REALLY?! ARE THESE ASSETS THAT CREATE THE REAL WEALTH?

Overall humanity is lacking, as a question of life or death, a new approach to feeding and wearing its several people. Over other social-economic models, the best system to achieve that aim has been the market economy. On the other hand, the productive system always has depended on the combination of actions in three platforms: Hardware, Software, and Humanware. Therefore, human survival in this living and limited system, that is, the Earth, should overlook those actions less destructive to Nature and lives, including human ones.

As a question of living or death, it is lacking for humanity to get a new approach to feed and wear its several people. Above other social-economic models, the market economy has been the best system to achieve that aim. On the other hand, the productive processes (by humans) always have depended on combining three main assets: Hardware, Software, and Humanware. For human survival in this living and limited system, the Earth, less destructive actions on Nature and their lives, including human ones, should dominate.

HARDWARE

It is the most evident asset due to its tangibility. It manifests itself in the matter and energy extracted from fossil, mineral, and biological sources on the planet, then converted into inert matter or energy, mainly through muscular effort (technology is here excluded) and with emissions to the ecosystem. It is still the primary source of getting wealth.

It configures the traditional view of wealth, tangible, as it is easy to interpret by the senses. This type of wealth is linked to human survival in the representation of goods, such as land or buildings, intended for food or shelter, and gives power to those who occupy, dominate and enjoy it. In a more sophisticated version, combined with human and institutional attributes, it encompasses objects such as rare metal coins (gold or silver). As its tangible nature predominates, they are more subject to theft by third parties who can take, occupy, or even destroy them.

In this context, raw material and muscular work costs usually correspond to the largest share of the product's value. This business approach focuses more on cutting costs, but that undermines its competitive market position with a low added value. A pattern of low remuneration for work and services prevails in which technical knowledge is not valued. The value of the products depends on the material character and less on the knowledge instilled, so they are easier to replicate by third parties who use observation or reverse engineering.

Most economies still operate on this archaic model. According to the market law, the massive supply of low-tech producers, who exploit manual labor and the extraction of raw materials, confers low bargaining power. Such a position reinforces the position of the counterparty - the most sophisticated operators in the global market - who allow themselves to control and impose the price they prefer - below the minimum. These low-tech economies will stagnate and lean to be replaced by others with even lower prices. Many economies fail to evolve into more sophisticated markets.

?Unfortunately, Portugal still plays in the weak position of an obsolete European economy (figure with greenish color).

These are economies based on extracting minerals or natural resources such as fishing or forestry, almost always with low wages for a lot of low-intelligence work and a lot of manual or muscular effort. Such economies tend towards autocratic and corrupt regimes. The general population tends to be poor or very poor. Or worse, it is despised, controlled by the wealthiest elites, and provided with a rudimentary, inconsistent, or misleading education. For example, the population learns to memorize but not to think and interact. The culture is usually despised not to jeopardize the dominant power. Most of the world's people live under this socio-economic model (the same map).

SOFTWARE

It is an asset of facilitation, connection, and cohesion between humans and supports their social, institutional, and economic processes. It aggregated the human species into an entity with the capacity to produce more and prosper; it has enhanced common knowledge and interaction through networks; increased everyone's trust in everyone. It works as a kind of glue between humans, a social ferment that leverages actions and cooperation. In the economic sphere, it is an optimizer of flows that create wealth in societies. Only today is the global connection between humans, things, and the planet possible, all functioning as a single living being, through modern technology, an extraordinary condition that can give rise to new opportunities for general survival (Gardels, 2022)?

In this configuration, the codified language (written, numerical or graphic) expresses the intellectual and institutional work. It all started long ago with small clay tablets with cuneiform language. In the current context, it is what can be expressed through bits, so integrate information technologies, the Internet, or artificial intelligence. Its interpretation is more restricted than hardware, whose reading depends on the human senses. Each code requires prior learning, and dissemination channels may be restricted.

The registry aggregates humans through their intergenerational relationships or all vast networks of cooperation, expanding knowledge or results. The (virtual) instruction log allows you to paste and prevent the action that will happen in the real world. Encompassing more people and processes in shared goals enables to creation of something greater than the sum of individual contributions. These are synergies with value. The human interaction (information flows) is impressive. Through it:

• It emerges disruptive or more extraordinary ideas.
• It generates more efficient processes through planning and control.
• It improves prevention which minimizes costs and mitigates risks;?
• While simultaneously, it creates much more value than is possible only in the material world.

The intellectual work is expressed through codified means such as reports, plans, budgets, projects, measurement records, and invoices. Institutions cover another part of the formal factors (North, 1990), such as laws, codes, norms, taxes, and contracts, in addition to regulation and enforcement by the government, tax authority, courts, and police.

The representation of the wealth, expressed on this platform, is through the fiat currency and digital currency; patents and industrial secrets; bonds such as stocks and bonds; records of property tenure rights; and even the written and formative culture of a nation, expressed in museums, libraries, and universities.

Economies operating at this platform's level tend to be consolidated democracies. These populations benefit from high social equity and training (civic and technical). As they generate trust, they are the preferred target for attracting global capital for investment. When public institutions cooperate with the market economy, this latter becomes effective and efficient. As a standard, their organizations apply systemic planning and control criteria, focus on productivity, invest in and apply technical knowledge such as marketing, and seek to innovate (focus on applied research). These economies benefit from high productivity and a lot of added value. They control high-value-added businesses such as logistics (as in Denmark).

But, there is a dark side!

The software can be an effective tool to trap society. A very dynamic economy in recent decades can regress its progress from the control by the State of the freedom of movement and expression of its citizens, leading them to fear being creative and enterprising. Or, in a free society, the State controls and exhausts the private economy to favor the public sector. An effective path of general stagnation. On the map below, Portugal ranks poorly among western competitors.

They are observed in economies transitioning from the production model based on cheap labor to a higher level of value creation. Most world governments use institutional software to control their citizens and maintain their power. For example, they prefer to teach pseudo-knowledge, or citizens memorize more than learn to learn, to not think by themselves; they promote a deficit in civic awareness or financial competencies by their people; they postpone public sector restructuring to maintain political support, a delay that gives rise to corruption; or, even, may apply surveillance and fear measures on the population.

An inefficient or ubiquitous public sector compensates for its failures or power strategies representing outstanding costs, then captured in the real economy (firms and citizens) by taxes or the direct control of private companies. This approach will tend to generate a loss of confidence on the part of the global capital market and investors, depleting these economies of vital capital and becoming trapped in a trap of continuous stagnation.

Therefore, the software is a sensitive instrument of the economy. It can either be an agent for cooperation and positive interaction, it may become the accelerator of growth, or it can be a control mean in favor of elites, becoming a brake on high-level development.

HUMANWARE

The future lies beyond technology but more in humanity itself (Leonhard, 2021). Here, the platform reaches the highest level of value from a human perspective. After all, the value attributed to the product is perceived by the final customer, who is human. It distinguishes itself from the machine procedure (as efficient and objective) by its emotion, intuition, art, disruptive originality, awareness of self and others, empathy, solidarity, cooperation, malleability, relationships, and in a multidimensional order (far beyond the coded language).

The high social and economic development standard requires human-focused approaches through informal education (civicism, ethics, communication, culture, creativity) and formal (technical) education, and less in memorizing content and training machines can do better. Software technology operates as an accelerator of human virtues, but it can be a destroyer if misused (as the social networks).

The savings club in this advanced pattern is very restricted.

As a rule, these are small countries or a few cities. Wealth is due mainly to the dynamics and efficiency of economic flows (the most robust form of value creation) and low material use. Most are democratic states that encourage social interaction and freedom of expression, have efficient public bodies (such as justice), and are transparent; government members are humble and conciliatory.

Some focus on applied technical research (Taiwan), others on teaching with a human focus (Finland). Government structures are low on spending and transparent (like Sweden), focusing on fighting corruption (in 2021, Portugal ranks 33rd among the least corrupt, worse than its direct competitors)!

Products with a high human content add much more value when compared to those derived from extraction, manual or muscular work. And that can be replaced by machines with decreasing costs tending to zero. These economies reveal scarce attributes such as civic awareness, technical competence, applied research (patents), creativity (disruptive innovation), prestige (brands), exclusivity (luxury), and intelligence (management of assets, capital, or intangibles).

Products linked to humanware, supported by software, are the paradigms of this era. They are dematerialized, little dependent on material value share, and reinforced by information systems and human networks. Therefore, the successful businesses of this era are GAFA, Uber, Airbnb, and similar.

This business model bets on the optimization of flows, whether among humans, such as those catalyzed by the Internet, as well as goods and energy. These flows include logistics, tourism, higher education, and scientific research.

A new social and economic revolution alongside the industrial revolution and environmental crisis?

Most economies still extract (almost) everything from underground, deplete the soil, enslave or subject populations in fear or with rising taxes to pay for inefficiencies or the greed of their leaders. In the established model, they poison the air and water, kill all biodiversity in the sea and land and condemn them to general extinction.

Human products have always depended on the three assets but combined in different proportions. It is expanding a movement of intelligent, highly dematerialized, and recyclable based technology in biology, genetics, nano, energy, artificial intelligence, computing, and other new technologies that emerge continuously. Over the centuries, as part of the value, the product was less and less dependent on the physical, instilling more knowledge and disruptive creation. Pressure from climate change and the environment could accelerate this movement.

Unfortunately, the club of countries capable of achieving the highest level of socio-economic progress will have to be restricted.

It will be difficult to change in time most economies by assigning humanware capabilities to their citizens. It will be difficult for state and business leaders to give up their absolute power and privileges and dematerialize, de-bureaucratizing, unlock, accept disruption and dispense with the status quo.

The general economic model will have to be less mechanical at extracting and depleting the ecosystem for humanity to survive. The approach should be bio-economic, simulating Nature using intelligence, shared and available nutrients, and lots of solar radiation.

?The original article, in Portuguese, was published in the online magazine "Engenho e Arte"

Lisbon, September 07th, 2022

?Jo?o Correia Gomes (Ph.D., MSc, Engineer)