Adopt natural system principles to keep economies profitable at their limits

The collection of “Hacks” for the Long Term Capitalism Challenge offered byHarvard Business Review, McKinsey and MIX, for the M-Prize for Management Innovation now has this proposal from me…

Please leave comments for reviewers on The official competition entry at the MIX site (here too is fine for conversation).  If you request information I’ll respond as I did for Bill Rees, and post it if it’s OK with you.

It’s a nice new version of the long series of proposals for using natural economies as models for better ways to organize ours, a kind of systems biomimicry.

General References: (added proposal references at the end)

  1. For closely related world system biomimicry see “News of the Commons
  2. To introduce systems ecology “Self-organization as “niche making
  3. I got very good detailed questions on the MIX proposal from Bill Rees, and posted my responses as Questions from Bill Rees.
  4. For an introduction to the physics and general systems theory of natural open systems, see Natural Systems Thinking

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The Summary

A good goal for growth would be to end at a stable peak of vitality providing a sound capital endowment for life on earth.  That would be better than ending at a peak of exhaustion, like other “tower of Babel” societies of the past such as Rome and the Mayans.

It can also be thought of as a change of “ism’s”.

It would also represent a change in form for our economic system, while still being the very same economy with the same people and rights, and reliance on creative innovation funded by investors.   By giving profits an end purpose, of caring for things rather than just for multiplying profits, it woud give the whole economy a very different purpose.    So, it can also be thought of as a change of “ism’s”.

It’s to change the use of our ability to control things,
to care for them.

So we’d need to change our systematic habit of using the profits from controlling things to multiply our control, to instead care for them.   Choosing to not make the change would turn us into one of those societies of good people that work together for truly evil purposes, that no individual would want to have anything to do with.

or similarly, it seems… it’s time to grow up!     ;-)

The Problem

This surprising approach to economic change is based on discoveries in complex systems physics.  They help you make observations for explaining why uncontrolled natural systems all begin with explosions of new organization and “fossil” energy use, and then need to change form in response to changing their own environment.     Part of what people have not noticed about our economic system is that it has always had “a secret life of its own”, as an uncontrolled natural system.   Growth systems in nature are spontaneous construction processes, not equations.  As systems they work by a “bootstrap” method for “using the system to build the system”.

Our conceptual challenge can be illustrated with the usual “Petri dish” idea of growth limits.  For yeast cells doubling in number every hour, the space on a Petri dish would be only half occupied an hour before it is exhausted.   The main difference between that and an economy is that yeast cells stop growing then.   In a real economy that expanded to limits, the strong competitors then keep growing, and do so by taking resources from others and so creating growing conflict as a symptom of limits.    There is a specific reason why that very visible effect has not been noticed.   People have been thinking of the economy as a conceptual model, rather than as the behavior of an environment full of individually motivated and learning parts.  A conceptual model doesn’t change when conditions do.   In contrast, what individuals are learning about their inter-relationships can changes dramatically, often with no warning at all.

How natural systems survive their initial “growth in a Petri dish” without running into crippling conflict is responding in time, by “maturing”.   One easily recognizes the natural maturation response at the end of growth in how plants or animals first grow with a burst of development and then mature, but also in how small businesses and most anyone’s career also does.   Maturing involves the growth process changing its focus, from internal development to external relationships.  Such systems first build things for expanding themselves and then to secure their environments and develop relationships.  That allows them to sustain their peak performance as they approach limits. Otherwise they’d waste their efforts on ineffective strategies, creating costly conflicts and exhausting their resources leading to decline.

Among other surprising things about this approach is that the economics for it originated with the observations of J.M. Keynes.  He found that according to his growth model, financial investments would need to work more like endowments than for multiplying capital, or businesses could not remain profitable at such time as growth of the whole ran into natural diminishing marginal returns.   In Chapter 16 of The General Theory he indicated he thought that condition, of growth producing more costs than profits for the whole, would not be at all difficult to achieve.  Today we certainly see the looming costs of unsustainable development actually overtaking the long term profits, but those symptoms don’t fit the old model.   They are treated as “externalities”, just “left over data” with no place to fit because the models omit that kind of variable.

So this proposal is to sketch out “where to start” and “how to proceed” toward an intentional economic transition to following “nature’s plan” and learn to mature.   We’d work from where we are to perfect the economy’s design for endless creativity, to make it sustainable and for its wealth to last.   The plan doesn’t define an outcome, but a learning process for moving in that direction, by learning about and from our environment.

A Solution

The first step would be to get some support and initiate two learning processes.   Each would need the production of educational materials and assistance for developing learning networks.   One network would be aimed at the expert community, of business, professional and government planners and managers.  They’d need to discover how to adapt the systems they manage to follow natural system principles.   The other network would be designed to serve other communities and interests.  That includes people needing to understand what the changes occurring mean to them, and to learn to observe how their own environments work and understand their own changing opportunities.  Serving those needs would contribute to the widespread efforts of self-help communities solving their own problems.

The “core curriculum” is learning to observe changing organization, large and small scale, in your own environment, and discover why it always begins and ends with complex animated processes (¸¸.·´ ¯ `·.¸¸) .   For example, one can notice for large and small storms alike, there is usually a “calm before the storm” and then things erupt with their full force.   If you find useful leverage for changing them, this approach also helps you see what else your intervention would affect.   You gage the timing and expectations in relation to any system’s natural rates of learning, historically ~3.5%/yr for economies (see “Timed Response” image).

The necessity for changing our uses of money comes from money being a token for physically delivered goods and services.   When delivering those goods and services is pressing the earth’s physical limits, there are just two ways to stop money from growing to relieve it.    Financial failures reduce the growth of the whole economy’s physical demands.  When people spend their financial profits on good works it also does, with the added advantage when spent as for endowments instead of to compound profits, of doing a lot of good.   It’s a natural relief valve for the economy’s growing physical demands that can be used to keep the economy profitable at limits to growth.

Keynes really tried to explain it repeatedly, in conversation, in his Treaties on Money and in The General Theory.  His effort to raise the subject did not get far because relieving economic bubbles of excess demand that way contradicts the main purpose of most money managers.  The only economist I know of who understood what it meant was Ken Boulding, who also raised the issue over and over and didn’t get very far.   It seems we now have little option but to adapt some form of it, given the consistent 40 years of  failure of all good efforts to change the data on accelerating resource depletion and need for expensive mitigations coming in.

You might reasonably respond to this with the profound thought “The impossible will still be impossible!”,… or something. You might then also study the realities a bit are realize it will only require tipping a balance of recognition to set off a cascade of endorsements for this kind of approach.   The pressures mounting for something to break are becoming very intense.   People who understand it might well find it easy to prefer not to do business with people who prefer to deny it, too.

The Practical Impact

What would happen is small networks of both institutional and private innovators would emerge, and probably work together quietly just getting a grip on the problem.   The initial implementation would likely come at a moment of tremendous economic strain, like we’re approaching.

The effect would be experienced as a tremendous relief, as it became clear that the mountains of unearned income would not vanish in a financial collapse (as usual), but would be steadily turned back into earned income and profits again.    On realizing that shift the financial markets would discover the windowless dead end they had just been facing would more or less suddenly vanish, as they realized there would actually be a future after all.

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It would also represent a change in form for our economic system, while still being the very same economy with the same people and rights, and reliance on creative innovation funded by investors.   By giving profits an end purpose, of caring for things other than the self, it woud give the whole economy a very different purpose.    So, it can also be thought of as a change of “ism’s”.

It’s to change the use of our ability to control things, to care for them.   It’s for us to give up our systematic habit of using the profits from controlling things to multiply our control, instead of to care for them.   Choosing to not make the change would turn us into one of those societies of good people that work together for truly evil purposes, that no individual would want to have anything to do with.

Dispassionately, one would have to say that devoting ourselves to cooperatively exhausting everything on earth useful to people would be as truly an evil thing as there is, a violation of everything we would want to stand for.   But it’s the natural goal and purpose inherent in maximizing capital investment as a way of life.  It also fits the evidence for how dozens of historic vanished human societies achieved remrakable greatness and mysteriously vanished.   With “efficiency of growth” being the core principle of institutional “sustainability” today, it’s also clearly what today’s human society with all its marvelous achievements is now proceeding to do, and to work energyetically together to accomplish.

It’s directions would change from being guided by using profits for multiply one’s control of things to caring for them.

Changing from organizing our economy around expansion (using profit for multiplying capital) to caring for what we built and our world (using profit to improve the quality and uses of capital) a change from “capitalism” to “fidelity”, remaining true to ones purposes rather than just investing in what’s addictive. If financial investments need to eventually all be used to endow other things it would replace using the profits of capital to multiply capital.  The main source of financial capital would then be the savings from creative labor, still invested to maximize returns, but for serving as a reserve and endowment for greater values such as economic sustainability and healing the earth, rather than just for self-inflation.

…it’s a “technical” definition of how to change from acting as capitalists to managing assets to remain true to ones own purposes,
ending “capitalism” to adopt “fidelity”.

The Challenges

The big challenge is the underlying problem of perception.   It has caused us to misunderstand how uncontrolled systems work for many centuries, and is also apparently the real cause for the frequent disastrous financial bubbles economies have always experienced.   Perceiving our mental models as reality lets us think wealth can be piled up to infinity, because mental models can do that.   It tells us the natural world can work the way our symbols on paper do, and doesn’t show us when to look for the difference.

It seems to be a problem for experts in particular, who rely heavily on the information they have modeled to represent reality. They tend to make false predictions especially because conceptual models can do lots of things physical systems can’t, and represent the world without the information they are missing.   The design of socially defined systems then gives us an artificial reality for past conditions with large gaps, that then also omits a practice of watching the self-managing systems that the validity of the models rely on.  That causes the world network of economic professionals to miss the significance of glaring change like the continual world escalation of resource costs that by definition is not supposed to ever occur in a free market economy.

It’s a difficulty everyone experiences, arising when people don’t notice their perception jumping back and forth between their theory and reality.  Our attention shifts between what we are “looking at” and what we are “thinking about”, and often don’t notice.   It’s possible to notice, but made difficult by how common language uses the same words to refer to both, as with “apple” referring both to the thing and the idea.  That seamlessly confuses the two if you let it.   Where it matters most is when making decisions about things people have no direct physical experience of, and only know about “in theory”.

What theory then provides is reality without any sign of the absence of all the physical parts.   Real systems of any kind have lots of parts, of course, many of them hidden.  Some of the parts of systems are controlled by external forces and some by internal ones, but it can be hard to tell one from the other.   Lots of parts of economies are of the latter kind, self-managing, and work by themselves largely hidden from view.  That includes what employees actually do to get their checks.   What they really do or why they change it can’t be put into a business model because employees just “work it out for themselves”, and often can’t quite tell you, as every job is a learning process not a formula!

The First steps

I tend to find that successful new directions of change are ones that have already begun, and only need to be recognized, and built upon with complementary additions.   The need for fundamental global change has never been felt more strongly or widely, for example.   It’s partly because lots of people seem to see the pressures will keep building till something breaks.   The idea of having investor earnings returned to them to spend as endowments rather than reinvested, causing a soft landing for growth, seems almost completely missing from the “alternative” literature.    So this proposal seems to be “a long shot”.   It “doesn’t fit the rules”.   It’s also being presented to intellectual communities who are experts at following the rules that this proposal mostly doesn’t fit.   So it’s likely to not to be understood.

People also sometimes think for themselves, though.  The recognition that nature is a physical system with organic parts, wrapped around a planet, seems to have been crystallized in the imagination again and again recently, only to be pushed aside again and again too.    Today we also see signs of that imagination what we need accumulating, along with an awareness of just how important that vision is.    People are extremely well informed about events, and it seems virtually everyone intuitively senses the converging crises confronting mankind from every direction.  People can also plainly see how different social and professional groups define reality in completely different ways, while also all clearly living in the very same natural world too.   All that might possibly break in the right direction.

Credits

The proposal is largely an individual creative synthesis from innumerable sources, with contributions and moral support from teachers, books, correspondents, family and friends.

My main influences on creative economic thinking have been Ken Boulding and my dad, Clement Henshaw (who taught physics as recognizing natural principles from observation) and the “alternative” social networks interested in change and appropriate technology.  Other pivotal thinkers for me (in no special order) were Jane Jacobs, J.M. Keynes, Robert Rosen, Walter Elsasser, Stanley Jevons, Jay Gould, Howard Odum, Margaret Mead, Louis Kahn, Bucky Fuller, Christopher Alexander, D’arcy Thompson, Lester Brown, Colin Renfrew, Rudolph Geiger, Lester Brown, Gerald Midgley, Paul Colinvaux, Joe Tainter, Tim Allen, Ricardo Hausmann and correspondents Stan Salthe, John Blackmore, Robt. Ulanowitz, Charlie Hall, John Fullerton and a great many others.

Tags

natural growth, finance, organizational successions, maturation, self-managing systems, natural systems physics.

Reference Materials

My research archive is Synapse9 [synapse9.com], including an introduction to “Open Systems Physics” [synapse9.com/home.htm#sci] and my blog, writing as ‘mothernature’ on “Reading Nature’s Signals” [synapse9.com/signals] with 280 short articles, 148 of which discuss principles of natural economies.  My “Connection” website [synapse9.com/connection] sketches a partnership approach to environmental design that mimimics natural system learning.  Sketchy notes on other learning partnership approaches are on the Partnerships Page of my draft 4YG Dashboard [synapse9.com/4YG/]

My list of publications is [synapse9.com/phpub.htm] and I’ve been an active contributor to discussions on complex systems and economics on FRIAM, “The Finance Lab”, the LinkedIn forum “Systems Thinking World”, and writing as Shoudaknown on Twitter.

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jlh


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