What future do we face? What future do we want? What must we do to get there?These three questions preoccupy us all. We can’t predict the future. We can imagine it and even design it; no outcome is predetermined and, as cognitive human beings, we retain the agency to shape the world we want. Perhaps most critically, we can also prepare for the future, by confronting both the risks that we can mitigate and the things that will surprise us. As the most effective conduits for ideas, narratives have the unique power to help us determine what’s going on, what lies ahead, and what needs to be done.

Read Before you Die

Defined in the simplest possible terms, a narrative is a story about something. Stories are essential to us because as human beings and social animals, we are storytelling creatures. In his 1938 novel Nausea, Jean-Paul Sartre wrote, “A man is always a teller of tales, he lives surrounded by his stories and the stories of others, he sees everything that happens to him through them; and he tries to live his life as if he were recounting it.”

What is Narrative

Robert Shiller, the “father” of narrative economics, goes one step further, linking narratives to the decisions we make: “The human brain has always been highly tuned towards narratives, whether factual or not, to justify ongoing actions.”The rich scholarly literature about narratives makes it clear that we think, act, and communicate in terms of narratives, and each interpretation, understanding, or model of how the world operates begins with a story. Narratives provide the context in which the facts we observe can be interpreted, understood, and acted upon.

Narratives & Decisions

In that sense, they equate to much more than the stories we tell, write, or illustrate figuratively; they end up being the truths, or the ideas we accept as truths, that underpin the perceptions that shape our “realities” and in the process form our cultures and societies. Through narratives, we explain how we see things, how these things work, how we make decisions and justify them, how we understand our place in the world and how we try to persuade others to embrace our beliefs and values.

Narratives as Realities

Narratives shape our perceptions, which in turn form our realities and end up influencing our choices and actions. They are how we find meaning in life.Our narratives have carved the paths of history, some down the darkest roads. But our narratives also bring out the best in us. In his book, The Better Angels of Our Nature, Harvard professor of psychology Steven Pinker makes the vibrant plea that the main line of history is one of improvement and that today’s world is richer, healthier, and safer than it’s ever been.

The Meaning of Life

This is correct: On most metrics, if we had to choose throughout history the best time to be alive, it would indeed have to be today. And if we had to choose one quality that powers the better angels of our nature? Imagination.Imagination is a glorious attribute. When its infinite possibilities are harnessed, it corresponds to a form of “superpower” from which every human being can benefit, individually or collectively. It’s easy to understand why: Every resolution of a problem begins with a bit of imagination. Conversely, many problems occur because of the failure to imagine that they could.

Imagination

This is correct: On most metrics, if we had to choose throughout history the best time to be alive, it would indeed have to be today. And if we had to choose one quality that powers the better angels of our nature? Imagination.Imagination is a glorious attribute. When its infinite possibilities are harnessed, it corresponds to a form of “superpower” from which every human being can benefit, individually or collectively. It’s easy to understand why: Every resolution of a problem begins with a bit of imagination. Conversely, many problems occur because of the failure to imagine that they could.

Imagination as Superpower

Narratives shape our perceptions, which form our realities and influence our choices. The expression “failure of imagination” captures this by describing the expectation that future opportunities and risks will resemble those of the past. Novelist Graham Greene used it in The Power and the Glory, but the 9/11 Commission made it popular by invoking it as the main reason why intelligence agencies had failed to anticipate the “unimaginable” events of that day.

Narratives & Perceptions

Ever since, the expression has been associated with situations in which strategic thinking and risk management are stuck in unimaginative and reactive thinking. Considering today’s wide and interdependent array of risks, we can’t afford to be unimaginative, even though, as the astrobiologist Caleb Scharf points out, we risk getting imprisoned in a dangerous cognitive lockdown because of the magnitude of the task. “Indeed, we humans do seem to struggle in general when too many new things are thrown at us at once. Especially when those things are outside of our normal purview.

Reactive Thinking

Like, well, weird viruses or new climate patterns,” Scharf writes. “In the face of such things, we can simply go into a state of cognitive lockdown, flipping from one small piece of the problem to another and not quite building a cohesive whole.”Imagination is precisely what is required to escape a state of “cognitive lockdown” and to build a “cohesive whole.” It gives us the capacity to dream up innovative solutions to successfully address the multitude of risks that confront us.

A Cohesive Whole

For decades now, we’ve been destabilizing the world, having failed to imagine the consequences of our actions on our societies and our biosphere, and the way in which they are connected. Now, following this failure and the stark realization of what it has entailed, we need to do just the opposite: rely on the power of imagination to get us out of the holes we’ve dug ourselves into. It is incumbent upon us to imagine the contours of a more equitable and sustainable world. Imagination being boundless, the variety of social, economic, and political solutions is infinite.

Out of the Holes

With respect to the assertion that there are things we don’t imagine to be socially or politically possible, a recent book shows that nothing is preordained. We are in fact only bound by the power of our own imaginations. In The Dawn of Everything, David Graeber and David Wengrow (an anthropologist and an archaeologist) prove this by showing that every imaginable form of social and economic organization has existed from the very beginning of humankind.

"The Dawn of Everything"

Over the past 300,000 years, we’ve pursued knowledge, experimentation, happiness, development, freedom, and other human endeavors in myriad different ways. During these times that preceded our modern world, none of the arrangements that we devised to live together exhibited a single point of origin or an invariant pattern. Early societies were peaceful and violent, authoritarian and democratic, patriarchal and matriarchal, slaveholding and abolitionist, some moving between different types of organizations all the time, others not.

Over the past 300,000 years

Antique industrial cities were flourishing at the heart of empires while others existed in the absence of a sovereign entity.The point is this: Prior to our “modernity” that culminated with the idea of the Enlightenment, there was an incredible variety of social possibilities that most modern people didn’t imagine were possible. Rousseau’s idealism about the “state of nature” in a pre-civilization world or Hobbes’ conviction that life before the state existed was “nasty, brutish and short” look more like a hypothesis than the scientific canon they often incarnate.

 Prior to our “modernity”

If ancient societies did not obey any specific organizational trajectory or evolutionary model, why should it be different in today’s world? What prevents us from imagining different pathways and new forms? What is it that constrains our ability to imagine better ways of dealing with our problems and why can’t we organize ourselves differently? Are we not capable of creating entirely new narratives? The answer is: Yes, we are! The definition of imagination as “the ability to confront and deal with a problem”.

Questions

It involves creativity and an openness to new ways of thinking, plus of course large amounts of disciplined analysis and the prospect of a business or policy application. Otherwise, to paraphrase the Brazilian economist Carlos Braga’s favorite expression, “vision or imagination without implementation is just hallucination.” When its infinite possibilities are harnessed, imagination corresponds to a superpower.

Hallucinations

Today, all sorts of people are engaged in elaborating novel and imaginative ideas, products, and strategies. They do so by developing new ventures, start-ups, economic policies, or mammoth projects and, in so doing, create and shape the future. Their original ideas translate into narratives that produce models which in turn influence behavior and help construct the future. Ultimately, they become instruments of policy and project market power.In the environmental sector, the stakes for our future are the highest. Imaginative nature-based solutions are leading to a bloom of start-ups.

Narratives as Models

It doesn’t take much imagination to realize that nature gives freely. For centuries, not only have we taken this generosity for granted, but we’ve also exploited it to such an extent that we are now on the edge of a precipice.Of course, nature is not “free”; it is priceless, and a degree of imagination is needed to grasp what this means in terms of policy.

For centuries ...

For economists and policymakers, valuing nature and assessing its contribution to our economies and societies is a recent endeavor because, for centuries, we’ve been overlooking the fundamental role nature plays in our lives and underestimating the risks that environmental degradation poses to human welfare and economic growth. Without taking care of the complex ecosystems that ensure that the temperatures remain tolerable, the air breathable and the water drinkable, we cannot function as societies. It follows that nature represents an indispensable input to economic activity. It is an asset.

Nature is an Asset

We need to treat it as such and in the process reconsider our measures of economic prosperity. Recent economic studies conclude that more than half of the world’s GDP depends on nature. It renders services that are obvious and others that are much more difficult to comprehend (like the work of complex ecosystems within the soil that recycle nutrients, purify water, and absorb atmospheric carbon). These are unfamiliar topics for economists and require a lot of imagination and disciplined analysis on their part to properly account for nature’s contributions to economic growth.

 Imagination and Analysis

As stated recently in the Dasgupta Review, “humanity has prospered immensely in recent decades, the ways in which we have achieved such prosperity means that it has come at a devastating cost to nature. Estimates of our total impact on nature suggest that we would require 1.6 Earths to maintain the world’s current living standards.” The idea is far-fetched, but it’s already been picked by hard-nosed investment bankers. Global solutions are going to come from undiscovered shores, and already we see them on the horizon.

Global Solutions

The Network for Greening the Financial System (NGFS) is a group of 91 central banks and supervisors committed to mobilizing mainstream finance to support the transition toward a sustainable economy. It is investigating many bold financial innovations that could (and most likely will) one day revolutionize the way in which climate-related risks are accounted for in central banking and banking supervision.

91 Central Banks

In short, alongside governments (which have a much broader and more effective range of tools and policies available to prevent and mitigate climate-related risks), central banks will adapt their monetary policy operational frameworks to reflect climate-related risks. This will involve the mitigation of balance sheet risks that stem from climate change and environmental degradation, but also the active support of the transition to a non-carbon, green economy.

Transition

Imagining what form this might take and devising policy tools and instruments to get there is the task of the NGFS, and largely depends on how climate risks will affect the economy and financial system through a range of different transmission channels. The menu of options available is extensive and encompasses changes in all three most important policy fields of a central bank: credit operations, collateral policies, and asset purchases. Some of the options represent a radical departure from standard central bank operational policies. They are the product of central bankers’ imagination.

 The Menu of Options

Some ideas go into uncharted territory, well beyond the scope of what the NGFS is devising in terms of possible policies. Creating “carbon quantitative easing” policies is one of them. It’s a novel, untested, and somewhat outlier narrative that already sounds familiar because it plays a key role in Kim Stanley Robinson’s novel The Ministry for the Future. In the novel, as the climate crisis gets dramatically worse, the world’s top central bankers end up cooperating by collectively abandoning caution to the wind and deciding to create a global “carbon coin” to fund decarbonization.

Decarbonization

Robinson’s inspiration is grounded on some academic papers published less than five years ago, and lately on the work of the NGFS, that doesn’t yet venture into such wild territory. But asserting novelists’ “poetic license,” Robinson’s imagination runs wild:“[The NGFS] suggested that possibly nations, companies and individuals who draw carbon from the atmosphere could be paid for it directly. Possibly petrostates could be compensated for the fossil fuels they keep in the ground.

Possibly oil companies could be paid to suck carbon from the air and then pump it back into the ground; they could also be paid to pump water from under the great glaciers of Antarctica and Greenland, which are currently sliding into the sea on newly melted subterranean water slides. Of course, legislatures and citizens will need to urge their central banks, and ultimately to instruct or order them, to do these things.

Antarctica and Greenland

But the good news is that with these new strategies in hand, even in our current political economy, awkwardly suited at best to the task at hand, we might be able to pay ourselves to do the necessary things, and thus dodge the coming mass- extinction event.”This idea is far-fetched, but it’s already been picked up by some hard-nosed investment bankers. Besides, surely the very purpose of imagination is to venture into unknown territories!

Hard-Nosed Bankers

Klaus Schwab is the founder and executive chairman of the WEF His latest books are The Fourth Industrial Revolution, a worldwide bestseller translated into 30 languages, and Shaping the Future of the Fourth Industrial Revolution.Thierry Malleret is the managing partner of Monthly Barometer, a succinct predictive analysis provided to private investors, global CEOs, and opinion and decision-makers. He has written business and academic books and has published four novels. Adapted from The Great Narrative for a Better Future, by Klaus Schwab and Thierry Malleret. © 2022 World Economic Forum.

2022 World Economic Forum

Ideas

The Power of Narrative

A notable moment in world economic history was the creation of the joint stock company. It started in Amsterdam with the foundation of the Dutch East India Company and then in England. By the end of the 17th century, shares of at least 150 corporations were traded at London's Royal Exchange, a market that also housed other merchants such as grocers, druggists and clothiers. But the government looked down on the nascent stock market and, in 1696, passed an act to restrain the practice of brokers.

Expelled from the Royal Exchange, brokers congregated in Change Alley between Cornhill and Lombard streets in the City of London. In 1700, when the city government prohibited them from meeting on the street, their main trading venue became Jonathan’s Coffee House. A market flourished where traders engaged in surprisingly complex contracts including forwards and options. Interestingly, none of the agreements were enforceable in official courts of law. Yet people engaged in them nonetheless.

Some of our most respectable financial institutions were born in coffee houses such as insurance firm Lloyd’s of London (formerly, Lloyd’s Coffeehouse), the Philadelphia Stock Exchange (formerly, Merchants Coffee House) and auction house Sotheby’s.It took more than a century for the English government to recognize that the broker’s private arrangements born in Jonathan's Coffee House “had been salutary to the interests of the public” and that the rules were capable of affording relief and exercising restraint far more prompt and often satisfactory than any within the read of the courts of law

The previous section summarizes how Professor Edward Stringham describes the early days of the London Stock Exchange in his book “Private Governance: Creating Order in Social and Economic Life”. The rise of the London Stock Exchange illustrates an instance where the market itself created efficient rules for securing property rights, absent government regulation. Stringham argues that private governance can fulfill a key role in creating and enforcing rules when regulators and courts lack the knowledge or a way to do it in a cost-effective way.

What Decentralized Finance Can Learn from the Early Days of Capital Markets

The emerging decentralized finance ecosystem (DeFi) seems to share many features with the rise of corporations and stock exchanges in the 17th and 18th centuries. Back then, the joint stock company was a phenomenal financial innovation, a new way to pool and coordinate human work for the fulfillment of projects that were unaffordable by individual investors. It enabled entrepreneurs to raise funds from the public and small investors to profit from the gains of such ventures.

As the DeFi ecosystem grows, a number of situations will require resolution:<ul><li>What cryptoassets should be accepted in decentralized exchanges such as Uniswap?</li><li>What cryptoassets should be accepted as collateral in algorithmic stablecoins such as MakerDAO or yield generating applications such as Compound?</li><li>What to do in case a hack compromises a smart contract?</li></ul>

In March 2019, Kleros launched the Token Curated Registry of Tokens (T2CR).In order to have a token accepted into the list, it had to comply with some <a href="https://ipfs.kleros.io/ipfs/QmbqgkZoGu7jJ8nTqee4NypEhK7YVBEJJmPJbJxz8Bx8nY/t2cr-primary-doc.pdf">minimal conditions </a>such as not having a malicious address. Then tokens could apply for badges having some desirable qualities such as being ERC 20, being a stablecoin, etc.Based on these badges, different agents could make decisions to accept the tokens into different places. For example, being listed into exchange <a href="https://deversifi.com/">Ethfinex </a>, DutchX or <a href="https://uniswap.ninja/">Uniswap.Ninja </a>.

Kleros' Token Curated Registry: Private Compliance for the DeFi Ecosystem

The regulation of financial markets has gone a long way since the early days of the gentlemen's clubs in London coffee houses. After starting as a purely private governance endeavor, the regulatory body for today's global financial infrastructure is a multi-stakeholder mechanism which encompasses public and private actors.The DeFi ecosystem is likely to go a similar route towards collaboration between public and private institutions for keeping the system safe and protecting investors.

Public/Private Governance and the Future of Decentralized Finance

A more widespread adoption of the Kleros Token Curated Registry can be an excellent first step for the regulation of the emerging DeFi ecosystem. A method that is native to the internet age and more sophisticated than the “coffee shop regulation” which is currently provided by centralized private actors.It took more than a century for the English government to recognize that the broker’s private arrangements born in Jonathan's Coffee House “had been salutary to the interests of the public”. We can hope that, this time, it will be a private and public endeavor since the early days.

Interesting paralel to London Exchange baby steps

How does the current DeFi market compare to the 'coffee house regulation' of the 18th Century and what does it have to do with Kleros? In short - compliance.

Inspirational

How Kleros can secure the DeFi ecosystem...

Author Margaret Atwood has imagined a future society that imprisons law-abiding citizens ("The Heart Goes Last"), a post-apocalyptic world filled with genetically modified creatures ("Oryx and Crake") and, most famously, a theocracy that forces fertile women to bear children for the privileged ("The Handmaid's Tale").Now, however, she wants to shape a more positive vision of the future.

A Positive Vision of the Future

Next year, the Canadian novelist and poet will lead a new online course titled "Practical Utopias: An Exploration of the Possible." Addressing issues from social inequality to healthcare, the eight-week program will put participants in virtual classrooms with experts from various fields to develop solutions to society's biggest problems."I don't come with pre-formed answers," Atwood told CNN's Christiane Amanpour. "The whole idea is that... people get together, consider the challenges facing us today and thrash them out."

A New Online Course

Hosted by online learning platform Disco, the course will see attendees join virtual seminars with the author. They will then take part in live workshops and develop "co-designed solutions" to present to Atwood, who was once <a href="https://www.newyorker.com/magazine/2017/04/17/margaret-atwood-the-prophet-of-dystopia">dubbed</a> the "prophet of dystopia" by the New Yorker magazine. "We're going to be considering things like: What sort of clothing, what sort of food or what kind of houses (will we need)?" she said.

Virtual Seminars

"Our biggest challenge right now is the climate crisis... And we're going to have to be looking at costs and benefits, because there is no free lunch.""If you, for instance, decide that we're all going to have vertical gardens," she added, referring to the use of buildings and walls to grow plant life, "then what are you going to do about wind storms?"

A Biggest Challenge

Known for dark depictions of the near future, the author of "The Handmaid's Tale" is now leading an online course aimed at building a "practical utopia."

Words

Margaret Atwood made her name through dystopias. Now she wants to build a brighter future

Over 50 years ago, economist William Baumol noted that economics was a theory of the economy that left no place for entrepreneurship. Economic models, simply put, were “entrepreneur-less.” Economics is no better today; in fact, it’s arguably worse. It focuses on faceless economic forces in formalized models. Modern economics is to a great extent a theory of equilibrium and efficient outcomes. But it is not a theory of the market.

Modern Economics Is Entrepreneur-less

As economist Joseph Schumpeter argued, entrepreneurs are the lifeblood of the dynamic market economy. They are in the business of creating dis-equilibrium. They engage in “creative destruction.” The new that they create displaces the old and makes us better off. The market economy without entrepreneurship would be static, barren, and boring.So what can entrepreneurs learn from economics? Not a whole lot. At least not from the highly mathematical modeling that is taught in intermediate and graduate level courses today. But there are other schools of thought that recognize their importance.

But Entrepreneurs Are The Lifeblood Of The Market Economy

So-called Austrian economics, which was founded by scholars at the University of Vienna 150 years ago (hence the name), is an alternative approach to understanding the economy that embraces entrepreneurship and even sees it as the driving force of the market. To “Austrians,” as the followers of this tradition call themselves, the market is best understood as a process that is never in general equilibrium.

The Austrian School Of Economics

With entrepreneurship at the core, “Austrians” only reluctantly use mathematical modeling and statistical analysis. After all, if the economy is a dynamic process of entrepreneurship and innovation, of what use are mathematical equations? Instead, their focus is on value creation, uncertainty, and how producers constantly adjust and attempt to meet changing consumer preferences.Austrian economics is an economic theory that is much more realistic than equilibrium models. For that reason, it is also much more helpful for entrepreneurs.

Entrepreneurship At The Core 

Few entrepreneurs have heard of or studied Austrian economics. But most entrepreneurs are Austrians without knowing it. They have learned from experience how the economy works and have developed an intuition. Their gut feeling, sometimes referred to as entrepreneurial judgment, is a tacit understanding of the economy as a market process and what this means for entrepreneurship.

Most Entrepreneurs Are “Austrians”

Here are four insights from Austrian economics that are part of that entrepreneurial intuition:<ol><li>Consumer Sovereignty</li><li>Value determines price and costs are a choice</li><li>Entrepreneurship is about creating tomorrow</li><li>Seek to be a good monopolist</li></ol>

4 Insights From Austrian “Entrepreneurial” Economics

Not only is the customer king, but all production aims to ultimately satisfy consumers in some sense by providing them with value. This value is entirely up to the consumer. Entrepreneurs can only provide the means, typically a good or a service, that help consumers become better off. Sometimes this requires educating the customer so that they understand the value of the product. And, typically, the value lies in their complete experience, not just what you sell.

1. Consumer Sovereignty

With value being in the eyes (and experience) of the consumer, the price they are asked to pay must be (much) lower. The entrepreneur’s job is to figure out at what price their product is attractive, and then choose a cost structure that allows for profit. In other words, the price is a guess based on what value consumers see in the product. The only choice is cost: how to produce at costs below the selling price and, ultimately, whether to produce.

2. Value Determines Price And Costs Are A Choice

Leading Austrian economist Ludwig von Mises noted in his tome Human Action that “the ultimate source from which entrepreneurial profit and loss are derived is the uncertainty of the future constellation of demand and supply.'' What that means is individual entrepreneurs choose costs in the present to produce a product that must be sold in the near or distant future, whatever the market situation might be. That’s the uncertainty borne by the entrepreneur.

3. Entrepreneurship Is About Creating Tomorrow

In standard economics models, competition is about offering the same or nearly the same goods competing on price. This is a terrible strategy for entrepreneurs, whose superpower is to facilitate value. Therefore, “Austrians” think of competition differenlty: It is about figuring out how to provide the best value experience possible. This often involves thinking out of the box and trying something new. Every innovation is by definition a new, unique offering and therefore also a monopoly. What benefits consumers most is entrepreneurs who aim to be good monopolists.

4. Seek To Be A Good Monopolist

Standard economics has turned its back on and developed models that exclude entrepreneurship. As Joseph Schumpeter, schooled in the Austrian tradition, put it: the market economy without entrepreneurship is much “like Hamlet without the Danish prince.” Indeed, entrepreneurs are the main characters in the drama that is the economy. An economic theory that recognizes this not only does a better job explaining the economy -- it is also a useful framework for entrepreneurs.

Hamlet Without The Danish Priest

Modern economics is a theory of the economy that leaves no place for the entrepreneur. So where should entrepreneurs turn to improve their understanding? The Austrian school of economics might be the answer.

Why Every Entrepreneur Should Study the Austrian School of Economics

The big idea: are we really so polarised? In many democracies the political chasm seems wider than ever. But emotion, not policies, may be what actually divides us.In 2020, the match-making website OkCupid asked 5 million hopeful daters around the world: “Could you date someone who has strong political opinions that are the opposite of yours?” Sixty per cent said no, up from 53% a year before.

Emotions Divide

Scholars used to worry that societies might not be polarised enough. Without clear differences between political parties, they thought, citizens lack choices, and important issues don’t get deeply debated. Now this notion seems rather quaint as countries have fractured along political lines, reflected in everything from dating preferences to where people choose to live.

Fractured Lines

Just how stark has political polarisation become? Well, it depends on where you live and how you look at it. When social psychologists study relations between groups, they often find that whereas people like their own groups a great deal, they have fairly neutral feelings towards out-groups: “They’re fine, but we’re great!”

Political Polarisation

In many democracies the political chasm seems wider than ever. But emotion, not policies, may be what actually divides us

The Power of Narrative

How Kleros can secure the DeFi ecosystem...

Margaret Atwood made her name through dystopias. Now she wants to build a brighter future

Why Every Entrepreneur Should Study the Austrian School of Economics

The big idea: are we really so polarised? | Dominic Packer and Jay Van Bavel

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