December 22, 2008
Kim has a good acronym for the current financial meltdown; GFHF or Global Financial Hissy Fit. I was out to dinner the other night with a renowned pessimist who was quite outspoken in relating the various tales of woe and impending doom (his name is not Hanrahan by the way). And so to the Review of 19 December and the lead article sourced from Prospect on the popping of the bubble in the contemporary art market. I know nought about this market but it appears to have links to other bubbles that are popping (and they are not from champagne bottles!).
In his book Manias, Panics and Crashes, Charles Kindleberger observed that manias typically start with a “displacement” that excites speculative interest. It may come from a new object of investment or from the increased profitability of existing investment. It is followed by positive feedback as rising prices encourage less experienced investors to enter the market. Then, as the mania gets a grip, speculation becomes more diffuse and spreads to other types of asset. Fresh assets are created at an ever faster rate to take advantage of the euphoria and investors try to increase their gains by borrowing to buy assets or using derivatives. Credit ultimately becomes overextended, swindling and fraud proliferate, and the mania ends in panic as investors seek to liquidate their positions.
The authors comment that the art market has adhered spookily to this model. It seems that the sub-prime fiasco in the US is the “super-prime” example of such mania. The markets work when asset prices are increasing so long as you are not the one holding the lemon at the end of all the wheeling and dealing.
That paragraph reminded me of a great book that I read about 5 years ago by Carlota Perez called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. She describes the process of going through the following stages of a cycle commencing with the discovery of a new technology:
- Maturity: Financial Capital Planting the Seeds of Turbulence at the End of the Previous Surge
- Irruption: The Love Affair of Financial Capital with the Technological Revolution
- Frenzy: Self-Sufficient Financial Capital Governing the Casino
- The Turning Point: Rethinking, Regulation and Changeover
- Synergy: Supporting the Expansion of the Paradigm across the Productive Structure
The main described by Kindleberger contains the particular stages in the irruption and frenzy components of Perez’s cycle. We were enamoured with the book as we were reading it after the dotcom and telco crashes of the 1999-2001 period while working in an information economy area of the Australian government. Little did we know that the financial excesses and losses of that period are minor in comparison with what is happening now. It is clear that while billions of dollars were lost at that time, there was no turning point in rethinking and regulation. There was still too much loose money sloshing around in the finanical system seeking short-term returns.
What we did like about the book was the expression of hope in the synergy phase where after the losses of financial speculation, money continues to be invested in the productive use of the technology. Unfortunately, we are yet to see this period as more regulation is still required and the bodies on the shore as the tide washes out still need to be exposed before credit becomes available once more.
February 12, 2008
Saw a great video recently featuring Annie Leonard on “The Story of Stuff“. It illustrates in just 20 short minutes the problems associated with the linear economic process we have in place in today’s society that is resulting in environmental degradation, a spiritual vacuum, and the treadmill of overconsumption. It’s like reading Clime Hamilton’s Affluenza but viewing it instead as a simple story featuring systems thinking that is great for kids and adults alike.
Wonderful how these new Internet tools are so easily available and how simple stories can be constructed that are highly motivating. A must for anyone with children – switch off the TV and spend half an hour around the computer screen watching this as a family and then discussing what you could do to make a little bit of difference.
December 24, 2007
Just doing some packing up of various papers on my desk (not quite like a bomb has hit it but fairly close) and came across a little schematic that I did while at the AusForesight conference this year. So here are my 5 pathways to organisational renewal.
An organisations can adopt one of many of these pathways (preferably multiple) to achieve positive change. For those who are regular readers of this blog, you will not be surprised that two of the 5 points of the star are foresight and knowledge management. Also listed are innovation (buzzword of the decade), leadership (buzzword of the past 30 years) and systems thinking (buzzword of the next decade!). Taking any of these pathways in a whole-hearted and meaningful manner will take an organisation down the path of organisational renewal. Adopting more than one of these at a time will enable a greater potential for success. I’ve taken the number 5 from a book that I have been reading for the past couple of months called “The 5 Literacies of Global Leadership” by Richard Hames (more on this excellent book later). That my 5 are in a star shaped pattern and some are more closely linked to others is just a coincidence – there is no grand plan with where they are located on the star – it’s just how they happened to be situated in a moment of inspiration during the conference.
October 17, 2007
The Victorian Government’s State Services Authority is running a project at the moment on the notion of Agile Government. It emerged from their previous work on their Future of the Public Sector 2025 project. In collaboration with Demos, a UK thinktank, they have released this provocation paper.
In the paper, they describe government agility in relation to being responsive to the needs of the community being served, being more adaptive in changing products and processes in response to broader changes in the operational environment, and shaping the external environment through policy making, taxation and service delivery. Three types of capacity are required which form an agility cycle:
- Scan emerging trends and issues through gathering information and analysis
- Respond to opportunities and risks by being sufficiently flexible at tactical and strategic levels
- Shape future environments through driving change.
They also list a range of agility capabilities:
- Outward-oriented culture to scan the external environment, join up different departments and agencies, shift resources with ease and stopping services and projects if they are not delivering a sufficient return.
- Systems and policy alignment between strategy, values, budgeting, etc, particularly focusing on realignment when goals and tactics shift as one part of the system changes.
- Workforce adaptability to match skills to changing tasks which could include service redesign, new capabilities and rapid deployment.
- Fast and effective decision-making through making judgements based on imperfect information, particularly on operational matters.
- Successful use of information such as analytical skills and the use of ICT including more responsive relationships with citizens.
For me, the agility cycle does not quite sit right, particularly with including the shaping aspect in the cycle. Agility is about scanning and responding and having that cycle move faster. The concept of shaping works at a different level . In one way, it is a form of responding but really it is actually something more systemic. It brings in the notions of complexity, societal behaviour change and community dialogue – an important part of government but perhaps shaping forms part of a framework that supports agility rather than forming part of the agility cycle.
Another aspect is that agility is a relative concept. If standard processes takes 3 years, than an agile government could be expected to do it in 12-18 months. Also, if it would normally take 20 years to generate larger generational change, then perhaps an agile government could do it in 5 years through its various levers of taxation, incentives and policies. The latter is more shaping, the former is more responsive. The longer term aspects of shaping have strong links to systems and complexity thinking.
All up, a most interesting paper and concept and one that the SSA are currently seeking comment upon.
October 12, 2007
Interesting article the other day by ex-VicHealth boss Rob Moodie on the future design of Australia’s health system – a recent topic of debate in the faux Federal Election.
He wishes for a health system, rather than a sickness system – one that focuses on maximising health rather than treating illnesses. I like how the design of that system needs to cover just four things; smart, balanced, fair and simple. Smart in investing earlier in prevention and education strategies, balanced so it is not out of kilter like the US system, fair to address inequality, simple with fewer more integrated systems across the tiers of government. I also like his use of the term diabesity that links the health issues of diabetes and obesity.
These four principles are excellent criteria to apply in any form of system design and I like it particularly because it does not mention cost. If you do these others, then cost will look after itself!
August 7, 2007
I’m putting together a conference for some people and want to demonstrate them the importance of seeing the bigger picture and how we often miss signals that are quite obvious. Some classic examples include the video of people playing basketball missing the gorilla in their midst and another is that of the wonderful videos at quirkology by Richard Wiseman, especially the colour changing card trick, my favourite.
Now to all those (yes both of you) out there in blogosphere land, are there other cool examples that I could use to demonstrate to these senior people that their own cognitive biases can limit them seeing the bigger picture that prevents them from identifying weak signals of emerging change?
May 28, 2007
There’s a great analysis of a recent Noel Pearson essay on Club Troppo. Noel Pearson is an advocate for indigenous people in Australia and he has commanded great interest with his recent pronouncements on greater responsibility by the indigenous community to their own future.
His essay contrasts the positions of the extremes and implores the progression of the radical centre. He investigates the denialists who are defensive of their own identity and heritage and who believe that they should not be made to feel guilty for past behaviours. There is the other extreme who wish us to be sorry for what has happened, to advocate large-scale social policy interventions and to in-effect, take responsibility for the situation.
Pearson contends that either of these extremes is wrong and that a radical centre position needs to be adopted, that holds the dialectic between the two extremes in tension and resolves them at the point where pragmatism and idealism meet, not through weak compromise but through strong leadership as “best leadership occurs at the point of highest tension between ideals and reality”. I think that this is a wonderful understanding of leadership that focuses not just on the notion of transcend-and-include but also on how to implement this on the ground in a meaningful manner.
He suggests that “there are at least ten classic dialectical tensions in human policy: idealism vs realism, rights vs responsibilities, social order vs liberty, individual vs community, efficiency vs equality, structure vs behaviour, opportunity vs choice, unity vs diversity, nature vs man, and peace vs war.” What a great list! The focus is not to choose between each of these as that will lead to failure but embrace both and leaning to one or the other at different stages as “a progressive measure at one time can produce regressive results later. Policy must take account of the effluxion of time and the stage of historical development”.
I co-wrote a paper about 5 years ago with Richard Vines which outlined tensions that need to be overcome from understanding the context of a situation, gathering information and ultimately resulting in a judgement call when a decision has to be made. We used the term “context management” as the process to define these tensions and identify the most appropriate response for that particular situation.
Understanding of staged development, cultural contexts and the political milieu is necessary to generate and position the leadership required to transcend and resolve tensions at the juncture between idealism and pragmatism. Such leadership is indeed, radical!
February 16, 2007
In a recent court case, the Queensland Land and Resources Tribunal has announced a decision in favour of Xstrata expanding its Newlands coal mine. The Tribunal concluded that the Queensland Conservation Council had not shown there was a causal link between the mine’s emissions and the harm caused by global warming and climate change. For some commentary on this decision, see an ABC report or Andrew Bartlett’s piece.
This reminded me of some of my favorite quotes of the German sociologist Ulrich Beck. He states that we are entering a world risk society where “dangers are being produced by industry, externalised by economics, individualised by the legal system, legitimised by natural sciences, and made to appear harmless by politics.” Further, the “transition from the industrial to the risk epoch of modernity occurs unintentionally, unseen, compulsively in the course of a dynamic of modernisation which has made itself autonomous on the pattern of unintended consequences.”
He goes on … “The difference between industrial and risk society is first of all a difference of knowledge – of self-reflection on the dangers of developed industrial modernity. The risk epoch imposes on each of us the burden of making critical decisions which may effect our very survival without any proper foundation in knowledge.”
I have found these quotes to be really profound and I re-read them every few months and see different nuances in them each time. We need to make our own decisions without good evidence as the complexity and ambiguity in society has clouded the links between cause and effect. Will the expansion of this mine contribute to global warming? Maybe not much but at what stage do you say enough?
So how self-reflective are institutions being in relation to the dangers of global warming? Not very considering by the sound of it. If “the hazards to which we are exposed date from a different century than the promises of security which attempt to subdue them,” new forms of decision-making are required. This could either be at the community level, national or international. But for world risks like global warming, the intervention needs to be relative to the system so it needs to be big! Including developing countries, local communities, the US, etc. All of us need to be involved if we are to turn the Good Ship Earth around – or at least halt its progress down the current slippery slope.
January 29, 2007
One of the strategic management approaches that we have here at work is the notion of challenge and response. That there are issues that we are facing that are presenting us with a challenge and that we have to articulate and implement some form of response to that challenge. Public service organisations tend to be great at responding but often have difficulty with framing and understanding the challenges that are faced.
In some planning discussions last year, we used the DPSIR model. It is derived from some early OECD work and has been primarily used for environmental systems. It can be summarised as:
Driving forces of change (e.g.industrial production)
Pressures on the system (e.g. emission of air pollutants into the air)
State of the system (e.g. air quality)
Impacts on population, economy, ecosystems (e.g. health problems)
Response of the society (e.g. emission permits)
It got people to think a bit more deeply on the challenges that are being faced, what is driving them, how the current system is being affected, what evidence there is for change and wider impacts before coming back to the response for dealing with the challenge.
September 6, 2006
One of the things I do in my work in the Department of Justice is look at the various systems that we oversight (for example, criminal justice system, emergency management system, etc) from a strategic perspective to see how they can work better. Each of these systems is complex; they involve multiple stakeholders with different interests, human agents (they are always messy), and various intersecting system dynamics.
I found this quote sometime back and rediscovered it recently. It neatly describes the strategic policy world that I live in and the need to consider emergence in system design rather than attempt to strictly control the re-design of the overall system. The quote comes from John Gall from his book “Systemantics: How Systems Really Work and How They Fail.”
A complex system that works is invariably found to have evolved from a simple system that worked … A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system.
One of the delightful phrases from strategic foresight is to “trust emergence”. It still allows tweaking as the system takes shape to accentuate the positive and disrupt the negative.