Thursday, January 18th, 2018

Understanding conditions… in plain English


Until now, our brief explanations of systems, scales, shocks, and flow have been little more than table-setting. With conditions, we begin to move into the heart of whole-systems thinking, which is all about assessing conditions, mapping connections and capabilities, and achieving life-capital in a flow with change.

As we noted in our discussion of shocks, systems exist and operate within a broader context characterized by changing conditions. To return to our familiar example of an automobile, the surface beneath the vehicle may be bumpy or smooth, but there is always a surface (since cars don’t levitate, fly  or float). The surface, then, is one of many conditions that together form the context in which the car exists and operates. Others might be wind speed and direction, traffic density, the amount of available gasoline in the tank, the skill of the driver, the speed of the vehicle, etc. Each of these conditions (e.g. traffic density) has a present value (e.g. heavy or light) that produces an effect upon the system (shock). So, when we use a term like “changing conditions,” what we really mean is that the value of a given condition changes. Roads go from being smooth to bumpy; traffic goes from light to heavy; the wind picks up; gas runs out; etc.  This is important, because while underlying conditions will change, they are more stable than their values, which, as in the example of wind speed, may change from moment to moment.

Emerging conditions

In addition to present value, conditions also possess emerging values that can be forecast and planned for. An example: As an automobile moves down a road, the present value of the traffic density condition may be “light.” But ahead, the driver can see the distinctive blue lights of police activity, along with dozens of flashing red brake lights. This tells the driver that the emerging value of the condition known as traffic density is “heavy,” which in turn allows him/her to adapt the system to that “condition.” Although the emerging condition-value “heavy” will only be the present at some point in the future, assessing that emerging value is not an exercise in prophecy or guesswork. By looking at the whole system as a whole, not as particular parts, it is possible to make a rational estimate of the character of an emerging condition.

Conditions at scale

You’ll recall that our discussion of scales began this way: “All systems operate at scale, and all scales are relational.” In that discussion, we proposed four scales: the Me Scale, the MyScale, the Us/Them Scale, and the One Scale. If systems operate at scale, and if conditions are the context within which systems exist, then it makes sense that conditions must scale, as well. To illustrate conditions at scale, we park the car and find a new example.

Let’s use your personal finances. At the Me Scale, your financial system operates within the context of such conditions as your household income and expenses, your career, your marital and tax status, etc. Each of these has both a present value and and emerging values. For instance, your household expenses this month may be higher than they were last month due to an unexpected repair bill or a quarterly tax payment. Depending on how much higher those expenses are, your personal financial system may experience quite a shock.

At the My Scale, your financial system is or may be affected by the local economy, your employer’s revenue, the relative prosperity or want of family members, and so forth. For instance, let’s say your brother-in-law loses his job and is in danger of missing a mortgage payment before his unemployment compensation kicks in. This is an emerging new condition, arising from the My Scale, that may have an impact on your personal financial system. One evening the phone rings. You answer and it’s your brother-in-law  asking for help paying this month’s mortgage. An emerging condition has just become a present condition. What’s more, he wants to borrow the entire amount. Now not only has the condition gone from emerging to present, but the value of that condition has gone from unknown to expensive.

Now let’s look at how events at the Us/Them Scale can give rise to conditions that affect your personal financial system. Let’s say that the government of China decides it can no longer purchase American government securities. As a result, the American government can no longer find enough buyers for it’s debt, forcing it to either raise taxes or cut spending in order to close the gap between revenue and expenses. So, let’s say the government does a bit of both, raising the marginal tax rate across the board by 5% and announcing that it will not fund a planned extension of unemployment benefits to Americans who’ve been out of work more than six months.

You now have two emerging conditions arising from the Us/Them Scale, both of which are likely to create shocks to your personal financial system. First, the tax hike goes into effect on the first of next month. Every paycheck after that will be 5% lighter, which means you will have to adjust the amount of pre-tax money you route into your 401K plan. It’s not a big deal, but there will be some pain. For our purposes, a condition which began way out in the Us/Them Scale – in a government meeting room in Beijing, to be precise – has just become an emerging condition affecting you in the Me Scale. But there’s more. Your brother-in-law is now four months into unemployment. He’s had no job offers and even interviews have dwindled away. In just two months, you are going to be faced with providing your sister and her family with regular assistance, or watch them lose their house. It’s yet another emerging condition arising from the US/Them Scale, but one that threatens severe shocks that will test the resilience of your personal financial system. Fortunately, by assessing conditions at scale, you are aware of the threat and still have plenty of time to begin adapting your system to meet it. That’s the goal of whole-systems thinking!

Seeing patterns in the chaos

Do you detect a pattern in the examples above? Doesn’t it seem clear that conditions usually arise from the outer scales and move toward the Me Scale? Think about your brother-in-law losing his job. We identified that as a product of the My Scale, and in fact in relation to you it was just that. But if we had looked a little closer at the circumstances surrounding his unemployment, we might have seen that his industry was the financial bellwether that convinced the Chinese to stop purchasing American securities in the first place! So, we say that as a general rule, conditions arise from remote scales and remain emergent until they reach the Me Scale, when they become present and interact with our personal systems.

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