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The Disaster Scenario

May 16, 2010

Earlier this week, I attended a series of presentations at the Rothamsted Research Station in the UK.  The focus was on the challenge of food supply and whether the world could adjust to the needs of a fast-growing population and the uncertainties created by climate change.

Ultimately the conclusion was quite optimistic. Scientists believe that new technologies – in particular genetically modified crops – will allow massive improvements in production that can support a world population f 9 billion people. They also believe that the population level will stabilize at around that number . The ‘wild card’, according to the scientists, is the price of energy; so long as energy prices can be controlled, then not only will we have adequate food, but also its price will remain relatively stable.

I emerged from the meeting feeling that advances in science do indeed often prevent ‘disaster scenarios’ becoming a reality. Yet at the same time, scientists may not be especially reliable sources when it comes to predicting the overall condition of the economy and society. Their optimism over food supplies and prices seemed to me to be based on three fairly unreliable factors –  one, that population growth would slow; two, that we will soon find alternative energy sources or cut our energy requirements; and three, (which  they did not mention) that complex, global supply chains will prove a reliable way to shift goods to the point of need.

However, I then read a review of a new book by Mat Ridley – ‘The Rational Optimist: How Prosperity Evolves’ – and was cheered by his conclusions. More importantly, I once again recognized the relevance of the contracts and commercial community in assisting this optimistic view of the future.

Some may recall my past writings abou the work of Nicholas Wade, author of ‘Before The Dawn’. Ridley is an economist; Wade is a scientist. But they reach remarkably similar conclusions that trade, in essence, lies at the heart of human innovation. In its summary of Ridley’s book, The Economist observes: ‘Trade is the spark that lit the fire of human imagination, as it made possible not only the exchange of goods, but also the exchange of ideas. Trade also encouraged specialisation since it rewarded individuals and communities who focus on areas of comparative advantage. Such specialists had the time and the incentive to develop better methods and technologies to do their tasks.”

It is the culture of continuous improvement that drives and provides incentive for innovation, without which the disaster scenario will become a reality. There have been those who predicted disaster from the very beginnings of time and insisted that we should all adjust or prepare for the apocolypse. Yet always we have survived, although not without tensions and problems. Today, the solution remains our readiness to innovate and our ability to collaborate. The enemies of these succcess factors are those who constantly focus on protecting against risk and therebydiscourage cooperation and limit the exchange of ideas.

If indeed it is trade that sits at the centre of our future success and our ability to prevent disaster, then the contracts community has a large and heavy responsibility to ensure it is not only removing barriers to to innovation, but that it is also itself innovating in the mthods through which trade occurs. We have a duty to ourselves and others to ensure that we contribute to the cultural and economic forces behind human progress. 

“Thanks to the liberalising forces of globalisation, innovation is no longer the preserve of technocratic elites in ivory towers. It is increasingly an open, networked and democratic endeavour”, says Ridley. Contracts can – and must – create environments where openness, transparency and networked communication are encouraged and rewarded and where cultures of blame, risk allocation and punishment are avoided.

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