Monday, July 22, 2013

Seeing Through the Fog of Policy, to Outcomes Management: To Survive, We Need a Form of Capitalism Where All Forms of Capital are Co-Managed

Commentary by Roger Erickson

This essay started as a discussion with an investment manager who initially argued that Lockheed Martin was a great private investment for individual citizens. It inevitably turned into an essay on net vs quarterly Outcomes Management, and where current views of capitalism have fallen short. The relevant evidence is near infinite, so here are just a few initial references, to trigger discussion.

Gauging short/long term balance between localized gains & systemic losses (see the comments from Spinney & Cockburn, below) can get complicated, so lets label it as Net Outcomes Management for now.

Net Outcomes Management can be a slightly confusing subject, but obviously one that can't be ignored. And, it's nothing that any high school calculus-101 student can't handle. It's not Rocket Science.  Simply put, the behavioral paradigm we use at age 5 is different than what we adopt by age 10, different again by age 20, and different yet again by the time we're grandparents, CEOs and/or elected public servants. During that span, we're tasked with learning how to manage NET OUTCOMES for increasingly more complex systems and contexts.  The same task looms for teams, companies and nations where both workforce count and workforce capabilities are constantly expanding.  In all instances, we need to adapt our policy methods fast enough to ensure that policy space and policy agility outrun growing demands.

At some point, the systemic investments we make are far, FAR more important to the welfare of our grandchildren and nation than our transient investments in personal liquidity.

How do we co-manage local, global and emerging investments? By rigorous national selection from rigorous national trial and error of course! The example essays from Spinney and Cockburn remind us how badly we're currently failing. Those failure remind us quite abjectly of what's happened to the US Middle Class, which has also been largely outsourced, by and for the 1%, also for transient gains which cannot propagate to a secure national future.

Chuck Spinney - Why is Boeing Imploding? Part II

Boeing’s Plastic Planes - How Boeing’s adoption of defense-contracting practices led to the flawed Dreamliner 787
By Andrew Cockburn, Harpers, July 17, 2013

See also Casey Haskins comments on "outside trainers" and outsourcing of key system processes. These topics all sound familiar, rather quickly - and all converge under the topic of Total System Tuning by Net Outcomes Based, OpenSource Feedback Networks.

ps: Spinney's references to Seymour Melman are more useful than any specific point raised in Cockburn's article below. They're worth calling attention to.

Profits Without Production

After capitalism: from managerialism to workplace democracy

Taken together, these essays are FINALLY approaching well established biology principles. After all, have you ever heard of a body that successfully outsources, say, liver functions to an extra-corporeal entity? It just doesn't pay, since the reduced platform resiliency & agility inevitably overwhelm any supposed short term savings. One message of evolution is to keep RIGOROUSLY SELECTED basics in-house, as the platform which then allows pursuit of the astounding return on further coordination. Make interacting system parts as simple as possible, BUT NO SIMPLER! 

That is always an exercise in system tuning - based on excruciating rounds of systemic trial and error - since we have zero predictive power. How quickly we learn from our trials and correct our errors determines National Security, and survival of our nation. If not, then our nation itself may become an error, in it's current format. It's our option to explore.

In our current situation, EXCESSIVE and/or random outsourcing of key capabilities from a given corporation - or killing the US middle class - both seem analogous to a brain thinking it can keep a body alive without liver, lung, kidney and skeletal muscle function, etc - which are to be "outsourced." It may look good on paper, given naive assumptions, but there's no evolutionary precedent supporting sustainability of that strategy. Quite the opposite, in fact.

We're left wondering why there's no capitalist model for careful investing in democracy & return-on-coordination, instead of just transient, local hoarding. Have "capital" investment models become too shallow & superficial for their own good?

That seems to be the question Marriner Eccles answered "yes" to, when he decided to expand from personal investing to investing in democracy, back in 1933. After all, there are multiple forms of capital, and none can exist in isolation. They are ALWAYS inter-dependent.

Why aren't Democracy Methods and return-on-coordination considered assets worth equal or greater management attention? If tools, tactics, strategies, policies, goals and outcomes are all assets, why don't we pursue more balanced management of all of them simultaneously? If we don't keep tuning everything, why bother tuning some isolated part of a failing system?  Isn't that like fixing the gas tank on a rusting car, when 1000 other parts are failing?


Tom Hickey said...

I would say that with globalization underway and now irreversible, the challenge humanity faces is viewing itself as a species and asking how it can survive and prosper in an ecologically sustainable way. This includes approaching the global economy as a closed system and retooling the design for the 21st century instead of falling back on failed mercantilism, which is leading humanity over the cliff. The cost of net recognizing this challenge and failing to meet will be enormous socially, politically and economy, and it also poses an existential threat.

Roger Erickson said...

right on cue:

"Capital as Will and Imagination: Schumpeter’s Guide to the Postwar Japanese Miracle"