Tag Archives: Dubai

Value Systems Science to Dubai: You Can’t Skip a Development Stage

In an effort to restore its credibility in global capital markets, the government of Dubai recently issued a 58-page report detailing its austerity plans as it works its way towards responsible, long-term planning. Global media organizations are touting the report as “unusually transparent.” Most reports of this nature coming out of the Middle East are heavily influenced by government officials trying to paint positive images of their centrally planned economies. In this report however, the government of Dubai has acknowledged the cancellation of over a thousand real estate projects valued at tens of billions of dollars. The lack of demand was sighted as the primary reason for the cancellations. This comes at a time when a possible deal is being worked on the restructuring of debt for Dubai World, the largest sovereign wealth fund to ever default on payments to its creditors with the onset of the global financial crisis.

There is a statement in the report that may not stand out to the average reader, but has significant developmental implications as to where Dubai is in its cultural emergence. The statement says that the government had completed a major reassessment of the “economic development” element of the Dubai Strategic Plan for 2015 (DSP 2015), which resulted in the cancellation of these projects. When DSP2015 was made public it called for the systemic development of Dubai.  In addition to economic development, it called for social development, modernization of the security apparatus (police), development of the judiciary and public safety, and for excellence in government. The report made sure it emphasized that the government’s intentions will be focused on those “other” aspects of the plan that were ignored during the boom years.

So, why is Dubai emphasizing these aspects of their cultural development now? The answer is simple: In their rush to look like the West, government leaders trampled over a very essential developmental stage identified primarily as the Law and Order value system, what is known in Spiral Dynamics as the all-important 4th level Blue stage of development shown on the graph below. Blue is a boring and uninteresting stage of development, but is an essential corner stone for sustaining modern day nations. It focuses on the building of institutions such as the security apparatus and the judiciary. It develops 50 and 100 year plans and empowers the institutions that see those plans to fruition. It is where the values of temperance are born and where we develop the capacities to postpone the impulses for immediate gratification in return for the promise of higher future rewards. It moves power from the hands of the charismatic leader and vests in its institutions, which take decades to develop and become a true reflection of a culture’s level of resilience.

But, as the case was with Dubai, the building of those important Blue capacities was by-passed due to the undeniable lure of financial success. Under normal developmental trajectories, resilient and systemic prosperity that defines an entire culture is a part of a healthy 5th level Orange value system that comes after the Blue stage of development. According to the Spiral Dynamics framework, this must be the order of cultural evolution if a country is to sustain itself during times of social and economic upheaval. Orange and all the stages above it need the strong foundational stones of Blue on which higher cultural complexity can be built. In addition, those institutions created in the Blue system must know how to regulate the Orange system as to keep it on a healthy, non-punitive path that promote overall cultural health. Orange identifies with a robust capitalist system, where strategic planning, science, research and development combine to create a diverse economy with self-sustaining psychosocial capacities.

As evidence by the low level of scientific research, and the absence of institutional independence, the two hallmarks of the Orange and the Blue value systems respectively, Dubai and the rest of the Arab world had remained in traditional stages of development. Those are the Tribalistic and Heroic values of the 2nd level Purple and the 3rd level Red value systems on the Spiral respectively. Historically, cultures lingered in the Purple-Red value systems for centuries before life conditions, out of necessity propelled them to seek higher stages of development. For the Middle East however, this normal trajectory of cultural emergence was interrupted by the immense wealth crated by the discovery of oil. This was thought of as a way to bypass the Blue and Orange stages of development that took centuries to form in the West. Oil wealth was thought of as the needed catalyst that would rapidly develop the culture and in a few short years have exhibit social complexity that rivaled that of the West.

With the help of the West, the push to develop the region went into high gear. In a few short decades it became the norm to have Western corporations and personnel in charge of the Gulf’s largest development projects. Western investment bankers managed the oil wealth by investing it in global financial markets. Normalizing these beliefs over the long run, allowed for the values of oil money to be perceived as the productive output of the Orange value system. This became a recognizable fallacy with every passing decade as the economies of the Gulf showed an innate inability to diversify from their heavy dependence on oil revenue. These surface Orange values however became imbedded in the collective psyche of the culture and its belief that sudden appearance of wealth was a sure way to ascend the evolutionary ladder to the Orange system and skip the quintessential Blue stage of development.

The prevailing thought was this: if the surface expressions and the crowded city skyline looked like those of the West, then the culture must possess the same level of psychosocial complexity as the West. This became the dominant narrative propagated by the West and adopted by leaders in the Arab Gulf over a 4-decade period of time. Cultural development became directly tied to the level of wealth each country in the region had, and Dubai was no exception. With a charismatic ruler like Sheik Mohammad Bin Rashid Al Maktoum, this city-state embarked on one of the most ambitious development plans in modern human history.  After showing success in it’s early steps towards economic diversification, Dubai became recognized as the modern day miracle in the Gulf. Soon thereafter, the ruler fell into the “build it and they will come” illusion that was further reinforced by opportunistic global firms offering “the higher, the bigger the better” sales pitch that built this desert oasis overnight.

With most of the focus being on the real estate sector, little attention was paid to who was buying up Dubai, and to the qualification of those who were building it. At one point during the boom, as much as 85% of residential real estate buyers were identified as speculators with values that thrived on the smell of money and very little else. Those were the short-term opportunistic and predatory values of the Red system with thinking that fell in the Egocentric stage of development. Red investors and the builders who encouraged them loved instant gratification with no regard for long-term thinking. There were no laws born of Blue institutions that were similar to those in the US or other advanced countries that limited investor purchases to 25% within a residential real estate project. These Western designed types of restrictions come from decades of trial and errors that protect the consumer and are heavily entrenched in the virtues of the Blue value system.

During the boom years, leaders of Dubai couldn’t be bothered with building Blue capacities with institutional fortitude. After all, having a good Judiciary system doesn’t land you on the cover of Fortune Magazine or get you on 60 Minutes. Anyone who warned of the absence of these virtues was quickly dismissed. This was a growing city-state and the absence of the Blue value system was felt everywhere not just in the real estate sector. It permeated life at systemic levels and the general rule became that anyone sounding the alarm over anything that came in the way of progress was silenced immediately.

Psychiatrist Carl Jung is famously known for his statement about things that we avoid in our conscious that inevitably appear later in our lives as fate. There’s a similar analogy in Spiral Dynamics that says a culture cannot skip a development stage. Attempts to avoid the normal value system sequence of emergence will have that particular value system coming through the back door (as fate) to fix the pathologies created by avoiding the proper sequence.  Well, for Dubai, the strategy to pursue the values of the Orange system and avoiding the Blue system was very short lived and came to a halt when global liquidity dried up and Dubai was left with thousands of unfinished projects and no money to complete them. The collective avoidance of the Blue system has appeared as a humbling fate. The most iconic humiliation the Ruler of Dubai suffered as a consequence of this was having to change the name the tallest building in the world from Burj Dubai to Burj Khalifah. Sheikh Khalifah the Ruler of Abu Dhabi had to put up the money to finish the Tower at a time when the Dubai World sovereign fund became insolvent.

All this worked to expose the short sightedness of an experiment that put one value system before the other. The thinking that money alone can move cultural evolution up the spiral was proven wrong. If anything, money showed the pathologies and greed that are inherent in human nature. Europeans who’ve been known to belong to the Green 6th level Egalitarian and Humanitarian value system, descended to their past imperial/colonialist selves very quickly and became the pillagers of wealth. Americans running some of the world largest sovereign funds for Dubai embarked on buying worthless companies that were teetering on the edge of bankruptcy and collected enormous fees on both ends of the transactions. This was Disney World for Western business people and corporations who saddled every business entity in Dubai with enormous debt, while filling their pocket with outrageous compensation. Very little of their activity was ever scrutinized due to the absence of a competent and proficient Blue system that understood the nature of what was being done.  When all the dust cleared, the Westerners went home and the government of Dubai was left with hundreds of billions in liabilities. The Ruler soon realized you could only imprison so many executives before the practice becomes a public relations disaster.

As Dubai begins to focus on building the Blue capacities it called for in the DSP2015, its past failures in absent of Blue continue to come to the surface. The newly empowered judiciary has begun prosecuting those responsible for inferior quality of construction work, and those responsible for corrupt practices. It’s also becoming aware of the absence of qualifying criteria and normal rules and procedures that led to the collapse of its ill advised global investments worth $100s of billion. Should Dubai’s leaders take their future seriously, the empowerment of Blue capacities must continue as to discourage exploitation by others and build the necessary institutions and capacities to enable it to diversify its economy away from natural resources. This will be its biggest challenge and if it succeeds it will become a beacon of leadership for the future of the region.

If there’s ever a lesson to be learned from this ordeal, it is this: In the absence of a solid foundation in the Blue value system that’s driven by Law and Order, exploitive values will move in to fill the void. It is an open invitation for people and entities with a keen detector for exploitation and a great degree of intelligence to manipulate the lower complexity of emerging cultures. Even with enormous wealth at their disposal, cultures cannot skip a development stage, a very tough lesson indeed in the science of value systems.

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All the Shoots Are Brown

The newest buzz phrase on Wall Street is “Green Shoots”.  Green shoots here and green shoots there and all one has to do is wait a day and watch them turn brown never to see the light of day again. So, why has there been so many false signs of economic recovery? The short answer is because we’ve exhausted the heck out of our business models. And what models they’ve been. It seems  that in a systemic act of defiance the global economy looked at what a business sustainability models looked like, and went out and did exactly the opposite. This past decade will be remembered as the debt decade during which the Bigger is Better pathology combined with the lack of rules on debt repayment to cause the unprecedented collapse of capitalism in its current form. A bigger and better chrome-plated Hummer to replace your regular Hummer? No Problem. A bigger and better McMansion to replace your regular 5,000 square foot home? No Problem. A bigger credit card with a lower interest rate? No Problem. A bigger mortgage to refinance and buy the gold plated Hummer to replace the chrome one? No problem. You can’t pay for any of it now? NO PROBLEM! Honestly, how did we ever expect to sustain such vicious cycle of debt without any accountability what so ever.

In years past, such conspicuous consumption would have never been possible as the institutions that lend the money held the borrower responsible at one point.   But, this time around there was a completely new lending philosophy created by Wall Street that took from grandma, China and Dubai equally, and because no one was watching, it made outrageous promises on returns and took hefty fees for itself. This new model wasn’t concerned about paying grandma back because in a style 10 times more sophisticated than that of Madoff it used money from China to pay her off and with a straight face called the whole scheme “securitization”.

This went on for years. Meanwhile both consumers and producers got used to receiving “securitized” money without ever having to prove the need for it, which made them all lazy, fat, and complacent. Yes, subservient hosts to a killer parasite that infected almost all who used it.   So why are all the shoots brown? Two reasons:

1.       The green seen by analysts is fuzz growing on dying hosts, and like any parasite once the host is dead, the parasite turns brown the next day.

2.       The brain of this comatose patient who was created out of greed registers occasional electric activity and analysts exploit the heck out of it trying to convince us that he/she will walk again.

What Wall Street and the economists of today don’t understand is that in order for  “Green Shoots” to grow into sustainable plants, you have to take the time to plant and nurture the seeds first and not be the plant thief on the observation deck waiting to cut down the harvest that never came.

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The Memetic Meaning of Dubai’s Collapse

For over 1 ½ years I’ve been warning about the imminent collapse of Dubai’s real estate market and inevitably the bursting of the bubble of its Dubai World Sovereign Wealth Fund; the richest of its kind in the world. Close to ½ Trillion USD worth of real estate projects have been canceled since last fall’s Cityscape exhibit in Dubai. The world has never seen anything as blatantly speculative as this Exhibit in its claims to have the demands to build whole new cities. One’s better judgment is clouded by the impression that in the Middle East, oil money doesn’t follow the same metrics as hard-earned money of yester years…. And who are we, the Western World on steroid to give the Sheikh prudent advice on HOW to bring Western modernity (ORDER – ENTERPRISE value system)) that’s hundreds of years in the making to a primarily tribal place of existence (Heavy TRIBAL-FEUDAL vMEME).

Well, the place is collapsing and the Sheikh’s government is scrambling to find and prosecute the people responsible. Apparently, Western businessmen cannot leave the Emirate permanently if they owe money (Dubai’s own interpretation on Islamic Banking). So Dubai’s airport garage fills up every day with hi end automobiles whose owners show their parking receipt and round trip ticket to the policeman at the gate, and leave with millions in debt never to return.

Here’s where Economics Meets Memetics; below is an analysis I made to the Spiral Dynamics Integral community in a heated debate about Dubai’s transformation in July 2008. There’s some reference to the color-coded value systems that are the hallmark of the Spiral Dynamics theory. Wherer appropriate, the descriptive theme of each value system is summed in one word. For a detailed description of the emerging science of value systems, please refer to earlier posts pertaining to the Spiral Dynamics theory and its use and applications

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July 2008

[SD-Integral] RE: Dubai transformation

Here’s my abbreviated Memetic perspective on Dubai:

Dubai is a rare experiment indeed in that it will force all the Spiral wizards to rethink the traditional evolutionary path of a culture. After all, the very idea of taking a nomadic (BEIGE-PURPLE) culture, put it in a time machine, and have it looking ORANGE in one decade is a mad scientist’s dream come true.

Traditional movement up the spiral took hundreds if not thousands of years, and only along the true and tried road did it pick up complexity. Absent BLUE, western ORANGE has downshifted to RED in Dubai. It is this downshift to RED that’s making it OK to condone slavery-like practices and destroy the environment and be clever enough (ORANGE cover/paint) to call it all by different names.

The lip service that developers and the Dubai government are paying to Green Building practices is a tiny drop of GREEN (EGALITARIAN vMEME)in a sea of RED (FEUDAL vMEME) that only waves a banner to those looking at the surface. The LEED certifications and sustainable design of individual buildings will have no effect on the environment unless “sustainable practices” are imbedded in a sustainable urban design scheme (YELLOW: SYSTEMIC vMEME)) that integrates cutting edge urban western design concepts such as the “New Urbanism”, “Design with Nature”, “Neighborhood Continuity” and many other concepts working in an “Integral Design” fashion to assure sustainability.  Massive solar farms in a massive desert called the “Empty Quarter” will be good example of the “Design with Nature” concept.

As far as the foreign labor issue, the question is not whether Dubai is providing better wages for laborers, it’s clear that it is. The real question is as people from a higher level of complexity who are building this city-state, do we have any responsibility to pass on the essential elements of healthy BLUE (ORDER vMEME)and ORANGE (ENTERPRISE vMEME) that has symbolized western human struggles and triumphs for the last 1,000 years, or continue our exploitation and let them deal with the collapse when the other shoe drops (The rest of the Middle East is watching and waiting, to say “I told you so”)

Many Westerners who do business with Dubai are not privy to any of the social ills that must be addressed because they do business in an ORANGE bubble. Even the article about sustainability by Ghanem Nuseibeh barely touches on the “cultural” aspects of what ails Dubai. It is very clear to me that Dubai’s RED/Orange considers any BLUE a nuisance, and will continue to do so as long as financial opportunities remain insatiable. The collapse of the Dubai real estate market is inevitable, and this will be the wake-up call that ORANGE needs. When the Sheikh orders a builder to “add another 15 stories” to a structure under construction, who do the owners sue when the supports cave in on the inhabitants of the building? With all the expatriates buying over-inflated real estate, who will they sue when the market collapses? Which institutions, in what court system, and which historic legal precedent will be used for them to make their cases? Can they obtain legal judgments against developers, banks, regulators, the sheikh?  Would their legal visa status be rescinded if developments go bankrupt, and if so what happens to their ownership rights?

In brief, this brave experiment is reluctantly allowing BLUE in through the back door, and only when this RED/Orange, through necessity, has to downshift to deal with its own damage control would BLUE truly surface. If its introduced swiftly and prudently it won’t take the rest of the Middle East down with it and we can all point at it and say it’s in a slightly better place than it was before the start of this experiment.  And we’ll all be glad for it as the rest of the Middle East learns what not to do in its movement away from tribal PURPLE/RED.

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