delivered at the Afro-Asian FinTech Festival Nairobi, July 2019
Good morning. And thank you for joining me today. And a special thanks to the Central Bank of Kenya and the Monetary Authority of Singapore for inviting me to share a few thoughts about the world we live in, the role of FinTech in its capacity to change the future of that world and how Africa can parlay its opportunity and accelerate its place in that future world.
The first thing I know about the world we live in is that it is full of humans. And I know that you all are humans. And that as humans 98% of you won’t remember 98% of what I am about to say. So I am going to give you the 2% that matters right now. And the 2% has two parts. The first percent is this:
Whatever improvements you seek, whether it is the economic progress of your company, country or continent, whether it is to improve the odds that your investments in digital transformation will stick, or whether it is to create a better world for our children, do this:
Spend less time worrying about technological code and more time decoding humans. Here’s proof:
75% of startups fail. And I think that number is under-reported. 84% of digital transformations fail. In fact $1.3trillion was spent on this in the US last year and $900billion has been determined a waste of money. 95% of corporate innovation fail. This is the big companies with the big money and the big brains and they can’t get it right.
Innovations fail not because they don’t work but because they don’t work for humans. And they don’t work for our collective humanity. Digital transformations fail because in truth they are about human transformation. And humans hate change.
So stop worrying about getting good at blockchain and start worrying about getting good at understanding why humans don’t do what they should and do do what they shouldn’t.
And if you want a quick cheat sheet on humans, I recommend Abraham Maslow, a psychologist from the 1950s who developed the Hierarchy of Need. All of our decisions are made through this set of filters. And most of us live at the base level of need, a level fueled by fear.
We fear the wooly mammoth, the saber toothed tiger, we fear new things and we definitely fear strangers.
In fact let’s prove it:
Turn to the person behind you and introduce yourself.
The reason why some of you choked up is because you are afraid that this stranger might hurt you, or worse, reject you.
Again, to be successful innovating anything requires an intimate understanding of how to connect with humans.
Think about M-pesa? Is its remarkable adoption rate a function of some sophisticated technology? No. It is being adopted by humans because it works simply for humans.
So again, your ability to move your country or company forward is a function less of writing code and more of decoding humans and meeting them where they are. And in order to do that you have to understand where that is.
So really FinTech should be FinHuman.
The other 1% I want you to remember is this:
Look backwards as much as you look forward. Focus not on learning from today’s West or the East but from the history of all civilizations. The problem with that suggestion is this. The famous 18th century German philosopher Georg Hegel captured it perfectly:
We learn from history that we do not learn from history. Georg Hegel
The nature of man is primal and alarmingly superficial. We are so enamored with the future that we forego the lessons of the past. Somebody else once said that the definition of insanity was doing the same thing over and over again and expecting a different outcome.
The fact of the matter is that while history may not repeat itself mankind does.
And the same has been true of every empire and nation-state that tried to prosper in perpetuity. Eventually they fail because they lose touch with their humanity.
Allow me to prove my point with a story.
Back in the 1940s there was this kind of strange guy named Sir John Glubb. He was what I might call a soldier-philosopher who spent much of his time in the Middle East serving as a mercenary of sorts. But more importantly he spent a ton of that time and after studying the rise and fall of empires. And he determined that every empire since the beginning of empires has a core “power” period that last about the same amount of time, 250 years to be exact or ten generations. It was true of the Assyrians, of the Mongols, of every empire. And it will be true of my country too. He also determined that the rise and fall of these empires follows the same arc and the same patterns of human behavior. I repeat, the same patterns of human behavior. And therein lies the clues and even the credo of how to maintain the positive trajectory this continent is on.
A trajectory I am calling Advantage: Africa.
Glubb wrote a 30 page treatise in 1950 titled The Fate of Empires that is startling in its depiction not just of how empires rise and fall, but countries, companies and even individuals. He presents a compelling, logical case that we all follow the same six stages:
The first stage is the Age of Pioneers. It is the classic stage of a startup, fueled by belief, courage and unbounded energy. It is a stage that is grounded on fundamental needs: need to survive, to compete, to assert ones abilities to win. And in seeking to win we are open to improvisation and experiment, we are willing to let go of tradition, we are open to anything if it contributes to progress against our goals. In the Age of Pioneer self-sacrifice and duty to the shared cause are paramount.
The second stage is the Age of Conquest. In 21st century parlance this might be better labeled the Age of Collaboration or perhaps Coopetition. In this stage there is growing awareness that geographic expansion now virtual versus physical is a benefit to commerce and to collective growth, that the whole can be greater than the sum of the parts.
The third stage is the Age of Commerce. It is the stage of emerging stability, with a focus on investing in infrastructure and the exploration of new forms and sources of wealth. A middle class pride emerges, reflecting the original belief system but beginning to show some vulnerability as money begins to take hold of the public as the reason for being and self-sacrifice begins to fray at the corners.
The fourth stage is the turning point. The Age of Affluence. It appears like everything is just great but in reality an insidious force is taking hold. Money becomes the thing, the only thing. And instead of a common good the orientation becomes individual gain. As Glubb wrote,
Gradually, and almost imperceptibly, the Age of Affluence silences the voice of duty. The object of the young and the ambitious is no longer fame, honour or service, but cash.
In the Age of Affluence, even Education suffers the same transformation. Instead of parents and students focused on acquiring lifelong skills as citizens and social contributors, they focus on the qualifications that command the highest salaries.
In the Age of Affluence the service to others begins to be replaced by service to self. We shift from being open and assertive to being closed and defensive. We begin to fear loss more than we celebrate gain. We are subconsciously holding on.
The fifth stage is the Age of Intellect, and this really is the beginning of the end. It is in this stage that the importance of WE is replaced by the importance of ME. The good news is that it is the stage that introduces significant advances in our understanding of the sciences but it is accompanied by a growing separation between the intellectuals and the masses, often including the ruling parties. The Age of Intellect is the age of belly button gazing, believing we can use rational thought to figure anything out, which is when we begin to ignore the emotion of our humanity.
The final stage is the Age of Decadence. The Age of Decadence marked by internal rivalries and extreme divisions. A universal pessimism takes hold, joined by frivolity as a false remedy. In the Age of Decadence, the athlete, the singer, the actor becomes the heroes. Economic inequality expands as does the masses and their leaders belief that progress is an entitlement, that everyone will grow richer just because. In the Age of Decadence, delusion and denial rule the day.
My modern day punch line to Glubb’s construct is this: America is solidly in the Age of Decadence.
And in what is now a global innovation arms race we are losing, , we are losing badly.
I won’t belabor the data. It’s all going in the wrong direction. From cost of education and health care to the decay of our entire infrastructure. I live in Boston. We have the oldest subway in the country. It’s a 122 years old and it breaks down every day. And we have the newest form of corruption, it’s called lobbying. Last year lobbyists in the US spent $3.8billion which is almost 5% of Kenya’s GDP.
The right numbers are down and the wrong numbers are up.
But wait you say, according to traditional measures like GDP and newer ones like the Global Innovation Index we are doing just fine, right?
Let’s go back to the Glubb model. What decimates empires is not externalities, it’s internalities. It’s behaviors not goods and services.
But when you look at our country’s performance through the World Bank’s 17 sustainability goals we are failing badly. And the trajectory we are on is unsustainable.
We are failing because we followed the course of history without learning from it. Hubris has replaced humility. Greed has replaced goodness, cash has replaced collective responsibility. Self-serving has replaced self-sacrifice.
And the fixation on technology has replaced a commitment to our humanity.
Which is why loneliness is now an epidemic in America. Not a social epidemic a health epidemic.
So what does all this have to do with Africa? Learn from the lessons of the past. Do not follow us. Do not follow the West. Do not follow the East. Do not follow what other empires have done wrong, do what they did right. And do not hold up the Global Innovation Index as a measure of relative progress.
My advice is to lock in your place here: The Age of Pioneers
Be the pioneers that you are and always have been. This continent was the birthplace of arguably the first pioneer, the first entrepreneur, homo sapien, modern man. In today’s world the Age of Pioneers is really the only sustainable age. The pace of change is such that constant reinvention is the new standard of doing business. And constant reinvention is what pioneers do.
The great news is that many of the attributes of Africa are the attributes of successful pioneers and entrepreneurs.
And there are 7.
1) Need = Driven
Need is a much greater motivator, a greater driver than Want. Here’s my theory of behavior change:
There are only two motivators of change, need and want, or said another way, desperation versus aspiration. And aspiration rarely works. Take me for example:
I’ve been wanting to lose ten pounds for three years. I want to lose weight but I don’t, because I don’t have to. And then I go to the doctor and she tells me that if I don’t lose ten pounds I will double my risk of a heart attack. I lose ten pounds by Friday.
Need is perhaps the greatest advantage.
2) Resource constrained = Resourceful
Vijay Govindarajan, a Dartmouth College Professor wrote a book entitled Reverse Innovation about the advantage developing economies have because they have less. He shared a story of a prosthetic being developed in India for less than $50 because that was all they could afford, versus $300,000 in the United States. A lack of resources is advantage.
3) Lack of legacy infrastructure = Open
The United States is lagging much of the rest of the world because we are stuck in our ways and in our use of technology. We are woefully behind in mobile payment adoption. Compare that with emerging countries.
Lack of legacy is advantage.
4) Nominal downside = Risk amenability
The beauty of no real downside is risk amenability and the willingness to try new things. Empires and startups fail when they stop taking risk. Risk taking is advantage.
5) Self-emerging = Self-awareness
Self-awareness and the ability to see and embrace the truth. The truth about you, the truth about the problems you must solve, the truth about the humans involved. The emergence of this continent is like the metamorphosis of a butterfly. You can’t help but look in the mirror and accept what you see. Truth telling is advantage.
6) Lack of hubris = Collaborative
Let’s go back to the Fall of Empires. Bad things happen when people stop working together. Good things happen when they do. This conference and the collaboration between the central banks of Kenya and Singapore is a perfect example of this. When I told people I was coming to this conference and that it was a joint venture between the two nations, people seemed confused. Why would Kenya partner with Singapore and vice versa. Because in the 21st century globalism is a central tenet and partnering an essential capacity.
Collaboration is advantage.
7) Pride = courage
Pioneers are brave, are unwavering in their resolve and work ethic, and in their conviction that their vision can be realized. Pioneers are not afraid of the truth, of failure or even success. They march forward with courage and confidence regardless of the barriers they must scale. Courage is the supreme advantage.
The seven attributes of successful entrepreneurs, of successful pioneers, are ADVANTAGE: AFRICA.
So the question before this continent and country is how to take full advantage of your pioneering capacities while avoiding the seemingly unavoidable future stages of decadence and decline? More pointedly, the question is this:
Is it possible to dissect the lessons of the past to inform a new order and new way of operating supported by enlightened policies that enable material progress without allowing our human-ness to screw up our humanity?
So what would I do? Three fundamental things:
First, start with a clearer depiction of your intentions. What is it you seek exactly? What is the measure of this place? We all need a different set of KPIs. GDP growth is not sufficient.
A perhaps terrible analogy is that GDP growth is like your blood pressure or body temperature. The numbers can look normal but it turns out you have cancer. Remember the empires. They all seemed to be doing just fine in the Ages of Affluence, Intellect and Decadence. And then…
GII is not right. It’s just forced inputs and outputs.
Even the 17 Sustainable Goals don’t quite capture it for me.
To my mind is has to be a measure that is pointed to in a quote from Emmanuel Macron in a recent interview with the New Yorker magazine:
“ …for society to be sustainable…you have to restore the equality of chances.”
Equality of chances means that every citizen (and employee) has the latitude to step forward, to get ahead, to participate, to improve one’s lot in life. I believe all countries should consider a new measure of collective performance as captured in something called The Latitude Index.
The index should be designed how well a country is doing structurally, personally and culture in order to have more of their citizens think and feel that they have the latitude and support to do more, get more and give more. Arguably a healthy economy is one where every citizen feels like they have the means to self-actualize right?
Every country is fundamentally after positive movement. Measures like the Global Innovation Index focus on inputs and outputs, not on the movement of humans and the gains in latitude they are getting and most importantly feeling.
The second thing I would focus on is education. Not just primary or secondary but tertiary. More specifically adult education. While yes we need to continue to re-think and bolster how we can do a better job of educating our children and young adults for today, we need to figure out how to educate our citizenry for life. And there are two dimensions here. The first is captured in this thing called the Unbanked.
As one example, it’s great that the financial industry is focused on how to use technology to provide financial capacity to the almost 3 billion people that don’t have it. BUT the goal of financial inclusion must be accompanied by a commitment to financial literacy. We all know what happens when you put a tool like credit in the hands of people that don’t understand credit. The sub-prime mortgage collapse of 2008.
The other dimension is this:
The pace of change is fundamentally faster than man’s natural ability to change, to adapt. We need to create what I call adult learning systems that motivate and enable every adult to learn how to think and behave differently including using the new tools and technologies before them. And I believe the job of creating those systems lies with both government and corporations.
The good news and bad news is that companies like Amazon are stepping forward on retraining. The bad news is that it is purely focused on functional skills training, which is like kicking the can down the road. We need to focus on behavioral skills training. Remember the empires!
And the final thing I would do is modify the Total Factor of Productivity formula:
So one of the few things I remember from business school is the idea that the growth of an economy is fueled by some combination of capital, educated labor and enabling infrastructure. So if we go back to the fall of empires, did they die because of a reduction in any of those things? Maybe a little but mostly they died because they lost touch with their collective humanity. So I would add a variable to this equation, and that is culture.
As this country and continent move forward, I would focus on humanism as a central tenet of your growth strategy. A dedicated and explicit effort to shore up and even define your shared values and beliefs, a commitment to embracing the truth, to we versus me, a fixation on weeding out corruption and selfishness and an effort to paint a vision for the future that every citizen can support and even get excited about. Cultures are complicated. Humans are complicated. But that does not absolve us from creating societies and systems that work for them versus against them.
The advantage is Africa’s. But it comes with a responsibility to prove Sir John Glubb wrong. And the way to do that is move forward not as bankers, technologists or bureaucrats but as humanists, laser focused on innovating in ways that serve mankind today and in the future.
The positive trajectory of this great continent does not have to end up like the rest. Let’s add a new Age that extends the Age of Pioneers. Let’s call it: The Age of Sustainable Human Progress, an age that benefits Africa and the world forever.