Signals: the Breakdown of the Social Contract

Prepare for the future: pay attention to signals.

Whoever you are, wherever you are and whatever you do, you are being bombarded by many powerful signals. The world is a high frequency place. Signals are rich with information, with messages if you like, which can tell us something about the future. Interest rates, the price of oil, the unemployment index, the price of a house or of milk, are all signals that tell us something about what is going on in the world economy.

These signals offer clues as to what we should be preparing for. No one can predict the future, but it is also true that events are usually preceded by signals. Magazine covers, innovative artworks and fashion all send signals that tell us something about what is going on in the world economy. The challenge is whether we have the capacity to receive these signals and properly interpret what they mean for us, knowing that every person has a different set of skills, circumstances and aspirations and therefore different people can act on the same signal in very different ways with very different outcomes. Some awareness of the signals around us will help us realise the future we want to secure instead of being rendered speechless victims of economic forces we never saw coming. For this to happen, we need to be attuned to signals.

Signals are everywhere. I could not help staring at the cover of British Vogue in April 2008 because it also sent out an important signal.

It took me a while to figure out what it was. Of course it’s easy to stare at Natalia Vodianova, one of the world’s leading supermodels, especially when she is completely nude and remarkably curvy for a model. But something unsettled me. “What’s wrong with this picture?” I asked myself. One of the world’s leading fashion magazines had a cover with absolutely no fashion. In fact, it showed no clothes at all….. It signalled the simple fact that the fashion industry had lost its old customer base – the young who were receiving unsolicited credit cards with large borrowing balances in the mail. Once the financial crisis hit, the fashion industry became aware that it had no idea who its new customer would be. Who had money to spend on fashion? Maybe now it would be the somewhat older woman, a mother, who was a very different customer. In short, the whole industry was suddenly engaged in a massive rethink.

André Malraux, the French novelist, art theorist and Minister for Cultural Affairs, once said, “Often the difference between a successful person and a failure is not that one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk – and to act.” This is as true of those who are building the economy as it is of those who are addressing the policy infrastructure and the social contract, but which signals should be acted upon? Deciphering which is which is now the task. We must all decide for ourselves. Hopefully, everyone will make a different decision from everyone else. The diversity of opinion and action is what will reinforce society’s ability to withstand the sharp ebbs and flows of the world economy.

It is the diversity of opinion about signals that gives strength to the economy. Some will be right, some will be wrong, but without edgework and calculated risk-taking there won’t be an economy at all. No one has a crystal ball or a monopoly on the truth – not the Federal Reserve, not the White House or any equivalent and not your neighbor. Instead, there is a range of opinions, which form a “market”. A market is a clearing mechanism that efficiently matches buyers and sellers.

Image credit:  Ronald Dueñas

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