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The Rules of the Economic Game

Basil Enwegbara

Great warriors had coup d’oeil in abundance. Great warriors used it to predict what the opponent would do. Alexander the Great called it his “hope,” Caesar called it his “luck,” and Napoleon called it his “star.” Coup d’oeil , literally translated as “stroke of the eye,” is the ability to assess a situation at a glance, which enabled these great leaders to look over the battlefield and take immediate advantage of the terrain and the opponents.

These great warriors, having the genius of war, looked first at the environment in which war occurred, then matched the environmental factors with personality characteristics. They knew that warfare always involved danger, physical effort, uncertainty, and change. And that is why Napoleon concluded that “if the art of war consisted merely in not taking risks, glory would be at the mercy of very mediocre talent,” and Machiavelli advised his Prince, “even when your domain was at peace, act as if it was at war.”

But who are the economic warriors of tomorrow? Are they going to come like the Barbarians, who defeated Imperial Rome? Where will their surprises come from? Or will these new players win because theirs is a battle of survival at all costs? Will their unique gifts be their great curiosity? Do they wonder why things work and what is beyond the ridge of hills? Do they have courage to go where no man has gone before? Will they have a burning desire to get new knowledge in a different way from others, and their ambition to conquer and build something different?

Prophecy, they say, is a risky business. Nobody can predict the future, including the experts. Socrates believed only an utter fool would desire to do so. Surprises and knock-out will emerge from the least expected. It happened to the British, when their great trading machine in the mid-Nineteenth Century was halted in the oil-rich Niger Delta, not by Germany or France, but by Jaja of Opobo, a former Ibo slave boy, who outsmarted Queen Victoria’s best-trained trading warriors.

Although it is true that nobody can predict the future, Lester Thurow, as one of today’s foremost thinkers, explains the forces that will shape the future. In fact, through such books as “The Zero-Sum Society,” “The Future of Capitalism,” or “Building Wealth,” he gives us the privilege of understanding tomorrow’s game rules. They are as follows:

Rule one: Nobody has ever become very rich by saving his money. The rich see opportunities to work and invest in situations where large disequilibriums exist. This was as true for John D. Rockefeller as it was for Bill Gates. In both cases their lifetime savings constitute a small fraction of their total wealth. Carefully saving one’s money and investing in normal equilibrium situations can make one comfortable in one’s old age but never really wealthy.

Rule two: Successful businesses must be willing to cannibalize themselves to save themselves. They must be willing to destroy the old while it is still successful if they wish to build the new before it is successful. If they won’t destroy themselves, others will destroy them.

Rule three: Businesses that would grow rapidly with high profit margins must take advantage of technological disequilibriums, exploit developmental disequilibriums, or create sociological disequilibriums. All other activities are slow-growth, low-rate-of-return commodity businesses.

Rule four: Understanding, recognizing, and accepting the limits imposed by their genetic weaknesses is the beginning of wisdom for all organizations. The secret of success is finding places to employ one’s resources where those weaknesses are irrelevant.

Rule five: Humans have discovered how to operate successful capitalist economies in the midst of modest inflation, but not how to operate them in the midst of even mild deflation. Given a choice between the same rate of inflation or deflation, take the inflation every time.

Rule six: There are no institutional substitutes for individual entrepreneurial agents. The entrepreneur winners of the game become wealthy and powerful, but without entrepreneurs, economies become poor and weak. The old will not exit; the new cannot enter.

Rule seven: Any society that values order above all else will not be creative, but without the right degree of order, creativity disappears as if into a black hole.

Rule eight: The economic payoff from social investment in basic research is as clear as anything is ever going to be in economics.

Rule nine: Knowledge-based capitalism isn’t going to work without a new system for determining who owns or controls intellectual property right. Capitalism requires clear, easy-to-enforce ownership right.

Rule ten: The biggest unknown for the individual in a knowledge-based economy is how to have a career in a system where there are no careers.

Rule twelve: Economic progress and environmental progress are synonyms, not antonyms.

Rule Thirteen: Luck is necessary. Talent, drive, and persistence by themselves aren’t enough to get wealthy.

Even mere intelligence will not be enough. After all, Sir Isaac Newton, who could predict the motion of the heavenly planets, failed woefully as a great investor during the South Sea Bubble. Those who are in the old industrial economy educational system are only doing a great damage to those who are going to inherit the mantle in future.

It is going to be a global economy where mind games and manipulation are the stock-in-trade. Even going to the best elite management school is no longer adequate; after all, whatever is learned there is already known to many. In fact, if information technology is capable of changing the game, in this “new knowledge revolution,” the game becomes changing the game. Ergo, I make no sense.