“Business leaders are being motivated and rewarded to heat their houses by burning their furniture.” — Mark Johnson (Innovation Show Episode 210)
A Ponzi scheme is named after Charles Ponzi, the creator of the scheme. A Ponzi scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.
Charles Ponzi (March 3, 1882 — January 18, 1949). Charles Ponzi was a businessman born in Italy who became known as a swindler for his money scheme. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo.
A pyramid scheme, like a Ponzi scheme, uses new investors’ funds to pay the earlier backers. These schemes eventually bottom out when the flood of new investors dries up and there isn’t enough money to go around. At that point, the schemes unravel. Pyramid schemes are based on tiers where new members are at the bottom and the members at the top make the majority of the money. Governments finance pensions and social security systems in the same way.
Younger citizens pay taxes to finance pensions of those who have gone before us. This system succeeds, as long as there are new workers supporting the top of the pyramid. But what happens when people are living longer, but still retiring as they did in the past?
Our guest on this week’s innovation show is Mark Esposito. Mark tells us that Japan, South Korea, and Cuba aside, all aging countries are in Europe. This results from a combination of very high life expectancy and very low fertility rates. This creates challenges for social security systems and financing pensions, because the number of children we have and how long we live impacts our ability to pay for pensions.
The world’s population will plateau for the first time in human history, creating an insufficient labour force to support the old-age pensioners. With the labour pool shrinking, the only way to increase economic growth is through continuous investments.
In the coming decades Germany will be in the grips of a pension crisis. Increasing numbers of people will age, but a decreasing number of young people will be able to support them. Just as interesting as that is today, the largest segment of the population are those aged forty to fifty-five. Most of them are taxpayers at the height of their earning power, so Germany is currently collecting the most taxes from the largest group of people in the country. They’re enjoying a financial heyday. At the same time, Germany is operating on a deficit budget and has not invested enough in its own infrastructure. Some financial modelling and a sprinkling of foresight tells us that not only will Germany face a pension crisis in the next ten to fifteen years as their largest population ages, but also their ability to collect tax revenue from that same group will deteriorate. These two factors alone put Germany and a good number of other developing countries in economic and social peril.
Such trends mirror what happens in organisations who neglect innovation, experimentation, and investments in their future. Like Germany, when they are enjoying a heyday, they double down on what makes them successful today. They don’t let notions of new business models or frivolous experiments distract them. Alas, this thinking will eventually see their business bottom out like a bad Ponzi scheme. As Innovation Show guest, Elvin Turner told us, these business leaders are stealing from their future to fuel today. I discuss a great exemplar in my forthcoming book, “Undisruptable”, Fujifilm.
When Minoru Ohnishi became CEO of Fuji Photo Film in the 1980s, he became what I call “positively paranoid” about the continued viability photography industry and Fujifilms place in that world. Ohnishi believed a storm awaited the organisation, so led an offensive diversification strategy to ensure Fujifilm would use that storm to put wind in their sails. The organisation sought to diversify its portfolio, the industries in which it operated, and even their business infrastructure. When Ohnishi passed the leadership baton to his successor, Shigetaka Komori, Komori continued where his predecessor left off. He slashed product lines that no longer served the organisation and recalibrated the business. In tandem, his leaders re-routed major exploratory investment into new industries such as health care and beauty.
Unbeknownst to many of us, Fujifilm makes more money today from its beauty products than it does from photography. The company has also become a major player in healthcare. Only last month, shares of FUJIFILM Holdings Corp. gained around five percent in Japan after its unit FUJIFILM Toyama Chemical Co., Ltd. announced that anti-influenza drug Avigan met primary endpoint in phase III Clinical trial in Japan for COVID-19 patients.
With disruption in any realm, we must prepare for a storm before it is thrust upon us.
Nations must prepare for the pension storm driven by the trends of an ageing population and technological unemployment because of the impact of automation and artificial intelligence.
Organisations must prepare for the storm or disruption due to a shift in the business environment.
Individuals must prepare for the storm by building capabilities, mindsets and skill sets for the future of work.
If you have not had the foresight and positive paranoia of Fujifilm, it is never too late, you can take solace in the Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.”
This article is a theme from my forthcoming book: Undisruptable: A Mindset of Permanent Reinvention for Individuals, Organizations and Life, now available for pre-order anywhere you find books.
It is also available as a workshop, delivered with passion and designed for a virtual world.
On this week’s innovation show we welcome author of “Understanding How the Future Unfolds: Using Drive to Harness the Power of Today’s Megatrends,” Mark Esposito.
Your business’s success depends on how you prepare for the future. While business leaders of the past looked in the rear-view mirror to predict the road ahead, we must look at the greater forces affecting the social, business and economic world today — megatrends.
Our guest today is here to share a fresh, holistic way to think about tomorrow by preparing for it today: He calls it DRIVE.
The DRIVE framework examines five interrelated megatrends:
• Demographic and social changes
• Resource scarcity
• Volatility, complexity, and scale
• Enterprising dynamics
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