The Frictionless Economy
The Curse of Being Important

by Roger Bourke White Jr., copyright November 2015


This thought was inspired by the juxtaposition of two events:

The first was reading an insightful 22 Oct 15 Fortune article, Why every aspect of your business is about to change by Geoff Colvin, which talks about the upcoming "frictionless economy" in which it is really easy to get new products and services designed, ordered and completed. So easy, that the need for traditional business organizations is going to decline dramatically. They will be replaced with newer, simpler and more flexible organizing styles that rely heavily on Big Data, automation, and intensive communication. Uber and other "shared economy" organizations are high-profile examples of these new organizing styles.

The second was going through some hoop-jumping between my doctor's office, the pharmacy, and the health insurance company over a change in the prescription of one of my chronic drugs. The pharmacy was telling me the insurance company was telling them, "Yes... but" over how to accommodate the change. As I was going through this hassle I also recalled how much space of my doctor's office was devoted to storing hard copy medical records.

Clearly this new frictionless economy is being very slow to come to my health care environment.

Why? Why are some parts of the economy adapting quickly to this and other parts languishing?

My answer is: The Curse of Being Important. This is a thinking style which is acting like a big anchor, holding back these neat changes in those activities which society considers "important activity" areas. One example being health care. Some other activities which are heavily Cursed are criminal justice, governing, employment with big organizations, and "important" farm crops.

This is an essay about how these two ways of thinking about doing things are competing in how we organize the activities of the world around us.

The Frictionless Economy

The "friction" being referred to in frictionless economy is the time and effort it takes to get things organized so that some good or service actually gets produced. This time and effort is called a transaction cost.

As the Colvin article points out, the contemporary company organization came into existence a hundred years ago to reduce these transaction costs. Having this company structure reduced the costs of feedback between the various activities required to produce goods and services in the pre-computer, pre-smart phone era. This style of organization was a practical solution to an expensive problem of the day.

Fast forward to today. Now we have these communicating technology innovations -- computers and phones -- plus Big Data and a lot of other Information Age tools. These mean the costs of transacting while making goods and services have been dropping steadily over the last fifty years. This change in cost means new ways of organizing can become attractive, and this is why breakthrough companies such as Uber are now proliferating. Another easy place to see the fruits of this change in transaction costs happening is in the grocery shopping experience. (I haven't personally experienced Uber so I will use shopping as my example.)

There is something else about grocery shopping that makes it distinctive in this discussion context. It is a "mundane" activity. It is not considered terribly important... unless it stops happening smoothly, say, due a natural disaster interrupting regular trips to the supermarket.

The result of it being important-but-mundane is the steady improvement that has been happening in the shopping experience over the last fifty years.

Shopping is an example of the bright side. Now lets take a look at some activities that haven't improved. Those that have been seriously afflicted with The Curse of Being Important.

The Curse of Being Important

The Curse rears its ugly head when too many people get involved in how an activity is conducted, have a serious say in how it is conducted, get emotional about how it should be conducted, and as a result innovation slows way down. Instead of innovation, proper ritual is important. A proverb that describes this happening is "Too many cooks spoil the broth."

Instinctive thinking has a lot to do with which activities get cursed. If human instinct thinks an activity is important, (which usually also means it has been around a long time) it will pick up the curse.

As pointed out above some activities which are strongly cursed are criminal justice activities, government, farming of important crops and health care. These have been around since pre-history. Old is important, but not necessary. An examples of new activities which are heavily cursed are commercial flying and growing crops to make ethanol.

What these activities have in common is slow change compared to the mundane activities such as shopping. This happens for two reasons: one is the ritual side is more important than the efficiency side, the other is that people are fearful when involved in these activities -- they worry that if something goes wrong, big trouble will result.

Here are some specific examples:

o In criminal law, if a person is wrongfully convicted or wrongfully acquitted, the damage can be severe. And this is a kind of damage the community is sensitive to -- think of how high-profile wrongful convictions are in story telling and the media news stream. The result of this deep concern is that criminal proceedings are heavily ritual-oriented -- the calls for innovation are ignored.

o In health care, the instinctive worries are two-fold: one is that everyone gets enough, and the second is that what is being prescribed to heal a person is not quackery of some sort. The result in the US has become a lot of reliance on health insurance to pay for health care, and elaborate procedures for getting medical procedures, devices and drugs officially approved. This has resulted in a lot of ritual and slow acceptance of innovation.

o In important food crops the result is slow change in how the farming is done, and the steady spread of more protections and subsidies which disconnect the farming done from what the market wants. One example is how rice crops are treated in East Asia. Another is how crops grown for ethanol are treated in the US. An anachronistic one is how sugar is treated in the US. It is low-profile, but the Sugar Lobby maintains its clout to this day, as much as it did during the Great Depression and World War II eras. Sugar is a fine example of how instinctive thinking affects this process. Instinctive thinking changes very slowly, so activities supported by it change very slowly.

Now lets talk about the exception to the ancient activity rule: commercial flying. Flying is a brand new activity, not ancient. Why has The Curse afflicted it so strongly?

Flying is new, but the fear of flying is instinctive and strongly felt by many people. What has happened over the last hundred years is that commercial flying has transformed from a curiosity in the 1940's, to an optional way of traveling in the 1960's, to something mandatory for those who travel in the 1980's and beyond. Because of their fears, the more flying became mandatory the more many people had to become "really brave" on a regular basis when they traveled. This is why The Curse is strong in flying. And The Curse is why air travel has improved so slowly since the 1980's.


It is ironic, but those social activities that many people consider most important are those which change the least over time, even though technology could be improving their effectiveness a lot. They don't improve, they don't get frictionless, because they suffer from The Curse of Being Important.

Mundane activities, on the other hand, are going through steady and dramatic improvements as the benefits of computerization and improved communication spread through mundane organizations and activities. These are getting frictionless.

The lesson here is that if we want our "important" activities to improve as well, we must recognize that The Curse exists, and do our best to keep it from dictating how we conduct those activities our instincts tell us are important. We need to recognize the value of efficiency in these important activities, just as we do in mundane activities, and we need to be willing to make changes to the rituals... er, procedures! based on gaining efficiency, not soothing instinctive fears.


--The End--