By Michelle Holliday
Here in Quebec, we are fortunate to have thousands of lakes. The tradition is to spend summer vacation splashing in the water at a 
lakeside cottage. Tragically, this tradition has been threatened in the past several years. Household use of phosphate-based lawn fertilizers and cleaning products has stimulated massive growth of blue-green algae in the lakes, which has choked out all other forms of aquatic life and turned the water toxic. It's poisonous enough to kill a dog.
It struck me one day how closely this situation mirrors the state of our financial system. We've over-stimulated growth to the point that all other forms of life are being choked out, and our biosphere has become toxic to us.
This isn't simply to say that we need to aim for zero-growth, as many in the sustainability movement propose. Physicist and author Fritjof Capra points out that, “Growth, of course, is characteristic of all life.” But he goes on to offer an important qualification: “[I]n the living world, it has not only a quantitative but also a qualitative meaning. For a human being, for example, to grow means to develop to maturity, not only by getting bigger, but also qualitatively through inner growth. The same is true for all living systems.”
How, then, do we develop an economic model that includes an appropriate level—and type—of growth?
Part of the solution may be found in a model called the Adaptive Cycle. Developed by Buzz Hollinger and elaborated by Frances Westley, the model shows that natural systems exhibit a continuous four-part process (typically depicted as a figure eight) of:
- Germination followed by
- Growth followed by
- Consolidation followed by
- Death and renewal, returning to germination, and so on.
In our economies, we have plenty of germination, growth, and consolidation. What our system generally lacks is sufficient death and renewal, with resources returned fully into the germination stage. The solution, then, may not be the total absence of growth—it may instead be a proportionate increase in economic death and renewal.
Getting more comfortable with the concept of death and renewal may not be as bad as it sounds. Some options might include:
- Producing only those goods that can be returned into the system fully and relatively quickly as germination (cradle-to-cradle manufacturing); making such “good” products cheap and “bad” products very expensive.
- Increasing the proportion of economic value generated by intangibles, which can germinate, grow, and consolidate without taxing the living system. This trend is already underway, both with the expansion of the technological and service sectors of the economy and with the individual shift toward meaning, experience, and connection.
- Reducing the pressure on companies to grow rapidly and incessantly (removing their legal obligation to do so, encouraging new forms of governance, such as cooperatives, and revising the general understanding of the purpose of organizations).
- Allowing failing companies to die so that the diversity of the economy is preserved—and so that society is not obligated to prop up companies that are “too big to fail.”
- Fundamentally reforming the financial industry (the debt and speculative markets, in particular) so that: (a) it no longer overstimulates growth unnaturally and faster than that growth can be processed through to renewal, and (b) it no longer jeopardizes an economy's resilience with excessive debt-to-GDP. See www.slowmoney.org for one example of how we might make this shift.
With changes of this sort, economic value could continue to grow without limit, but material production would ideally net out to zero growth, in what some economists refer to as “dynamic equilibrium” or a “steady-state economy.”
This vision raises the challenge of determining just how much growth would bring us to an equilibrium state. And it may be that the Earth will give us the answer. As it stands, when consumer spending falls, it triggers the US Federal Reserve Bank to lower interest rates in order to stimulate more spending. Instead, perhaps we'll need a system in which any reduction in the health of the biosphere would trigger a tightening of financial stimulus to growth.
Michelle Holliday has 20 years of experience in brand strategy, with particular expertise in authentic marketing. She founded Cambium Consulting after observing that the predominant organizational concepts and ways of working are neither optimal nor sustainable. And she is driven by the desire to help usher in an expanded set of beliefs and practices based on a view of organizations as living systems.
lake photo: Ian Britton
By Ginny Wiley
When the going gets tough, the tough think systems. Pegasus's former president Ginny Wiley has been helping people think systemically, in good times and in bad, for more than 25 years. Based on learnings from the recent financial crisis, here are her HUMBLE guidelines for responding with confidence to conditions of dynamic uncertainty. Print them and post them in your workspace as a sustaining daily reference.
H-How Did We Get into This Predicament?
How do we learn from what has happened so that we don't make the same mistakes again? How do we summon the courage to step up to the plate and take personal and organizational responsibility for the consequences of our actions? It's easy to think of us vs. them, Main Street vs. Wall Street, the haves vs. the have nots. As systems thinkers, however, we know that we are all part of the system. We need to move from blame to accountability, to recognize the role many of us played in this debacle by not asking questions earlier. We knew that housing prices couldn't rise forever; we knew that unsecured lending was risky; we knew that if it seemed too good to be true, it probably was!
U-Unintended Consequences
As we move forward, we will challenge decisions by looking for unintended consequences before we act ("Fixes That Fail"). What are the unintended consequences of bailing out (or not bailing out) a financial institution or an auto maker or providing relief for untenable mortgages? What are the unintended consequences to organizations of layoffs, or delays in capital investment, or the elimination of all training? On a personal level, what are the unintended consequences of liquidating assets, cashing in a 401K, or putting off medical care?
M-Mental Models
Let's challenge all of our mental models! Give thought to a specific situation from the vantage point of three or four different stakeholders. When we think we have it tough, can we imagine the impact of this situation on those who had far fewer resources to begin with?
B-Balancing Loops
Remember that reinforcing loops cannot go on forever, be they vicious or virtuous. Think about possible balancing loops that are (or will be) at play as the situation seems to be getting worse. For example, as housing prices fall, there will be some good deals on houses; with stock prices down, investing in a retirement plan will buy you more shares which, eventually (remember time delays), should result in more value. Consider scenarios for the impact of different balancing loops.
L-Long- Versus Short-Term Solutions
Short-term solutions tend to relieve pain or stress, but are frequently needed and applied at the event level. Ultimately we need to address the long-term issues. Think about the "Shifting the Burden" archetype. Short-term solutions are fine (and often necessary), but not at the expense of the long-term solution. Ask the question: What might be the unintended consequence of the short-term "fix" that could seriously undermine actions needed to implement the long-term (fundamental) solution?
E-Easy Answers Usually Lead Back in . . .
Easy/comfortable answers and actions usually only provide symptomatic relief. Remember the Albert Einstein quote: "The significant problems we face cannot be solved at the same level of thinking we were at when we created them." We need to think systemically.
Ginny Wiley is former president of Pegasus Communications. She previously worked at GKA, a systems thinking consulting company, as a consultant and trainer. Ginny served as vice president for Chapters of the International System Dynamics Society and holds an MBA from Northeastern University.
By Janice Molloy
With the days growing shorter and kids heading back to school, fall is definitely in the air. The end of the growing season serves as a tangible reminder that nothing grows forever: not plants, not children--and not companies or product sales or economies.
This is a principle of the living world, and also a principle of systems of all kinds. In systems language, every reinforcing process eventually encounters a limit, or a balancing process. And yet, in the excitement of the growth, or boom, phase, we often seem to forget that "to everything there is a season."
A Decade of Booms and Busts
In a recent Wall Street Journal article, "How I Got Burned by Beanie Babies," Karen Blumenthal looks at lessons from the booms and busts of the past decade, including the housing bubble, the tech bubble, and, yes, the bubble that played out around a brand of stuffed animals called "Beanie Babies." The wild-eyed speculation in each of these situations brought financial success to a few, and financial ruin to many more.
Blumenthal's hope is that by understanding the patterns these rollercoaster rides tend to follow, we can "be more astute in reacting and adjusting our own behavior." Here's what she has observed:
- The biggest bubbles seem to occur during times of rapid and radical innovation. Because of the dramatic nature of the changes, we become susceptible to "bizarre rationalizations," like the idea that home or oil prices could climb forever.
- Once booms get started, people jump on the bandwagon in droves, further boosting prices. As Blumenthal states, "Initial skepticism gives way to curiosity and then escalates into a kind of frenzy, a feeling that you may be the only person on the planet who isn't part of the fun, and you'd better scramble to get in."
- Even knowing that all booms eventually bust, people ignore warnings, thinking that something about this particular trend makes it different from all previous ones.
- Greed runs rampant. Blumenthal notes, "At some point, the bubble reaches a point that is so ridiculous that greed takes over and all common sense must be suspended to continue the myth." She sheepishly admits that she once spent $50 on a $5 "Peace Beanie Baby," falling prey to the illusion that she might one day finance her children's college education with the little stuffed animals.
- Dangerous behavior ensues, as some people desperately try to "keep the party going." This is the stage when unethical or patently unwise actions take place; according to Blumenthal, "It was only after the tech boom started to weaken that WorldCom Inc. began to cheat on its earnings."
Blumenthal concludes that the only people who profit from boom cycles are those who sell on the way up and aren't worried about trying to maximize their profits. She advises most people to invest for the long run: "The only way to survive financial busts is to hang on long enough to outrun them."
Limits to Growth
Knowledge of systems behavior can also help us avoid becoming caught up in the boom-bust dynamic. As Donella Meadows says in Thinking in Systems, "Whenever we see a growing entity, whether it be a population, a corporation, a bank account, a rumor, an epidemic, or sales of a new products, we look for the reinforcing loops that are driving it and for the balancing loops that will ultimately constrain it." The "Limits to Growth" (also known as the "Limits to Success") systems archetype offers a framework for acknowledging and exploring the constraints on unbridled growth.
But tools and guidelines will only get us so far. Escaping from the bubble mentality may necessitate a shift in the Western concepts that "bigger is better," "more is better than less," and "growth for growth's sake." Perhaps only by embracing the reality of limits will we be able to make the most of what we actually have.
Janice Molloy is content director of Pegasus Communications and managing editor of The Systems Thinker.
bubble photo by Jeff Kubina/Creative Commons license (CC) BY-NC-ND
By David Packer
The recent debates about torture provide insight in how looking through the lens of systems thinking can change the picture and possibly lead to better conclusions.
To some, the issue is simple: Torture, while undesirable, is the best way of protecting our way of life by preventing terrorist attacks and activity. From that perspective, it is "worth it." We sense a threat and use whatever means necessary to collect information. We then act on that intelligence and remove the threat. This is a clear balancing loop of seeing a gap, acting to close the gap, and closing it. Our society is saved. End of story.
But maybe not. Other loops are lurking, fuzzier and slower, but maybe more powerful. These are the unintended consequences of the same action that, if strong enough, can work to make us less safe, the exact opposite of what we want.
For example, the act of torture--or even perceived torture--almost certainly upsets both enemies and friends, creating more threats and less help in meeting them. Over time, as President Obama recently hypothesized, it can "corrode the character of the country." Such impacts drive the system downhill, increase threats, and stimulate even more violence. This gives us a reinforcing process that can be a literal death spiral. (In systems language, this structure is called the "Fixes That Fail" archetype).
A systems perspective allows us to see, darkly at times, not only the most visible loop but also others that describe possible unintended consequences. By bringing these other loops into the light, we can then debate the power of various interactions--and make more informed choices. The question here becomes, for example: In what other ways can we achieve the same goal without unleashing the negative side effects?
Practice in using such a lens can bring openness and definition to our way of viewing our world. It enhances, I believe, our shot at creating the future our children and grandchildren deserve.
Dave Packer is founding partner of the Systems Thinking Collaborative, veteran of the MIT System Dynamics Group and of Digital Equipment Corporation, grandparent of eleven, Ginny Wiley's spouse, and a Red Sox fan, among other things.
By Janice Molloy
"Do you need help finding anything?" By the time the third salesperson had asked me the same question during a recent trip to a large home improvement center, I started to smile. My prediction had come true.
Customer service (or lack thereof) is a pet peeve of mine. I don't have studies or statistics to document my claim, but it seems to me that customer service declined precipitously during the free-spending years of the recent economic bubble. Trips to 
the department store meant wandering through racks of clothes in search of a sales clerk or waiting in endless lines for a person to measure my child's foot for new shoes.
In response, I shifted to doing most of my shopping online, where "live chat" gave me the ability to ask questions and get a quick, if impersonal, answer. But I couldn't avoid the grocery store, where clerks absentmindedly scanned my healthy and not-so-healthy food choices while chatting with baggers about their latest crushs.
My speculation on this unfortunate pattern of behavior was that, with consumer spending at an all-time high, retailers didn't feel the need to train their staff on greeting, engaging with, or helping patrons. If I, as a shopper, got frustrated with the lackadaisical treatment and took my business elsewhere, store managers seemed confident that others would flood through the door to replace me--and my dollars.
But the flow of money--and consumers' compulsion to spend it--masked a common, underlying balancing loop: As the number of customers increases, the quality of service often falls. When the quality of service falls, over time, the number of customers drops. Understanding this dynamic (an admittedly simplistic version of extremely complex economic behaviors), when the bottom fell out of the economy last year, I happily speculated that customer service would improve as stores sought to attract and serve the needs of potential purchasers.
Sure enough, salespeople seem to be more solicitous lately. Cashiers smile as they ask if I want chips or a drink with my sandwich. Retailers have realized that, in a tough economy, they can distinguish themselves from their competitors through their service. Likewise, stores can boost sales by encouraging employees to make recommendations and help people find what they're looking for.
During my recent trip to the big-box home center, one of the salesmen tracked down the unusual CFL lightbulb I needed. If he hadn't been attentive to my needs, I might have left without making a purchase. As the economy flickers slightly brighter, I find myself hoping that store managers will continue to push on the customer service wheel. I have a few more home improvement projects to tackle this summer and will need someone to point me in the right direction.
Janice Molloy is content director of Pegasus Communications and managing editor of The Systems Thinker newsletter.
photo: Ian Britton/freefoto.com