How might we design our organizations and institutions to align incentives for all stakeholders? Taking inspiration from small, kin-based groups, Joon Yun asks how we can scale such dynamics globally.
"Jenny Stefanotti (JS): I think the final criticism of Silicon Valley is that I think our vertical to capitalism is still too narrow. There are other stakeholders that were mindful of but because they're not on the cap table, over time we end up serving ourselves more on the capital side than the user, so that creates these power asymmetries. What we've ended up with in tech is we haven't served our customers and our clients as if they're our children. It creates these power asymmetries that start to raise concern. Are we doing the right thing? Are we serving our users? What about the user agreement? What about all these things? Right? I get it. I think the path forward here is can we take those stakeholders even the ones we can't see that we can't imagine. The ones that can't speak up; climate, future children, animals and plants. Can we start putting them in the cap table in the same way?"
[00:00:53] JS: That's Joon Yun, philanthropist and author of Stakeholder Capitalism and Inclusive Stakeholding. This is the Denizen podcast. I'm your host and curator, Jenny Stefanotti.
You might recognize Joon's name from our earlier episode on new narratives with John Fullerton and Hunter Lovins. This is the conversation that I had with Joon before that one exploring his work.
In this episode, we're talking about inclusive stakeholding. It's a term that Joon coined, which looks at what works in kin-based relationships and asks how we might scale such incentive structures globally. Both of Joon's books are short and well worth reading. His book on Inclusive Stakeholding is actually a collection of short essays that's a very quick read.
In this conversation, we dive into some of the key insights from his book. We talk about what we can learn from biological systems. How to use the principles of Aikido for systems redesign? The importance of stories. Upgrading psychology and language to be less individualistic. How attending Burning Man for nearly two decades has influenced him? And much more.
Joon is a brilliant systems thinker. I got so much out of reading his book. And I'm confident you'll walk away from this conversation with meaningful insights about systems change.
[00:02:01] JS: I think about this on three levels. One of them being exclusive stakeholding. You coined the term and talk about in your book, which is where some stakeholders are excluded, which is really the default in modern society and institutions.
Stakeholder models, like we talked about in stakeholder capitalism, where other constituents are considered. But there are likely a balance of different sets of priorities. And then inclusive stakeholding really takes a step further and asks can we align incentives so that, instead of balancing competing needs, we're aligning them? Which essentially is a same conceptual space as this notion of omni-win decisions that we talked about in game B.
I want to have a conversation with you, Joon, about how we got to where we are and then this concept of inclusive stakeholding and how we might make a transition. But first, I'd love to hear more about your story and how you went from the work that you've done in finance focused on health care for the last couple decades into the work and the thinking that you're doing around inclusive stakeholding and institutional redesign.
[00:03:11] Joon Yun (JY): I talked to Jim Rutt and Jordan Hall about this probably in the course of the last year. I think these conversations are both converging, diverging, going in lots of cool directions. I'm really excited.
And as it relates to my own background, I'm thinking about what's germane. I can come out of this from multiple perspectives. I'll start with the [inaudible 00:03:32] first but then get into the personal perspective.
The neutral lineage on this for me is fairly straightforward. I was that kid in high school that used to knock on doors of professors I admire. And there was this open-door policy in teachers and also in college. When they were available, they would have office hours and you talk to them.
And what's really cool is I think academia tends to be conservative and competitive. And so, I was always curious, what didn't they write down? What are ideas that you were thinking about? But because just the timing wasn't right or the amount of data and just the way the science works, they couldn't get it published. But it was in their head. And it turned out that people had to connect the ideas in their heads as they had written down, which, of course, the stuff just didn't get published. So it lives and dies with the people.
In the same way that we might think that every thought is been put into their internet somewhere on Google. But in fact, I think some of the best ideas are still in people's heads and to the extent that they're able to share either it's a lot easier platform than publishing, science publishing. Then I think it allows the pie to grow for everybody. We all learn from each other.
When I travel, I'd go to England and I'd be doing the usual tourist thing. Seeing things. Then I knocked on William Hamilton's door. He had coined this term inclusive fitness to describe the kin skin in the game you have in the welfare of others. And when you have high degree of skin in the game, in this case is genetics, called it Hamilton's rule, then the vested interest kept you focused on the welfare of others. You succeeded as others succeeded.
And especially in a hive structure where you related to pretty much everybody in the hive in the entire community, you benefited as the high benefited. There was this co-service role of our behaviors that we're serving ourselves by serving the hive. When as others, one was a motif. And that really stayed with me.
And when I was in college I became very interested in biology, in evolution of biology. And a lot of the giants were still with us back then, Stephen Jay Gold, [inaudible 00:05:32], Carol Williams. And it's E.O. Wilson that really stopped me in my tracks. I walked in that door and we sat down. And I could have listened to him for a week straight. He'd written a book called Social Biology and was working on a book on entomology and societies.
But it really caught my attention how social we really are and how pro-social we are. And I've been thinking about where we live today, we've all migrated. And the way we live today is radically different. There was the general idea of evolution dislocation which caught my attention and that applies in medicine and certainly in finance too. But even in thinking about our behaviors, our social behaviors. That's one lens. And that has always stayed with me.
I became very interested in evolutionary medicine thinking about disease and even aging as adaptations, maladaptation to get up from all lenses. And then there's a personal story.
And by the way, I just want to take a quick pause here and just mention that I would love all of these things to be reducible to practice for people in the audience and how what are the actions we can take? Even though we're talking a lot of top-down theory. So much of inclusive stakeholding and the project and the movement is about things that we can do to make things better.
I do think that great outcomes are not only possible. But it feels like we're on the brink of it. I think it's a really exciting time. I think a lot of unfortunate things have happened in the past, in history, but also today. There're all things that we can make better. There're all things that people can participate in even the people that may not have seen it one-way, different ways differently. I think we can bring everybody on board.
It's not just two on the arc going forward. But hopefully, everybody can join. So I want to just put that out there. Something to look forward to as we navigate this conversation.
On the personal front, I was born in Korea. Came twice in the United States. Two-time immigrant. That's how much we love the country. And our family, our extended family on my dad's side, they all live in a small village, a rice-farming village in Central Korea. And it's been untouched by conflict. And it's nestled in the mountains. A beautiful place. And really nothing happens.
I mean, we haven't made contributions to the world. The world hasn't come in. Born there, you farm, you die there. The answers are bare in the hills. And it was such a magical place in my mind. I was young. But the feeling was every time you stepped in, it felt like everybody had your back. It was really such an amazing feeling. It felt like what you would call home with a capital M. We call it koyang in the book. The two books on this. One is interdependent capitalism. The other is Essays on Inclusive Stakeholding.
The book ends and begins with the idea of home because I've only felt at home in a few places. But when you're there, all the restlessness disappears. It's this feeling you have and the way people look at you. The way people stop when you walk by them and say hello. You're picking up all these cues.
And it's essentially a kin tribe. It was our family's version of a beehive of people having very high kin skin of the game. Amazing place. Now I live in Silicon Valley. I'm at California in 1994. I was raised in the East Coast when the school in the East Coast came out on a lark in '94 with my wife. And we've just been amazed at role that silicon Valley's played. And so many great transformations, technologically. But also, I think the area has really taken a stewardship role in many of the incredible things going on in the world.
But I will say this is a highly transactional world. And in a way, it's a good thing. When I think about how can tribes work very high in group loyalty but the out groups, it's much more competitive. If you look at the tribal world affairs over the years, it was pretty brutal.
The way we're living today, which is very little kin skin in the game. It's more transactional. And we'll talk about all these topics a little bit more. The difference between investing and transactions. How that shift happens when we lose mutual kin skin in the game.
But trade has been a good thing in so many ways. When I look at life here, people do amazing things with the fact that they have very high social entropy. They can move around. There's liquidity to relationships, which is good and bad. People can switch jobs and technologies trade, ideas trade. It's just an incredible melting pot.
But the same thing that produce is so much good for the world also produces feelings that are not quite right. When people are constantly trading you out, whether it's a job or a relationship, it feels transactional. When things feel transactional, it creates a feeling of alienation. These are all like epiphenomena. Second order, third phenomena. The fact that we were not designed to live cohesively among strangers.
It's a transition that we've handled – I don't know. Some ways really well. On the other hand, I think it's caused a lot of suffering. A lot of issues along the way that we lead to [inaudible 00:10:18], which you mentioned earlier. I think it's that seeing the good of both formats, the high kin skin of the game, kin tribe.
Our family's been together since 1892. I'm technically 38th generation farmer. I don't farm. I have very soft hands. But when I'm there, the feeling is what I remember. And being here is also it's a feeling both upside and downside. And we haven't gotten everything right in the Silicon Valley. We made our share of mistakes. We all do. But it's also producing a lot of goods. Is there a way to put the best of all worlds together is the beginning of the story? Can we do what we did really well? What nature did really well? The bio algorithms of inclusive stakeholding to now social algorithms of inclusive stakeholding.
Now maybe close with what I think has been the single greatest contribution of Silicon Valley, it turned out – in my opinion, it wasn't the transistor. It wasn't chips. It wasn't internet. It wasn't biotech. It wasn't blockchain. It was the idea of including an excluded stakeholder.
150 years ago when the Industrial Revolution was going, capital had aligned with each other through an innovation called joint stockholding. It was the first instantiation of inclusive stakeholding that wasn't biological. You could actually form these partnerships. It was a social algorithm. It's not your legal contract. You land capital with each other. So you move forward to the team. Or in this case, on ships.
But those teams tended to exclude. And again, when they set out – I don't think it was bad intention. I don't think they're meant to be imperialist or colonialists. I don't think they wanted to abuse labor. But over time, because of the race to the bottom, Gresham's Law, bad money can outcompete good money over the long arc.
The things that started out well – and you can say that about today's companies, right? I mean, the intentions are great. But over the time, the race to the bottom produces these outcomes where the excluded stakeholder pays the price. And that's imperialism, colonialism, abuses of the Industrial Revolution.
In Silicon Valley, at a time when capital labor had split, put labor on the cap table. It was really a transformational event because you're now ingesting the externality, the social pollution of the abusal labor. And by putting on the cap table, all of a sudden, they could run circles around companies that did not include labor. Employees who have skin of the game are aligned with the team's interests and they just perform better.
And all of the incredible technical innovations, the lapping innovations that Silicon Valley's produce can be traced back to the fact that people are just motivated. They're on the same team. We somehow figured it out.
Now I think the final criticism of Silicon Valley is that I think our vertical to capitalism is still too narrow. There are other stakeholders that were mindful of. But because they're not in a cap table, over time we end up serving ourselves more on the capital side than the user. So that creates these power asymmetries.
What we've ended up with in tech is we haven't served our customers and our clients as if they're our children. So it creates these power asymmetries that start to raise concern. Are we doing the right thing? Are we serving our users? What about the user agreement? What about all these things, right? I get it.
So I think the path forward here is can we take those stakeholders? Even the ones we can't see that we can't imagine. The ones that can't speak up; climate, future children, animals and plants. Can we start putting them in the cap table in the same way?
[00:13:49] JS: One piece of your story that you didn't mention that I'm curious about. And then I'm going to get into the substance of the topics, which is the fact that you've been to Burning Man 18 years in a row. And actually, you and I met at a Burning Man event at Esalen. You mentioned inclusive stakeholding. I talked a little bit about your reluctance to go and then finally going. And then this notion of somebody referring to it as home. And you just mentioned this concept of home with a capital H. I just want to make sure that we talk about that piece of the puzzle and then let's get into the ideas.
[00:14:21] JY: I mean, you and are huge fans of Burning Man. And even a lot of the movements we've been a part of, we set up like Burning Man. Non-institutional. Just good people working together. Having fun. That's the way the National Institute of Nutrition Project's gone. Just all former years of our institutions working together as people without any contracts or payments. It's like Burning Man. I think the setup is so gorgeous, the way the Burning Man community runs a very unique culture out in the desert.
Now. That have been 20 years. And the thing that struck me about Burning Man was that I think it was probably maybe the fourth or fifth time where I stepped in and it felt like home. It's kind of like Dorothy on her return trip, right? We don't realize that we're born in the middle of this journey.
This is a very, very long time we're spending in – and this is just a frame. We can think about it this way. That we're living in Alice in Wonderland. But when you're born and you die in Alice in Wonderland, you think this is normal. But when you actually start to slow down and look at life, things don't make sense. In many cases, things are just backwards. But if that's your frame of reference, if you're born in the belly of the beast, you don't know that you're in the belly of the beast. You think it's normal and you look at the cells and the stomach lining and you think like that's just the sky.
But once you pop out, it's like when Neo pops out and briefly sees the sunlight. I had this moment also when I went to Kenya when I was 17. It was 1985. And people are talking about – very concerned about famine and lots of goodwill. It was the Summer of Live Aid. And I went to Kenya and I went to – I was in Nairobi. I ended up leaving Nairobi. Went to a small town. I was getting increasingly disenchanted with what I was seeing on the ground.
And I met a Masai boy and I ended up spending quite a bit of time with him. Got to know him. He was my age. And then eventually brought me to his village. And as soon as I walked in, it was like my village in Korea. You walk in and it was home. You just looked around, like, "Oh, my God, this is the forevermore."
Whatever world I was born into, it is not quite it. Burning Man had the same feeling. I mean, I had this resistance to going to Burning Man. My college friend had been going for four years. And the more pictures they showed, the more stories they told, the less interested I'd become. Because it just wasn't me. And I could see why they were excited about it. It didn't feel like me.
Finally, on the fifth year, I went. And I didn't drive in with them because I want to make sure I could leave when I wanted to because I felt like it wasn't going to resonate with me. No Camp. I'm not a huge fan of dust, the porta potties, things like that. I think it just didn't fit my idea of something that would be fun. And they greet you with the phrase welcome home, which was the last thing you expected to hear when you're out in the middle of the desert.
But what I witness inside, like within half a day, I began to start to think about why it felt like home for so many people, including me. These are the little glimpses. And I think we get glimpses here and there. And it's just enough to help you process what's going on in the default world and gets you motivated about what's possible. You see how humans are when you strip away a lot of these not only conventions, but these needs and these whatever sets of cultural algorithms we've adopted into our lives. And you shed that. And amazing things start to happen. And people act in ways that are just so profound.
One of the epic phenomena of losing skin in the game, we don't invest in each other because there is more skepticism. There's more counterparty risk. When you're in a kitra, there's implied trust and loyalty to things that are just foundational to the human experience. When you feel trust and loyalty, you can do amazing things.
In a counterparty world, it's more about skepticism and counterparty risk. We're more measured. We count our beans. And good things happen because we're able to trade and count our beans. It's not the same feeling. Moreover, once you start trading, you start building things for the sale value, the trade value instead of the inherent value. Now, again, that's a good thing, right?
Steve Jobs wanted to sell Apple products and because he can produce unbelievable things. I want to make sure that people understand that almost every topic we're going to touch on here, it's a duality. There's something amazing about it but there's also a shadow. We're speaking on mics and on Internet that were built by people because they wanted to make a living. I mean, that's great. It's the fact that people want to make a living is what makes them innovate and design products and work hard. That's a good thing.
But the downside is when things are done for the sale value instead of the inherent value, as a observer, you start to see things that look dystopic, things that are alienating. Oh, did you do that because you meant it? Or did you do it because you were promoting something?
When things start to feel like they're promotional and when they start to feel like it's done for some other reason, a secondary gain, it's like when you get a phone call from a friend it feels different than a phone call coming in from a telemarketer. Same thing with an email. An email from a friend is golden. An email from spam, like, "Oh, you're selling something."
You can hear in people's voice. You can hear it in their actions. And when you're surrounded by things and ideas and voices that it feels like everything's a sale, then it creates this feeling of alienation. And I think we feel that today. I feel like so many things are performative, whether it's a campaign promise or even a friend's Instagram post. Like, wow. Are you selling us, right? Just to tell us how it really is.
I think that's the downside of commodification. And Burning Man, and Larry Harvey and the founders, they were reacting to that. All the early birds reacted the fact that this doesn't feel right. Art for art's sake instead of art for commerce. And again, commerce is great. Commodification is great. But let's spend at least a week out on the desert and just live this e-commodified experience.
That's why I think Burning Man, because it's such a concentrated experience, it brings a lot of those things to life that you can go home and reflect on.
[00:20:28] JS: I want to now dive into the substance around the concepts. First, let's go back to the core kind of premise is that there were institutional dynamics when we live in tribes where we had genetic relationships between the people around us. We're governed by people. We were fed and formed and governed by people who had our best interests at heart. And there was an alignment of interest.
And then as we have begun to a global village, there has been a misalignment of interest. Can you talk about the distinction between when you have a misalignment of interest plus competition, you get a race to the bottom? But if you get alignment plus competition, you get a race to the top. And that's some of the favorable dynamics when you can shift to inclusive stakeholding.
First of all, why don't you explain the concept of inclusive fitness? Because I know this is central to why the dynamics held that did at the smaller kin scale.
[00:21:24] JY: This isn't fitness as in exercise. It's evolutionary fitness. And the inclusive idea here is that your ultimate evolution of success is not just how you do. Like in a beehive, soldiers don't even reproduce. Their genes are not going to propagate through their own reproduction. It's a dimorphism. Only the king and queen have kids.
But because they're so genetically aligned, sacrificing one's genetic opportunity to serve the hive still benefits them. So that in order to really account for behaviors that are altruistic, they have to think about elevation and fitness in a wider frame. Your genes are still propagating even though the soldiers are dying. They were kin. They would share 50 of genomes.
One way to think about it I think that people around here anyway [inaudible 00:22:11] instantly is to think about kin skin of the game as having founders, stocks. When a man and a woman have a child, they're essentially founding a joint venture called a child and they have 50% founder stock. And grandkids is 25%. Siblings is 50%. And so on down the line. You proportionalize the stakeholding as it extends to the community and over generations as well. So there's this self-replicating hive that rolls with each generation that re-instantiates that high degree of alignment within a hive over and over again.
Now I should go downstream. You do get genetically diluted. And so, there is this compulsion to move away to disperse. And that's nature's way of also compelling gambits to the outside. Going on journeys. The adventurism. You're getting pulled not only by the excitement of seeing something new. But also, your former tribesman from five generations ago feel a little foreign. it actually encourages a diaspora. So to help people spread out.
And this is true with all species. There's this dispersion instinct that comes with declining skin in the game that helped us go through the ends of the Earth. The thing that's different is that we've re-met now in a global melting pot. There's this ability to continue to spread out in self-replicating units of hives.
We formed this global hive first meeting physically. And usually, it started with raising their swords, right? Because now you're total strangers. And we've gotten past that. And now it's about nation states, and competition and independence movements.
But we've reunited at an even higher level now because of technology. People have connections across the globe. They have business relationships. They've even melded their genes. I mean, we're truly in a melting pot at multiple levels. So we are now at global hive.
But because we don't have skin in the game in each other's lives, kin skin in the game, then the following things happen. Essentially, the relationships start at a level. Let's just say, right? I'm just being abstract here. And so, people try to – by game theory, what are the game A is? The game theory, you're looking for win wins. And that's all good. A lot of good comes out of that.
But over time, the idea of win-win turns into win loses in part because the power is symmetries. Once something is good, you start to see power asymmetries build. And once that becomes sufficient –
[00:24:37] JS: What do you mean when something is good power asymmetry is built?
[00:24:41] JY: I might have misspoken. When power asymmetry emerges, that creates risk because that's the potential pathway to tyranny where power subverts instead of serves. And that's the thing that I encourage people to always think about. When you look at a power structure, does that serve or subvert?
In a highly lined tribe, power serves. In which case, it's great to give them power. The more you centralize power to the strongest, the more they're going to serve you. If the power is subverting, then the instinct is the decentralized power. You basically have three formats, right? You either have benevolent alphas or you have malevolent alphas. Or you have decentralization. And those are the dynamics that are constantly at play.
In an inclusive stakeholding world, power serves. The queen bee serves the hive, right? The behavior of the queen bees and the queen ants and the termite hive too, there is this trust and loyalty that is genetically designed. We don't have that anymore. So we've got to look for other ways to get there.
The main takeaway here is when you don't have mutuality of stakeholding, then the power asymmetry becomes the beginning of really, really bad things. Power starts subverting, starts hegemonizing. It's the beginning of tyranny. And we've seen this over and over again, whether it's a political institution, social institution, economic institution.
Whereas if you have mutual stakeholding, like in a hive, then any one person's success, even if it's runaway success, you get pulled forward instead of being left behind by the person's success. In a post include stakeholding world, you'd be rooting for people to go do amazing things. Because their journey is going to pull all of us forward. We don't feel like we're getting left behind.
That's why I think what starts out as good competition then leads to asymmetric power structures, which that once they become self-fulfilling, right? Because if they start controlling other power structures, then extracted behaviors are emerging. And that's when things really start going sideways.
[00:26:32] JS: You talk a lot about self-expanding beasts. Why don't you tell everybody what that means? What those are?
[00:26:38] JY: Self-Expanding beast is an institution that figures out the algorithm where they found the recursion. Feedback loops in general. If it's not serving, they're dangerous, right? In your body, almost everything good is a negative feedback loop that self-moderates to some sort of local minimum. Some sort of balance. Positive feedback loops create runaway phenomenon. They're rarely a good thing in nature.
Anything that's self-expanding that has figured out the recursive code, that's something that you just have to be mindful of. The chances are is going to cause issues. Self-Expanding Beast is a institution that has figured out the algorithm where it's got this loop and it can just continue to expand perhaps at the expense of others.
One way to think about this is the human body. And when I look at the human body – and, obviously, I'm very interested in aging from an adaptive perspective, evolution perspective, biological perspective. One of the ways I think about the body is that we are made up of a trillion cells that have very high kin skin in the game. Every cell is aligned. Your toe is pooling for your liver, is pulling for your retina. And everything works cohesively and pulling everything forward.
After 40, I used to notice that on like CAT scans, things, cells and tissues start to accumulate fat. So it made me wonder if the cells are losing their pro-sociality and are starting to express more independence. Because it looks like they are basically taking hydrocarbons out of the system and storing it locally. Kind of feels like war for oil. And every country starts doing this. Is that a fractal of what's going on around the world now? Do we see it inside the body? The arc of individual bodies experiences very high degree. Essentially, it's one kin hive. Then after enough divisions, it starts behaving more independently.
And of course, the way to test this, are there algorithms of inclusive stakeholding biologically that we don't know about inside our bodies? And once you lose it, can we restore it? I mean, this field of science, obviously, it really doesn't exist yet. But we do know that there's a hormone that makes you nurture others instead of self. And it's oxytocin.
I wondered about like the most aggressive forms of independence in the body, which is any cell that figures out not only how to be independent, but figures out how to subvert native instincts of other cells of your neighbors and extract from them, they're cancers.
Their cancers are essentially self-expanding beasts. They are former kinsmen that have shed their inclusive stakeholding. Now they're exclusive stakeholding and they're essentially colonialist. They start extracting from their neighbors. And they create these feed for mechanisms that become unstoppable. Cancer, self-expanding beast, self-expanding power structures to me, I think about them all through the same pathway.
Now getting back to could you actually re-instantiate inclusive stakeholding in cancer or in aging? There was a study I looked at whether or not a nurturing hormone could moderate cancer growth. There's a study out of Stanford, I think it was published like two years ago, where they gave oxytocin. Oxytocin makes us start thinking about other people. We start nurturing others instead of self. And I'm not saying oxytocin in any way it's a cure for cancer. I hope we find it. But I don't think this is it. I think it's too downstream.
But lo and behold, applying oxytocin into tumors shrank them. We somehow were we able to re-instantiate inclusive stakeholding a sense of nurturing towards others into the tumor cells that are gone rogue and had become self-expanding beast.
What I like about that line of thinking is instead of thinking about our former kinsmen who are now strangers, as enemies, could we just think about them as future kinsmen again? All the stories tell us to go attack the beast. But maybe they're not really the beast. Maybe our role is to steward their transformation towards an inclusive stakeholding future that they can be part of it.
In the case of cancer, we know that chemotherapy for most cancers, it ultimately fails. Here we are, we're just like attacking with, attack, attack, attack. Kind of like what we do in social media when we feel like the other side's the enemy, we're just continuing attack. And it doesn't actually solve the problem per se because the other side is going to attack back.
Versus here, instead of saying you're the beast. You're saying, "No. You're actually Beowulf." Like you're actually saying you're part of the solution and you nurture their transformation from what we thought was the self-expanding beast.
And you allow them to come home again, right? If you can de-domesticate yourself in such a deep, kind of de-monsterize the cancer cell, so that the way it domesticates itself, it actually becomes more integrated into the human body.
If we can think about that as a model system, as a fractal, as an idea, again, none of this is like – we haven't solved aging. We haven't solved cancer. And nowhere close yet unfortunately. But could we do it at the social level? Could we figure out social algorithms that allow these so-called self-expanding beast to be part of the solution to building a more inclusive future that works for everybody and not just a narrow a set of stakeholders?
[00:32:05] JS: Sort of we're hinting in that answer at another concept that I've heard you talk so much about. This concept in Aikido where you use opponent's force against them. Or you talked about feeding the head of the snake to the head. Can you say more about that?
[00:32:21] JY: Yes. I think it's an old idea in many traditions of philosophies, that if you can use the energy in the system. A simple analogy is like when you're sailing, you can actually use the wind against you to attack and go into it. You don't need a motor. You can literally go headlong into a win.
Aikido is the idea that you're using the energy of the so-called opponent to actually put down the opponent. What you're really doing is you're really redirecting the available energy.
And what's great about that, it actually has a couple implications. Number one, it's easier on you. Instead of thinking about yourself as a hero, you're just a steward in the process. You're not creating enemies and they don't see as an enemy. And therefore, it's less work for everybody including yourself.
The second thing is, actually, if you're redirecting these systems energy, then it puts the so-called enemy position to go on their hero's journey and potentially be part of the solution. You win by having it be less work. Because the energy being supplied by the system and even the enemy wins. The so-called enemy. Because now they rejoin the team.
Now I'll give you a very specific example. Healthcare is an amazing industry. It's an honor to be part of it. And a lot of things have gone well in a short period of time in the last 50 years. It really is crazy how much healthcare is contributed to expanding the health and the length of life for a lot of people around the world. It's unequal. There's many things that we got to do better and a lot of things we've got to work on. But it's been that credible industry.
Now, having said all that, when you step back and think about what healthcare is, what is a product of healthcare? Healthcare basically manufactures old people. We tend to think about ourselves as micro products and providing services. But what really rolls off the assembly line of the healthcare system from an abstract perspective is that we mass manufacture old people who need more health care.
We've somehow created this recursive loop where the more successful we are as an industry, the more they need us. That's the positive feedback loop. But depending on your perspective, it's also negative feedback loop. Because that makes healthcare growth unstoppable. In 15 years, the average health care costs in this country is going to equal average salary.
We can't colonize the entire economy with this current model. Somehow, healthcare has become the self-expanding beast. As amazing as it is, we're on a very challenging track.
Now how do we get to this point? Incentives. It really is how to get some of everybody's interests. Patients, doctors, payers, pharma companies. Everybody imagines themselves doing the right thing under – their incentives are lined up to perpetuate these systems.
By the way, I think the nicest way to say this when we say incentives is that everyone's just trying to feed their family. When you see these things that don't make sense and you trace it all the way back to the people that are involved, like you know what? They're all people that are trying to feed their families. We're all on the same boat in that regard. But it just doesn't add up.
Somehow, these family values that we cherish, in aggregate some produces things that we don't even recognize. When you look at a patient-doctor relationship, it's still sacred. We are the words as physicians. Our duties to patients is a fiduciary obligation. It's an amazing relationship. Something that nearly everybody surveyed in America is like, "You know what? They trust their doctors, right?" And yet, you add it all up and we get these perversions.
The networking of all of these self-interests somehow produce something different than we would aspire towards. If the perverse incentives within the system are part of the issue, then can we actually use incentives to solve the problem? And so, that's how we thought about how do you move the system from just treating the symptoms of aging to look at the core biology of aging? We did it as an incentive prize.
If healthcare is a self-expanding system, because of perverse incentives, can we use incentives, in this case, the incentive price is what they called the X price structure. Can we use that as a solution? It creates this sort of leveling. It's almost like a natural hedge and we use the incentives against other perverse incentives and they go to battle with each other.
[00:36:28] JS: Yeah. I mean, what strikes me is a lot of these examples of more aligned incentives are a question of changing the scope. Some examples are changing the time horizon with which you're optimizing better alliance incentives across stakeholders.
I've been reading a lot about the circular economy lately. Instead of changing from a model of product to a service, where the owner of the thing is the producer of the thing. The incentives are much more aligned with the social outcomes that we care about. Now do you want to produce something that will last? Because you can get the recurring revenue for it. And then all the value of all the components of that thing can be recouped. They're not valuable to you when you're done using the product as a consumer. But as the producer, you can take those back and make another one, right? It recaptures a lot of the value that's lost in the system.
A lot of these examples, the one that you give in the book, is if you're looking at a stake in someone's health over the long term, instead of just optimizing for revenue from that person over the short term, right? That's a sort of change in scope that changes incentives.
I mean, it feels like a lot of the core concept of inclusive stakeholding is finding that alignment. But it's not clear to me how your thinking addresses when there is a zero-sum situation or a misalignment of incentive between stakeholders. How does inclusive stakeholding handle situations like that?
[00:37:50] JY: I heard a couple of things in there. I'll come back to that zero-sum. I tend to think about these as arbitrages by the beast. Once we don't have alignment of interest, then the things that work for you work against you. Technology can be good or bad depending on whether the power is going to serve as a subvert. Like nuclear energy may be good or bad depending on how it's going to get used.
Short-termism versus long-termism. The fact that the system didn't self-design long-term investments in like health insurance. The health insurance you're referring to is, instead of doing this one-year fee-for-service trade between a insurer and a client, what if you reorganize instead of such that you get paid like 1% management fee, 5% of the health savings 10 years on the road?
Essentially, turn and insure into an investor in the client's health rather than a trader against the client's health. Because right now the existing system, if they could just put you on a drug and your one year older is sicker but you're now somebody else's charge. And at 65, they put you on the public bill, Medicare. Those are perverse incentives. And the solution is to get back into alignment. You're now a stakeholder in the client's long-term health.
Talk about the same thing with teachers too. I don't think we're going to create perverse incentives by encouraging teachers to find the next Zuckerberg. But just tiny amounts. And it doesn't have to be even economic. But if a student makes a contribution to the world 10 years on the road, then all the teachers get named your stakeholder in the future generation.
That the return to long-term thinking, the reason it doesn't happen on its own is because "the beats is in control." The beast is going to constantly migrate the market forces back to our short-termism. Just like with CEOs managing the quarterly earnings. It's the non-inclusive stakeholding that promotes these perversions.
Essentially, you just turn it into an inter-temporal arbitrage. It looks good at the individual level. But the system level doesn't work. Because in an aligned system, it should work locally, one-to-one. It should work globally across the community. But the fact that somebody that looks good at the micro but doesn't work macro is a form of scalar arbitrage. The system, the beast is playing these games where it looks good to us. And so, we just keep playing it. Just the fact that we like sugar, which is a proximate gain. But obesity and diabetes are long-term harm.
And the system is going to constantly find these inter-temporal arbitrages because they're the ones when they arbitrage because they're incentivized to find the arbitrage. So now we're getting duped because the power structures are luring us to – in this particular case, to be victims of the inter-temporal arbitrage.
The example of food and information, I think these are really profound things going on today. When look at a kin tribe, you're fed by people that love you most, mom, dad, uncles and aunts. And now you're fed by people and power structures that love themselves most.
And slipping from somebody's number one priority to number two priority is a sea change, everything changes. Because now every piece of technology can be a tool for extraction. The fact that you like sweet food, it's just going to be mined by the system to expand their balance sheets. And you eventually become a victim of that kind of extraction, right? That's happening at food.
Same thing with information. We used to be informed by people that love this most. And they might not have known much. But they cared. You're essentially consuming and receiving love. And now we're informed by people that love themselves most. Again, we slip from number one to somebody's number two. And again, that changes everything.
So now when you look at big food and big media, can we actually rely on them to do the best thing for us? I don't know. I think it's a very open question. These systems, are they serving or are they subverting? And that's the race to the middle idea. At a certain point, race to the bottoms are easy to see. But the systems don't want to be seen. They want to find a way to not be seen even though the runaway power asymmetry is growing.
They create a race to the middle where you become a participant in the hegemony rather than just a victim. And then we become complicit in the self-domestication that happens. I think that's the real risk that's going on today. Because we've never solved a stakeholding problem. Instead, we're playing into it. We're leaning into it now. And the power structures have figured out how to absorb us into that.
I mean, if you look at like a casino, it's all voluntary. People walk in by themselves and they play a game that they know is going to favor the house. And the house sets the rule. And basically, it's wealth transfer from the people back to these power structures.
[00:42:19] JS: I want to briefly talk about how one transitions. We talked a little bit about the concept of using the incentives to support the transition. But you talked about some other really interesting things in the book. One of the things I thought was really interesting, the need for new stories. And that your family foundation had put out a prize for new versions of Plato's Republic, Thomas Paine's Common Sense, Rousseau's The Social Contract, Adam Smith's The Wealth of Nation, Karl Marx's Das Capital and Rand's The Fountainhead. And also, a declaration of interdependence as opposed to independence and bill of responsibilities versus bill of rights. I'd love to hear you just talk more about what your thinking is behind that.
[00:43:00] JY: There's two ways to encourage pro-sociality. One is two incentives, where people do it because it's in their interest to do so. But second, we know that people will do the right thing just because it's the right thing. And if we get our stories right, we can also get there through a second path.
Now, over the long, long haul, stories will not be enough. Because if you don't have the right incentives, then we're back to Gresham's Law.
[00:43:22] JS: Can you say what Gresham's Law is?
[00:43:23] JY: It's the idea that it's a race to the bottom, right? If you ask one food company to put in less sugar, another puts in more to get market share. Over time, you only end up with high fructose corn syrup. If you re-ran human civilization as a simulation, you'd end up with high fructose corn syrup in 2020 because that race to the bottom.
If you ask one company you to put in less click bait, another one puts in more. If you ask companies to do the right thing, they just lose market share and the more mulligan versions end up gaining more power. That's the self-expanding.
When you have self-expanding beast, the ones that are most perverse actually grow the fastest. This is what happens inside a tumor as well. The most aggressive ones. I'll compete the other ones. Then eventually, the entire tumor is the most aggressive form. The Greshem's Law is the race to the bottom.
When you think about post-sociality, these notions of let's do the right thing. Let's build a better planet. Let's make a successful planet. Over time, if you look at how power accrues, it's going to start accruing to the performative versions of it. And next thing you know, we're right back to where we started.
Wo while I think the stories are really important to get people steering that direction, we need the best of both. I think we're going to always need better incentives to align people and better stories to keep us moving forward in a way that is like – so it doesn't feel crass. If everything's just incentives, even when we do the right thing, it's less fun.
I imagine just a future where it's like 50-50. 50% we're getting there because of storytellers and good stories. And 50% because we just winnowed out the perverse incentives and putting incentives that align people towards the [inaudible 00:44:54].
[00:44:55] JS: I just wanted to build on that. Because one of the other things that you had mentioned, psychology 2.0. I thought this was really interesting. This debate about the role that language plays in consciousness and how new words make us more conscious and mindful of the experience of others. And how psychology is focused so much on the individual and not the second-order relationships between individuals. This concept of compersion, which none of us have probably heard that word. I thought that was an interesting piece of the puzzle that you talked about. And I wanted to just make sure everybody got into it here as well.
[00:45:25] JY: When we think about these self-expanding power of structures that dupe us, one of those institutions is language. At the first order, language is there to communicate. But lots of social scientists and biologists, language actually evolved to deceive. It's a format for counterparty risk.
And especially, if people are really good with words, it can actually create demography. Everything else, language is technology. It can be used for good or for bad. It really comes down to those power servers or subverts. Is it about me or is it about you? That's the central question at all times. We can always bring it back to that again. As you go back out of the world, just think about that. Is that power structure serving or subverting?
Now, words. Before the exclusive stakeholding world, we probably didn't need to name things as much and count things as much. But once we're in this post-inclusive fitness world, we needed to count and name. And then there are stories that are composed of combinations words.
But they're race to the bottom selects for versions of stories that serve the storyteller more than the story listener. Because the storyteller doesn't have skin in the game in the story listener in the modern world. In a kin tribe, they had highly aligned interest. You wanted to say the right thing. You want to share stories that empower others.
Here, there are stories that empower others but it still serves the storyteller more. And so, that creates this perverse dynamic. If you look at how Beowulf, the story of Beowulf, arborized all over Europe to the Germanic languages and into the Northern cultures, it mutated and is selected for the ones that sold the best.
Essentially, the storytelling market is whatever sells the best. Not what is true. So you can see how it's just going to create all sorts of distortions over time. And because it's been going on for so long, one things we reflected on is are all the stories we've been told actually sold? But these are not true stories.
Romeo and Juliet an actual love story? Or is it a performative version done for sale? Shakespeare, from a young age, had to provide for his young family. He's a great storytellers. He's amazing with words. But is that actually a real love story?
It's the same story about Thomas Paine. The story about Thomas Paine is that he was trying to Garner a lot of attention. Is that actually true? I mean, Rousseau, he says it is our nature to be – it's man's nature be free. Well, actually, it's our nature and nurture. It's not nature to be free.
But why did that sell? It's because it's in demand. Because once you're isolated, just imagine you were in a highly aligned tribe. And when you're in highly in tribe, you advocate for each other. But once you don't have skin in the game, now you have to self-advocate. Meaning you have to speak up. And then that forces the other person to speak up, which makes you speak up louder. Everybody keeps raising their hands. And next thing you know, you're just fighting.
Self-advocacy, the retreat to self-ism and the self-interest is itself a race to the bottom. And next thing you know, you start to see the word self get attached to almost every word that used to involve two people. Help is now self-help. Reliance is now self-reliance. Service is now self-service. Love is now self-love. Compassion is now self-compassion.
And then you end up with Freud, who's like ego, id, me, right? Studying. What's going on inside our heads. Psychology 1.0 is this like unidimensional, narcissistic, ego-driven frame. And the highest state of being is the self-actualization, right?
And that's fine. I think we learned a ton about ourselves, including things that affect other people. I think it was in many ways an incredible forward progress. But the idea is that psychology 2.0 is they really think two-dimensionally, three-dimensionally. There are other people that are having psychological experiences but we don't have words for them. And that four-quadrant chart that's in the book just outlines just the very simple thing that reveals to us how early we are and truly understanding interpersonal psychology to the four quadrant chart.
What is it called when you're sad because the other person's sad? That's known as compassion. That's a word that's used. What is it called when we're unhappy because they are happy? That's known as envy. What is it called when we are happy because the other person is unhappy? That's called schadenfreude.
But what's the word for I'm happy because you're happy? The English language doesn't really have that word. And technically, it's the word compersion. But we certainly don't use it. And the word exists in other languages. And you can say it as a phrase, vicarious joy. But it just shows you how early we are and really developing the field of psychology to be inclusive of the experience of others.
Now you can take this and take it to many domains of things that sound familiar. We talk about our empathy. Our empathy is how we want to understand how other people are feeling. And I just want to point out that just, again, empathy in and of itself is not good or bad. It's just technology. And you can use empathy to extract more data through a machine, right? It's not the fact that you know what people's thinking can be used for them or against them. Empathy is not the answer or the problem. The problem is about stakeholding and who we're going to use it for.
There are many other experiences that humans have that we have no words for. And the Wolfram hypothesis, Wolfram Alpha hypothesis, is that until you actually name it, it's hard to really experience it. And it gets back to this Homerian idea that he used to describe three-colored rainbow. And of course, we know there's seven. But that's also not true.
The idea that, back then, until you the colors are named, you didn't see them. But of course, there were not seven colors of the rainbow. There's infinite colors. Until we name things, it doesn't pop into our consciousness. Until we name words like I want to be validated. I want to be understood. I want to be listened to. I want to be curious upon. These are all everyday experiences that we feel but we have no English word for them.
It'd be great to have a naming competition where all these words get named that allow psychology 2.0 to self-develop. And then we start experiencing these things. We can articulate these things. And then we'll have, hopefully, much better relationships.
[00:51:15] JS: I look forward to continuing to walk this path alongside you.
[00:51:18] JY: Likewise. Thank you for having me.
[00:51:20] JS: Thank you so much for listening. And thanks to Scott Hansen, also known as Tycho, for our musical signature. In addition to this podcast, you can find resources for each episode on our website, www.becomingdenizen.com, including transcripts and background materials.
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