How Silicon Valley Can Lead the Revolution in Human Intelligence

We are on the cusp of an evolutionary leap in human consciousness in which Silicon Valley can and must take a leading role. There has been much written about the coming revolution in artificial intelligence but not nearly as much about the simultaneous revolution now occurring in human intelligence.

Silicon Valley is well positioned to be at the vanguard of this evolutionary leap but only if it can collectively evolve to support it. Silicon Valley in its current form as a global hub of innovation impedes the evolution of human intelligence. Silicon Valley, however, is well positioned to renovate itself relatively quickly to lead this evolution in consciousness.

Human Intelligence is Limitless

Your own intelligence, for example, is limitless. The human mind is the most incredible thing that we are currently aware of in the entire universe. While you read these words, the approximately 100 billion neurons in your brain processes about 20,000,000 bits of data per second while using only about 20 watts of power.

According to IBM’s Almaden Research Center, our brains do every second what it would take dozens of the world’s largest super computers hard-wired together using tens of millions of watts to replicate.

When our consciousness is seated in our prefrontal cortex, however, we are only able to hold 3-7 things in our field of awareness. Generally, we consciously use only a fraction of our innate intelligence because the autonomous parts of our brains process most of those 20,000,000 bits to determine whether or not we are safe. Once our systems determine that we are in danger, the limbic brain takes over, automatic defensive behaviors kick in and we go off-line.  When triggered, we no longer have access to any of this intelligence. In short, it’s a constant challenge for us humans to use our limitless intelligence.

Collective Human Intelligence is Even More Limitless

The enormity of the collective intelligence assembled in a typical startup is even more astounding. Being in a group activates our social neuronal networks. From an evolutionary biology perspective, the typical startup is a tribal life form whose intelligence is exponentially greater than that any of any individual employee. Imagine a network of supercomputers invisibly hard-wired together. That’s our typical startup. The trick is in how to harness this brilliance.

Here’s how to do it. Humans are tribal. Whenever we are in a group, our social neurons process data about the group, determine the leader, and deduce her mood, values and behavioral norms. This happens automatically in a matter of nanoseconds. Most importantly, the group entrains itself to the leader’s field of consciousness. To grossly simplify developmental theory, humans have two speeds: we’re fear based (incoherent) or love based (coherent).

Because of these hidden dynamics of leadership, the quality of a corporation’s collective consciousness is generally determined by the leader. Neuro-economist Paul Zak has noted that workers in trust-based environments are twice as productive, twice as happy and have job tenures that are twice as long as those in fear-based environments. My book, Great from the Start, and Frederic LaLoux’s Reinventing organizations profile leaders who had largely transcended fear and created infectiously positive work places that optimized this intelligence for peak performance.

Since most of us, including most CEOs, have not transcended the reactivity of our limbic systems, we are still fear based. Most corporations run on fear, which triggers employees’ limbic systems and takes their brains off-line. As a result, corporations generally are only able to use a fraction of their collective intelligence.

The Prevailing Corporate Design Limits Its Collective Intelligence

The very design of the corporation compounds this problem by inherently limiting the expression of this intelligence.  The prevailing form of corporation exists solely to maximize profit for shareholders. This doctrine, known as shareholder primacy, is the root belief at the core of the global economic system. In Silicon Valley, shareholder primacy expresses itself in the belief that corporations exist to maximize profit for venture capitalists and their limited partners.

Within corporations, especially our public ones, this belief leads to a myopic focus on short term profits at the exclusion of all else. The entire magnificent collective intelligence of the corporate organism gets focused narrowly on one thing – maximizing profits. At their cores, the iconic technology companies of Silicon Valley – Apple, Google, Facebook, Cisco, HP – exist solely to maximize stockholder welfare

This problem is further compounded by the codicil to the doctrine of shareholder primacy, which is the belief that it is morally acceptable to foist as many as possible of the negative costs of corporate behavior onto society and the environment in order to maximize profits.  This codicil encourages corporations to engage in international arbitrage to produce goods as cheaply as possible even if it means producing them in labor conditions and with environmental consequences that would be illegal in the United States. This codicil not only impedes corporate intelligence by optimizing it for profit maximization but also reduces enterprise value by encouraging anti-social behavior that ultimately erodes goodwill and harms performance.

Finally, shareholder primacy renders the prevailing form of corporation unattractive to younger workers. Meaning is the currency of today’s workplace. Corporations struggle to retain talented younger workers because working for a corporation that exists solely to maximize profit for stockholders simply doesn’t provide enough meaning for them.

Prevailing Corporate Values Limit the Corporation’s Collective Intelligence

Shareholder primacy further impedes collective corporate performance by creating a conflict of values. Most corporations are run by good people who would like to run their businesses according to the Golden Rule. Corporations may espouse inspiring core values, however, but maximizing stockholder welfare is the core value that ultimately trumps all others in the board room.

This conflict creates cognitive dissonance which causes corporations to emanate an incoherent field of consciousness both internally and externally. Our brains detect this dissonance and tell us to be wary of corporations. We know deep down that they are not inherently trustworthy in their current form.  We know that many of the largest transnational corporations such as Apple have transcended the sovereignty of any individual state and owe fealty to none.

Often, the limitless collective intelligence of these corporations gets misused when it is focused narrowly on making a profit.  Uber, for example, has become the model of shareholder primacy run amok.

The Evolving Neo-Liberal Economic Narrative

Silicon Valley is a product of the prevailing neo-liberal, free market economic narrative whose origins can be traced to the Mont Pelerin Society after World War II. The neo-liberal economic narrative may have been the best antidote against totalitarian, state controlled economies, but it now limits the collective intelligence of humanity by keeping its economic energy focused on maximizing profit for shareholders. In Silicon Valley, the collective intelligence of the entire ecosystem focuses on producing corporations that are designed for one purpose: to maximize profit for shareholders.

The emergent economic narrative not only recognizes the rights of investors but also respects the carrying capacity of the planet and the social foundations necessary for a healthy civilization. As Laurence Fink, Chairman and CEO of BlackRock, said in a recent letter to major corporations, in the new narrative “every company must not only deliver financial performance but also show how it makes a positive contribution to society.”

The Evolving Economic Matrix – Corporate Law

Corporate law provides the foundation of the global neo-liberal economic matrix because under the prevailing corporate law of Delaware the corporation exists solely to maximize stockholder welfare. Ten years ago, B Lab and a bunch of corporate lawyers set out to redesign the corporation to support a new economic narrative. The result was the benefit corporation, a new form of for-profit corporation that is now available in 35 states, DC, Puerto Rico and overseas in Italy as the Societa Benefit.

From a systems theory perspective, the benefit corporation made the smallest possible change to the existing legal system to allow an entirely new expression of the corporation with a social purpose. The benefit corporation is identical to the prevailing corporate form except that it must provide a material positive impact on society and the environment. In addition, directors’ fiduciary duties flow to all of the corporation’s stakeholders, including society and the environment.

The key points of benefit corporations are that they replace shareholder primacy with a multiple stakeholder model and have a purpose of creating public benefit in addition to making profit for stockholders. This new corporate form has a social and environmental conscience that transcends and includes the usual pecuniary one and is therefore prone to altruistic behavior that better preserves enterprise value.   In short, the benefit corporation is an answer to Mr. Fink’s call for a new model for corporate governance.

Most importantly, the benefit corporation liberates the corporation’s collective intelligence beyond the traditional narrow focus on profits to also be a force for good. As Mr. Fink stated, “without a sense of purpose, no company, either public or private, can achieve its full potential”.

Other Evolving Components of the Economic Matrix

Corporate law is not the only component of the neo-liberal economic matrix that is evolving. Accounting, for example, currently reinforces shareholder primacy by encouraging corporations to optimize operations for fiscal capital and ignore or deplete other capitals. Oil and transportation companies, for example, have not had to fully account for the effect of their operations on the environment.

Accounting systems are evolving to measure what matters. The Multiple Capital Scorecard is an example of a new accounting system that accounts for multiple capitals, including natural and social capital. Reporting 3.0 is a global initiative to evolve reporting standards beyond financial measures to spur the emergence of an inclusive and regenerative global economy.

The growing market for socially responsible and environmentally sustainable investments increases demand for investment grade opportunities using the new corporate legal forms and emerging accounting and reporting systems. Impact Investors already have trillions of dollars under management. Although the current administration in Washington has signaled contempt for social and environmental concerns, the impact investor community believes that sustainability and social and environmental impacts have become permanent fixtures of the investment environment and will likely soon be the new normal. Mr. Fink’s letter is just the beginning.

Business schools are beginning to provide alternatives to the neo-liberal narrative. Business schools tend to lag, however, and still primarily espouse the shareholder primacy philosophy. This may change rapidly as research at Harvard Business School has shown that conventional corporations provide a lower rate of return to investors than those that have adopted principles of sustainability such as those embedded in the benefit corporation.  This gives Bay Area business schools an opportunity to lead the development of a new curriculum.

The Evolution of Leadership

In order to unleash the collective intelligence of corporations, we need to reinvent leadership and develop leaders who can lead from the heart and emanate coherent fields of consciousness that inspire peak performance. Frederick Laloux describes this type of leader in his book as being able to sense and respond to reality from a state of flow.

Most of us have had the experience of flow, a peak state where we are literally out of our minds and in the moment. When we think about it, we generally have activities that put us in a flow state – skiing, baking a cake, surfing or working in the garden. Happily, we finally understand enough about the human psyche so that we have the tools to help leaders optimize their coherence so that they can be in flow and inspire a collective flow state characteristic of peak performance within their businesses

Courageous leadership that watches out for all of a corporation’s stakeholders, however, is not sustainable in the legal architecture of the existing economic narrative. Under stress, the prevailing corporate law will force the leader to maximize profits as demonstrated by the recent sale of Whole Foods to Amazon. In short, leaders need the benefit corporation and similar governance architecture to support a multiple purpose, multiple stakeholder approach to business that allows them to build long term value.

In the emerging economic narrative, CEOs will lead with an understanding of the laws of collective consciousness and guide their enterprises as responsible global corporate citizens. These CEOs will use the power of their businesses for the collective good of humanity. Such CEOs will recognize that we are one human family sharing a common planetary home and will be the steward leaders of not only their corporations but also of humanity and her planet. 

A Call for Silicon Valley to Reinvent Itself

It’s time for Silicon Valley to better harness the inherent brilliance of its startup ecosystem by joining forces with the growing global network of people who are co-creating the emergent inclusive and regenerative economic narrative that transcends and includes the neo-liberal agenda. Using systems theory principles, we can make small changes to components of the existing ecosystem, as we did with the benefit corporation, to amplify Silicon Valley’s power to change the world.  As Mr. Fink says in his letter, “society is demanding that companies, both public and private, serve a social purpose.” Let’s transform the startup ecosystem into one that produces the kind of companies that BlackRock is calling for. Let’s unleash the collective brilliance of Silicon Valley to create corporations that are responsible global citizens that create value for all.

 

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