From Iceland — An Alchemist

An Alchemist

Published August 2, 2011

An Alchemist

A standard feature of many European courts of the Middle Ages was the alchemist. The practitioner of alchemy was afforded respect not only because of his demonstrable powers over the elements, but also because of the promise of what he should produce in the future. Many people think that this art died out in the Middle Ages with the advent of chemistry, but alchemists are with us even to this day.  
On the one hand, the practice of alchemy is a forerunner of the modern science of chemistry, and might properly be called a proto-science: on the other, it might be understood to be a forerunner of a kind of profession. The alchemist was in some ways on the cutting edge of the science of his time: he could produce many astounding effects, which are chemical commonplaces today. But the alchemist was also a kind of courtier. Sort of an olden-days MBA.  
Alchemists were maintained, at great expense, not only because they could demonstrate practical chemistry and metallurgy. Alchemists also famously pursued the creation of the philosopher’s stone, a magical substance thought capable of turning base metals into gold; and creating an elixir which was said by some to bestow immortality. The noble who could access the unlimited wealth and health promised by the alchemist would be the most powerful lord of all time. No doubt many alchemists pursued their art in good faith; but because alchemy involved research and experimentation, the promise of unlimited wealth and life was always just around the corner. Not a bad way to make a living, if you can convince the court of the efficacy of your methods.
I was surprised to see the celebrity alchemist Michael Porter on the Icelandic state television’s in-depth news program Kastljós on June 28. I thought that his alchemical silver might have been tarnished with the Icelandic financial crisis, but apparently the influential are still impressed by his vision. Even if I’m sceptical of his association with wealth and life, the magician’s stagecraft is impressive. 
Deference despite error
Michael Porter is associated with the Harvard Business School. This stamp of approval is itself works as a spell of enchantment: people have a tendency to confuse power with quality, so Harvard receives an advantage when it comes to credibility. In Iceland, newspaper articles about him always begin with complimentary phrases such as the endlessly repeated “einn helsti hugsuður heims” (“one of the world’s foremost thinkers”). The Kastljós interview was typically deferential. This deference seemed to be justified by his “prophecy of the cranes” in 2006.
During Michael Porter’s visit in 2006, he did make a comment about seeing far too many cranes in Iceland. This is apparently an indicator that the economy is overheating. But to give credit where credit is due: this was a common, even consensual, opinion among many, many people. They just weren’t the people associated with Iceland’s “economic miracle”. So, he made a common-sense warning to those who attended his lecture, many of whom, we now know, are responsible for the Icelandic financial meltdown. Be that as it may: a pat on the back for a little common sense.
However, according to Vísir’s business paper, Porter expressed at a lecture attended by Ólafur Ragnar Grímsson and 80 professors from various countries, that he was “impressed by Iceland and its economy” („heillaður af Íslandi og hagkerfinu hér“, Markaðurinn, April 4, 2007).
Despite the footnote of the prophecy of the cranes, Michael Porter was mainly used to sell the idea that Iceland was in good shape economically. He was referenced by people like Lárus Welding (Fréttablaðið, February 16 and 28, 2008), Hannes Smárason (Fréttablaðið, September 27, 2006). So much for foresight.
This is not to say that there is no chemistry hidden in his alchemy. There is much that rings true in what he says in the Kastljós interview. But are these common-sense speculations, or uncommon insights built on his method? Why is he back in the Icelandic media at this point in time? Why do the media afford him such deference when the record shows his powers are ambiguous at best?
To begin with, the community of experts has invested much of their own reputation in Michael Porter. The University of Iceland was quick to adopt his method – including selling his books and other study materials – from his Institute for Strategy and Competitiveness (Markaðurinn, February 21, 2007). He received an honorary doctorate from the University of Iceland on October 2, 2006.
Porter is an ideological saint in the hagiography of the management elites, the modern-day courtiers of power. Institutions from the London Business School, to l’École Nationale d’Administration, to Bifröst; all revere the world-view Michael Porter represents. The Harvard Business School is the world’s foremost training ground for such technocrats. To question Michael Porter is to question the very raison d’être of all of those institutions, and the powerful layer of society we call managers. It is a similar mindset to that which caused the Icelandic financial crisis: not daring to call the emperor on his new clothes. MBAs are now the people who administer universities (as opposed to academics); hospitals (as opposed to doctors); the military (as opposed to actual soldiers); industry (as opposed to real capitalists and workers); and government. Who’s left to question Michael Porter?  
The Court Alchemist
No doubt common-sense qualms will have arisen among those watching the Kastljós interview. The following may have set off the alarm bells.  
Magic words. Otherwise known as technical jargon. The first retreat of the technocratic expert, jargon is designed to stake out expert territory rather than to communicate. What we previously knew as know-how, technology and expertise will thanks to Michael Porter henceforth be known as clusters. If you don’t know what clusters are, you will be frozen out of the conversation: only the initiated will be in on the newly-created mystique.  
Promises of turning lead to gold. In the case of geothermal expertise, Iceland has, according to the theatrically arm-waving Michael Porter, “unlimited opportunity to export the technology”. Surely not unlimited, even if the wealth accessed were in the mere billions of dollars. Foreign investment would be “phenomenally good for the country”. Very remarkable? Extraordinary? As opposed to what?  
Enchantment. Whatever else Michael Porter has mastered, rhetoric is certainly among his skills. This honorary doctorate-bearing Íslandsvinur always speaks of we, “our energy use here in this country”. “In Iceland, we’re still discussing and debating.” What is his personal investment? Does he live in Iceland? If Iceland were to sink into the ocean, would his own portfolio not stay quite dry?  
As much as I admire his technique; and as much as I love being enchanted; I hope that people in general are not so discouraged as to grasp at any old straw. What is he really suggesting in this Kastljós interview? Getting past the enchantment, promises of turning lead to gold, and his magic words – what’s up?
I’m afraid I have in mind certain disenchanting words spoken by Sigríður Ingvarsdóttir of the Innovation Center Iceland (Nýsköpunarmiðstöð Íslands) from the Fréttablaðið of November 1, 2008: “The most important thing for us to remember is what Michael Porter has asserted: that the state should not get its competitive advantage for nothing. The ability of companies to innovate and develop is most important when it comes to competitiveness.” (My translation: „Það mikilvægasta fyrir okkur nú er að minnast þess sem Michael Porter hefir haldið fram; að ríki fá ekki samkeppnisstöðu sína í arf. Hæfni fyrirtækjanna til nýsköpunar og þróunar er það sem skiptir meginmáli fyrir samkeppnishæfnina.„). I wonder if there isn’t a certain mischievous private sector vs public sector dynamic at work here.
The Kastljós interview is mostly spent communicating Michael Porter’s excitement about Iceland’s boundless opportunities in geothermal energy. After creating this positively-charged atmosphere, he continues.
Michael Porter: “The milestone that’s being created today… in Iceland…. There is now a private-sector organisation for the entire geothermal cluster. And it involves all the players – that are important – and it’s not government…. This is a private sector-led entity, where the private sector has come together, put resources together, created an organisational framework for collaboration and taking action.”
All right, so unnamed business interests are now teamed up and are in place to take advantage of geothermal resources. All the players – that are important. Hopefully all the players that are important aren’t the same bunch of jokers who ruined the Iceland’s financial sector. Now, are these players that are important actual capitalists? That is, do they invest their own money in the hopes of receiving dividends?
Michael Porter: “Better to have a mix of public and private.”
When I hear that, I have to wonder. Are these players that are important actual capitalists, ready to invest their own resources and reap the benefits; or are they like the people who ruined the Icelandic economy? That is, managers with golden parachutes, who reaped handsome rewards despite sinking the ship. If a company has to be saved by the state, how is that a capitalist venture?  
Alternately, if the public funds research and development, and investors step in after all the risk is taken by the public – how is that a capitalist venture?  
Again, if a state company or crown corporation is built from the ground up by the public, then privatised for a song – how is that a capitalist venture?  
Surely, those who take the risk should reap the reward.   
Michael Porter seems to think that whatever happens, action on the geothermal front should happen yesterday: “In Iceland we’re still discussing and debating.” “There’s an organisation, but the question is: can Iceland take action.” When asked whether Icelanders lack business expertise, he says it’s more a matter of entrepreneurship, being “aggressive, risk-taking”. On the large scale, the culture is risk-averse, slow and political.  
The picture that emerges out of this is that of players that are important being ready, willing and able to take on the Icelandic geothermal challenge. They presumably embody the Porteresque virtues of being “aggressive” and “risk-taking”. On the other side is the political culture, which is slow, risk-averse, “discussing and debating”.  
Whoever benefits from the players shaking off the risk-averse culture of discussion and debate, so they can get back to risk-taking aggression; it will not be the public. What’s good for the players is unlikely to be good for us.  
Who paid for him to come here, anyway?  
If the Kreppa, the Icelandic financial crisis, has taught anything, it is this: transparency is of utmost importance. Conditions for transparency must be maintained. The panic of hurry, aggression and risk is the perfect perfect fog of obfuscation. Iceland needs tortoises now: the hares have already shown what they’re made of. Slow and steady wins the race.  
Keeping the house in order
More and more, we seem to resemble the Middle Ages, in which a court surrounds a sovereign; the privileged courtiers grow rich at the expense of the poor, and even at the expense of the merchant class. In mediaeval times, the nobility was international, players who married and allied across borders. The primary skill of the courtier is manipulation. The MBA is the key to the kingdom.  
Still, there were “good” courtiers and “bad” courtiers; useful and detrimental. And in time, the sovereign has evolved into the democratic consent of the people; the court astrologer evolved into the astronomer; and even the alchemist evolved into the chemist.  
So entertain the alchemist when you see him, but don’t reward him beyond his measure. Beware of fool’s gold. And take his formula with a pinch of salt.

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