The Future of Work: A New Understanding of Value

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According to the influential economist Mariana Mazzucato we need to rethink the way that we look at value. Modern economies reward activities that extract value rather than create it, and we often forget that things of value tend to be co-created. In an interview we had with Mariana Mazzucato in the run-up to our Symposium: The Future of Work, she challenges us to re-examine our views. 

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What ideas on ‘success in business’ would you like to get rid of?
Currently business success is based on pleasing shareholders through governance models that are driven by maximising shareholder ‘value’. This leads companies to focus on ways to increase share prices and stock options. I believe we need a stakeholder governance model that leads to value being understood as collectively created. This means ‘valuing’ the role of public sector and voluntary sector institutions. Indeed, ambitious public institutions were behind the investments that led to everything that makes our smart products smart, from the Internet, to GPS and touchscreen display—but also to the new forms of energy and revolutionary medicines.[1] Understanding value as being co-created, and policy as being about shaping markets and not only about fixing them, could lead to very different business propositions and relationships.   

What would happen if we don’t change how we view value?
Then we will continue to confuse value extraction with value creation—and hence increase inequality, and in the process reduce the opportunities for innovation.[2]

What better definition of success can we come up with?
Success should be about how to drive different organisations to co-invest and share both risks and rewards. I have been helping global organisations think about the ‘moonshots’ that can be used to drive innovation in areas that will affect our ability to tackle the grand challenges around climate change, healthy ageing, and inequality. We need ‘missions’, these are concrete targets that require to be tackled by different sectors, actors and disciplines. I wrote a report for the European Commission on Mission Oriented Innovation[3], that outlines both how to choose missions and how to implement them. 

I believe that a good definition of success is whether governance mechanisms and investment mechanisms enable the concrete tackling of societal missions, and in the process drive innovation which is a key driver of long-run growth, both at the organisational level and the national level.

How can we help our organisations to look beyond the short term and focus more on the long term?
Organisations need to be incentivised to invest in the long run, and to use such investments to tackle goals. This is not only about setting missions which reward actors that are ‘willing’ to tackle them (the reason I argue we should not be picking winners but picking the willing), but also to use the tax system to do so. Currently the tax system actually rewards short-termism—through low capital gains tax for example. There is no reason we should not have a financial transaction tax (why reward super quick investments that just move assets around rather than investing in new ones that produce real value?). We need to think about how to use the tax system to steer long-run investments (in areas like human capital formation and R&D) as well as tilting the playing field to reach ambitious goals such as those around the green economy  

How will shareholders ever become more conscious of the fact that they have more responsibility than just making money?
I don’t believe shareholders can be forced to think in new ways. By creating and making explicit a collective value creation system, shareholders will have less of a stronghold on the concept of ‘shareholder value’, moving towards one of stakeholder value, and also the word value itself will be more ‘contested’. It is ‘value-based pricing’ that has justified the astronomic increases in medicine pricing—but the underlying value proposition is one that ignores for example, the $35billion/year that the National (public) Institutes of Health pump into the health innovation system. 

So short-termism needs to be backed by new understandings of where value comes from. Otherwise the solutions become only defensive about ‘taxing’ wealth, rather than new structures and relationships (e.g. symbiotic public private partnerships) that create more (collective) wealth in the first place. I have set up a new Institute for Innovation & Public Purpose at University College London where these ideas are being explored, both on the research side, the policy making side, and the education side to train global leaders of the future in public, private and voluntary sector organisations interested in long-termism and innovation to solve global problems—whether it be ridding the ocean of plastic, or creating sustainable cities.

Mariana Mazzucato is Professor of Innovation Economics at University College London and the writer of The Value of Everything (2018). On the 9th of November she is one of the keynote speakers at our Business Symposium: The Future of Work.

Business Symposium: The Future of Work

[2] Mazzucato latest book is about this topic: The Value of Everything: making and taking in the global economy

[3] Mazzucato's recommendations can be found here: Mission Oriented Innovation. Mission Oriented Innovation has now been incorporated into the Horizon programme (Euros 100 bn).

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