ADRIAN GORE: Why vision-based leadership is well worth embracing

Source: Business Day, 02/11/2018

I am known for repeatedly making the call for positive leadership, to
liberate our country’s incredible potential. What fascinates me is the
criticism I receive �` for my naivety, in light, it is said, of the
challenges we face.
I am not discounting the fact that we face real challenges. We do: GDP
growth is at -0.7%; 50% of those 15-35 years old are jobless; we have
a bloated public sector wage bill and a hefty budget deficit to fill;
and tragic inequality. My plea for positivity is not in spite of these
challenges, but because of them �` and it is rooted in cold, hard science.
The optimism paradox �` the gap between private hope and public despair
�` is an intriguing idiosyncrasy explained by behavioural economics. On
the one hand is our belief that in our personal lives our future will
be better than our past, known as optimism bias. According to recent
research from the Nobel prize-winning economist Angus Deaton, based on
data collected on 1.7-million people across 166 countries from 2006 to
2016, individuals are unwaveringly hopeful, to the point of
consistently but irrationally believing they will be better off five
years from now.
About 62% of respondents believe the world is getting worse, fuelled
by misperceptions of how the world has changed.
Optimism bias can be explained by evolutionary biology. With our
earliest ancestors facing threats posed by violence, disease,
childbirth and so on, the average lifespan was 21 to 35 years. To make
any kind of progress in life we needed to imagine a reality that was
different, and one we believed was possible. We are in essence,
descendants of the optimists �` the pessimists died off.
Counterintuitively, however, this private optimism is contrasted to a
persistent and pervasive public pessimism known as declinism �` the
belief that our world (or country) is on an irreversible downhill
trajectory. Declinism also has its roots in evolutionary biology.
Hunter-gatherers were faced by constant environmental threats and were
coded to seek out negative cues, a fundamental conditioning for survival.
In 2017, the global market and opinion research organisation Ipsos
Mori surveyed perceptions of 26,489 people across 28 countries as to
how the world is changing. About 62% of respondents believe the world
is getting worse, fuelled by misperceptions of how the world has
changed. The degree of optimism about the future differed hugely by
the level of people’s knowledge about global development �` those who
were most pessimistic about the future tended to have the least basic
knowledge on how the world has changed for the better.



The major flaw in much of the declinist narrative is the failure to
distinguish between absolute and relative changes: relative decline is
interpreted as absolute decline. Steven Pinker highlights these
conclusively progressive trends in his latest book, Enlightenment Now.
Life expectancy is up, from a world average of less than 30 years in
the mid-18th century to more than 70 years today; the threat of
infectious disease has been greatly reduced; and around the world
children are going to school longer with literacy going on the rise.
The list goes on.
The critical point is that as South Africans we suffer this acutely.
Not only are we gloomy about how the world has changed and what the
future holds; on a broad range of issues, SA survey respondents gave
the least accurate guesses of where the figures on global and national
development stood �` out of all 38 countries. And while South Africans
are not just impervious to the facts on progress, the study revealed
they are confident in their erroneous perceptions.
Declinism could easily be excused as a peculiarity of cognition,
except it has real and dangerous consequences which impede our
progress. Firstly, we don’t see our country’s progress. The fact is
SA, like the world, is a fundamentally better place as time
progresses. Our GDP is 2.5 times the size it was in 1994 on a dollar
basis; formal housing has increased by 131% from 1996 to 2016; new HIV
infections have gone down 60% from 1999 to 2016; and the murder rate
per 100,000 is down 50% from 1994 to 2017.
Our country is also larger and more relevant than we think. Our
provinces square up against other countries in terms of GDP: Gauteng
is bigger than Kenya and Ethiopia, and the Western Cape is almost the
size of Ghana. Our economy is substantial: in terms of stocks traded
in 2017, SA trumps the Middle East and North Africa region, Singapore
and Norway. It holds 82% of the pension fund assets in Africa, 18
times that of its second- ranked peer, Nigeria �` even though its GDP
is larger and its population 3.4 times larger.
This is important structurally; these long-term savings are invested
into government and corporate debt and company equity, driving growth.
Our market also enables huge companies to be built. Discovery’s
revenue footprint (including Discovery Health Medical Scheme) is more
than half that of Mauritius; and both Standard Bank and FirstRand are
bigger than all Nigerian banks combined on a tier 1 capital basis.
Secondly, we see problems as insoluble anomalies, and our decline as
inevitable. What blinds us from recognising our progress is our myopic
obsession with the problem of the day. Before 2005 the issue was
HIV/Aids. Then we experienced crime in the early 2000s, followed by
xenophobia in 2008 and the Eskom power crisis and labour unrest
thereafter. In the past two years #FeesMustFall, state capture and
land expropriation have occupied the public’s attention as the issues
signalling our impending demise.
It is precisely because these problems change that they cannot be
intractable. I’m not minimising them �` they are tragic and need to be
solved. I’m making the point that we have the ability to gain traction
on these issues, albeit at times in a messy way. The effect of the
above is that we start perceiving our country and its economy as risky
and we avoid investing, when the opposite should be the case.
SA has a relatively stable economy, as seen by its GDP growth, which
is the lowest in volatility when compared against Brics peers from
1994 to 2017. This suggests that we misprice risk and miss
opportunities. The rand, however, is one of the most volatile
currencies in the same peer set, over the same period. If we consider
the country as a “company” we can then use GDP as a proxy for the
“revenue” of the country, and the currency exchange rate as an
indicator for the “share price”. If we then take the standard
deviation of our currency over the standard deviation of our GDP, SA
consistently has the highest ratio over time relative to the above
cohort. This suggests a profound gap between perceived risk and real risk.
Our country has remarkable potential, but we need to deliver economic
growth, which is vital to tackle our serious challenges of
unemployment, poverty and inequality and delivering real improvements
to quality of life. Looking back, had SA mirrored the rate of global
or emerging market GDP growth we could have been 17% or 38% bigger
(respectively). The Bureau for Economic Research puts the cost of the
last 10 years at R500bn, and the opportunity cost at 2.5-million
additional jobs. Our rudimentary calculations show this could have had
the dramatic effect of halving poverty.
We have a choice: a problem-centric leadership approach as per the
above, which perpetuates declinism; or a vision-based leadership
approach, which is an antidote to declinism. The latter involves
acknowledging our country’s progress and creating hope; seeing our
problems as real, but soluble, and seeking out positive cues alongside
negative ones when reading our environment; and recognising the
potential of our economy and investing in it.
This is how change happens. Attitude drives fundamentals, not the
other way around.