Paradigm Shifts, The New and The Old

(First published in The Huffigton Post March 11, 2014)

I assert in my book MEMEnomics that we are in a middle of an economic paradigm shift that started in 2005-06. Sometimes a dying economic system breathes life into its own values and metrics sending its most visible champions into a righteous frenzy. A dead cat’s bounce, so to speak that tries to convince fewer and fewer people that everything with the old system is fine. When it comes to our economy, the symptoms of the old system are disguised in rosy financial reports, record stock prices and home values hitting new highs. The pathologies are so deep we often confuse the narrow-mindedness of what financial reporters, CEOs, and CFOs tell us with real economic news. The type of news that matters most to Main Street which is experiencing record levels of poverty and a majority of a population that is one paycheck away from financial ruin. The old system has little empathy to the majority of Americans who have grown helpless and hopeless in their struggles against the current system. Wall Street and the world of finance have decoupled from Main Street and real productive output long ago, creating two vastly different Americas.

On the other hand, the emerging system is one that cares about the plight of the less fortunate. It disdains the pathologies of greed and resource manipulation and seeks to level the playing field in a more equitable and natural way. But, like the current system that took years to be defined and become the dominant narrative for American values, the new system will spend years in its embryonic phase before it reaches that critical tipping point. We are living in precarious times that will define our future for decades to come. Small changes to the current system no longer move our economy forward. As proven by the financial bailout, our government only extended the pathology of the current system.

We are in need for systemic change that requires deep structural reform to all of our institutions and it is not happening fast enough. This is the primary reason why the division in our country is so great. This battle between new and old will get uglier before it gets better.  These have historically been the patterns of paradigm shifts and without the pain and division culture seizes to be an open system.  Only open systems have the capacity to raise cultures to higher values.

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While the new paradigm continues to be defined, the old paradigm continues to be a system of vacuous economic intuitions that are in crisis and becoming less relevant with every passing day. So while we wonder why the economic recovery has been so one-sided, here’s a reminder from Thomas Kuhn, the Harvard educated philosopher who originally coined the phrase Paradigm Shift:

The transition from a paradigm in crisis to a new one from which a new tradition of normal science can emerge is far from a cumulative process, one achieved by an articulation or extension of the old paradigm. Rather, it is a reconstruction that changes some of the field’s most elementary theoretical generalizations as well as many of its paradigm methods and applications. During the transition period, there will be a large but never complete overlap between the problems that can be solved by the old and by the new paradigm. But there will also be a decisive difference in the modes of solution. When the transition is complete, the profession would have changed its views of the field, its methods and its goals. 

So, without the dynamic tension and the highly charged debates between old and new, open systems like scientific research, democracy and human emergence, will surely collapse and become closed systems ruled by elites, oligarchs, and dictators where very few voices of descent are ever heard. Sadly, even with the most open of systems, no one can expedite the onset of a new paradigm, but we can all be witnesses to the damage the old one leaves behind.

 

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The Memetics of Money & the Future of Digital Currency

In my book MEMEnomics, I dedicate an entire chapter to studying the role of money in human emergence which sets the stage for the premise of the book that money has to be tied to human productive output. This is  a measure of the accountable fourth (Blue) system of values.  For over 8,000 years this catalyst for upward mobility has served that critical function in the fourth level value system, but our misguided monetary policies sought to change that history in the last 40 years.

The unhealthy expression of the Orange fifth level system (strategic manipulation) has had its run at it and has corrupted it. The result was the 2008 financial crisis and its aftermath that I, along with a few economists call the Great Contraction. European governments have used money  as an agent of the Green value system (Egalitarian and Humanitarian values)  to bring on equality, and of course, we’ve seen the results of that; a deeper and longer lasting economic contraction.

Because of the fourth level functional nature of money, measures have to be constantly put  in place to safeguard against it corruption. Money, regardless of the expression it takes (digital, paper, gold etc..), without having a visible regulator to deter the predatory nature of the 3rd (Red) and Fifth (unhealthy Orange) systems, will always be exploited. Pure and simple. No Utopian Green thinking will ever change that.

bitcoins2There was no exception to this assertion  even with money’s recent incarnation as a digital currency. For years I have warned about the many vulnerabilities inherent in Bitcoins.  The recent bankruptcy filing of Mt. Gox, the largest Bitcoin exchange  in the world proves that point.  Money has to always be safeguarded by a constantly evolving fourth level system (SmartBlue) in order to protect it as one of the oldest social contracts known to the human race; the safest store of value.

To read more about my views on the future of digital currency, Click here for an article I wrote to the Huffington Post about the subject. The piece was written just a few hours before Mt. Gox filed for a half-billion dollar bankruptcy protection from creditors.

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In Search of New Alpha

 

For a book that is highly critical of the latest incarnation of capitalism that is financial innovation, I was surprised to see it reviewed by the website Seeking Alpha. Two million people subscribe to the site’s financial news and many more visit it to gain better understanding of financial markets.  In layman’s terms, Alpha is a measure of how well a certain stock, bond, or sector performs against expectations set for it by analysts. So when I read the title of the review “Seeking Alpha with Memenomics”, I had an inclination that the reviewer has a good grasp on the macro memetics of capitalism. Here the review in full:

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Seeking Alpha With Memenomics                                                                       By Range Chiever

Feb 11, 2014 10:06 PM

I just finished reading Said Dawlabani’s “Memenomics- The Next Generation Economic System”, and I am still buzzing. Or maybe that is my first cup of Death Wish coffee. In my investing lifetime there has been a handful of works that greatly advanced my investing intellect. Books and articles from Peter Lynch, Warren Buffett and Charlie Munger come to mind. This book may top them all. You see, investing is all about seeing value where others don’t. If one sentence could articulate what seeking alpha is about, that would be it.

However, I would recommend this book to only a small subset of souls who happen to mix economics with their psychology. This is not exactly peanut butter and chocolate. To really understand the message it requires a basic understanding of the works of Clare Grave’s Spiral Dynamics or at least a decent understanding of the study of human development.

The book reframes the economic history of the United States as a process of developmental growth from the early 20th century up through the financial disaster of 2008 and then to today.

His assessment of the crash in 2008 through a cultural development lens is something that has been swirling in my head for half a decade. He integrated and articulated many key points into a beautiful story that resolved many conflicts I was struggling with. I’ve always scoffed at folks who said that the Government bailout was not the best course of action during the crisis. He has changed my mind.

So, how can an economics book about personal and cultural development possibly help your investing prowess? Well, once you understand that the US economy is evolving and developing along a path of greater development, it is easier to see the general direction of the economy and maybe more importantly, spot those companies which are poised to benefit from this development.

Said used two companies to illustrate highly evolved corporations of the future. They are Google and Whole Foods Market. Much to my delight, these were two companies that I added to my portfolio in early 2009.

It’s impossible to explain the context in the book required to understand the praise for these two companies. In his terms, it is the appreciation of People, Profit and Planet as opposed to almost all other companies where Money Only Matters. It’s like the friend who calls only when he needs something compared to the friend who calls because he genuinely likes you.

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He does differentiate between the two as well. Google is a disrupter in the evolving technology field and Whole Foods while steeped in an age old industry is finding ways to differentiate itself. He outlines characteristics, from WF’s restriction on executive pay and team based culture to Google’s democratization of knowledge and their unique venture finance arm. There is so, so much more and if this interests you at all, you must read the book.

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I have renewed vigor today in my search for alpha. It reminds me of the time I first read Peter Lynch’s One Up on Wall Street or the several hour binge session of Warren Buffet’s annual letters to shareholders. I am posting today looking for a few souls out there that might have a similar view or plowed into this untouched jungle with machete in hand.

Disclosure: I am long WFM, GOOG.

 

 

 

 

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