Elisabet Sahtouris wrote an article in 2005 called The Biology of Business, which began with a dubious recapitulation of Darwin’s model and explanation of evolution, and then attempted to apply this model to business ‘ecosystems’.

Like many others who adhere to the myth of ‘progress’, she describes the first half of evolution of all-life-on-Earth as competitive and the second half (with us as the crown of creation) as cooperative. Stephen Jay Gould effectively demolished this romantic myth in his book Full House, and I won’t revisit that argument here, except to say that we are evidently not the crown on creation (merely one incidental and not particularly special node on an evolutionary tableau that has no ‘higher’ or ‘progressive’ levels), and that the ‘purpose’ of evolution is diversity, resilience (best served through complexity), and punctuated equilibrium — not knowledge, self-knowledge or ‘progress’. I know many people find Gould’s scientific explanation cold and deflating, but, not being of spiritual bent, I find it refreshing, humbling and completely intuitive.

At any rate, she goes on in her article to lament the dysfunction of our current economic system, which she blames largely on its inability to stick to the evolutionary principles of biological systems which were, presumably, its initial inspiration as a ‘social’ system. These principles are:

1. Self-creation (autopoiesis)
2. Complexity (diversity of parts)
3. Embeddedness in larger holons and dependence on them (holarchy)
4. Self-reflexivity (autognosis’Äîself-knowledge)
5. Self-regulation/maintenance (autonomics)
6. Response ability’Äîto internal and external stress or other change
7. Input/output exchange of matter/energy/information with other holons
8. Transformation of matter/energy/information
9. Empowerment/employment of all component parts
10. Communications among all parts
11. Coordination of parts and functions
12. Balance of Interests negotiated among parts, whole, and embedding holarchy
13. Reciprocity of parts in mutual contribution and assistance
14. Conservation of what works well
15. Creative change of what does not work well

For those not familiar with the jargon, holons are ‘layers’ of life, from cell to organ to body to community to Gaia, the community of all-life-on-Earth. These are, in effect, principles of collective self-management.

Elisabet goes on to lament that principles 9, 10, 12 and 13 in particular are currently not applied in much of our economic system, and describes a rather naive ‘eightfold path to excellence’ written by Tachi Kiuchi to correct these ‘flaws’ in the system.

The question is, is our economic system, currently or possibly, a collectively self-managing system? I think it is neither, for a simple reason: No species is capable of ‘creating’ collectively self-managing systems, or in fact any kind of complex system. By their nature complex systems are not fully knowable, and so they cannot be invented. They evolve by the collective cooperation and effort of all their constituent parts.

By contrast, economic systems consider most of their constituent parts as ‘resources’, externalities to be used for the benefit of a small and hierarchical group of preferred interests. They are dumbed-down, merely complicated systems, not complex systems at all. While they may aspire to imitate some of the principles of complex systems described above, they cannot possibly hope to embody any of them, any more than a robot can be designed to fully emulate the operating principles of a body, or a computer the operating principles of a brain. Constructed artifacts are merely that, and they are merely complicated. The principles by which they operate are limited by their construction, and vastly different from those of a complex system.

So what can we do to make our economic system more response-able, more like a true collectively self-managing, evolving system? The best we can do, I think, is to acknowledge its frailties, that stem from its fundamental complicatedness. Complex systems scale very well, and increasing complexity increases the resilience of these systems. Complicated systems, however, scale very poorly — they need hierarchy, brutal and rough intervention, and bureaucracy to function as they get larger. When it comes to complicated systems, small is beautiful. Complicated systems are only self-manageable when there are very few components. That is why human social constructs seem to work better when the number of people involved is close to six, or fifty (see chart above).

Rather than Tachi Kiuchi’s naive ‘eightfold path to excellence’ our business and economic systems would be better advised to break themselves down into very small, local, community-based units of human-manageable size, let their members operate them as the high-maintenance human constructs they are, and stop pretending that they are, or can ever be, what they are not.

I’m doubtful we can relearn the humility to do so, but I think there is no other workable way.

If you want to get people to care about something you have to frame it in personal terms, show them how it affects them personally. So when I talk to business people about Global Warming, I frame it in terms of business risk, business sustainability, and business resilience. These are things they care about.

Some definitions:

• Business Risk: The possibility of the business suffering loss, harm or danger. It is the product of the probability (likelihood) of adverse events occurring, times the consequence (severity) of these events should they occur.
• Business Sustainability: The capacity of the business to remain in existence.
• Environmental Sustainability: The capacity to be continued indefinitely with minimal long term effect on the environment. Often shortened to just ‘sustainability’. Business executives don’t really care about this, but they do care about their business’ sustainability. You have to show them that the two are connected, and how they are connected.
• Social (and Environmental) Responsibility: A duty of care to safeguard the well-being of people (employees, customers, community) and the environment. Business executives don’t really care about this either, unless their indifference exposes them to business risk.
• Business Resilience: The capacity of the business to adapt to or recover quickly from adverse events.

There is a well-established framework that positions risks in terms of likelihood (the probability of them occurring) and severity (the consequences if they occur). It’s an imperfect model for several reasons:

• both the probability and consequences of most risks increase over time, so a chart that depicts short term and one that depicts long term risks will look very different
• the consequences often depend on who you are
• the consequences can be depicted different ways (dollar cost, loss of life, loss of quality of life) and these depictions can vary widely
• both likelihood and consequences are very subjective — they’re a matter of prediction, and humans are notoriously bad at predicting, and tend to underestimate the likelihood and consequences of adverse events

Despite these imperfections, charts that depict risks in these terms do tend to attract the attention of business. Most recently the Davos group produced this chart of its ’26 greatest global economic risks’ (NPT= nuclear non-proliferation treaty; CII= critical information infrastructure):

From Davos World Economic Forum Global Risks 2008 Report

As interesting as this chart is, the problem is that its developers don’t know much about what the risks really are. The likelihood of a pandemic, for example, as anyone knowledgeable about the topic will tell you, is more than 6% in the next decade. Likewise, to suggest the risk of significant global freshwater loss in the next decade is only 6% indicates a serious ignorance of ecology.

There are of course other ways to parse risks and the adverse events or crises that produce them:

• by how suddenly they occur or their likelihood of recurrence
• by the nature of the crisis (social/economic, natural, technological)
• by whether it’s caused by internal (to the business) or external occurrences

The potential suddenness of a crisis affects preparedness and mitigation strategy. Risks that are due to internal causes (failure to adhere to regulations or social norms; internal sabotage) are generally more controllable than those due to external causes, and hence require different strategies that focus on prevention and not just adaptation. But generally, the variables that are most important to business are the two in the chart above — likelihood and severity, in the short term (two years or less). Multiply the two together and the higher the result, the more attention business will pay to it.

Risk strategies generally focus on five things:

• prevention (for those risks that are controllable), provided the cost is not uneconomic
• early detection (gathering, sensing and listening to credible information and early-warning signals)
• mitigation — taking early steps to reduce severity
• response — adaptation and recovery once the event has occurred
• learning — revising the strategy after the event in order to be better prepared for recurrence

While planning can help (especially when a key component of the plan is training and rehearsal), perhaps a more important aspect of risk preparedness strategy is improvisational capacity. Aid workers during the Katrina disaster, for example, relied on networks of skilled collaborators connected continuously by satellite phones, who would ‘huddle’ impromptu as unanticipated issues arose and assess the wisest course of action.

The key elements of crisis mitigation and response are information-gathering, coordination and decision-making, and in a crisis none of these tends to go ‘according to plan’. Businesses that are agile and improvisational are often better able to cope with crises than those with extensive, complex, rigid plans. Plans are based on assumptions, and when the assumptions prove false (e.g. the assumption by FEMA that, in the advent of a hurricane, backup systems would ensure electronic communications were functional) organizations that can’t improvise add to the crisis instead of alleviating it.

With these assessments so subjective, there is a danger that such charts simply lose all credibility, and business people cease giving them any attention. What could be done to increase the credibility of these assessments?

If you’ve read The Wisdom of Crowds, or frequented any Prediction Markets, you probably know my answer: Instead of asking so-called experts, get the ‘crowd’ to make the call. Average out their predictions, and you’re likely to have a much more accurate assessment of both the likelihood and severity of different types of risk than the ‘experts’ at Davos could hope to muster.

To help them do that, you need first to decompose the risks. The simplistic scatter chart of the Davos gang overlooks the fact that many, perhaps most, of these risks are interrelated: The occurrence of one increases (or occasionally decreases) the likelihood of many of the others. When it comes to assessing the business risk from global warming, for example, businesses need to assess two short-term risks and at least five longer-term risks:

• regulation risk (risk of new carbon taxes and caps, and restrictions to supply and operations)
• reputation risk (risk of boycott for notorious emitters of global warming pollutants)

• risk of water shortages (related to glacial melt, evaporation and droughts) — every business needs water and some use staggering amounts of it
• risk of energy shortages (as oil supplies are depleted and become vastly more expensive and restricted)
• risk of pandemics (as infections spread beyond their normal tropical habitat to areas with no natural resistance, affecting humans and they animals they eat)
• risk of pestilence (as insects likewise spread beyond tropical areas and attack trees and agricultural plants with no natural resistance, wiping out crops and making food, paper and wood unaffordable)
• risk of sea-level and sea-temperature rises (engulfing low-lying cities and growing areas, and affecting aquatic life)

The global warming business risk can also be broken into:

• risks that arise because of actions the company takes, or neglects to take, that contribute to global warming or reduce impact on global warming (e.g. cost of reducing pollutants, and taxes paid on emissions)
• risks that arise because of the consequences of global warming on the company’s operations (e.g. water shortages)

So a chart of the major real risks to a business, at least in the longer term (20-50 years rather than ten) might look like this:

The risks that are not considered to be significant short-term (less than two years) risks are in the upper right corner, and as long as business is only concerned with the short term, these risks are perceived to be lower-left corner risks, not worth being concerned about. Besides, most businesses perceive these as largely unpreventable and unmitigatable anyway, so their approach is to worry about them if and when they occur.

Here’s a brief summary of these 15 types of risk:

* Low in the current perception of business; high according to economists and scientists. (I) = Internal cause risks. (E) = External cause risks.

The above perceptions of risk probability and consequence will vary from business to business and are, of course, subjective. How might we use the Wisdom of Crowds, and Prediction Markets, to make them less so?

To assess these business risks would require two different ‘crowds’: one familiar with national and global economic, social, technological, environmental and political conditions (for the risks that have causes external to the business), and a second familiar with the company itself (made up, say, of employees and customers, for the risks with causes internal to the company. We could set up global and regional Prediction Markets for each of the external-source risks, and then tie them into Wisdom of Crowds assessments of the business’ employees and customers for the internal-source risks. By looking at the median and standard deviation assessments for both probability and consequence of each risk, we could place each risk on the chart above for each business, with a tight dark circle representing risks where there is great consensus and a large light circle or oval representing risks where there is considerable divergence of opinion. Both short-term and longer-term risk assessments could be plotted for each type of risk.

Each of the stakeholders in the business — management, employees, customers, investors, suppliers, community members etc. could then use this risk chart to make decisions in its own areas of interest. Customers might be more interested in reputation (#4), supply chain (#6) and innovation (#9) risk for example. Management could focus risk management decisions on upper right quadrant, short-term risks, while institutional investors could focus investment decisions on longer-term risks.

The risk chart could then be the basis for a comprehensive risk management strategy for businesses, using a methodology something like this:

1. Develop a process to continuously reassess the likelihood and potential severity of the risks facing the business.
2. For each risk that is controllable by the business, identify cost-beneficial prevention actions. The costs of these programs should include the costs of over-regulating the business, bureaucracy, and stifling creativity and connectivity by restricting access to new technology.
3. Develop a process to detect early-warning signals of these risks, and a mitigation program to put into effect when they are detected.
4. For all risks, develop an adaptation and recovery plan. For major risks that could arise suddenly, use scenario planning to understand how the risk would likely unfold, train people to know what they should do, and do a ‘table-top’ and other exercises to simulate and practice coping with these risks and increase business resilience.
5. After recovering from an adverse event, assess learnings and review and change the strategy as appropriate.

This is the approach I’m taking when I talk with businesses about environmental sustainability and social and environmental responsibility. Tie environmental sustainability to risks to business sustainability, and social and environmental responsibility to risks to business reputation, business continuity and business resilience.

I’m convinced that business cares about these risks, and is prepared to take steps to manage them, and that, by doing so, they will become more sustainable and responsible. The businesspeople I speak to want to do more, personally, to make the world a better place and to be better corporate citizens, but to justify doing so they need these actions to be couched in business risk, business sustainability and business resilience terms.

I’m not saying that this is all that it will take. Our markets are distorted and far from perfect, and regulation is also needed that equitably forces businesses to reduce their adverse impact on the planet and on the social fabric of the communities in which they operate. What business managers tell me is that, provided the regulation is equitable, enforced evenly, and provides a level playing field for all players in their industry, they don’t have any problem with regulation that will reduce their adverse social and environmental impact. In fact, quietly and off the record, they tell me they’d welcome it.

This means that race-to-the-bottom ‘free’ trade agreements need to be replaced with fair, regulated trade agreements that put people and the environment ahead of profits. We can never achieve a level regulatory and competitive playing field as long as these laws (which irresponsible global corporatists strong-armed weak and gullible governments into signing) encourage offshoring, exploitation, pollution, waste, cost ‘externalization’ and the dumping of toxins in struggling nations.

When the laws are equal, and the risks are equal, we just might find that business becomes more responsible and sustainable than we, its customers, are. Worth dreaming about, anyway.

It’s about time I stop pretending there’s nothing wrong. If you’re a regular reader of How to Save the World you’ve certainly sensed from my writing that something’s amiss — my writing is shorter, disjointed, unfocused, just not all there. I’m behind in everything I want to do, even though I love what I’m doing. Those I love are not getting enough attention from me. And some of the therapeutic daily and weekly routines I’d trained myself to do diligently lie undone.

I have no stamina. I get interested in things and get wrapped up in them for awhile and then my interest flags and I do something else for awhile. I don’t abandon things (though that’s probably how others see it), I just put them aside, and usually take them up again later with just as much intensity. When I wrote the article about the importance of Doing One or Two Things Really Well, I was trying to provoke and teach myself that very valuable advice, but I often do not take my own advice… Just because you know just what to do, doesn’t mean you’re going to do it.

If the paragraphs above sound familiar it’s because I wrote them in July 2005, in an article entitled Apology. I seem to be back there again. Back then I wrote:

I’m happier than I’ve ever been in my life. But I can’t say the same for the people I touch. Although few are saying it, it’s clear they feel short-changed for my time and attention. That’s why several of my recent ‘thinking out loud’ articles have been about the scarcity of time and attention.

I don’t know what to do. Ideally I should be able to do everything on my Intentions list, and I will, but even though I know how to do them and I’m working on them it’s not happening nearly as quickly or directly as I want, for a number of reasons:

• I’m spreading myself too thin, not allotting enough time or attention to anything. Trying to do too many things too quickly and at once.
• I’m not as efficient at doing things, spending my time productively, as I’d like to be.
• The people I love and work with and network with are also not efficient at ‘using’ my time and attention. They want more time and attention from me than should (I rationalize) strictly be necessary. I can’t blame them for that. I can’t and won’t say ‘no’ to them, because what they want from me is important. That’s why I’m here.
• I need time off, to relax, reflect, write, exercise, sleep, and I’m not taking it.

I know some people who seem to get so much done, but when I ask, they don’t seem to know how they do it. I observe, and admire their energy, but I just can’t seem to figure out the secret.

Advice welcome. Especially if you (unlike myself) have taken your own advice, and found it to work.