On Risk Aversion (Updated)

In 2009, I wrote this post on risk aversion.

Here's where it sits on my mind today.

Is risk aversion a fear of auditors, bad press or is it a fear of losing hegemony - a denial of the natural transformation that is occurring now towards models of complexity and resilience? 

It seems we prefer the illusion of control, governed by models that are 
- analytical
- artificial 
- categorical 
- linear 
- hierarchical
- authoritarian
- siloed
- mechanical, and
- simplistic. 

To be able to achieve manageable simplicity, we would have to be able to identify and control the context, the boundaries, the parameters in which we operate. This is not possible, if it ever was. 

But how do we change that the easier way?

Mental Models: Five of Many Basic Assumptions Currently in Need of Revision

1. The Universe is Composed of Fundamental Building Blocks

This view has proven fruitful in certain types of research, but I wonder why people think that what exists in the universe can be exhaustively explained by reference to fundamental components and their interactions? Effects and causes occur at many scales of granularity.

I also wonder what makes people lean toward the idea that there is a certain "fundamental" aspect of reality? Is the notion of a foundational layer of reality a product of experience or a conceptual hangup?

 

2. Individual Interests Drive Collective Behaviours

Individuals are born into an existing social milieu and learn the language, norms and aspirations of their group. Though I'm not one to say that we are all simply products of our socialization - people have unique sets of abilities and unique ways to express them - in this chicken/egg scenario, the collective comes first. Therefore the collective will is not an aggregation of individual interests and the notion of an "original position" where individuals came together to forge a society is a mythical fancy with no explanatory value.

Another mistake fed by this assumption: Researchers assume that it's altruism or community feeling that needs to be explained rather than individualism because, ironically, individualism is the current ideological norm and raw self interest is seen as the more fundamental fact. This assumption is not objectively justified. It's an idea that supports the economic system and preserves the social order by allowing individuals to be seen as wholly responsible for their own lack of success, regardless of social realities.

3.  All Biological Traits are Products of Adaptation by Natural Selection (Fitness)

Evolution occurs but that doesn't mean that every trait of every species can be explained as a positive contribution to survival. Species not only pass along traits that positively enhance the possibilities of survival, but traits that are not maladaptive - traits that are just there - or even weaknesses that are compensated for by a cluster of other traits.

The attempt to explain every trait in terms of adaptation begs a lot of questions.  Nearly every species eventually becomes extinct or evolves into a different species. Evolution cannot directly explain the biological mechanisms that give rise to the emergence of a new trait, but only indirectly - only insofar as random mutations occur that  aren't survival liabilities or that are likely to enhance survival opportunities.

4. There Are No Natural Final Causes (No Whys, only Hows)

If you're wondering why I've included this, it's because it's generally assumed that any final cause or purpose (sometimes called "teleology") of existence would imply a non-natural (metaphysical) factor. People who believe themselves to be scientifically minded try to distance themselves from the idea that there are purposes in nature because they assume it necessarily aligns them with proponents of reviled "intelligent design" (ID) theories.  ID theories suppose that matter is a passive receptacle for the purposes implanted in it by a divine architect of the whole universe - an architect who cares about us and who especially cares that we are purified of contaminants from our participation in the natural material world in particular - so one can hardly blame them.

In a sense though, the struggle for existence would be a natural final cause, wouldn't it? The drive to survive is a natural purpose, though not necessarily one that is embodied only in individuals.  Scientifically minded folks need to question whether the idea of natural final causes really is an oxymoron and get over feeling guilty-by-association. (This is just one instance of reactive distancing that shuts doors on avenues of meaningful inquiry.)

5. The Ability to Scientifically Predict and Control Phenomena Proves Determinism

To predict and control what happens, a scientist needs to be able to spell out what influences events in the most generic and universal way possible. This is done by eliminating variable, unpredictable influences by trial and error (or prior knowledge) and then by refining the definition of the predictable influences and their objects so that they can be stated in the form of an equation or "law of nature" that plays out within a generic frame of reference.  For example, Newton's laws of motion refer to "bodies" without any reference to their shape or density, and to "motion", without any reference to the wind's influence, etc. To control something, knowing a number of such general laws, technologists can exactly arrange certain chains of events so that they unfold in predictable, mechanical ways. For instance, we have technologically advanced machines. Parts are arranged, the right amount of power is supplied, and presto...


Only some kinds of investigation allow for this kind of simple analysis and arrangement. For most events, it is not possible to eliminate unpredictable influences and isolate the predictable ones because there is no way to predefine a generic frame of reference within which potential influences are in play.  There is therefore no law in relation to which the influences of an event are "exactly arranged" so that the event rolls out in a pre-determined, mechanical way. Most events are  neither physically nor metaphysically predetermined.

...To be continued...

Change Discourse: An Aside on Planning and Evaluation

In large organizations, in the accepted practices of planning and evaluation, we are hampered by our inability to acknowledge unanticipated benefits, i.e., the creativity of what is proposed. We seem to be unable to value options that we haven't anticipated in advance or even to accommodate valuations of unanticipated options. What would count as legitimation in these instances?  The unanticipated benefit cannot be considered relevant, based on pre-established criteria.

Why do we deprive ourselves of anything more than our presupposed potential?  The standard (ontological and meta-ethical) notions of objectivity and fairness in evaluation are in need of a major rethink, especially in a complex, rapidly changing world where future potentiality becomes at least as important as present actualities. Adaptability and responsiveness are more important than adhering to artificial and outdated notions of objectivity, which for at least two millennia, have been more about projecting our conceptual filing cabinets on events than on encouraging openness to new an novel ideas and approaches. To add irony to insult, in today's variant, to mimic the successful model of reductionist science, it is assumed that the ability to assign a number to some evaluative criterion makes that criterion objective. 

The difference between living and mechanical linear/reductionist notions of objectivity needs to be emphasized. In the linear/reductionist model, the relevant determinants of an event  are isolated and identified in a rigorous way, such that they can be arranged and used in planning experiments and building machines. As successful as this method has been, however, according to scientists such as Eugene Wigner, the approach legitimately applies to only a small set of relatively easily manipulable things (which is why basic physics is about necessary laws and anything more complex is statistical at best at the lowest level of granularity.)  The attempt to apply it to a large open-ended organization occasions the kinds of issues described by Burt Perrin (Paragraph 103). 

Stuart Kauffman shows that a living system is one where the boundary conditions are intrinsic to the phenomena under investigation, which are not "placed by hand" as they are in a more mechanistic model. He further argues(cf. pp. 131-143) that there is "no way to pick out the relevant collective variables that will play a causal role in the further evolution" of living systems.  (p.140-1) Nevertheless, we put our methodological carts before our ontological horses, and worse, we justify our aims based on our methods, rather than the reverse. This is not only reductionist. It reduces us.


Our model of measurement needs to change from a mechanical one to one that respects that we work in living systems. We need to use something a bit less pedantic than a pre-established list of specific criteria for evaluation and learn how to acknowledge context, the context being our actual overall aims in relation to what is being evaluated both now, and as they change, with learning, over time.  We need to look at a higher level of granularity if we're really serious about innovation or getting beyond a nihilistic means-focused outlook (a hamster wheel).  This will require a sea change at every juncture. Responsiveness and resiliency will be key.

Complexity and Employee Engagement

In a blog entry called Social Media vs. Knowledge Management: A Generational War , Venkatesh Rao states

[N]ot only do Boomers not get complexity, they are suspicious of it, thanks to their early cultural training which deifies simplicity. The result of this difference is that Boomer management models rely too much on simplistic ideological-vision-driven ideas. Consider, for instance, the classic Boomer idea of creating “communities of practice” with defined “Charters” and devoted to identifying “Best Practices.” No Gen X’er or Millenial would dare to reduce the complexity of real-world social engineering to a fixed “charter” or presume to nominate any work process as “best.” … I suspect, as Gen X’ers and Millenials take over, that the idea of vision and mission statements will be quietly retired in favor of more dynamic corporate navigation constructs.

I don’t know that this is strictly about the generations, but it certainly is insightful. I’d like to link this to the debate between what is called reductionism and complexity. Reductionists believe that “the truth is simple” and try to explain things by reducing everything to a narrow set of definable objects and a set of laws for their interactions. It’s as if there is a warehouse full of categorized objects (e.g., sub-atomic particles, genes) and a certain set of rules about how these are to interact, that are based on these things’ intrinsic, mathematizable qualities.

To me, it’s obvious that nothing in the universe is like that. First of all, laws are not forces, but mathematical conceptions of patterns of interaction. The idea that you can produce and explain things through the placement of objects and the application of laws leaves out a lot of information. For instance, in nature, when does a process start, and with what event or thing? What are the boundaries and parameters of a system of interactions? (How do you know what factors will be/become relevant?) Does one particle have the same properties as a number of them, and if not what is the “minimum”?

In recent years, complexity and complex systems theory have undercut a lot, but certainly not all (or even most), of reductionist thinking. Physicist, Robert B. Laughlin, for instance, argues that laws are not what causes certain interactions, but the reverse, laws are what emerge from interactions. Complexity theorist, Stuart Kauffman observes that reductionists just take parameters as givens, while showing that in living systems, life creates its own parameters (e.g., cell walls). Nature is self-organizing.

The point is that the old Newtonian paradigm is now crumbling and a new paradigm is well underway to becoming the reigning one, a point that Gilles Paquet has made with effect. So how does this tie to mission statements and charters and what-not?

Methodologies parameterize: They define limits of operation, without necessarily any awareness being generated of how the limits are drawn. This is why there are predictably going to be “perverse effects” of target-setting. Transaction quotas, for instance.

Programmed procedures might be great when you can reasonably identify all of the things that might have an effect on the outcome and control for that but, outside of a laboratory or some staple factories perhaps, life’s not like that. It’s putting the cart before the horse to think that the methods, processes, templates, and formalized procedures we've come up with so far provide adequate parameters of possible activity. Process templates and toolkits, initially touted as panaceas, are all eventually discarded, not always because of the shocking unforeseen, but due to the fact that they can never capture all of the complexity of normal operations. And besides, most people prefer to think rather than follow instructions, as long as they have the time to do so.

An over-reliance on methodology cuts off possibilities and prohibits learning and risk-taking and the use of good judgment, and sets up blind, impersonal systems as abstract authorities. The results of over-programming organizational processes mean you’ll lose the engagement of more risk-tolerant and innovative employees and wind up entangled in a web of rules.