Sunday, November 16, 2008

A synopsis of my book - Skills for a complex economy

This book talks about why we need to think in a different way in order to thrive in the future. It will go through the new skills that are called for, and describe the background conditions, which determine the competences that are going to be crucial to posses.

My starting point is the long-term trend of humans, machines, cultures and economies to connect - tighter, more often, in greater detail and over larger distances. Occurrences in wildly different realms and areas increasingly interact and impact each other - and on top of it change is accelerating in the global system, as each new technological development enables us to make the next step forward even faster.

We are going through a paradigm shift. The culture of the industrial age is receding and new ways of cooperating and organizing are becoming the new normal. All of this demands a different mindset, which is more relevant to the conditions of the years ahead.

It's not an absolute shift. Large parts of the old culture and the old rules still apply and the norms of the past remain useful in many contexts. It's not like we are ripping out the whole cultural foundation and starting anew, but we need to rebuild, add new features and understandings, and prune away some assumptions that are no longer in line with the new reality. We are in a transition phase where mindsets are clashing. The most interesting places to examine are not the extremes of completely new models. Rather, I'm fascinated with the areas where the old and the new overlap and converge. The grey zones, where you can see all kinds of hybrids emerge.

In an organizational context, for instance, we can observe the softening of the borders between the traditional roles of a ”manager” and ” employee”, between ”producers” and ”consumers”, and between ”partners” and ”competitors”.
Likewise, we see a blending of the hitherto sharp distinction between the individual, personal interest and the interest of the greater good. In technology we experience a blurring of what's ”here” and what's ”there” as everyone and everything comes online.

I call these converging areas the power zones, because that's where the action is. They are dynamic. This is where you find fast growth and development, this is where the business model of the new economy are created, and this is where you can observe the demand for new skills and mindsets - and see the need for new kinds of organization and cooperation.

The enormous increase in material wealth that we experienced during industrialization was made possible by standardization and mass production. Moving forward, we need to think in terms of customization and a much greater focus on the demands and needs of the individual.

In the era of assembly lines, it took large amounts of capital to create new products. Only a shrinking handful of big companies could compete on the market for cars, refrigerators, sewing machines or Broadcast media.
Today, the most important means of production is a computer connected to the Internet. Incidentally, that is also one of the most important platforms for consumption. Knowledge that was exclusive to specialists can be accessed by anyone in 0.14 second using Google, and most teenagers take it for granted that they can upload photos and videos to youTube in an instant.

Both the means of production and the access to knowledge has become radically broader, and this democratization is changing our roles in society. Rather than being passive consumers, the majority of us will become participants and co-creators. In an increasing number of contexts we will no longer accept things as they are. We will demand influence; we will interact and engage in the continued developed of the objects and processes which we use.

Creativity is a key word in this context - but the word has acquired a new layer of meaning. Creativity is no longer a somewhat elitist, artistic activity. It has become a basic, necessary skill. Creativity is an imperative. It has become a demand on us in our everyday life that we are able to develop and add something new to the processes we participate in - whether it is on the job or as a consumer.

Being creative, however, does not necessarily imply creating something new from scratch. It is as much about remixing; combining existing elements in new ways. In short: Creativity has become more of a continued, collective process.

It's not like consumers are completely taking over the production of goods and services, but consumers are increasingly involved in determining what the final product looks like. Consumers become participants in creation; they configure, they contribute data and content, they provide feedback and they help spreading knowledge of the product to others.
Consumers are thus in a tight interaction with the producers - and vice versa. That interaction is a precondition in order to create exactly what an individual needs or demands in his or her particular context, here and now. The focus moves from producing finished products for passive consumers, to designing tools that empower the end users to contribute to solving their individual needs.
Producers that aren't capable of involving and listening to their costumers run the risk of commoditization; that is, ending unable to differentiate your product by meeting the individuals needs of the costumers. Then you can only compete on price.

The trend towards participation affects our notion of responsibility and power. If you are a co-creator it follows that you must see yourself as co-responsible. And this is a major cultural shift. Rather than just doing
what you are told by those higher up in hierarchy, we must learn to take an initiative and be proactive in using the opportunities we have been given to shape our circumstances.
The divide between the upper and the lower tiers of our future society will be marked by those that assume responsibility and are pro-active, and those that remain passive. Arguably that was also the case in the industrial society, but the difference is that in the past century only the privileged few had an opportunity to be creative and to assume responsibility. Today it is a fundamental demand in most jobs.

Leaders, too, will need to adapt to the fact that the nature of power has changed. As competency and initiative moves from the center and out into the network, the function of leadership shifts. To telling employees ”why” and ”where to”, rather than telling ”how” the organization should work.

The progressive coupling of everything and every one implies that we will need to consider ourselves as part of a larger context. No one can really see themselves as independent or self-sufficient any more - neither individual persons, nor companies, organizations or nation states. We are intensely interdependent.
Climate and environmental issues are perhaps the clearest illustrations of how the interests of the individual and the interests of the greater good are converging.
On the Internet we can see the so-called Web 2.0 services - like Wikipedia - as examples of how egoism and altruism are becoming harder to distinguish as motivation for the creators.
In business there is a strong trend towards more integrated and complex products and services, and this in turn means that a single company is unlikely to have all the skills in house that are needed in order to deliver a complex service. In order to be competitive, companies need to cooperate, create alliances and platforms that invite others - companies or consumers - to contribute. The utility of a product or service will depend on the extent to which it links and re-enforces the value of other products and services.

In networks where the stakeholders are interdependent and the interaction is continued, you can get a sense of how to behave in order to create mutual value by studying the field of game theory.
It's all about creating win-win situations, in which the result that emerges from cooperating is greater than the simple sum of the individual contributions.
The scientific research into game theory has indicated some of the factors that can enable so-called “plus-sum games”: You should be initiating cooperation; you should show and establish trust; you should connect, engage in networks, and send your creations into circulation and interaction.
It's very close to what's called “open innovation” in a business context.

And it sounds pretty - but it's not simple or easy. All kinds of noise and disturbances tend to erupt when we are integrated in new contexts. In Europe the debate on integrating immigrants is an obvious example, and it raises the questions of where the border to our community runs; who will we include, and under which conditions?
The European Union itself illustrates the issue: In principle a union is in the interest of the greater good, but from a local perspective the union implies an often controversial surrender of sovereignty.

When the circle, which delineates our sphere of interest, expands it is not always in sync with an expansion of our circle of empathy. And it is by no means certain that all stakeholders agree on the borders to the area of shared interests.

This also affects our concept of openness. When you are cooperating and working for a common good it makes sense for all stakeholders to make their resources freely available to each other, so they can be integrated in the co-creation process of new utility. But often, cooperation is only partial, not complete. There's a grey zone with some cooperation, and some sharing - and some consideration about where to draw the limits to openness.
An example: Excessive enforcement of patents and copyrights can lock up the raw material for new development. Individual inventors and creators want to be paid for the efforts and ideas, but it may come at a cost to the greater good if new products - technological or cultural - are not developed as fast as they could have beeen if all knowledge and tools where freely at the disposal for everyone to utilize and build upon.

Likewise with privacy. There's a very strong trend towards recording all details of our lives and making the information available to others. It's a Faustian bargain, because the data makes it possible create services that help us very effectively and in an individualized fashion. For the greater community the information about our actions also means that society can hold its citizens accountable in every detail - for better or worse.
For the individual, however, it feels intimidating and abusive when we experience that our sphere of privacy is intruded upon and we lose control of our personal information.

Nonetheless I believe we will go on connecting everyone and everything ever closer. It's the arrow of time; a trajectory of evolution which we have followed since the big bang, simply because cooperation and alliances provide an evolutionary advantage. We are becoming one global system, and, given time, perhaps one collective organism.

Historically, we have understood the world and the mechanisms behind it, by splitting it into pieces and analyzing the individual components. For good reasons. Until recently we didn't have the technology to examine systems holistically and while they were running.
Not only do we now have the computing power and tools to visualize enormous data sets, but the issues that are crucial to us and the systems with which we are interacting are now of a nature, which we basically can't gauge if we just reduce them to their components.
Whether it's physical phenomena like urban traffic, eco systems or climate change, or if it's social phenomena like civil war, fashion or online services, we need to approach them with a perspective that is holistic and which considers the interactions and the relationships between the many components of the system.

This is where complexity theory enters. If a multitude of components are coupled tightly and the interaction between them becomes sufficiently rich and fast, that's more or less the recipe for a complex, dynamic, adaptive system.
You may never have heard of the concept before, but once you learn about them, you start noticing them all around us. Despite the fact that physics, societal change, ecology, economy etc. are governed by the mechanisms of complex dynamic systems, we tend to only understand those issues in terms of the traditional, Newtonian, linear and mechanical paradigm which was the underpinning of the scientific and philosophical worldview of the industrial age. This is no longer sufficient.

In the 21st century having a deeply internalized understanding of mechanisms such as feedback, self-organization, non-linearity, probability and evolution will be crucial in order to understand and act intelligently in an increasingly complex reality.

By examining the mechanisms of positive and negative feedback we can explain why some systems are inert and resistant to change, while other systems can easily be drawn into rapidly accelerating and self re-enforcing processes.
Knowing about self-organization we can better grasp the qualitative leaps that happen when many elements start interacting. We get a sense of what it takes to harness the collective intelligence and the wisdom of the crowd. We can also analyze the drivers behind the tragedy of commons, in which choices that are perfectly rational at the individual level add up to a collective madness that can be fatal to the entire community.
With a better awareness of non-linearity and chaos we can appreciate that complex issues rarely have clear-cut, certain answers. We learn to think in terms of probabilities, rather than certainty. We accept that we cannot have absolute control of complex process.
Finally, complexity theory teaches us that evolution never stops. Circumstances change, and we must change with them in order to remain fit. Diversity is the raw material for continued development; we need to let variations and mutations try their luck with reality. Those that thrive will carry the torch onwards. This goes for biology, for ideas, as well as for products in the market place.

It's fascinating how these patternes and mechanisms can be observed across all types of complex systems and networks. Systems theory is a basic understanding, which can be applied across disciplines. Like reading, writing and arithmetic, systems theory is a fundamental literacy that gives access to and strengthens ones understanding of all other topics - be it economics, ecology, marketing, micro biology or music.

… And so what?
To stay in the terminology of evolution, one could consider the future as a fitness landscape. Those, which are best adapted and equipped will thrive under the conditions in the landscape - the rest will not make it to the next round. Companies that aren't capable of adapting to the new circumstances will face an uphill battle - while those that have a better understanding of the trends and drivers will experience that their knowledge and the solutions they develop are exactly what the market is asking for.
The same is true for humanity and our way of living. If we manage to leverage the possibilities that massive connectivity offers us; if we find ways to live comfortably within the constraints of the ecosystem - well, then we can hope to keep reproducing. Otherwise, we will join the hundreds of thousands of other species before us that tried but failed to get a foothold on existence.
It is absolutely crucial that we learn the skills for a new, complex reality and, likewise, that we rid ourselves of past habits and mindsets that have now become counter-productive and are standing in the way of our chances of thriving. The sooner, the better.

Some of these skills can be thought of as a return to behaviors that used to be perfectly natural for humans - like being creative and explorative. Others of these competencies require us to train and adapt to a mindset that can seem counterintuitive at first. But we must learn it, just as we had to learn the skills that were relevant and necessary when industrialism happened.
We have been raised with the logic of hierarchies, clear-cut roles, black and white answers and a fundamental approach to life as a zero-sum game in which every one is fighting each other over a finite, limited amount of resources. With that kind of background, it is not easy or natural for most of us to start reaching out, showing trust, assuming responsibility or embracing uncertainty as opportunity. But, as I have argued here, these ways of acting make sense and create advantages in the age of the network.

The hardest part of this mindset to learn is probably also the most pressing. We need to find an understanding of happiness and meaning which is not so narrowly connected to an ever-expanding material consumption.
For this, we might find some inspiration in the skills, patterns and mechanisms I have described. Seeing your self and ones actions in a larger context; thinking in terms of plus-sum games; being accommodating and creating connections; being creative and assuming responsibility, adapting to new circumstance… Those are the skills we will need in a new, complex reality.

Saturday, November 08, 2008

More Power Zones

Here’s another couple of ”power zones”; areas in which the convergence of realms that used be seperate creates some interesting and challenging new results.

We are not at the point where our machines our truly conscious, but a lot of smart systems seem to have moved way beyond simple, mechanical and linear computing. They have a certain new quality; one gets the sense that there is ”something” in the way the machine works that was not explicitly installed there by an engineer.
Likewise, our systems have started to show traits that we would traditionally only associate with organisms that are alive.