Going around like a carousel

Should we step up to the plate and question our instincts? Or will “Pinoy Kasi” stand in the way? But why do we need to step up to the plate?

Consider our instincts: We are parochial and insular. We value hierarchy and paternalism that we rely on political patronage and oligarchy that ours is a culture of impunity.

Let’s pause right there.

And then acknowledge that we’re the regional laggard. Because we must ask: How come we’ve been running around like a carousel? Or are we riding the back of a tiger that we’re just hanging on to dear life, come what may? Sadly, the tune appeals to us: “Que, sera, sera; whatever will be, will be.”

Here’s how behavioral economics explains our quandary: “2 systems determine your behavior in your mind – one conscious and the other automatic, and your brain is lazy and causes you to make intellectual errors. [Thinking Fast And Slow by Daniel Kahneman. A Princeton University psychologist, he won the Nobel prize in economic sciences in 2002 “for bridging economics and psychology.”]

That is reinforced by “The Science of Irrationality: Why We Humans Behave So Strangely,” by Dan Ariely, scientificameric.com, 21st May 2008; Ariely is a behavioral economist at the Massachusetts Institute of Technology and author of the best-selling book, Predictably Irrational.

Then recall the “growth mindset” versus the “fixed mindset,” and this one’s from Bill Gates: “Our genes influence our intelligence and talents, but these qualities are not static. Suppose you mistakenly believe that your capabilities derive from DNA and destiny rather than practice and perseverance. In that case, you operate with what Dweck calls a ‘fixed mindset’ rather than a ‘growth mindset.’

“The fixed mindset is a huge psychological roadblock—regardless of whether you feel you were blessed with talent or not. If you have ‘the fixed mindset’ and believe blessed with raw talent, you tend to spend much time trying to validate your ‘gift’ rather than cultivating it.

“To protect your self-identity as someone super smart or gifted, you often steer clear of tough challenges that might jeopardize that identity.

“Here's how Dweck puts it: ‘From the point of view of the fixed mindset, ‘effort’ is only for people with deficiencies. [If] you’re considered a genius, a talent, or a natural—then you have a lot to lose. Effort can reduce you.” [What you believe affects what you achieve, Bill Gates, gatesnotes.com, 7th Dec 2015]

Can we in the Philippine elite recognize that “effort” is only for people with “deficiencies” – because “effort” is demeaning? That is why the blog never tires of raising that our caste system and our instincts feed on each other. And why a “growth mindset” is Greek to us.

News item: “PH's Grade 4 students lowest in math and science around the world — international study.”

Unsurprisingly, we are reacting? Translation: Grade 4 students are way lower in our hierarchy, and it’s OK to be displeased. On the other hand, we can’t be dissatisfied with ourselves? But aren’t we the regional laggard? And the latest proof is that Vietnam, once among the poorest in the world, has overtaken us.

In other words, does the buck not stop with us in the elite class – and that includes legislators, economic managers, and us in the chattering classes, among others?

Let’s get back to the two systems that determine our behavior – conscious and the other automatic. Put another way, and it explains why we can mix apples and oranges.

Here’s the predicate: Our fixed mindset, for the longest time, makes us perceive “poverty” as the reality of Juan de la Cruz.

On the other hand, our neighbors recognize that beyond their human impulse is the consciousness to traverse poverty to prosperity. And so, Lee and Mahathir advised Deng to “beg for Western money and technology to raise China’s people from poverty.”

Unwittingly, given we’re in “auto-pilot” mode, we fall into the “logic-trap” that is linear and incremental. And worse, we take “pwede na ‘yan” as a good deed.

For example, we celebrated the OFW phenomenon for the longest time because its impact on the economy gave us a positive and Christian good-deed sense. We created employment and a consumption economy that generates 6%-7% GDP growth. And the icing on the cake was the consistent upgrade in our credit ratings.

Unsurprisingly, despite the pandemic, we want to preserve and protect those credit ratings. And here’s what Fitch has to say, “Asia leading the demand-side is not true, noting that consumption is still far behind the pre-pandemic levels.” [“Fitch Ratings warns of low-base distortions in 2021 growth data,” BusinessWorld, 8th Dec 2020]

Consider: We have a structural problem that will not go away until we commit to traverse poverty to prosperity.

That is our challenge; it is beyond poverty per se. And it demands something well beyond our instincts – that also brought us a culture of impunity.

The bottom line: We boxed ourselves into a tiny corner – as in we’re riding the back of a tiger.

What is the converse? The growth mindset displayed by our neighbors, including most recently, Vietnam: Beg for foreign money and technology.

Let’s build on the predicate.

Poverty likewise bred insurgency in [the] rural Philippines. Enter: The comprehensive agrarian reform program. Question: How come there is still poverty and “insurgency” in [the] rural Philippines? And why we’re spending a ton of money on the 4Ps.

Worse, while our neighbors have become industrialized economies, they still outperform us in agribusiness, including rice. Worst, we have IRRI in our backyard. Yet, it is Vietnam that became the rice exporter to the Philippines.

Why? A fixed mindset is narrow, if not a small mind, too – because it shuts out the bigger world and nourishes parochialism and insularity.

What else did we load on the above predicate? We defined “inclusive” very narrowly that we undermined economies of scale and perpetuated the Pinoy crab mentality.

Beyond agrarian reform, we introduced the party-list system and the LGUs. We know the downsides and the reality of both. Still, we even want to push the envelope and do Federalism.

Our neighbors did agrarian reforms, too, but they moved forward and pursued industrialization instead of being bogged down by political processes – with no guaranteed outcomes, in our case.

Consider: Because of our growing consumption economy courtesy of OFW remittances and the BPO industry, we have been celebrating what we call a “manufacturing uptick.”

But that reinforces the argument that our fixed mindset deprives us of the ability to develop and industrialize. And why we continue to address poverty via the 4Ps.

We’ve been going around like a carousel. Yet, poverty, insurgency, the education crisis – and it is beyond grade school levels because, in higher education, we’re the laggards too – and underdevelopment continue to define us.

That is why the blog never fails to stress that our top eight companies cannot even match the revenues – and contributions to the Vietnam economy – of Samsung Vietnam.

News item: “Ayala Corp. eyes e-vehicle business; establishing a solid, globally competitive manufacturing sector can diversify and strengthen the country’s economic base.” [Philstar.com, 15th Dec 2020]

That is a step up in the motorcycle business no different from moving up to electric-powered jeepneys from the diesel ones. Yet, the reality is we’re 50 years behind in developing an efficient public transportation system.

If we look out to the bigger world, this is what is happening. “Pound-for-Pound Taiwan Is the Most Important Place in the World,” Ruchir Sharma, The New York Times, 14th Dec 2020.

“Over the past year, Taiwan has taken the lead in the race to build thinner, faster, and more powerful chips or semiconductors. Its fastest chips are the critical building blocks of rapidly evolving digital industries like artificial intelligence and high-speed computing. The thinnest chips will be powering the coming ‘internet of things,’ in which homes, cars, appliances, and even clothes will connect to smartphones and voice-activated speakers over 5G networks.

“As of now, any country looking to dominate the digital future has to buy these superfast, ultrathin chips from either Taiwan or South Korea. And Taiwan has the edge in both technology and market power. It is a small island of just 24 million people, but it is at the center of the battle for global technological supremacy. Pound for pound, it is ‘the most important’ place in the world. As the Cold War between China and the United States intensifies, that importance will only continue to grow.

“After World War II, only two major emerging economies managed to grow faster than 5 percent for five decades in a row and to rise from poverty into the ranks of developed economies. One was Taiwan, the other South Korea. They kept advancing up the industrial ladder by investing more heavily in research and development than did any of their rivals among emerging economies. Now they are among the research leaders of the developed economic world as well.”

Sadly, given our instincts, we won’t look out to the bigger world and benchmark. Because that entails “effort,” and it is demeaning. We are the Philippine elite. Let others exert “effort,” but not us.

Consider: “Where economists focus their research: They don’t always look in the right places,” The Economist, 10th Dec 2020.

“AN OLD joke: a policeman sees an inebriated man searching for his keys under a lamp post and offers to help find them. After a few fruitless minutes, the officer asks the man whether he’s certain he dropped his keys at that particular location. No, says the man, he lost them in the park. Then why search here? Asks the officer. The man answers: ‘Because that’s where the light is.’

“For years, the story has been used to illustrate the simple point, of great relevance to social scientists, that what you find depends on where you look.

“Indeed, another reason for economists to spend more time on under-examined places is that a broadening of horizons would improve the profession itself, and thus enable economists to serve governments better. There are too many unanswered questions in economics for some corners of humanity to receive so little attention. The 70 least-studied countries account for just 1% of all mentions in economics papers over the past three decades.

“And while the profession’s increasing focus on empirical work is welcome, concentrating research within the cone of light that data provide means that some questions are asked much more often than others: in particular, those answered with statistical analysis. An effort to pay more attention to the places least able to provide high-quality data, which often face the toughest roads to development, would force economists to grapple with qualitative matters. If critical contributions to development come from difficult-to-quantify variations in cultural factors, a geographically limited discipline will find it hard to detect them. And both the world and the profession will be poorer for it.”

Let’s get back to the Philippines and reprise: We have a structural problem that will not go away until we commit to traverse poverty to prosperity. That is our challenge; it is beyond poverty per se. And it demands something well beyond our instincts – that also brought us a culture of impunity.

Recall the blog has challenged our decades-old approach to fiscal and monetary policies because while logical, they were linear and incremental. And it comes from our fixed mindset that poverty is the challenge.

And given our lack of experience in development, we can’t wrap our heads around the economic miracles demonstrated by our neighbors.

We can disagree with the assertion, yet we can’t deny that we celebrated our GDP growth of 6%-7% for the longest time. It is classic linear and incremental thinking because we remain the regional laggard, i.e., well behind the efforts of the Asian Tigers, for example.

How do we then turn the challenge on its head and not be under the spell of linear and incremental thinking? 

Recall the posting that discussed setting a goal of raising GDP by $200 billion because we want to benchmark against and beat the hell out of our neighbors, including Malaysia.

But that’s not how we do it. See above; economists don’t always look in the right places. 

Does that explain why we’re the regional laggard? And that innovation isn’t our cup of tea? 

Recall Fr. George Gorospe; reality is dynamic and in constant flux. And in today’s age of big data and analytics, that is indeed relevant.

That’s why the blog keeps reminding us that we’re still at the dualistic level – either/or, as in the Pinoy crab mentality – in human development. For example, we recognize the Pareto principle intellectually, but in practice, we’ve never had the chance to demonstrate it.

It is not unusual. In Eastern Europe, the writer also witnessed how the lack of development experience makes the value of “the vital few” suspect (over “the trivial many.”)

And if we look even in US politics, people are stuck at the dualistic level, including avowed Christians. They forget that Christ demonstrated the folly in his confrontations with the scribes and Pharisees.

Recall the Two Great Commandments that Christ preached against the 613 Jewish Commandments. Unsurprisingly, he had to die on the cross.

In other words, like the story of creation, Christ is the manifestation of the dynamism of the universe. He did not come with the Big Bang. Because until sixty-six million years ago, dinosaurs were walking the face of the Earth when a devastating asteroid impact abruptly ended their reign. [Natural History Museum]

Recall the blog references the photosynthesis phenomenon often because it is central to living things, i.e., four (carbon, hydrogen, oxygen, and nitrogen) elements make up 95 of the molecules in living things. On the other hand, there are 118 elements, the first 94 occur naturally on Earth, and the remaining 24 are synthetic elements produced in nuclear reactions. [Wikipedia]

Enterprises, public or private and including economies and nations, are living organisms. That is why the term “ecosystem” has taken a much wider import. Unsurprisingly, they strive to create the requisite ecosystem in their effort to thrive in this universe. And photosynthesis is nature’s model of an ecosystem. Try to find a better one.

We are now in the age of big data and analytics. And the challenge of developing relevant algorithms mirrors the principle of the vital few over the trivial many.

But it demands forwarding thinking and dynamism to be able to do justice to the exercise.

Consider: “PEZA pursuing ‘township’ strategy for ecozones, upgrading worker skills,” BusinessWorld, 6th Dec 2020.

“There are 408 operating ecozones nationwide, 74 of which focus on manufacturing. Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) has 35 manufacturing zones; the second is Central Luzon, with 12. Ms. Plaza said these are preferred locations because of the presence of critical infrastructure, workforce, and local government unit support.

“The number one demand for industrial locators is improved logistics, currently concentrated in the National Capital Region. The leading manufacturing sectors in the Luzon economic zones are electronics, metal, rubber, and plastic products, as well as real estate.”

The above represents big data. What about the analytics? The key is not to fall into the “logic-trap” and settle for linear and incremental.

For example, the country’s most significant export categories at over 64% are (a) electrical machinery, equipment, and (b) machinery, including computers.

They give the biggest bang for the buck. That is why the blog has repeatedly raised the benchmark that is Samsung Vietnam and Vietnam Apple AirPods. We must learn to figure out the vital few over the trivial many and then design fiscal policies accordingly.

That is how to prioritize and overcome the Pinoy crab mentality. It does not mean we will neglect the rest, but we must recognize the economies of scale — and prioritize.

And it brings us to the Pearl River Delta Economic Zone. In other words, if we are to prioritize the product categories that account for over 64% of exports, we must mirror the Pearl River Delta Economic Zone. That is how to come close to our neighbors’ competitiveness because that is how we can raise our ability to attract FDIs so many times fold.

See above; setting a goal of raising GDP by $200 billion.

Can we step up to the plate and question our instincts? Or is “Pinoy Kasi” our be-all and end-all? Why do we need to step up to the plate?

Consider our instincts: We are parochial and insular. We value hierarchy and paternalism that we rely on political patronage and oligarchy that ours is a culture of impunity.

Gising bayan!