Friday, April 24, 2009

Rafat's Law of Diversity

Here is what I call "Rafat's Law of Diversity": 

1. One constant variable in life is that change will occur.
Jim Rogers, Street Smarts (2013)
2. The ability to keep up with change and adapt to changing environments provides a competitive advantage.

3. Entities and people who adapt the quickest to change will have an advantage and will be ahead of their competition. In economic terms, this is called the ability to adapt to "creative destruction" (See Joseph Schumpeter).

4. As of 2009, the world population is becoming and has become more and more inter-linked. Globalization is occurring rapidly, causing persons who would have never interacted fifty years ago to now interact and to engage in numerous economic and social transactions.

5. In short, due to globalization, countries and entities are becoming more diverse.

6. Entities that have the ability to interact on a positive basis with numerous cultures will have an advantage over entities that either lack this ability or have less of it.

7. Entities that lack diversity appear to be slower to adapt to change.

8. Entities lacking diversity as their surrounding local or non-local environment becomes more diverse show their internal culture is more resistant to change or that they are unable to gain talent from a diverse range of sources.

9. Entities unable to draw talent from a diverse range of places or resistant to change will be disadvantaged against more fluid, diverse entities.

10. As globalization increases, entities that are more diverse will have both tangible and non-tangible advantages over non-diverse entities.

11. Therefore, more diverse entities will be more competitive than non-diverse entities.

12. As of 2009, Asians are approximately 60% of the world population. As of 2009, persons of African descent are approximately 20% of the world population. As of 2009, the United States has only 5% of the world population. Mandarin and Spanish are more commonly spoken worldwide than English.

13. The United States is a consumer-based economy that relies on domestic and international consumption of its products to increase growth, profits, and influence.

14. To fully maximize one's successful interactions with worldwide entities, one must be fluent in more than one language and well-versed in several cultures.

15. Multinational entities that fully maximize their ability to engage with several cultures will maximize their ability to gain new customers and allies.

16. Entities that fail to maximize their ability to engage with several cultures will be disadvantaged against multinational entities.

17. Familiarity with different cultures and languages will maximize a multinational entity's ability to compete globally, providing it an advantage over entities that fail to maximize their ability to compete globally.

18. "Familiarity with different cultures and languages" may be called "diversity."

19. Multinational entities that favor diversity will be more competitive than entities that do not favor diversity.

© Matthew Rafat

Update on May 14, 2012: according to an April 2012 McKinsey Quarterly report ("Is there a payoff from top-team diversity?" by Thomas Barta, Markus Kleiner, and Tilo Neumann), U.S. companies with the highest executive-board diversity had returns on equity 95% higher and earnings margins 58% higher, on average, than those with the least executive diversity.

Bonus: Individuals or groups speaking on issues is not a free speech problem. Problems arise when individuals use their free speech to gang up on private individuals or politically-disconnected minorities. Such a "minority classification" will vary based on geography. A transsexual in SF would present a different analysis than one in rural Wyoming and still another in the college town of Bloomington, IN, depending on the reach and power of the group. To smooth out such differences in power, the fed gov may and should intervene when speech presents the likelihood of physical harm to an individual targeted by "gang speech." If physical harm is not likely but access to equal protection and provision of gov services is affected, there is still a role, albeit a lesser one, for the fed gov, though in such cases, a "restitution fund" allowing the individual to move elsewhere may be the best solution. "Gang speech" may take many forms, and may include unions, corporations, or any group of powerful individuals targeting a private individual because of the private individual's speech or non-violent but non-conformist behavior. If America is to continue building on diversity as one of its strengths, it must allocate resources to maintaining this unique advantage. Just as freedom is not free, neither is diversity.

Update on January 15, 2017: "When disagreement comes from a socially different person, we are prompted to work harder. Diversity jolts us into cognitive action in ways that homogeneity simply does not." -- Katherine W. Phillips

Update on June 2017: I have created another "law" here: 

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