Transitioning From Ego-system to Eco-system Economies (1)

The following is excerpted from a summary of the book by Otto Scharmer: Leading from the Emerging Future: From Ego-system to Eco-system Economies, which features Ten Transition Theses

Otto Scharmer writes:

“We live in an age of profound disruption. Global crises, such as finance, food, fuel, water, resource scarcity and poverty challenge just about every aspect of society. Yet, this disruption also brings the possibility of profound personal, societal and global renewal. We need to stop and ask: Why do we collectively create results nobody wants? What keeps us locked into the old ways of operating? And what can we do to transform these root issues that keep us trapped in the patterns of the past?

The book Leading from the Emerging Future: From Ego-system to Eco-system Economies ponders these questions and proposes a new line of thought that is summarized in the 10 insights below.

* 1

(1) The root cause of today’s global crises originates between our ears — in our outdated paradigms of economic thought.

Wherever you go and talk with people, they already know or feel that we are approaching a moment of disruption. You’ll find this is the case whether it’s a team at the top of global companies, governments, civil society organizations, or citizens gathered for grassroots-level community meetings. Most people today feel that we live in a time where something is ending, and something else wants to be born. This feeling is so common that we almost take it for granted now. Yet, just 10 or 15 years ago it didn’t exist the way it does today.

The symptoms of the current crises can be summarized in terms of three divides that disconnect self from the primary sources of life: ecological, social, and spiritual. The ecological divide manifests in symptoms like environmental destruction. We currently use 1.5 times the regeneration capacity of planet earth. In other words, we actually use 1.5 planets! The social divide manifests in increasing rates of poverty, inequity, fragmentation and polarization. And the spiritual divide shows up in increased rates of burnout, depression and in an increasing disconnect of GDP from the actual well-being of people.

The ecological divide is based on a disconnect between self and nature. The social divide disconnects self from other. And the spiritual divide is based on a disconnect between self and self — between the current self (which resulted from our journey of the past) and the emerging future self (that may result from our journey to the future).

What driving forces cause the deepening of the three divides? If the symptoms represent the visible part of our current reality iceberg above the waterline, what does the systemic structure below the waterline look like?

At first there is a set of eight systemic key issues. A structural disconnect between:

* the infinite growth imperative and the finite resources of planet earth;

* between the Haves and the Have Nots;

* between the financial and the real economy;

* between technology and real societal needs;

* between institutional leadership and people;

* between gross domestic product (GDP) and actual well-being;

* between governance mechanisms and the voiceless in our systems; and

* between actual ownership forms and best societal use of property.

These structural disconnects depict a broken system. But what is the root cause that gives rise to these disconnects and their systemic bubbles?

We believe that the most important root cause for these systemic disconnects originates directly from our paradigms of economic thought.

Like most things on earth, economic frameworks also have their life-cycle of birth, development, growth, and finally a phase of outliving their usefulness. The frameworks of modern economic theory are no exception. For example, after the world economic crises of the 1930s, the mainstream economic thinking evolved by opening up to Keynesian macroeconomic thought, which then shaped policy making for the better part of the remaining century. Then, after the stagflation crisis of the 1970s, mainstream economic thinking evolved again by opening up to Milton Friedman’s articulation of monetarism, which influenced policy making for the decades that followed. How then has the mainstream economic thinking evolved and opened up as a result of the global financial crisis in 2007/8?

Unfortunately, there has not been any significant evolution or opening of the mainstream thinking since the financial crisis, and our economic debates are still shaped by the same frameworks, faces, and false dichotomies that ushered in the crisis. This is even more worrisome as the 2007/8 crisis may well mark a bigger disruption than the two crises previously mentioned. This is precisely why the development of an advanced economic framework is one of our primary tasks today.

The main shortcomings of conventional economic frameworks and theory can be summarized in two words: externalities and consciousness. While externalities have been discussed at length, consciousness tends to not even be noticed.

* 2

(2) The blind spot of modern economic thought can be summarized with a single word: consciousness.

Consciousness doesn’t register as a category of economic thought. It happens to be a blind spot. However, in the reality of business leadership, the real role of a CEO has everything to do with it. For example, most work of managing change boils down to helping conflicting stakeholder systems to move from one way of operating to another, that is, from just seeing their own point of view to seeing the problem from multiple perspectives. Whenever people leave their own points of view and begin to appreciate the perspectives of other stakeholders as well, the consequence will be better collaborative relationships and better results.

Yet, in spite of its growing practical relevance, consciousness still doesn’t register as a category of economic thought.

* 3

(3) The evolution of the economy and of modern economic thought mirrors the footprints of an evolving human consciousness.

The history of the economy and of modern economic thought can be reconstructed as the embodiment of an evolving human consciousness. The modern economy is based on division of labor, which consequently has led to enormous leaps in productivity. Division of labor comes with the question: How do we coordinate all these individual activities to a coherent whole?

Viewed from this angle, we can differentiate four responses to this question, which include the stages of economic development that come with them:

1.0 Organizing around centralized coordination: This involves organizing around hierarchy and central planning, giving rise to centralized economies (socialism, mercantilism), and embodying the traditional forms of values and awareness.

2.0 Organizing around decentralized coordination: This involves organizing around markets and competition, giving rise to the second (private) sector, the free market economy. This embodies the state of ego-system awareness, that is, a concern for the well-being of oneself. 3.0 Organizing around special interest group driven coordination: This involves organizing around stakeholder negotiations and dialogue, giving rise to the third (social) sector and the social market economy (stakeholder capitalism). This embodies the state of stakeholder awareness, that is, a concern for the well-being of oneself and one’s immediate stakeholders.

4.0 Organizing around commons: This involves organizing around awareness based collective action (ABC) as a mechanism to transform stakeholder relationships from habitual to co-creative. This way of operating embodies eco-system awareness, that is, a concern for the well-being of other stakeholders and the whole.

Although each culture and country navigates its own journey through these states and stages, there is a tendency to move from 1.0 to 4.0. There also is a growing complexity through these states, as earlier forms continue to exist in the later stages, i.e., 1.0 institutions (like hierarchies) and 2.0 institutions (like markets) continue to exist in a 3.0 or 4.0 economy, but they do so in an evolved larger meta-context defined by the respective stage. 1

Historic examples for 1.0 include the 18th century mercantilism. For 2.0 we only need look at the 19th century free market or laissez faire economies. The 20th century version of the social market economy or stakeholder capitalism brings us to 3.0. Examples of where the current 3.0 model hits the wall include various types of global externalities. The collapse of the climate talks in Copenhagen and the successful intervention of Wall Street banks after 2008 to prevent effective banking regulation to be passed are prime examples for the systemic failure of Capitalism 3.0 to deal with the major challenges of our time.

Thus, the evolution and complexity of the real economy is calling for an evolution of our awareness from 1.0 (habitual), 2.0 (caring about the well-being of my ego), and 3.0 (caring about the well-being of my ego and some of my direct stakeholders) to 4.0 (caring about the well-being of my ego, all stakeholders, and of the whole eco-system).

In other words, the economic imperatives of our time call for an evolution of our self from ego to eco, from one state of awareness to another. This is not just for moral reasons, but also for economic reasons because getting stuck in the state of the ego no longer makes for good business.

* 4

(4) To paraphrase Einstein, the problem with today’s capitalism is that we are trying “to solve problems with the same consciousness that created them.”

The issues of the three divides may be more intense today, but they are not new. So what have we learned in dealing with them over the past 100 or so years?

We treat the symptoms. For each problem we created ministries, academic departments, NGO clusters, foundations, journals, conferences, career tracks, and so on. In short, we’ve established for each problem a silo solution, a small industry that responds to the respective issue on a symptom basis. If we have learned one thing from the past 100 years it might be: We cannot solve these issues by addressing them one symptom at a time. We keep missing the interconnectedness among the three divides and the deeper systemic root issues from which they originate. We are busy doing exactly what Einstein warned us against: reacting to problems with the same consciousness that created them.

We’re wasting our resources by trying to solve 4.0 (eco-system) problems with 2.0 or 3.0 response patterns. And by debating whether our response should be shaped by 2.0 or 3.0 mechanisms, we are wasting our public conversation with false alternatives. The real questions that we should be asking are: How do we advance our economic thought and action to 4.0? How do we construct pioneering pathways into the co-creative eco-system economy?

* 5

(5) Helping stakeholder systems shift their way of operating from ego-system to eco-system awareness is the central leadership challenge of our time.

Helping stakeholder systems to shift their way of operating from ego- to eco-system awareness is “central” not only in the sense that it is shared across systems, but also in that the well-being and survival of our children and future generations depends on our ability to develop such collective capacities now.

Today’s companies can be likened to today’s nation states. Both are too small for the big problems and too big for the small problems. As a consequence, top-level leaders face major multi-stakeholder challenges that require them to link with and influence large groups of key stakeholders in their eco-systems or extended enterprise. The bigger your extended enterprise, the more success will depend on your ability to make the stakeholders in your system see each other, see the whole, and to care about the well-being of the whole.

We have been doing change work in a variety of systems, including business, education, health, government, and community-based organizations. What struck us throughout these experiences is that the fundamental leadership challenges across these systems are basically the same. They deal with convening large, complex stakeholder groups, making them listen to each other, bringing them on a journey of seeing the system through the eyes of other stakeholders, taking them to a place of deep reflection and stillness, and allowing them to connect to their own sources of inspiration and energy.”

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