3 Takeaways - The Revenge of Power: How Power is Shifting in the 21st Century with Moises Naim (#94)

Episode Date: May 24, 2022

Power is easier to get, harder to use and easier to lose. Moises Naim explores how power is changing across all sectors of society. Power has shifted from country leaders to public squares, large companies to start-ups, and large armies to insurgents. Being in charge isn’t what it used to be! But at the same time, power is also concentrating in some sectors. Autocrats are reinventing politics and gaining power using 21st century tools - populism, polarization and post-truths - and undermining democracies around the world. Moises Naim is a Venezuelan journalist and former editor-in-chief of Foreign Policy magazine. He was Minister of Trade and Industry for Venezuela, director of Venezuela’s Central Bank, and executive director of the World Bank. He is the author of The End of Power and The Revenge of Power.

Welcome to the Three Takeaways podcast, which features short, memorable conversations with the world's best thinkers, business leaders, writers, politicians, scientists, and other newsmakers. Each episode ends with the three key takeaways that person has learned over their lives and their careers. And now your host and board member of schools at Harvard, Princeton, and Columbia, Lynn Thoman. Hi, everyone. It's Lynn Thoman. Welcome to another episode. Today, I'm excited to be with Moises Naim. Contrary to widespread perception of power becoming more concentrated and those who have it becoming stronger than ever before, Moises believes that power is becoming more frail and more vulnerable, that it's become easier to get, harder to use, and easier to lose. The transformation of power has upended government with the election of

leaders such as Donald Trump in the U.S. and Hugo Chavez in Venezuela, and it has similarly reordered business, the arts, and religion. I'm looking forward to finding out more. Noisis is a scholar and a journalist. He was Minister of Development for his home country of Venezuela and Editor-in-Chief of Foreign Policy Magazine. He's also written two books, The End of Power and Revenge of Power, both of which are excellent. Welcome, Noisis, and thanks so much for our conversation today. Thank you. I'm delighted to be chatting with you. And I am delighted to be chatting with you, too. How did you first become interested in power? When I had power, as you mentioned, I was a member of the economic cabinet of my country.

I was a minister of industry trade development. And I was always surprised by the gap between what people thought I could do and the power I had and what I did have in reality. In reality, it was very constrained. It was limited. I did not have resources to match the responsibilities. Politics would interfere and water down and distort policies. And I, at the time, thought it was me.

I was a very young 36-year-old, unexperienced young professional that all of a sudden became the Minister of Economy. And so I thought, this is just happening to me. And then after working in government, I went to the World Bank, where part of my job was to talk to ministers from around the world. And I discovered that the same experience that I had with it was a global thing. It was not just me and my incompetence and my youth and my inexperience. It was that the nature of power is very restricted in many ways. I'm not naive. I'm not suggesting that people like Xi Jinping in China

or even Vladimir Putin now or the president of the United States or the Pope don't have power. All I'm saying is that very often that power is more curtailed and restricted and limited. And then I made my business talking to heads of states and talking about their power, and it's the same thing. Power was becoming more and more fragmented and ephemeral. It used to be that power was

equated with the size of organizations. Can you tell us about that? Yeah, the size of an organization and owning physical assets mean, right? You need land and buildings and machinery and trucks and things like that. Well, then digital economy appears. And instead of having the material, concrete, tangible assets, you had digital assets and intellectual property and patents and everything having to do with innovation became a much bigger part of the balance sheet of companies. I love your example of the chess grandmasters. Can you tell us about them? That's a fantastic, concrete and surprising examples of power.

And historically, it was the sport at the highest levels. I'm not talking about amateurs playing chess, you know, but chess of the world, the world class, a grandmaster level, all had a structure. And that structure was dominated by Russia, by Eastern Europe. In recent years, that changed and was appended. And new players from improbable places came. Even women started challenging the grandmasters. Women that had been marginalized or couldn't compete started competing and winning and becoming chess masters on their own.

And so I use that metaphor and I trace what happened. Why did that happen? Why did the barriers to entry to becoming a chess grandmaster happen? And it illustrates what happened in a lot of other places in which newcomers that I call micropowers came and challenged established players using a different playbook, approaching strategy with a different perspective, taking into account new realities, and of course, using the new opportunities created by the internet.

You've identified many shifts of power that you've seen. Can you tell us about the shift from brawn to brains? Yes. And as I said before, power was associated, for example, with owning large tracts of land. Now you would rather own a microchip that contains a lot of information. And so big and strong and physical was important. Now you want brainy, you want innovation, you want an attitude towards exploring the unknown, running risks that others would not run, being comfortable with a non-tangible reality of these assets. You've also seen a shift in power from North to South. Can you tell us about that? In a variety of ways, you have seen new countries coming on the world stage that are quite amazing.

The obvious example is China. In the last decade, China's economy went from $6 trillion to now $14 to $15. So, a huge expansion of the Chinese economy. And a lot of that, of course, the source was human capital, you know, workers, but it also had a very strong dimension of technology that was not often created in China, but taken and sometimes stolen from others in the world. So that's an example of a newcomer that became a player in very unprecedented ways. We have seen the list of the wealthiest people in the world published by Fortune or Forbes now includes more billionaires from the developing world, from India, China, all the places than ever before. In a lot of competitive, who would have said, for example, that Anheuser-Busch, a very important American brand,

a very important American company, is now owned by foreigners, not Americans. That would be a surprise to a lot of beer drinkers in America. So there is all kinds of indications that the concentration of power that belonged to the North and to the world's wealthiest countries is now fragmenting. And that trend of big no longer dominating also applies to the military. I was really surprised. Yeah, and the very sad story of September 11, it cost Al-Qaeda $500,000 to stage September 11. And the consequences of that have been trillions. And we are still suffering the consequences of that. And what we're seeing in Ukraine these days is also a good example. You have the armies, the military, the armed forces,

one of the largest, most powerful nuclear superpowers in the world that are being contained. And we don't know how it's going to end, but surely the Ukrainian military and the Ukrainian people have offered us a view of how the smaller player is able to either deny the big ones the ability to do whatever they wanted or even displace them in terms of who's going to be calling the shots in that place. You talked about the business world, how the largest companies used to be the ones with

the most resources, whether it's manufacturing plants or land, and how that's changed to ones now with the most talent. What has changed in terms of the leadership, the CEO of these organizations? Is there change there too? Yes, perhaps the most relevant, important change for CEOs is that the tenure in office has become shorter and shorter. The occupational hazard of being a CEO and being fired or having to leave the company is very high. Every year, the length of the tenure of CEOs

shortens, which is a surprise because at the same time that that happens, they're making more money than ever. And the CEO compensation is, of course, an important visible issue and part of the debate on inequality. That is an important debate that is taking place these days. So the first thing is that perhaps as a result of my research, you discover that in order to be successful these days, you need to be laser targeted and very almost obsessively concentrated on doing well what you're doing. You cannot afford to be distracted. The problem with that is that it makes you lose peripheral vision. Your challenges and your opportunities very often will come out from outside your comfort zone, from outside the natural markets, from outside the kind of business that you know

so well because you need to be very competitive. That concentration of attention creates a tunnel vision that clouds the identification of things and opportunities and threats that are coming from around you, not from the core of your attention. It used to be that the mega players competed only against each other. Can you explain more how the structure and nature of competition has changed? The structure of competition has changed and the nature of competition has changed. And we have seen how new challenges, newcomers are able to displace established players. We have seen that in almost every sector of the economy, any business sector in which the world disruption and this innovative

innovation and disruption, disruptive innovation has become part of the mantra in today's business world. So when you look at finance, the competition for the big banks then is not other big banks, but it's the hedge funds. And in the car industry, the competition for GM and Ford and Toyota is not other big car companies, it's Tesla. So when you say disruptive innovation, you're saying that in every field there are newcomers that can easily acquire power. When you talk, Noisis, about power being more fragile and power decaying, what do you mean and why is it so important? Everybody starts by explaining that it's going

to disrupt something or disintermediate something. Those are the two main phrases or words being used. But then there is a lot of that. There are also different dynamics that are generating some of the largest and most capitalized companies in the history of business. And those are the technology giants that reach valuations that we have not seen before. And they are concentrating powers in ways that we have not seen before. So one of my books is about the end of power. Ten years later, I just published one titled The Revenge of Power. And what happened in those 10 years?

Power has become easier to acquire, harder to use, easier to lose. There is that happening. But at the same time and simultaneously, there is also concentration of power in some sectors. So call it the first is the centrifugal forces that spread power and the centripetal forces that concentrate power. And it's the clash of the two that explains a lot of what's going on in business, in politics, in geopolitics and so on. Yeah. So that's why you mentioned that the U.S. could be hurt by Al-Qaeda. Similarly in business, the competition for the big banks is not other big banks, but it's the hedge funds. The competition for GM and Ford and Toyota is not another big car company. It's Tesla. So that in every field, there are newcomers that can easily acquire power. When you say that power is decaying, what do you mean and why is that so important? There are things that the powerful were used to do that they cannot do anymore,

that they are a thing that are denied to them or that they took for granted. Market power gave companies the opportunity to impose views, prices, products, cycles, and everything else. That continues to be the case, but now they have to navigate waters that are filled with competitors, regulators, stakeholders, users, employees, activists. So it's a much more, it's a world more people by challengers and forces that constrain the power of the big corporation. That doesn't mean that they're not immensely powerful.

Goldman Sachs and JP Morgan Chase and all that in the banking sector or the technology companies are very large and have a lot of power, but they would also be the first to tell you that they also navigate in waters, as I just said, that limit what they can do. So the new players have a power to stymie and to block? According to my theories, they will have limits to that. That has been the case until now, but especially in the internet and social media, generically we call the platforms. That has been the case, but I see all kinds of signals that show that there will have limitations. And in some cases, I will not be surprised

if they are forced to divest and restructure and change the perimeter of their business. What you call an aspiration revolution. What is it and why does it matter? When I wrote The End of Power, I explained that power was more ephemeral and more often challenged. The question is why? Why has that happened? And I have a long list of factors that are contributing to that. I included in three categories that I call the revolution. And there's the more revolution in which there is more of everything, more countries, more people, more NGOs, more terrorist organizations, more companies, more political parties, ideologies, currencies.

Choose something that has to do with the human experience and there is more of it. So that's the more revolution that contributes to what's happening to power. But then there is the fact that those things that we have a lot of now are movable, and that is the mobility revolution. They move or they're connected or through the internet, there is a lot of mobility, not physical, but very often digital. So the second is the mobility revolution. Then the third is the one you're asking, which is the mentality revolution, which is a profound change in values, perspective, aspirations, desires of people. The University of Michigan has been running now for decades, the world values system,

which essentially surveys the world, a very large part of the human population, and tries to understand what are the values, what are the expectations. And what is quite amazing is it's like they're surveying two different planets. The way the aspirations and the hopes and the frustrations and the activism and what they demand of others and the way they use power is complete. It's like we are talking about two different worlds in just 10, 20 years. So it's quite something to view the world value system, but what were the answers they were getting 10, 20 years ago

and what they're getting today. It's completely different. People are more tolerant in some aspects, more intolerant in others. But phrases like you have to do that just because that's the way you have always done it, that that's the way we have always done it, that phrase now doesn't buy you much, doesn't have a lot of power to motivate or to run an organization. So there are all kinds of changes in values, man, and the mentality revolution that is forcing CEOs to rethink the way they deal with all the stakeholders that surround their operations.

It's really interesting to me that better is now not enough, that people look to see what's happening elsewhere. So they might emigrate, they might move, not because of absolute deprivation or absolute opportunity, but relative deprivation or opportunity. To me, that's fascinating. That is so important, Lina. I had a very interesting experience. I was visited by a group of European political leaders, young. They came to Washington, and they were a very pessimistic bunch. They were worried about being left behind, of a world and of work that is not what people wanted. So all kinds of litany, a very long list of disappointments, regrets, frustrations. And just by coincidence, the following week, I had a similar visit by a group of Chinese students.

And that was one of the most optimistic group of people I have encountered in a long time, because they were seeing the changes in the country. They, of course, are aware of the limits and the problems and difficulties and deficiencies that China has. And they are aware that they live in a dictatorship. But they are optimistic. They think they're going to be much better. The future is good for them. And so it was quite interesting to compare and contrast the expectations and perspectives of European leaders and Chinese students. Moises, you talk about it generally, a decline in trust in institutions

globally. Can you elaborate? Yeah, actually, it's not me. It is a series of researchers that are studying that. The most notable, well-known study and survey on that is by a company called Edelman that has the trust barometer. And the trust barometer shows that every year, trust is declining. People don't trust in business, in bankers, don't trust the media, don't trust government, don't trust anyone. And so that has huge consequences in terms of how you run a company, how you run a government, how you run for government and for office. And so trust, which is indispensable, is in short supply these days. Why do you think there is a decline in trust? Let me quote a Spanish philosopher that in 1939, his name is José Ortega y Gasset,

a philosopher, a writer. He was writing in 1939 about a European turmoil. He saw coming what the tragedies that then happened in Europe. And at the time, he wrote a book called Man in Crisis. And one of the phrases in that book is, we do not know what is happening to us. And that is precisely the thing that is happening to us. So we all feel that big things are going on, climate change, artificial intelligence, and the pandemic, everything. We know big things are happening, and we know that they will affect us and our families. But we don't know how. We don't know where. We don't know what we can do to adjust, to respond, to prepare, to fortify us in the face of these huge coming challenges that we don't have a handle on. I think that feeds into trust and also trust influences that perspective at the same time. What's happened in government?

That they are having a very hard time being successful. It's very hard to succeed in government these days. Expectations are multiple, high, and the difficulties of fulfilling those expectations of your voters are huge. So we are surrounded by what I call in the book the revenge of power, which is this feeling we have all met somebody who says everything is bad, the politicians that are all crooks,

nobody wants to work for the well-being of society. They're all there to steal. They're carers. They're opportunists. Nothing is worthwhile in terms of politics. So anti-politics is also an important part of all this. It seems like there is increasing fragmentation in politics in many countries around the world, and that there's increasing gridlock. And there are also people running for office that one would not have expected to run for office. And they're very successful at getting a very large percentage of support. Can you talk about that? Yes. These are the 3P leaders,

a new breed of political leaders that use their power or attain their power using the three P strategies. And the three P strategies are populism, polarization, and post-truth. Populism has always existed, is often confused as an ideology, which is not. It is just a bag of tricks, a toolkit to acquire a government that is based on the division of society too. A voracious, corrupt elite that exploits a noble people. And therefore, they need a defender, a champion that protects the noble people. And normally, these populists using that construct, and then very often, they do not achieve. Their promises were empty and were just a trick to get into government. But now, as you said before, polarization is an important part of that.

It's not just a division between the noble people and the corrupt elite. It's now that we have all kinds of identities, interests that fragment the political space. And where discord and conflict is the norm and polarization. Everything is polarized. Just imagine wearing masks for the pandemic became a political issue. Wearing or not wearing a mask defined you and expectations about who you are and so on and became a matter of political football, which is crazy. That just shows you the extent to which this identity kind of behavior creates new political realities. How do you govern a country in which it is divided in so many fragments of race and gender and religion

and partisan politics and all kinds of things that divide. And discord is an or. And that's polarization. And then there is the third P, which is post-truth, which is creating doubts about what to believe, who to believe. All the system of lies and half-truths trying to confuse people. And that is, of course, amplified by technology, by the social platforms. And so you have the post-truth that feeds into polarizations and breeds even more and

deepens the divide of populists. All of that together creates a very nasty political environment. And it's amplified as well to look at their own progress. And maybe they feel their progress is not as fast as they would like it to be, or they see greater progress possible elsewhere. Exactly. And there is a lot of, there are millions of people that are living lives that have a trajectory and a set of circumstances that they did not imagine. They had a different life in mind. And that, of course, is complicated. We are entering, Lynn, in a very difficult period in

which you have a lot of frustrated citizens, for good reasons, that don't know what it is to live without democracy, and therefore are very quick in deriding, criticizing, dismissing democracy, and they're willing to accept something else like autocracies. Well, that dissatisfaction is about to boom with the levels of inflation we're going to enter. We are already at inflation levels that we have not seen in decades. We have a whole generation of individuals that have not lived in inflation. Those of us who have know how insidious it is, how damaging it is, how impoverishing

and creates also inequality, opens up opportunities for corruption. And so inflation has horrible political consequences. And that environment in which you have a whole generation of people that don't know inflation and will now be living with inflation are ready to ignore democracy or just deride it. So the combination of both is very concerning. You also say that broad swaths of the population have been left politically homeless due to polarization. How do we fix that? Well, first by recognizing that our democracy is worth protecting,

that there should be values that should be above and beyond our most personal identities, that the notion of patriotism, the notion of being a citizen is more important than being part of a group that is tribal in nature. So tribalism is something that is with us. It's becoming important and we need to fight it. Moises, before I ask for the three takeaways you'd like to leave the audience with today, is there anything else you would like to add? What should I have asked you that I did not? No, I think you covered a lot of terrain and thanks for the opportunity, but I think you covered everything. Okay, then what are the three takeaways that you'd like to leave the audience

with today? That democracy is an endangered species in the political ecosystem. That democracies that we took for granted are now under siege, and that there is a global war on checks and balances. The erosion, and I can give you the numbers, which are quite striking in terms of how democracy has had a very bad patch and has been declining. In 2011, 49% of humanity lived in autocratic regime. In 2020, 10 years later, that number is 70%. From 49% to 70%. That means that most of the world lives in autocracies. Of 195 countries, only 34 are liberal democracies. In 2021, only 15 countries were moving towards becoming more democratic. That's the lowest number of transitions since 1978.

So democracy is under siege, democracy is undermined, and is undermined by a new crop. This is the second takeaway. There's a new crop of leaders that I call the 3P leaders that I already described that undermine democracy from within. They win elections, they become heads of state, they acquire power, and they immediately start undermining the checks and balances of democracy. And of course, eliminating term limits in ways that will ensure that they will continue to be in power. Those are the 3P leaders that I talked about.

The third takeaway is that no problem has ever been solved if it was not first discovered and recognized as such. And I believe that that's the case with democracy today. We are sleepwalking towards autocracy and the world has not understood the level of risk that we are now facing in terms of losing our democracy. Thank you. This has been great. I really enjoyed both of your books. Thank you very much. If you enjoyed today's episode and would like to receive the show notes or get new fresh weekly episodes, be sure to sign up for our newsletter at 3takeaways.com or follow us on Instagram, Twitter, and Facebook. Note that 3takeaways.com is with the number 3. 3 is not spelled out.

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