We live in an in-between period where old orthodoxies are dying, new ones have yet to be born, and very few things seem to make sense. — Ziauddin Sardar
The more we have wired everything into everything else, the less we can know about tomorrow. — Stowe Boyd
American businesses currently are sitting on a dragon’s hoard: $1.9 trillion in cash, collectively. Which begs the question: why aren’t they investing it in something?
Adam Davidson takes an journalist pass at this in Why Are Corporations Hoarding Trillions?, and the result:
There are countless economic journal articles laying out theories about why corporations have shifted from borrowing to saving. Some of the reasons are prosaic. Just like people, companies might want to have money for emergencies or for lousy economic times, and the past decade has been a period of increasing risk. Also, corporations have become far more focused on something they call ‘‘tax efficiency,’’ which the rest of us call ‘‘tax avoidance’’: For various reasons, holding on to cash and carefully shifting it among subsidiaries, especially foreign ones, is a great tool to shrink your tax bill.
The answer, perhaps, is that both the executives and the investors in these industries believe that something big is coming, but — this is crucial — they’re not sure what it will be. Through the 20th century, as we shifted from a horse-and-sun-powered agrarian economy to an electricity-and-motor-powered industrial economy to a silicon-based information economy, it was clear that every company had to invest in the new thing that was coming. These were big, expensive investments in buildings and machinery and computer technology. Today, though, value is created far more through new ideas and new ways of interaction. Ideas appear and spread much more quickly, and their worth is much harder to estimate. (Indeed, the impossibility of valuing the Internet is essentially what created the 2000 stock bubble.)
Surely the most important economic question of our time is a fairly simple one: Are the good times over? Will wages continue to fall for many, while rising high for a few? In the cash conundrum, we might find a modest reason for optimism. If corporate leaders and their investors truly believed that the future were bleak, that innovation and economic growth were irreparably slowing, there would be little reason to hold on to all that cash. Their hoarding of it hints that they think the next transformative innovation could be just around the corner. If in fact they do — and if they’re right — it’s good news for all of us.
Many — unmentioned here — believe that it is increasingly difficult, if not impossible, to assess risk (and therefore rewards) because we are in an age, according to Ziauddin Sardar,
characterised by uncertainty, rapid change, realignment of power, upheaval and chaotic behaviour. We live in an in-between period where old orthodoxies are dying, new ones have yet to be born, and very few things seem to make sense. A transitional age, a time without the confidence that we can return to any past we have known and with no confidence in any path to a desirable, attainable or sustainable future.
Sardar calls this the postnormal. As I wrote in 2013,
The tempo of modern life has sped up to the point that the future feels closer, and since it’s only a heartbeat away it seems reasonable to imagine being able to glance around that corner and know what is about to transpire. But that’s just a feeling.
The future is actually farther away than ever, because we have constructed a world that is the most multi-faceted astrolabe, the most incestuous interconnection of global economic interdependencies, the deepest ingraining of contingent political scenarios, and the widest pending cascade of possible ecological side-effects. The more we have wired everything into everything else, the less we can know about what will happen tomorrow.
And so these giant technology corporations — many of which are my clients — make small acquisitions, invest (relative to their means) modestly even on their moonshots. They wait for a time when the fog clears — or we develop better means to push aside the clouds of complexity and uncertainty — and perhaps then, and only then, make a big bet.
Until then, we are living in the postnormal paradox, where those with the greatest means to invest wind up sitting on the sidelines, uncommitted.
Originally published at stoweboyd.com on 24 January 2016.