Diversity has failed. Society took the easy option. It has backfired.

Like many people, I was emotionally moved by the senseless killing of George Floyd. After years of watching police brutality videos, very little seems to change.

The common theme amongst interviewed protestors is clear. An overwhelming sense of gross injustice. Police brutality and unaccountability was just the tip of the iceberg in a much bigger systemic issue.

Economic Injustice

Economic injustice is the deeper issue which underpins the lawlessness we are seeing. 10 years of aggressively promoting diversity has failed. Black faces in high places was the easy, simple and quick option. It never addressed the core issue; systemic lack of access to opportunities for the economically disadvantaged. Society is now paying the price of taking the shortcut.

Here's my $0.02 on the systemic economic injustice

Systemic Problems Summary

• Network Effect: Our lives are determined by networks. Who we are as human beings, our access to opportunity, our belief systems etc are profoundly influenced by the networks we operate in
• Social Mobility Crisis: If Americans want to live the American dream, they should move to Denmark. The ability to move up the economic ladder has been in decline since the 1970s for most developed countries. The UK & US do appallingly. This the biggest injustice of our times.
• Educational Attainment: Social class has the biggest impact on the likelihood of success in the education system. IQ is not the biggest determinant of performance, nor is race.
• Labour Market: The end-to-end recruitment process is broken. Human biases plague decision making, choosing the polished ‘silver spoon’ candidate over the unpolished ‘scrapper’ to minimise risk
• Entrepreneurship and startup: The biggest myth of them all. Mobilizing resources (people & capital) depends on the ability to access those resources. Data suggests large parts of the startup world and venture capital world is elitist, sexist and racist but as you will see this is not a conscious decision. It is a function of networks

How the world works:

Before we can make progress on addressing these systemic issues, we must first understand how the world works, how ideas, resources, and opportunity is proliferated through society. Without this foundation, we can not make progress. In short, our lives are the product of the giant network we operate in.

*James Currier Managing Partner at NFX, a seed-stage venture firm

The network effect impacts almost every aspect of your life. While we like to feel like we have complete choice and control, our lives are significantly more constrained than we think. James Currier gives an incredibly articulated thesis. I would highly recommend reading. Networks determine your life

''Working with network effects in our 100+ companies makes it impossible not to notice how the same mechanisms and math that create near-destiny for companies also create near-destiny for us as individuals'' James Currier - Managing Partner NFX Ventures

To summarise his main points

1. Network forces influence the majority of how our lives turn out. And 90% of those network forces are established in just 7 crossroads or pivotal life events
2. Nodes (people) exchange EVERYTHING including conscious things like money and goods, but also unconscious things like ideas, expectations, and affirmations. Network forces also compound over time, they get stronger and increase their exchanges
3. The Principle of Least Effort tells us systems that survive optimize for efficiency. Nodes (people) exchange more when the friction is low (efficient). For human beings, this means physical proximity, interaction frequency, tribal trust, similarity etc.
4. In networks, the rich get richer due to preferential attachment processes. Meaning things like money and status are distributed based on how much you already have. E.g If two people posted the same great tweet, the one with the biggest followers will get the credit.

The most consequential part of the thesis is that nodes exchange EVERYTHING and networks optimize to exchange more by minimizing friction between nodes. Since the 1970's most western societies have become more economically polarised. The nodes have become more isolated in their own bubbles, increasing the gap and friction between disadvantaged people who need what the advantaged have at their disposal, whether that's capital and resources or expectations and principle. The network structures of our society have failed to provide economic opportunity for the disadvantages

Economic injustice starts with networks. This how human beings organize themselves. Although we can not change this overnight, we can make sense of why rugged individualism is never a viable solution. Before anyone asks, LinkedIn networks are not a solution to structural issues. Networks are in 3 categories of hierarchy. Physical networks are the most powerful. A network approach can help us individually and collectively address the bigger problem.

Social Mobility

The social mobility crisis is the clearest illustration of how our network structures have failed. Social mobility is defined as the ability of individuals and households to move between social strata in a society. It is predominantly used in the context of upward mobility. Research is trying to answer questions such as, over the course of a lifetime can people move up the income ladder? Do children have better standards of livings than their parents?

The foundations of capitalism rely on effective social mobility. Why would we tolerate it otherwise? If citizens are hopeful and certain that the future will be better than the present, they do not riot. The challenge is that social mobility is hard to measure and even harder to implement.

Plot twist one: The US and UK have some of the lowest levels of social mobility in the western world failing to make the top 20. The UK is in 21st and US in 27th.

Plot twist two: Social mobility has been rapidly declining in the US since the 1940's. The American dream used to exist. The data tells us that it doesn't anymore.

The breakdown in society we are seeing now is not just about race and police brutality. It is fundamentally about the likelihood of economic prosperity for the disadvantaged and access to opportunity. Quite simply, it is about hopelessness and it is a cry for help. They have every right to feel it.

Educational Attainment

The issue starts from kindergarten. IQ is not the most important determinant of a child's educational attainment. Environmental and social factors account for a greater degree in performance. There is a clear link between social class and cognitive ability for kindergartners. Social class is the single factor with the most influence on how ready to learn a child is when she first walks through the school’s kindergarten door. To compound to the misery, attainment widens with age as the gaps in the early years magnify. Closing this gap is essential for long term social mobility goals.

Race-based skills gaps shrink significantly when children’s social class is taken into account. The issue is class, not race.

Noncognitive skills are perhaps more important. To summarise have you ever seen a middle class/upper-class child engage with adults? It is remarkable. Now compare with working-class kids.

The Economic Policy Institue outlines how social class is the causal factor, but network theory allows us to explain how and why it happens.

Labour Market Problems:

Disadvantaged minorities then have to battle a broken labor market. The end to end recruitment process in the private sector is flawed. 95% of companies make the wrong hires. US Department of Labor claims the wrong hire costs approximately 30% of the employee's first-year earnings. Zappos CEO Tony Hsieh once estimated bad hires had cost the company 'well over $100m'. The impact is that recruitment becomes about minimizing risk and not upsetting the applecart. The none monetary costs of wrong hires are often greater than the financial.

Even before disadvantage candidates get the interview, their name, and class work against them. Candidates with white-sounding names are 74% more likely to get a call for job interview vs those with an ethnic-sounding name. If you have an accent, you're likely to earn 1/5 less than your colleagues with neutral accents. Accents are a function of social class.

Recruitment managers who claim to 'not see race' and 'only take on the best candidate' are kidding themselves. They radically overestimate their ability to eliminate bias in their decision making. I would highly recommend everyone taking Harvard's Implicit Association Test. The IAT measures the strength of associations between concepts (e.g., black people, gay people) and evaluations (e.g., good, bad) or stereotypes (e.g., athletic, clumsy). You may be startled at how racist you are.

The impact of low-risk attitudes and inherent bias means the polished 'silver spoon' candidate wins. The one who grew up in in the right network, and had the right brands on his CV, was coached by the right people. Those from disadvantaged socio-economic backgrounds are battling systemic issues in the labor market.

The failure of diversity

Black faces in high places has been a failed policy by corporations and governments. It was an easy, meaningless and cheap move that showed them as being proactive. Improving senior BAME representation has done nothing. Black lives matter was started under an Obama administration. Most corporations do not really want diversity. They want the same people they have always had, but with a different skin colour.

Affirmative action has failed to increase access to opportunity for those who need it the most, both in the US and UK. When viewed through the perspective of inherent bias, and the network effect, this has benefitted a tiny percentage of affluent, well educated, well-connected minority men. The biggest barrier to accessing opportunity is not race. It is social class. In the UK, the most socially disadvantaged are white working-class boys.

The solution is simple. Class-based affirmative action. Universities should have social class quotes to prevent some places having 40% privately educated students. Instead of businesses asking questions about your ethnic origin or sexuality, companies should be asking about your upbringing and social class. This is how we make a massive impact overnight. This is how we begin to address the systemic issues.

Concluding thoughts

I have never been to a protest. I will never go to a protest. I pick my battles and choose the social problems I will solve. This is how I choose to make a positive impact.

However, for those of us in business, we live our lives believing in rugged individualism and agency. This belief system is the only one that helps us achieve our goals. Too often, the debate is binary. The answer is either individualism or revolution. Business leaders can appreciate structural issues and systemic challenges of our society while believing in their autonomy to achieve a goal. It starts with humility and taking less credit for success. By examining the issues, without any preconceived notions of the world, we will all find small things we can do to help.

Maybe that's employing the candidate who speaks with a working-class accent, being consciously aware of our biases, offering our network to someone who needs it, or even taking some time to offer some advice to an aspirational 16-year-old.