Economics for Humans

SARAH GREEN: Welcome to HBR IdeaCast. I’m here today with Umair Haque, director of Havas Media Labs, and the author of Betterness: Economics for Humans. He blogs for hbr.org and was recently listed one of the most influential management thinkers in the world by the Thinkers50. Umair, thanks for joining us today.

UMAIR HAQUE: Thanks, Sarah. It’s wonderful to be here.

SARAH GREEN: So you open the book by talking about how the field of economics needs to make a shift. What’s the shift we need to make?

UMAIR HAQUE: Well, I think that we are on the cusp of a paradigm shift in economics. And let me summarize that to you by asking you a hypothetical question. Which is, if I was going to ask you, what do you think a good life– a meaningfully-good life– consists of, your answer to me would probably be about a lot more than money and stuff.

It would probably be about a life that is rich in relationships, social capital. Probably be about a life that is rich in terms of accomplishment, organizational capital. It would be about a life that is rich in terms of meaning and fulfillment and passion, what you might call “emotional capital.” And I think that those are the things that really add up to a meaningfully-good life. And I bet that your hypothetical answer to my little question would not be that far off the mark for many of our answers.

But the paradox is that economics as we know it, and as we live it, does not really capture this conception of a good life. The idea of a good life, as we practice it, in economic terms, is very much about the idea of GPD. And GDP is really about the amount of industrial output that an economy can conjure up. So we have a big gap in between these two conceptions. And this is what I call an “outcomes gap.”

We know that the money and the stuff that GDP consists of doesn’t necessarily add up to the definition of a good life that I’ve put forth to you now. So I think that’s kind of the bare bones of the paradigm shift that we stand on the cusp of. So I think the question that this great crisis forces us to ask is, what is the point of an economy? Why do we do all this stuff? Why do the gears of exchange spin? And I think what we need today is a much more nuanced and sophisticated answer to that question to keep prosperity going.

SARAH GREEN: And before we get into some of that aspects of that answer, I just want to underline. So this can sound, I think, perhaps a little utopian or “pie in the sky” to people. But as you point out in the book, we’ve made this kind of shift before in other fields, like the field of psychology.

UMAIR HAQUE: Absolutely. If you look at the field of psychology, there was a paradigm shift that took place from what you might call negative psychology that was mostly about curing dysfunction, mostly about erasing the negative, to positive psychology, which is really a psychology of optimal functioning. So in a positive paradigm, healthy is not defined as a state that’s merely free of dysfunction. Healthy is a state where you achieve higher and higher peaks of functionality.

And I think that’s really the question that we have to ask ourselves about today’s economy. Because surely, the sum total of prosperity cannot mean billions of person hours spent mopping people’s brows over slightly smellier deodorants and new models of cars every year. Surely we’re capable of more than that.

SARAH GREEN: So to get into some of what we might be capable of, you’ve introduced a few new terms in the book that I just wanted to ask you about. So one of those is “betterness,” the title. And the other is “eudaimonia,” which I believe is Greek. So tell me a little bit about why you felt you had to reach out of the normal constraints of the English language there.

UMAIR HAQUE: Well, when we talk about a good life, let’s go back to what the point of an economy is. Presumably, the point of an economy is to provide us with goods. That’s kind of the fundamental basis of prosperity. Now, for us, today, if I ask you for some goods, you’ll probably tell me the stuff that lines the bleak, exurban shelves of your local big box store.

But are those really goods? I don’t think those are really goods. If we go back in history to the kind of big bang that kicked off human organization and thinking about prosperity in a much more rational way, we end up, in my reading, with Aristotle.

And for Aristotle, goods are not just stuff. Goods are the stuff that we’ve been discussing. The relationships, great accomplishment, meaning, fulfillment, passion, ethics, these are all goods. Those are the things that real prosperity consists of. And that conception is what the Greeks called “eudaimonia.” It’s a meaningfully-good life.

And in a way, it’s a much more nuanced and sophisticated conception of the good life that we have today. Because for the Greeks, a good life was not full. It was not meaningfully-rich if it just consisted of the stuff of opulence. It also required the stuff of relationships. It also required the human stuff. It also required the stuff of great accomplishment.

So their conception of richness was much more sophisticated and nuanced than ours, I think, in many ways. So that’s why I reintroduce the term “eudaimonia” into our discussion. I think it’s very important for us to understand that there are more sophisticated and nuanced definitions of a good life, and that if we want our lives to be meaningfully better, it may be that we have to start at the beginning.

SARAH GREEN: I guess that’s how it works with the word “betterness” too, is that you’ve asked in the course of this interview, what’s the point of all this stuff? And if the answer is business, well, that comes from the word “busy,” right? So you’re just busier and busier. I guess the idea with betterness is that you would actually be better and better, and that’s the point.

UMAIR HAQUE: That’s exactly the point. And the idea with betterness is that maybe business is kind of a software for human exchange that is on its last lets. Maybe it’s time for us to take a paradigm shift beyond business as we know it and ask us, can we reconceive human exchange as a lever to lift us to higher peaks of prosperity, not just as a way for us to collect more stuff?

SARAH GREEN: So it sounds like what you’re saying is that right now, we are trying to fly across the country in a Model T Ford. We just don’t have what we need to get there.

UMAIR HAQUE: Yeah. I would use another analogy, which I often use. I would say that we are a bit like a tribe that wants to move into the Bronze Age, and we’re using Iron Age tools. Maybe we’re using Stone Age tools.

Our economy is still optimized for what I call “opulence.” And the reason it’s optimized for opulence– which you can think of as more, bigger, faster, cheaper– is because of this thing called GDP. That’s the focal axis around which our economy spins.

That’s the number that analysts and bean counters endlessly obsess over. That’s the stuff that corporate profit reports add up to. That’s the reason that our economy exists. I think that that is not a sufficient tool for us to achieve eudaimonic prosperity. I think if we’re going to target more meaningfully-better lives, we’re going to have to take a quantum leap beyond and past it. So that’s kind of where I begin my five key recommendations to bring betterness to life in the real world.

SARAH GREEN: I wanted to ask you a little bit more about the GDP question. I think in the book you have a metaphor that’s really useful where you talk about us actually being like a broken-down car that has a rev counter but no speedometer. And could you just walk us through that metaphor a little bit?

UMAIR HAQUE: Sure. The idea is that GDP is a little bit like a rev counter. It tells us how fast the economy’s pistons are moving. But it doesn’t really tell us if our journey to prosperity is going anywhere. And we have a very visceral example of that here in the States, where GDP has grown over the last 20, 30 years, but median incomes have not. And arguably, life for the middle class– or maybe if you’re a cynic, the people formerly known as the middle class– has gotten very, very difficult and challenging.

So we’re kind of like a car that’s bogged down. We’re pressing the accelerator, the engine is roaring, the rev counter is spinning, but we don’t have a speedometer. And without the speedometer, it’s very difficult for us to tell, are we actually making forward motion towards prosperity or not?

SARAH GREEN: So then, in that case, who builds the speedometer? How do we get out of this? Who has responsibility for fixing this issue?

UMAIR HAQUE: Well, I think that is one of our great challenges as a society. Let’s think about one of our greatest achievements– America’s greatest achievements– in the 20th century is the creation of GDP. The Bureau of Economic Analysis calls it the crowning achievement of 20th century economics. And it was. It was a titanic intellectual achievement and a practical achievement.

Why are we not pioneering the 21st century version of that, which is what I call a “national balance sheet”? That’s kind of a speedometer for an economy. To go back to your first question, if a good life consists of relational capital, social capital, organizational capital, emotional capital, all these wonderful kinds of wealth– real wealth– why do we not measure them and monitor them? Because you get what you measure.

SARAH GREEN: I’m wondering, as we talk about some of these really big issues and societal challenges, if there’s anything that you think would work on a sort of more individual level. Because that’s the unit that a lot of free market economists always talk about, right? If we all just make the right economic decisions, somehow, it will all shake out in the end.

But it seems like, as individual economic actors, the jobs that we’ve chosen, and the products that we make, and the products that we buy, and the services that we offer have contributed to this sort of “economics of opulence,” as you call it. So how can we, as individuals, make choices that lead us in a more better direction?

UMAIR HAQUE: So how can we make eudaimonic choices, is really your question. Listen, I think that your hypothetical answer to my question was really about a personal balance sheet, not a national balance sheet. And a personal balance sheet is like a national balance sheet but smaller. How rich are you relationally, emotionally, socially, organizationally? I think if we are to think about our lives in those terms, then our preferences will begin to shift.

We will probably begin to make more eudaimonic choices if we are able to begin building mental models for our own lives about reaching higher peaks or eudaimonia themselves. I think the challenge we have right now is that it’s very difficult for us to conceive of what a meaningfully-better life consists of. As a society, we don’t have a blueprint. We don’t have a mental model to guide us in that direction. What we do have is a deeply-embedded set of mental models that begin with the idea of GDP– more, bigger, faster, cheaper, nastier.

SARAH GREEN: So it sounds like the recommendations that you lay out in this book could be applied on any level.

UMAIR HAQUE: Well, what I do is lay out five key recommendations, which go through– you’re right– from the macro level to the micro level to the individual level. And I’ll take you through four of them really quickly. The first one is that the global economy should have a balance sheet of real wealth, eudaimonic wealth. The second one is that nations should have balance sheets of real wealth, eudaimonic wealth.

The third one is that using those balance sheets, we recalibrate markets to achieve what I call a “generative advantage,” an advantage in terms of creating real wealth, not just more profit. The fourth one is that organizations update their brains– the idea that the organizational brain in most organizations consists of this trifecta of vision, mission, and strategy. And I don’t think that you can get to real wealth creation by having a vision or a mission. I think you need to take a quantum leap beyond to what I call an “ambition” or an “intention.”

SARAH GREEN: So how is something like that different in reality, other than just semantics? How are those qualitatively different?

UMAIR HAQUE: I think that they’re fundamentally different. I think that if you’ve ever had the displeasure to read a corporate vision statement, it may have been one of the more unpleasant moments of your life. They’re frankly pretty boring, pretty soulless, and pretty devoid of meaning. And that’s not by coincidence. It’s by design. Because those things are designed for shareholder value, on one level, to assure that an organization can outperform its rivals, maybe on another level.

What they’re not designed to speak to is the idea of real wealth. So let’s take one of my favorites. The vision statement for one of the world’s biggest fast food chains is to have the cleanest restaurants and the fastest food. That’s fantastic. So you’re going to give me that stuff while you are making me a little bit more obese, a little bit more dissatisfied with my grungy life.

That vision statement does not say anything about real wealth. How are you really going to make a difference in my life? How are you going to impact my personal balance sheet, my societies balance sheet? How are your products and services going to add up to the real goods of eudaimonia for me? So I think, don’t forget, vision and mission statements are the fundamental documents that guide billions of person hours of efforts around the globe every year.

SARAH GREEN: It’s a little sad to say this, but in some ways, it seems sad to me that we’ve gotten to a point where we’re saying that companies have to actually make people’s lives meaningfully-better is somehow radical or naive or utopian. I think there is certainly an appetite out there for this reality to come to fruition. But how optimistic are you that we can actually make this happen?

UMAIR HAQUE: I’m extremely optimistic. And the reason that the book is called Betterness is not just because I think it’s possible for us to create a better economy, but I think that it is probable that we will create a better economy. I think that if you think about my four recommendations, what is standing in the way is not heaps of money.

It doesn’t cost trillions of dollars to do this. It’s not talent. We know how to do this. It’s not people. We have the people to do this. What is missing is probably the will to do it and the blueprint to take it forward. So I’m extremely confident that this will happen.

And it is happening in some countries already. For example, if I was to ask you, what do you think are the two countries that are beginning to update GDP in the world today? And don’t forget, America is the country that invented GDP. It’s one of our great achievements of the 20th century. Your two candidates would probably not be India and China.

But those are exactly the countries that are beginning to do it. So I am very confident that we will take a quantum leap into a better future. But I think the world is a big place, and there’s no guarantee that the countries that do it will be the countries that we expect to do it.

SARAH GREEN: Umair, thanks so much for talking with us today.

UMAIR HAQUE: Thank you very much.

SARAH GREEN: That was Umair Haque. His latest book is Betterness: Economics for Humans. It’s available as part of the Kindle Singles Program, or wherever e-books are sold, and is also a downloadable PDF on hbr.org.