by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.,
Spending a yucky Saturday afternoon catching up on last month’s Wired (just got this month’s issue in the mail so I need to clear out last month’s). Wired is one of my favorite magazines and I always seem to find something useful in it.
In the January 2012 issue however I was initially ticked off by one article titled Slumdog Economist, which highlights some of the work of economist Robert Neuwirth who studies the underground economy. I reason I was ticked off is that I always wanted to study the marketing habits of street vendors. He stole my idea! How dare he!?
Kidding aside, it is a great article that looks at the underground economy of street vendors or those that work under the table. Neuwirth calls this the System D economy. Some fascinating ideas and facts in the article and I highly recommend that you take a moment to take a glance at it.
One of the surprising facts that comes up in the article is that currently 50% of workers globally are part of System D and that is projected to rise to 2/3rds by 2020. Take that you global multinationals!
Neuwirth explains many of the reasons for this surprisingly rapid rise of System D, but the most telling response to why the rapid growth is in this statement; “Because it’s based purely on unfettered entrepreneurialism. Law-abiding companies in the developing world often have to work through all sorts of red tape and corruption. The System D enterprises avoid all that.”
In my work as a consultant with many corporations what I see is a lot of red tape and corruption. True, the corruption may be slightly different than the type of corruption that Neuwirth is implying, but in my scheme of things, political interference is still corruption, and red tape is red tape.
Risk departments (all departments) should be allowed to do their work in the absence of red tape and corruption. That may be an obvious statement. What might not be so obvious is that risk departments should also work on a principle of pure unfettered entrepreneurialism. Is yours?
