry & creativity would only lead to fruitless outcomes.

Reading Snippet - Why Nations Fail (7)

How to prevent inclusive political and economic institutions from emerging - a historical perspective

It is often observed that successful nations are concentrated in Western Europe, North America and the former white settlements, whereas previously fertile nations in the Middle East and Asia have failed and Africa had struggled to be successful from the start. Instead of blaming it on culture or climate, the authors offered a powerful alternative criticism to the West.

They noted that prior to European trades, Asia had been commercially active as the Asia and Middle Eastern merchants exchange silk, china, grains and spices. However, as the Europeans joined in the trade and faced competition from other European companies or Middle Eastern traders, their intention to monopolise these profitable trades resulted in local warfare, taking over from local rulers and forcibly closing the markets or demanding locals to cultivate the spices and selling at low prices. The result was the imposition of extractive political & economic institutions (the natives were next to being enslaved) or causing the local rulers to withdraw from market economies (e.g. closing down their own markets or demanding their own farmers not to plant spices lest they would attract the Europeans' attention) which removed their chances of moving from primitive institutions towards modern institutions in the way European states could.

The Africa story was more heart-breaking. As the plantations in the Caribbean developed, demand for slave went through the roof and some African local polities started to profit by capturing other Africans. As these polities grew rich, they organised themselves into centralised administrations with the sole intention of attacking other tribes and selling the tribesmen as slaves. As a result, these administrations were highly extractive in nature with power concentrated among the few leaders who organised the raids and shared the spoils, without any intention of developing their own sustainable economy. As these polities were military in nature, coups and internal unrests were common as different factions tried to control the leading positions. On the flip side, the weaker tribes that were attacked had to withdraw from fertile grounds into the geographically difficult areas to avoid further tragedies, meaning that they lost the ability to develop their own economic institutions. For some polities that did not attack other tribes, their leadership instead sold their fellow citizens to the Europeans, by making every minor crime punishable by slavery, or by fabricating oracles to legitimise the sending-away of believers. These administrations gradually evolved into extractive institutions through slavery.

These two sets of examples serve to show that when states are affected by extreme historical events (economic warfares and slavery), there will be perverse incentives that can cause them to develop highly extractive institutions or institutions that are withdrawn from potential evolution towards inclusiveness. It is not just their internal setups and internal affairs that would decide their subsequent institutional developments, but also external or international events. The next time we discuss why Africa has not evolved into inclusive states, we should understand that the Europeans should shoulder as much blame as the Africans themselves.

Reading Snippet - Why Nations Fail (6)

Why nations' political and economic institutions diverge so much? The 'critical junction' explanation

While the archaeological and historical perspectives explain why political & economic institutions are necessary in human society and why the institutions diverged between states over time, they did not explain why they diverged so much over a short period of time.

To be precise, people found that Western Europe and North America developing a break-neck pace after the middle ages, breaking away their similarities with South America or Eastern Europe. To account for this, the authors introduced a complementing idea called 'critical juncture'.

These junctures are created by historically impactful events, such as Black Death or de-colonisation. During these events, there are extremely strong interactions among all affected parties, allowing deep changes to be made over a (relatively) short period of time. These junctures are not 'short' in an absolute sense, but in a historical sense. De-colonisation unfolded over the course of half a century, while Black Death's juncture lasted 2 centuries.

During a juncture, it's not just the accelerated interaction frequencies that caused significant divergences, but also two other factors. First of all, the differences in the pre-existing political and economic institutions would be magnified in setting the permitted interaction options, and given the many more decisions that were made, the magnification would indeed generate greater divergences like a 'multiplication factor'. A cited example is Black Death, in which a strong market culture (bigger and more independent towns compared to rural areas) and weaker monarchy in the UK allowed it to steer the institutions to become more inclusive, whereas in Eastern Europe the diminished rural workforce simply allowed landlords to be more extractive over the remaining population.

The second is the more volatile interactions - by definition, these junctures are triggered by major historical events, meaning that the arena in which the interactions unfold are very different from the previously more stable environment. This is likely to give power to a previously quiet force and vice versa, leading to greater likelihood of interactions that are towards the extremes of the option spectrum or that the option spectrum differed entirely from one interaction to another. In short, this simply means that each interaction point forces great divergence instead of allowing small, incremental changes.

As these junctures play their courses, the states will not just look very different from how they were at the start, but also very different between one another.

Reading Snippet - Why Nations Fail (5)

How political and economic institutions develop - the historical view

From the archaeological view, political and economic institutions are the necessary setups for human societies to develop. How the different states developed distinctively different institutions and why some became extractive and some inclusive could be explained by the historical view.

Under this view, at each point along the historical axis, different parties are trying to influence the political and economic institutions. There are also indirect historical events unfolding that would open up or set options for the state to take (e.g. the migration of tribes from the Stepp towards Western Europe). As the parties interacted and certain options were realised, this would shift the political and economic institutions' shape, and gradually evolve into their historical or present shape.

A number of fine points to note here. First of all, most of the interactions & decisions are small steps that would affect the next set of available interactions or decisions. For example, if decision was made to end monopoly, then the next set of actions could be to re-introduce monopoly, or to maintain free market. Another point is that decisions & interactions could reverse progress, e.g. medieval Venice went from partially inclusive to being extractive during the 13th Century. This leads to the third point that the impact is not 'cumulative' as in inclusiveness would accumulate through a string of historical interactions or vice versa; instead, it should be viewed as 'Brownian motion' in which the historical timeline has numerous interaction points which affects the setup of the institutions and influences what the institutions could look like at the next interaction point.

What this also means is that even if two states look very similar initially, the small differences at their starting points could affect the set of options available to each state and result in divergent paths. Also, even if two states were extremely similar at the start, the small interactions taken at each point could lead to gradual divergence as the possible options became more and more different as decisions were made.

Reading Snippet - Why Nations Fail (4)

How political and economic institutions develop - the archaeological view

Having outlined the concept of extractive vs. inclusive institutions, the exploration now turns to why some countries developed inclusive institutions while the others are stuck with extractive institutions.

From an archaeological standpoint, human  civilisation only developed after some form of centralisation was possible. Like all animals, the initial human lived as hunter-gatherers, and rules and rights were primitive - if you do not agree, you simply break off the group and wander away. However, as human spotted fertile fruit trees and good hunting grounds, especially during the 'long summer' in 10,000BC during which warm climate allowed an explosion of plants & animals, human started storing surplus and identifying good spots, making settling a viable alternative to nomadic lifestyles.

The move from nomadic to sedentary lifestyle was not an easy transition, requiring the creation of additional laws & rules (such as mentioned above, property rights and how spoils should be divided) not necessary for nomadic lives, and then administer the rules and maintain order by resolving any arising conflicts from the created law & ensuring the resolutions were enforced. This required centralisation of power, i.e. a small group of powerful people among the nomadic group to set and enforce the sedentary-favourable rules, and then use the power to coerce or persuade the entire group into the new lifestyle.

With this centralisation of power for the purpose of rule creation, conflict resolution and rule administration, a political institution had been effectively created. With these political institutions, economic decisions for the benefit for the society (and elite) could be arrived at and enforced, e.g. creating new settlements, trying out agriculture, domesticating animals, taxing all spoils in preparation for lean years. Starting with political institutions, economic institutions were next created which were heavily controlled/influenced/dependent on the political institutions.

In short, when economic opportunities presented themselves (the Long Summer), effective exploitation depended on some centralisation of power to allow effective development of principles/method/structures/processes (changing from nomadic to sedentary lifestyle), leading to political institutions. With political institutions, economic institutions could then be created as a result of using the centralised power in designing the economic principles/methods/structures/processes to exploit the economic opportunities.

Work snippets - the builder's metaphor

The Builder's Metaphor - my interpretation of what it means

I attended a company workshop some weeks ago on next year's strategy, and unsurprisingly one of the participants raised the 'three builder metaphor'. One of the favourite metaphors of all times, which goes as follows:

There were 3 builders working on a cathedral site back in the middle ages. The bishop walked by and asked: what's in you mind? The first builder replied: "I am thinking how to lay the bricks". The second replied: "I am thinking how to complete the wall". The third replied "I am thinking how to complete a cathedral". The first builder ended up laying bricks for his work life, the second become a good site supervisor, while the third climbed the career ladder and became an architect masterminding many great buildings.

The wisdom from this metaphor - be the third builder, think about the vision and the long term.

It's an easy metaphor with a nice wisdom, one which you feel you understood immediately and could retell to other people with ease. Nonetheless, I used to struggle to apply the wisdom at work or in life. What does it ACTUALLY MEAN "be the 3rd builder"? What are the changes to our principles, thinkings and actions? What is it like to mind the vision? If everyone is like the third builder, wouldn't productivity collapse? Easy to say, hard to enact.

After spending time in different industries with different job roles, I am starting to GET the meaning (maybe). I started to notice that a lot of colleagues focus on doing work without prioritisation. They are not in the pure processing job roles (e.g. cashiers, letter sorters) whose jobs ARE to perform certain processes in the same way as the first builder's brick laying. They are software engineers, yet their pure incentives is 'I have completed this engineering requirement as per spec'. Is this part of the spec top priority? Did you complete it with the deadline in mind? Is the engineer quality 'good enough but not much time spent' or 'perfected by spending lots and lots of time'? These are not questions they have in mind. They are viewing their role like the first builder - I have DONE my work and here is the output, now let's go home.

Then there are colleagues who are thinking the above question, and so their work is prioritised, the deadline pressure is felt & responded to, and more thoughts are put into the trade off between time and quality. They are like the second builder, and they are saying 'I have DELIVERED the project as per requirements, now let's go home'.

Finally, there are colleagues who are are thinking how other projects or other divisions in the company would be affected as their project is delivered. At the same time, they are thinking about whether people are developing themselves and how the team culture is unfolding in the process. Alongside their project delivery work, their own teams and other teams are co-ordinated and elevated in the process. They are saying 'I have DELIVERED A STATE CHANGE for the company, now everyone can feel better'.

The different between the first and second builder is obvious to a lot of people - 'doing' is good, but 'delivering' as per requirements and constraints is even more important. The difference between the second and third builder is more obscure - it is about recognising that what you do have an impact on other components in terms of other projects and in terms of teams' culture and personal development, and account for that when planning.

Now that I have an interpretation, I will try to act like the third builder. It's not about 'let's talk about grand visions', it's about arranging your work to allow grand visions to be realised

Reading Snippets - Why Nations Fail (3)

Why Extractive States can still have some initial growth

The authors' had no intention of acting against scores of historical cases that showed growth amongst extractive states - Soviet Union, Maya city states, Communist China, South Korea under dictatorship, to name a few. The key point is that those growths could arise but could not last.

Extractive states got into the situation first by forming a centralised political environment - a small group of people could command or coerce the rest of the population into submission. This allowed them to organise some form of law and order, and also allocate the state's resources and enforce the allocation. With such political power, there are two ways to grow - by 'arbitraging' the resources from low productivity, or by allowing limited inclusive economic activities.

In 'arbitraging', the people and resources engaged in low productivity activities like farming could be switched to high productivity activities such as heavy industries, utilising foreign technologies. But once the state has completed the switching, it often struggled to develop momentum in upping the productivity in these 'high productivity' activities, or there would be resistance in introducing newer technology - when people were coerced into switching industries, the coercion metrics would normally focus on forcing people to maximise their working hours and penalising failures. These discourage workers from taking any risk in experimenting new methods of trialling out new technologies; the downside risk is simply too severe.

In allowing limited inclusive economic activities, this is usually predicated on having a strong grip over the state, such that the elites need not fear some people getting rich & powerful and overthrowing the elite class. An example was South Korea, which with US' support could sustain dictatorship with little fear. They would allow people to conduct economic activities, and reap benefits through taxation or having a stake in those activities.

As mentioned earlier, the human intervention that generated these growths also intervened to stifle sustained growth. Incentives for the population to innovate is low, while the elite would resist new innovation for fear of their own political & economic powers being harmed. Creative destruction was removed and inefficiencies would stay when the rest of the world moved on. Finally, these states may 'fail' as the elite fought against each other to attain the 'top' profitable position.

Reading Snippets - Why Nations Fail (2)

The Political & Economic Institution Theory

After denouncing the other theories, they raised their own theory - nations fail because their political and economic institutions are set up for failure.

The crux of the theory is that there are broadly 2 types of institutions - extractive institutions designed by elites to squeeze profits for themselves and no one else, and inclusive institutions that give the general public a chance to succeed and participate in political and economic activities. Extractive states do not allow sustainable economic growth and will eventually fail.

The political and economic institutions are intertwined - political institutions define who become powerful, and the power will be used to steer the economic institutions; in turn, the economic institutions determine how the economy will be run.

There are 2 keywords in this theory - 'pluralistic' and 'centralised'. The institutions should be 'pluralistic' so that multiple players can compete and do not monopolise the power or economic benefits. At the same time, the political institutions should be 'centralised' so that each institution has enough authority to enact policies, instead of hitting impasse every time a decision needs to be made & executed.

The main cause for extractive states to not have sustainable economic growth is down to two reasons. First of all, when political and economic powers are concentrated such that a small elite could reap all the benefits, there would be in-fightings to compete for the podium position. These fights would lead to state failure.

The second reason is the lack of creative destruction. In inclusive states, pluralism allow competing parties to adopt new technologies and embrace knowledge to capture the market. In the process, old technologies and poorly organised parties are pushed out. Productivity improvement is sustained. On contrary, extractive states are inclined to keep the status quo so that the power of the elite and the setup of the institutions will not be challenged. Innovations are discouraged and uncompetitive parties are not phased out. The result is a backward state that could not grow

Reading snippets - Why Nations Fail (1)

Setting the scene - refuting alternative theories

The authors were aware of the numerous theories on why some nations prospered while the others failed. To capture the audience, they actively raised those theories and suggested why they were 'wrong'

Geography - this usually postulates that the climatics (temperate vs tropical etc) or geographical provisions of species available for domestication (e.g. Africa had few species for domestication) would determine whether nations could triumph. Colder regions (W Europe, North America) are usually more successful than hotter regions (Africa, S America). Well, Middle East was more prosperous than Europe in the Middle Ages, while New Mexico and Mexico have different fates despite being quite similar in climate.

Availability of species for domestication. S America had few species available, and so they could not become prosperous. However, when the Spanish arrived and introduced the species, they did not become more prosperous. Conversely, wild wheat was available from Middle East through to Middle Asia, but their prosperity differed

Culture - Western (Judaeo-Christian) cultures are better than other cultures in creating prosperity, while the more liberal Protestant culture is better than the more conservative Catholic culture. However, Chinese culture created a more prosperous China and Japan before the rise of Europe after Middle Ages. Likewise, Catholic France is more prosperous than a lot other Protestant countries. Not a good way to apportion prosperity.

Ignorance - the rulers and elites for the struggling countries are ignorant and do not know the best policies for their countries. Give them knowledge and guidance, and they will be back on the right track.

A classic example raised was Ghana after independence - they had the best economists as advisors, but the government ended up suppressing the rural areas and building supply chains that are far apart. The policies look a mess for the country, but makes a lot of sense for the elites in terms of profiteering and politically in terms of pleasing the key stakeholders

The geography and culture arguments imply the fixation of prosperity - not thing could be done about geography and culture is very hard to shift. The flaws are quite obvious - at different junctures throughout history, various geographic zones and cultures rose and fell. The ignorance argument neglects the fact that the rulers were not mal-informed but instead were making conscious decisions after gathering all facts, theories and options

This is why the authors then proceeded to raising their theory - the interaction between political and economic instituions