The common but generally accepted adjective used to describe the impact of the pandemic is "accelerated". It's an interesting choice because it suggests that the effects of the pandemic are not new, they existed pre-covid. This reminds me of the famous saying from William Gibson:
"The future is already here — it’s just not evenly distributed."
This is commonly referenced in technology. Gibson is, after all, a science fiction writer. The obvious technological change that's at the top of everyone's mind is the acceleration to digital. Businesses that were not digital or able to facilitate remote work had to make these changes overnight (or at least start to). As we re-emerge from the pandemic into a "new normal," the digital playing field will become much more evenly distributed.
However, when thinking about the big shifts accelerated by the pandemic, the more interesting and enduring are those being driven by Protest Culture. The pandemic has shone a light on the inequalities in society. They existed pre-covid, but the pandemic has intensified and shifted them into mainstream culture. The more mainstream and popular an idea, the more governments and businesses take action.
There's a theory in political science called the Overton Window which is just as applicable to business. The Overton Window is a "range of policies politically acceptable to the mainstream population at a given time." It takes time for new ideas to be accepted by the mainstream and to seep into government policy. It's the same within the business world and the ideas that rise to the top of the agenda in the boardroom.
The pandemic has accelerated ideas that were once radical in business to being sensible ideas now. These kinds of ideas became clear while listening to business leaders talk at the Wired Smarter Conference last week (the agenda will give you a taste). The key themes I took away from that conference were prioritising resilience over growth and regenerative business models over extractive ones. Digital was a big theme but seen as a necessity for survival.
Pre-pandemic, lots of businesses aimed to be purpose-driven. They were shaping their brand identity around societal issues like sustainability and social justice. But how many of them baked this into their business and operating models? The prevailing sentiment among business leaders was that revenue-growth comes before everything else. This meant they were focused on maximising profits and creating a sense of purpose through great branding and PR, not through good business design. But the Overton Window is shifting.
Maximising shareholder value at the expense of the environment and social justice is becoming less popular. Showing tangible progress on having a positive impact on sustainability and social justice is becoming expected. Instead of societal purpose being used as just a marketing activity, these issues are moving into boardrooms for big businesses.
The question now becomes how can businesses do both? Create positive outcomes for the business (profits) and tackle the issues that Protest Culture has thrust into the mainstream? Here are three industries that are facing these pressures and beginning to adapt.
Introspection of Fashion Brands
Ethical issues around the production of clothes have been around for some time. I remember reading "No Logo" by Naomi Klien in my first year of university and having my eyes opened to a lot of things. One of the most memorable was reading about how clothes were made. Back in the late nineties and early naughties the human cost of sweatshops was the main topic. Twenty years on and these issues have not gone away. They are now compunded by Extinction Rebellion, Greta Thunburg and organised protests about environmental damage. Protestors are typically the youth, the primary audience for fashion brands.
Today, the number of small independent companies doing things differently has proliferated. They are sourcing the best quality materials in a regenerative way. They are consciously thinking about how they design and produce their products by minimising the human and environmental cost.
One of the most popular items of clothing is also one of the most challenging to produce sustainably. Over 2 billion pairs of jeans are sold each year, but on average each pair takes 7000 litres of water to produce (source). Some of the poorest regions of the world produce jeans and they are the ones shouldering the ecological damage of their production.
Independent producers are challenging this. For example, The People Tree (who do more than just denim) uses eco-friendly materials and reduces water usage and chemicals in all the items they produce and sell. Another independent, Hiut Denim, focuses on sourcing the most sustainably produced materials and ensuring their ethical production by being part manufactured (and repaired) in Cardigan Bay, Wales (not outsourced to sweatshops in the poorer Asian countries). For a long time, these smaller businesses have operated on the outer edges of the Overton Window. They serve a small audience, usually at premium prices, and are therefore unappealing to big brands aiming to maximise sales growth.
However, mindsets are shifting. Paul Dillinger, the Head of Product Innovation at Levi's, spoke at the Wired Smarter Conference last week. He talked about how living through lockdown this year has meant that many people (including Levi's and its customers) have realised that they are living with a load of stuff they don't need. Furthermore, Levi's core audience is suffering from unemployment and money troubles. He said:
"We can't come out of this pandemic expecting them to pay for stuff they don't need with money they don't have."
Dillinger talked about sustainability as a big trend in the fashion business, but one that marketing teams are very good at obfuscating. He believes many brands are using sustainability as a lever to create demand and not to positively impact the planet. His tone was very introspective and he asked questions fundamental to how Levi's makes money in the future:
"How do we grow in a healthy way? A way that empathises with our customers' new normal. We shouldn't be selling them products they don't need. What's the new value proposition?"
Part of the solution is collaboration. He said: "If you figure out how to use less water to produce jeans and you don't share that with competitors you're an asshole." He argues that we live in a new paradigm now and it involves more collaboration. He wants Levi's to compete on style but cooperate on how the industry grows together more sustainably. This is ecosystem thinking, a topic I started exploring in my last newsletter and will be an important trend across every industry and business.
Big Tech, big responsibility
The purpose of Big Tech firms, particularly Facebook and Google, is very utopian. The debate rages on about how harmful and controlling these platforms have become. Facebook and Google were, not so long ago, plucky upstarts, rethinking how we connect with each other and information from around the world. Whilst their services have created many positive outcomes, they have always had their critics when it comes to the negative effects of issues like data privacy and mental health.
There are a lot of things converging against them, such as antitrust investigations, whistleblowers exposing unethical practices, and an increasing number of high profile critics (Scott Galloway is one of the most incisive). This increase in awareness is really important because we're all spending more time online due to the pandemic.
Recently, the film The Social Dilemma on Netflix exposes Big Tech's manipulation of people's behaviours, the negative effect on mental health and the degradation of democracy and society. I think the debate is still operating at the extremes. The Social Dilemma raises a lot of good arguments, many of them longstanding. But to reach a mainstream audience it had to turn it into a form of entertainment, which sensationalised the key issues.
Facebook's response to The Social Dilemma was very defensive. I agree with their opening statement that the Social Dilemma was sensationalist and unbalanced. However, there is very little humility coming out of Facebook and it feels like they are doing the bare minimum to avoid being regulated. Facebook and Big Tech are pretending not to see these issues and labelling them "unintended consequences." These issues are so widely debated that they cannot ignore them any longer. By doing so they are acting irresponsibly which they can get away with because they hold monopoly power. That's the power of platform capitalism at its most concentrated level.
The strength of these critical voices is beginning to shift mainstream public opinion. The fact that the US government is investigating Big Tech means the Overton Window has shifted significantly over the years. The problem with monopoly power is that, unlike the clothing industry, we're seeing little change on the supply side. TikTok has emerged as a new competitive platform because it started in China where Silicon Valley Big Tech doesn't operate. What we've seen with TikTok is that where the creators go, the money follows. Is there another paradigm where other competitors might emerge? Could the next big TikTok-Esque challenger come from the decentralised web?
The decentralised web has come a long way since the 2017 crypto bubble. The use cases outside of alternative currencies have ballooned. Many decentralised platforms help redistribute ownership of the web and its content. A new kind of web that is community-owned. Mainstream examples such as Reddit have introduced coins to reward community participation, and new networks like Cent, "a network where Creators & Fans can earn income together" is offering a new kind of economic model. Direct engagement with fans and full ownership of content are strong value propositions. The challenge is the barrier to behaviour change through existing habits and network effects. But as readers of previous newsletters will know, once the push factors from existing solutions and the pull of new solutions become strong enough, more people will make the switch.
We're currently experiencing the impact of how Protest Culture has impacted the financial services industry. The 2008 financial crisis created fertile ground for anti-bank and anti-capitalist ideas. The Occupy movement was a powerful protest against the financial system. Protests against the cost of the recession are being pushed onto what has commonly become known as the "recession generation." Fintech emerged in the mid-tens and those consumer-facing challengers defined themselves against big banks and adopted the language of Occupy.
This diffusion of culture into financial services businesses is happening again right now. Financial services are key to creating systemic change because money can be re-routed which impacts investment, growth and prosperity.
One of the most recent examples is Greenwood, a new digital bank by Killer Mike (real name Michael Render). Render is a musician and an influential activist in the George Floyd and Black Lives Matter (BLM) protests. In an interview with Techcrunch, Render and his co-founders Andrew Young and Ryan Glover talked about creating a neo-bank to re-route money to black communities:
“It’s no secret that traditional banks have failed the Black and Latinx community. We needed to create a new financial platform that understands our history and our needs going forward, a banking platform built by us and for us, a platform that helps us build a stronger future for our communities. This is our time to take back control of our lives and our financial future. That is why we launched Greenwood, modern banking for the culture.”
According to Render, black people are twice as likely to be refused a mortgage and so a new banking platform is required to create social and economic justice. As a result, the bank has had ‘tens of thousands’ of account requests in less than 24 hours. For more on the subject, Greenwood was at the top of the agenda on the Fintech Insider Podcast recently.
It's not just social justice, there are financial services businesses focused on environmental impact too. Pensionbee is about to launch a fossil-fuel-free plan. Pensionbee's CEO, Romi Savova, held Legal and General to account, and forced change, for their inclusion of Shell in one of its most popular responsible investment funds. Pensionbee now have a waiting list to join their new fossil-fuel-free pension fund due to launch in November 2020. Pension funds can have a big impact on re-routing money. They manage large sums of money and they invest in stocks over a long period of time. Diverting capital away from brands like Shell will impact their ability to invest in the future.
The future is already here
The examples provided across these three industry verticals are not all mainstream. Companies like The People Tree and Hiut Denim have created successful businesses by being purpose-led. It looks like Levi's, a mainstream brand, will be following suit rather than just talking about sustainability. There are very few challengers in social media given the monopoly power of incumbents. But a paradigm shift to a decentralised web could shift power from corporations to people. Fintech has already shown its rebellious DNA. The next generation of fintech is creating new products and businesses around social and environmental issues. And because their business is all about money, they could have a significant long term impact on society.
Change is happening, it's just not mainstream yet. Protest culture is hugely powerful in shaping the agenda of governments and the board room. The transparency of the world we live in today means that big corporations will be exposed for greenwashing or ignoring their societal responsibilities. The pandemic has magnified these issues and the business world is adapting. If you want to see the future, look at what is happening around the edges, because before long it will become the new normal.
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