Brian Arthur On Coming From Your Inner Self

Brian Arthur interview http://www.dialogonleadership.org/Arthur-1999.html

Electrical engineering, math, operations research, McKinsey, Bangladesh...

(excerpts below...)

*To McKinsey's credit, it didn't go in there and just reorganize on day one. They went into large companies like Deutsche Bank, or BASF, and they just sat and sat. They didn't do anything. They just sat and observed and interviewed and observed and thought and went back and observed. It cost plenty to do this, but they were quite patient. This would go on for months until they had what I would now call a complex picture of what was going on. The opposite of that would be to come in with some cognitive picture saying, "You need to be reorganized this or that way." They actually let a picture emerge, and this wasn't lost on me. I would now call this an inductive rationality rather than deductive rationality. Rather than laying a framework on top, they simply let the framework emerge.

I was studying Operations Research, and after McKinsey I lost faith in that too. Operations research was too mechanistic. I began to realize that the important things in business wouldn't be decided mathematically. Operations research is good for scheduling fleets of trucks or production lines, but when it comes to something truly important a wider cognitive vision first makes sense before you make decisions. That couldn't be done easily via the kinds of decision-making I was being taught.

I was saying that small events can lock the economy into different structures and that it's Fractal - that there are structures within structures, that the entire economy isn't the best of all possible worlds. Capitalism does not lead you to the best of all possible worlds.

This is finer and finer Reductionist thinking. The movement that started complexity looks in the other direction. It's asking, how do things assemble themselves? How do patterns emerge from these interacting elements? Complexity is looking at interacting elements and asking how they form patterns and how the patterns unfold. It's important to point out that the patterns may never be finished. They're open-ended. In standard science this hit some things that most scientists have a negative reaction to. Science doesn't like perpetual novelty.

At deeper levels in business there are decision-makers, agents, and at any time each agent faces a set of problems, probably with a capital "P," and to those problems there are Solutions (Problem Solving). This just happens to be a structure we laid on business, trying to make it a science. We believe there are Problems and there are Solutions. Implicitly it means that if you are managing there is a feeling here that you can actually frame the problem correctly so that there is a Solution with a capital "S," and it's up to you to learn how to arrive at that solution. But all this only works in repetitive business, where you can optimize and the problems are well defined.

And so, the point I want to make is that there is no well defined problem with a capital "P." Imagine it's five years ago and you're thinking about Bosnia. You're in the State Department or the UN and you're going to put in a UN peacekeeping force. If I said to you, "Optimize the problem in Bosnia," you'd say, "What problem?" I mean, clearly things aren't right, but is there a correct problem? Does a problem exist? No. I don't mean there is no problem, but there is no correct problem (Wicked). All you can say is that you have this situation and there are many ways to cognize it.

But what I'm facing more typically as an entrepreneur or business person is a set of situations. And what I'm trying to do is to make sense of these. John Seely Brown says the challenge in the Old Economy is to make product. The challenge in the Digital Economy (New Economy) is to make sense (Making Sense).

Cognition is never extracted from the situation. You don't make sense from the situation, you impose sense upon the situation. Confusion is the absence of the framework, and known confusion just means that you have framework. You can label it. We have a nice saying in Belfast, "If you are not confused, you don't understand anything."

So what is facing management in high tech is confusion. The job of management in high tech, at the highest levels, is not to manage but to find frameworks. Once you have frameworks you're willing to impose, they imply the appropriate reactions. Not optimal reactions, but appropriate. So you can't optimize in this area. All you can do is to act appropriately.

You are conforming to what's arising, but not in a passive way. You are pre-positioning yourself. So in that sense it's all about the position.

In a Cognitive Economy, most businesses are going to be small (SmallCo). They will have the ability to adapt faster; they'll be more flexible. There isn't a prayer of changing the large companies (BigCo), but you can immediately set up a new one. I think that's the way to move forward.

All of this is embodied not in just one person, but in the whole surroundings of that culture. When that starts to get lost, it's not sufficient to put it back. In that sense, cognition doesn't just stop with one person's understanding. It has a large infrastructure as to what your neighbors' cognitions are, what is taken for granted in that Culture, and then what is physically available in that culture to work with. I think that's why regions often get ahead and stay ahead for centuries.*