PCBC Preview: Joshua Cooper Ramo

Joshua Cooper Ramo is Vice Chairman and Co-CEO of Kissinger Associates and a member of the board of directors at Starbucks and FedEx. He’s also a keynote speaker at PCBC 2016 in San Francisco. Ramo’s new book, The Seventh Sense: Power, Fortune, and Survival in the Age of Networks, proposes an “age of networks”—the emergence of constant, widespread connection. Recently, he spoke with Professional Builder about keeping pace in a volatile financial climate, staying ahead of your clients, and what neurosurgery and laying a concrete floor have in common (Images: Geralt via Pixabay).

Professional Builder: What is the “seventh sense”?

Joshua Cooper Ramo: We live in an age where almost everything changes because of connectivity. I expect that people who build and design houses think about that and understand that almost every aspect of design—what they spec, how they design, what you want in your house—has changed because we live in a world where we’re connected to all kinds of things. That revolution has been happening on a practical, physical level for 5 or 10 years now. It’s affecting everything from currencies to how we fight wars to how we conduct our politics. Like every big revolution, it shows up everywhere—in the headlines, in our daily lives. The seventh sense is the idea that some people have an instinct for how this works that’s better, sharper than the rest of us. The book is designed to teach people how to think about connected systems so that they can have the same kind of edge.  The people who see what’s coming in financial markets or in politics have that edge. It’s important that the rest of us develop it, too.

How is it relevant to people building houses?

Almost every element of our lives is being changed, including the way people choose to design, build, and organize their lives. So much of what has made America great is that everybody had a home, could build it for themselves, and take care of their families there. It’s the cornerstone of the American dream. I don’t think that’s going to change, but the way we build, design, finance, and live in our homes is changing as fast as the technology around us. I think it has a profound impact. The people who will be the most successful for their clients and at building things that fit the way we live our lives today will have an understanding of that stuff. It would be great if, through connectivity, designers, builders, and architects could be ahead of their clients in order to make their lives easier, the house more efficient, and the design-build process more cost-effective.

You talk about the emergence of new sources of power and a shift that you say will be as significant as the Industrial Revolution. How is this important for people who build homes?

The way we choose to construct our living spaces, for as long as people have been building homes, is an expression of the kind of society we live in. More and more services are available, and the focus is less on manufacturing and more on doing and experiencing things. The range of options available for how people live their lives is going to expand. Fifteen years ago, few of us thought is would be common or inexpensive for people have media rooms in their homes. Now that’s something that everybody wants to have. I think that process is going to continue. 

Are there commonalities shared by those who are successful in the digital age? What are some of them?

The most important commonality is that they understand that the rules are changing. You can go through life saying “no, the rules aren’t changing,’ but almost everything today, whether you’re investing stock or getting a loan or writing for a newspaper—you’ve got to admit that something feels different than it did 10 or 15 years ago. I don’t want to say a it’s blind disregard for what has come before, but they see that technology and connection in a house allows them to innovate and develop things much faster than before.

The second thing is the ability to use connection to do things faster. Something I talk about in the book is called “skill time compression.” It used to take an awful lot of time to master a particular skill, whether it was neurosurgery or laying a concrete floor. Now we can get the tools to do those sorts of things—videos to show you how to do something, help from real-time diagnostics systems. A willingness to embrace the fact that it’s possible to upgrade your skills really quickly is something that those people have in common.

The last thing is understanding that no matter how fast technology changes, our demands change. Nobody, five or 10 years ago, thought that we would want to watch movies on their phones, but if you look at your kids, they’re watching movies on their phones. It’s the ability to be flexible and to understand that whatever you’re thinking about today is likely to change tomorrow.

You talk about terrorist attacks, refugee crises, a broken global economy, election results that continue to surprise us: historic forces that are shaking our world. Which are most relevant to home builders?

The macro-economic environment continues to be really important—people deciding how to finance their houses and whether to build them. You’re part of an industry that has experienced huge ups and downs over the last couple of decades. Not because of anything anybody in the industry did, but because of decisions and forces that were largely out of your control.  What’s important to understand that we’re entering an era of tremendous turbulence as network systems change fundamental macroeconomic principles. The big challenge now is, how do we have a healthy, growing middle class? That challenge will require new economic ideas.

You just mentioned The American Dream. Some would say that it’s being upended.

It’s less that it’s being upended that it’s being changed. I’m pretty optimistic about America in the long run. I travel the world, and there are very few countries that have what we have in terms of basic infrastructure, laws, incredible energy, and people who trust each other to work together. But at the moment, the system is out of balance and there’s the sense that the benefits aren’t being evenly distributed. That’s the great challenge: How do you correct that balance? But over the long term, I don’t see any other nation that can compete with us in terms of living the life of your dreams—as long as we can fix the underlying issues.

The home building space includes those who build 10 homes a year and those who build 1000 homes a year. How can builders leverage the power of networks given their difference in scale?

One of the great things about networks is that they permit—even for someone who builds 10 homes a year—access to the best ideas and the best technology. It used to be, if you wanted to build a car, you had to be part of Ford or General Motors. That’s changed now. Technology and connectivity allow people, no matter what their scale, to be world class. It also means they’re competing against world class.

Is it fair to say that networks are democratizing business? Leveling the playing field?

A: Well, they’re changing the playing field. To some degree they’re giving individuals anywhere in the system more access to more power, ideas, and technology than ever before, and at lower cost. At the same time, it’s clear that certain companies are growing to incredible size, and it’s very hard to compete with that. You and I aren’t going to wake up tomorrow morning and create a competitor to Facebook. Our version of Facebook isn’t likely to go anywhere. Technology and networks are very democratizing, but they’re also creating very powerful forces for centralization at the same time.

Homebuilding isn’t always known as the most innovative of industries. How can builders and developers thrive in a digital world? Some are pushing back.

Pushing back is almost more a matter of temperament. I’m doing a substantial remodel of my house in New Mexico. We’ve got a design team in Japan that’s working on parts of it. My wife is German so we’re sourcing certain things from Europe. Ten years ago, that would have been a huge pain, and now in almost every case it’s one click away. It’s opening up to ideas that can help you deliver more of what your clients want or what the markets want. It’s a matter of grabbing those things. Some people have the idea, “I’ve been building houses this way for 50 years, we’re going to do it this way for the next 50 years,” and that’s a completely legitimate point of view. The problem is, in a market economy if somebody else decides to change the rules, then you have to catch up.

The home building industry got slammed during the recession. Yet you’ve said that in epochal times in history—and we’re living through one at the moment—the winners are those who take risks. What’s your best advice to builders and developers about taking risks?

How do you take risks that are smart risks? You’ve got to understand the age we’re living in. Understand that financial volatility wasn’t just a feature of 2008 but is going to be a part of our lives for a long time. Understand that networks can handle very, very complex systems, which are different than complicated systems like a jet engine, with a lot of moving parts. Complex systems are where there’s all kinds of surprise, and that’s what’s going on in the financial system—the more people that are connected, the faster they’re connected, the more stuff going on that nobody can predict. Taking risks is essential, and we’re living in an age where, by definition, the most successful people are doing things that have never been done before. You’ve got to do it while being very cognizant of the fact that the environment you’re operating in is going to be one of a lot of instability, so you don’t want to take a risk where one little twitch in that environment is going to wipe you out.

So, informed risks.

Exactly.

The Seventh Sense has just come out, and the one review I’ve read said that skeptics would consider your views overwrought—and that you, in turn, would see that opinion as the hallmark of somebody who will be left behind.

Yeah, pretty much. You go back and read about the industrial revolution and learn that people were saying, “Oh, no big change.” People in [the year] 1500 happily saying, “This whole science thing is going nowhere; we’ve never heard of it before.” But hundreds of years later, it’s clear who was on the right side of history in that debate. 

Joshua Cooper Ramo’s PCBC 2016 General Keynote speech will be at 8:30 am on Wednesday, June 22.