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Asset protection and economic decline: are they linked?

November 21, 2018

Compared with the United States, China has taken a commanding lead in the levels of optimism among its young people – and that translates directly to upward mobility and wealth creation.

An article in the New York Times highlights the gap that has emerged in terms of personal opportunity, declaring that ‘the American Dream’ is alive and well – but it has moved to China.

Protect or grow

Optimism has always been key to growth and it is inevitably hard to sustain. A tipping point seems to occur when politicians, businesses and society start to worry more about protecting what they have than about a belief in the opportunity for more. Asset protection, while understandable, is in fact constraining.

There are many examples of this through history, ranging from the decline of Ancient Rome to the mercantilist causes of the American Revolution. In recent years, the United States has shifted from unbridled optimism and belief in the future to an increased sense of unfairness and exploitation by others. This has led to a focus on issues such as asset protection and trade barriers, at the expense of innovation and growth.

The role of contracts

Within businesses, these protective attitudes often become evident in their contracting practices. They are frequently based on innate distrust of trading partners and a determination to ‘protect the crown jewels’. Negotiation in such circumstances is not about maximizing opportunities, it is more about containing potential for loss and using power to impose or avoid risks. Battles over existing Intellectual Property are common and the primary focus of commercial staff shifts from ‘enabling opportunities’ to ‘protecting against failures’.

It is of course true that optimism must be tempered by a degree of caution – but when optimism declines, caution tends to take over. We see this in the comparative attitudes to contracting when comparing China to the Western world – the former seeing risk as an exciting challenge, the latter seeing it as a potential barrier.

Contracting as a bellwether

One way that I have seen organizations successfully shift to a more optimistic, growth-oriented outlook is through a change in internal motivators and measurements of commercial staff. Their behaviors can be enabling or constraining. By changing measures from a focus on compliance to a focus on creativity, management encourages an atmosphere for innovation and fresh ideas. This isn’t a matter of ‘win at all costs’, but rather like the attitude in China, to see risk or complexity as an exciting challenge to be overcome, rather than a source of fear and a reason to say ‘no’.

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