This week has seen the annual gathering at Davos with the usual depressing outcome. Much has been said about inequality, and yet the focus is much more about growth than about fixing the inequality problem.
Last night I witnessed an interview in which the interviewees, fresh from an expensive and doubtless liquid fueled dinner, saw no real problem with those at the top having too much. They saw the solution as better education and welcomed the qualitative easing measures by the European Central Bank that would further increase their own wealth!
I have spoken before about the potential for the pitchforks to come out if the peasants are still asked to ‘eat cake’ but still those at the top do not understand. Five years ago it was considered obscene that it took the top 388 billionaires to have the same worth as the poorest 50% of the world population. Today we only need 80 to match the 3.5 billion of the world.
There were two other disturbing facts. Firstly, the richest person has a net worth greater than the GDP of all but 70 of the countries in the world. Secondly, the increase in wealth of the richest person was higher than the increase in GDP of all but three countries in the world.
Not that we should single out the one person as many of the billionaires in the world could generate similar disturbing figures. Equally disturbing to the increases of the super rich has been the decline the standards of many at the other end of the scale.
In other words, the economic crisis seems to have left those that caused it unscathed whilst those with no power to control it have ended up paying. Bring on the guillotine!
As someone who works with and encourages entrepreneurship, you may expect me to praise these super rich entrepreneurs. In some ways I do not blame them entirely. They live in a world where GDP rules the league table of countries and where GDP per capita helps you to the top of the country league table.
Unfortunately, GDP was a measure put in place to measure the success of measures in the USA to recover from the Great Depression. It simply measured a country’s income. Even the author of the measure gave a warning that it was not a measure of success. GDP does not differentiate between good and bad income, nor does it measure what is achieved with that income.
There have been other measurements offered such as the Genuine Progress Indicator (GPI) which weights income based on whether it is good money or bad. Under GDP you get credit for producing and for clearing up environmental damage from production. GPI gives the clearing up income a negative value.
Not surprisingly, countries at the top of the GDP tree don’t want to change. The USA for instance has constantly increased GDP over the last fifty years. However, when Genuine Progress Indicator is used then they have made virtually no progress over the last fifty years.
Another interesting indicator that exists within the UN is Gross National Happiness. This defines happiness (not pleasure which is momentary) and measures national income against how it is used.
Bhutan is a country that uses the index to drive its government decisions and it is no coincidence that they are measured as one of the happiest countries in the world despite being one of the poorest.
All of this leads me to believe that we do the majority of really innovative entrepreneurs a big disservice by measuring their success by the size of their bank balance. Even worse, it may dissuade entrepreneurs from pursuing some really innovative solutions simply because the monetary reward isn’t great.
So in part two, next week, I will look at other ways of measuring successful entrepreneurs that encourages more innovation and which encourages people from all parts of the world population to have a go.