{"id":5143,"date":"2019-01-14T08:47:55","date_gmt":"2019-01-14T08:47:55","guid":{"rendered":"http:\/\/chief-exec.com\/?p=5143"},"modified":"2019-06-06T10:51:20","modified_gmt":"2019-06-06T10:51:20","slug":"maxwells-brexit-a-case-of-intangible-destruction","status":"publish","type":"post","link":"https:\/\/chief-exec.com\/?p=5143","title":{"rendered":"Maxwell\u2019s Brexit: A case of intangible destruction"},"content":{"rendered":"

Strip away from Brexit the bitterness, debate and division and what is left \u2013 an abrupt change of circumstance with a future that is unknowable, concludes John Egan<\/em>.<\/span><\/h4>\n

There has been no shortage of prediction of the outcome for Brexit, from the multiple conflicting versions of \u201cProject Fear<\/a>\u201d to a trade deal that should be the \u201ceasiest in history<\/a>\u201d.<\/p>\n

Such predictions have a common assumption \u2013 that the consequences of Brexit will arise from a mass of incremental social and economic adjustments in the UK and Europe. Tomorrow the sun will rise just as it did today, but the weather may be different. However, this assumption itself may not survive the unfolding of events.<\/p>\n

Depending on its final form, Brexit to some degree may be seen as a rare case of punctuated evolution<\/a> through which an existing status quo<\/em> is decimated by rapidly changing environmental factors [1]<\/a>. It makes the future highly unpredictable.<\/p>\n

In companion articles Chief-Exec.com <\/em>has described how normally an enterprise<\/a> and a household<\/a> can each survive and thrive on account of their differences with their external environment \u2013 they rely on their special attributes to give them their \u201cedge\u201d (see below).<\/p>\n

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Households and enterprises each host a Maxwell\u2019s Demon<\/a> to select valuable (hot) attributes from the external environment to enable the creation of their own value and find their \u201cedge\u201d.<\/p><\/div>\n

In each case, enterprises and households build a relationship with their outside world based upon the value they are able to create and produce<\/a> for consumers. Production is the replication of information to communicate a perception of value. Creation is the origin of that information.<\/p>\n

Energy is expended within an enterprise and household on the production of inventories for sale and acquisition in the outside world \u2013 transactions upon which survival depends. Energy is also channelled through creative endeavours, and this is devoted to the relationships created with the outside world. It appears as value perceived<\/a> \u2013 as innovation [2]<\/a>.<\/p>\n

This shared perception of value may be seen as social capital<\/a>\u00a0 [3]<\/a> that is created by investment in the innovative activities of an enterprise and indeed a household. Much endeavour in both is expended growing the social capital that essentially provides the \u201cedge\u201d that offers the promise of well-being.<\/p>\n

As the innovations and production of enterprise and households are sold into their external environment, they inevitably change this to some degree. If there were to be no effect, these economic agents would not be sustainable. \u00a0Existing social capital is destroyed, to be replaced by perceptions of value that have evolved to be more suited to their place and time. This evolution is normally incremental [4]<\/a>.<\/p>\n

In the above deconstruction of the mechanism of everyday life, the outside world is considered more-or-less stable. For changes that do occur, they normally take place slowly, over years.<\/p>\n

The punctuated form of evolution is altogether more spectacular, as the glacial drift of incremental evolution is disturbed by rare seismic events. Small adaptations rapidly lose their relevance and value. The clock is reset for a new era.<\/p>\n

And, so it could be the case for Brexit.<\/p>\n

The \u201coutside environment\u201d for UK enterprises and households has for 40 years been provided by the trading treaties upon which the European Union is based. Embedded social capital everywhere is determined by this environment and countless hours of endeavour have been devoted to its formation both in the UK and Europe.<\/p>\n

A particular problem with social capital is that it is as intangible as its associated perceptions of value. It largely goes unmeasured. Its accounting appearance as sunk costs, investment that cannot be returned through future transaction, make it appear ephemeral [5]<\/a>. Nevertheless, a substantial destruction of this intangible capital will be fundamental to the outcome of Brexit.<\/p>\n

The future will be determined by the destruction and then reconstitution of perceptions of value across national populations.<\/p>\n

So, what then can be safely concluded.<\/p>\n