Friday, January 09, 2009

Questions on growth

From time to time, I've posted some of my musings about growth. I had a related email discussion recently with a colleague, and one of my emails to him contained questions that I'd like to ask you, too.

We know the world's economies are currently experiencing hard economic times. Yet I wonder if thinking of this in terms of business cycles is the best way today. Jay Forrester has written, "Our greatest challenge now is handling the transition from growth to equilibrium".

If you think of the world in terms of business cycles, getting from bad times to good is a largely waiting game, assuming you've saved enough in the good times to carry you through the bad. Before refrigeration and long-distance transportation of food, that happened on an annual basis, too: you had to save enough food from this year's harvest to survive to next year's. Admittedly, some organizations are good at gaining ground during these periodic "yellow flag" situations, but many of us will just try to survive until the good times return.

If Forrester and others are correct and we're really moving from a long period of growth into an even longer period (possibly forever, at least in practical terms) of relative equilibrium, then dealing with those (equilibrium) times may require a fundamentally different mindset (as Cynthia McEwen and John Schmidt would remind us), not just a changed process.


  • What if (aggregate) growth went to 0% forevermore? What would it mean to you, to your business, and to your personal life?

  • Do you think there's reason to believe growth could stay at 0% or below for a very long time? Is that of necessity either good or bad, or does its value depend upon our reaction?

  • Is it a good idea to try to keep growth positive? Why? Are there any downsides? Are there indeed any limits to growth, either in terms of annual growth rates or the overall size of anything?

  • As attractive as growth may be in the current worldview, systems ideas would indicate that the longer we try to keep growth going once we've exceeded the carrying capacity of the system (the planet), the worse the eventual and inexorable fall and the lower the eventual sustainable standard of living. If you favor continued growth, how will you overcome those seemingly inviolate systems limitations?

  • If the systems theories play out in the real world, how do we reasonably make the transition from our current state to a new, equilibrium state in ways that attend to people (social justice, the ability to procure what we need for life, the ability to make a difference or find purpose, etc.) and the natural environment (sustainability, the depletion of nonrenewable resources)?

  • Can we make such a transition a good thing and not a painful thing?

  • What do we owe our descendants? For how far into the future do we bear responsibility?

  • If these systems ideas have merit, what changes in mindset (in worldview) do we need to survive emotionally as well as physically? For but one example, negative growth has long meant failure for people leading businesses, but that could be the way of the future. Can we realistically change our mindsets and our systems so that satisfying needs (instead of generating growth) defines success?

  • In case these systems ideas don't apply in this situation (e.g., if technology can once again save us even in the face of decreasing energy supplies and rising population), can we design robust actions that work well in either eventuality? How do you answer Tom Fiddaman's questions about the sufficiency of technology?

  • What other questions do you have?



Let me be clear: aggregate growth of 0% does not imply that there is no dynamism, no growth in the economy. Our need for certain products and services will increase, even as our need for others will decline. I'm only thinking of aggregate growth in posing these questions.

I have lots of questions and only tentative answers. Right now, I really am interested in seeing your questions, as I've seen the power of listing questions before trying to provide answers.

Later, we'll get to considering answers and how we might test those answers for reasonableness and usefulness.

Questions?

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24 Comments:

Blogger Bill Harris said...

I sent word of this posting to Art Kleiner, and he responded with a comment and a link to an article in strategy+business by Yoshiyuki Kishimoto, Hiroyuki Sawada, and Chieko Matsuda called Follow the Customer, Follow the Car. It's a good article; I encourage you to read it. Sometimes history can replace or at least augment a simulation model as a learning tool.

A few comments:

- The emphasis in the article seems somewhat related to that in More on growth: realize when your market plateaus, and meet demand, not (arbitrary) growth goals.

- If one isn't careful, the approach in the article could lead to a not-so-good forced obsolescence strategy. I like that our last car (Japanese) ran until it had over 200K miles on it, and we got rid of it only when someone ran into it and totalled it. I like that our current car (Swedish) has close to 170K miles on it and largely seems as solid as when it was new. I like that we bought each of them, drove them away, and mostly never went back except for oil changes and other routine maintenance.

By contrast, when we bought US cars before that, I was a constant visitor to the service shops to get warranty and then non-warranty repairs. That may have only been my poor luck, but it spanned at least three different vehicles, and I'm no longer willing to take the risk. As a reader of Deming and others of that persuasion, I do not blame car production workers for those results.

- The authors may be right on bank consolidation, but I wonder. There seems to be an undercurrent of a focus on small and local, driven partially by complexity issues and partially by environmental concerns. Will that apply to banks? I don't know, but my business account is at a small, local bank. If I were to move it, my second choice would likely be a bank that's even smaller and more local. Why? They seem to care about me first and their bottom lines second, not the other way around.

- Most importantly, the authors do downplay growth over servicing scarce customers, but they don't quite get to stating explicitly that a focus on growth may be a bad thing for society and for business, as far as I can tell. I suspect many managers reading that article would get the message to push a bit less strenuously for growth; I think the important message may be that managers need to change their mindsets away from growth. It's back to the Dana Meadows leverage points list: not striving for as much growth is, at best, the weakest of leverage points in her categorization. Changing mindsets to focus on customers and their needs (not wants) and to give up on growth is near the strong end of her list. If we are at or beyond the limits to growth of this planet, we may need to wrestle with such mindsets.

I still welcome your questions.

10 January, 2009 09:35  
Blogger Wayne said...

We don't expect to get healthier and healthier as life goes on. In fact, we are thrilled when we can maintain our health. If maintaining individual health is a worthy objective, could maintaining organizational health also be worthy and sufficient? In my experience with organizations, the reason they need to grow is that it can help to cover up errors and inefficiencies. The mindset that really needs to change in my view is that of exploitation (of the Earth's bounty). In its place there should be a sense of balance and harmony. Can the current economic "engine" be morphed into one based on such a radically different paradigm?

10 January, 2009 19:11  
Blogger Bill Harris said...

Wayne, thanks: I like your metaphor.

To take one aspect of your last question, if we change to a different paradigm that's not built on growth, can we figure out how to get money into the hands of all who need it? Or will our reaction to low or zero growth be to trim people out of companies to keep the organizations viable while building unemployment?

And is Chris Martenson correct? Is an economy built on lending inexorably drawn to growth for survival? I don't know.

Incidentally, my fifth point in the original article looks like it's going to refer to a triple bottom line, but then it only references people and the environment, not profit. That was intentional. It's not that profit isn't important—it is—it's that I was viewing the economic system as having the purpose of helping people, not being an entity worthy of support in its own right independently of people.

11 January, 2009 15:59  
Blogger James said...

This is a great post, Bill, it is good to see you cultivating this conversation. These thoughts are quite similar to some other conversations emerging in the ecological economics community so based on this similarity I am struck by Herman Daly's perspective on the difference between growth and development: "Growth is more of the same stuff; development is the same amount of better stuff (or at least different stuff)." This is one tiny snippet of a great piece that he just put out in Adbusters on The Steady State Economy, and it is also worth note that Adbusters has recognized Herman as "Person of the Year.

Alan Atkisson has also pointed out that many other natural systems transition from growth to development phases with relative ease. For example, he points out that the human body grows for about two decades and from that point on continues to develop. Our economy is going through a similar transition now from growth to development.

Questions abound for me on this topic. Perhaps foremost--how we to encourage understanding that quality of life can still improve while quantity of consumption decreases?

Also, in light of the current economic crisis, how can we best protect the economy's life-supporting functions such food production, health care and ecosystem services amidst the chaos that will undoubtedly trim the less important financial and luxury markets?

Last but not least, a question pertaining to the obvious fact that free market capitalism is finally being revealed as a flawed model. What new national and international policies and institutions do we need to design in order to prepare for a transition to a steady state, or true cost, economy that recognizes the need for investments in natural and social capital as well as financial?

11 January, 2009 16:04  
Blogger Bill Harris said...

Jim, thanks for your comments and additional questions! That's what I'd like to see at this time: more questions we need to consider. I'd like to see them from people with a broad spectrum of a priori beliefs, too, for we all may have concerns, and we all may see different important factors we need to understand.

Thanks, too, for the links and for that definition of "development." I admit to being one of those who wonders if sustainable development is an oxymoron, and I admit that it hinges on the definition of "development."

11 January, 2009 16:17  
Blogger Julian Goh said...

Bill Harris,

Here is my observation:

1. Our economy cycle is shifting from long-term to short-term and then very dynamic. Dynamic will be based on 'per second basis.' Thus, 'change management' is relevant to your writing.

Message sent by JOT

11 January, 2009 19:13  
Blogger Bill Harris said...

Thanks, Julian. I agree that figuring out how to do change management in this sort of situation could be important. Any other questions to add?

11 January, 2009 19:43  
Blogger gsociology said...

I saw this discussion about growth. We have a couple of reports and a guide that shows world and regional economic growth trends, here:

Understanding the World Today
http://gsociology.icaap.org/

These reports and the guide might be useful to give context or background to discussions of economic growth.

Gene

11 January, 2009 20:34  
Blogger Bill Harris said...

Thanks, Gene. (To make it a bit easier, that link is http://gsociology.icaap.org/.)

11 January, 2009 20:45  
Blogger Wade said...

The limit on growth, in my mind, is an incorrect conclusion based on a poor metric. I would like to suggest something far beyond what realprogress suggests, although their paper "If the GDP is up why is America down?" (Atlantic, 1995) is a classic worth reading on flaws in GDP as a measure of anything helpful.
http://www.economischegroei.net/file/14

In the physical realm, there are two ends of the complexity spectrum. At one end is "objects" that occasionally "interact", such as billiard balls. Almost their entire existence is in "self-energy" with very little in interactions. At the other end is the realm of galactic centers, where hugely energetic processes exist in interaction form, in a world almost devoid of "objects".

We, in this analogy are looking at ways to increase the number of objects, and say, gosh, there's a limit to how many of anything we can make. This much is true. The most you can own is 1 Earth.

What we are not looking at is ways to increase the value and power and stored energy of interactions, which is where we should be looking, I'd suggest.

This requires understanding "relationships", which are more complicated than "objects", and gives even System Dynamics folks pause.

Here's a relevant thought tidbit though. If you have two vectors, A and B, what's the largest product you can get from them? Most people who know vectors would say, well, that's (a,b) or the inner product a.b or |a||b|cosine(theta) = |ab|.

The correct answer is infinity, if you allow complex values for theta and don't restrict yourself to real values. ( see http://www.pacifict.com/Exponential.html )

So my candidate question is, what would constitute the analogy of complex relationships those with "imaginary" components?

Here's two immediate answers. (1) Virtual Reality. I own a very nice 35 foot sailboat in the virtual world "Second Life" and enjoy sailing it in the Cape Cod area (in Second Life). Having done both, I'd say I get about 95% of the pleasure of a real boat at about 0.01% of the cost. I get to stop and meet people, chat, discover new places.

(2) The incredible waste due to our concept of "other people." This last year it's been clear that many people would rather lose their home and become homeless than, say, let a second family move in with them and share the space and the rent.

This is indeed bizarre. What would be the "value" to these human beings, to all of us, if they did learn how to live happily with each other? They might consume less, and "contribute" less to the GDP, but they might add joy and value in many other now-liberated ways.

Our real pleasures and joys and values in life can be increased unboundedly, if we let go of the idea that the proper metric of them is the GDP or any other variant that assigns values to objects but not to life or dynamic relationships (same thing.)

There is more than power in system dynamics structures, there is potential unlimited wealth, with the same few components. Life does this with genes, as we are increasingly learning, using all mixes and matches, not just 1 gene per function.

We should learn from life.

Wade Schuette
Ann Arbor, MI

12 January, 2009 10:54  
Blogger Bill Harris said...

Thanks, Wade, for your thoughts, your link, and especially for your question.

I'd like to request everyone to hold those thoughts for a bit, please, for we may need them later. For now, I'm hoping to focus on listing questions, in the spirit of what I've learned in the past about using questions to organize thought. If we get enough questions (and if I get enough time), I may try to create a master list of questions that bear on this topic, and then we can begin to think about filling in answers.

Temptation arises, though, and I will make one comment and ask one question about your ideas. I like your idea (which seems quite worth exploring, even as I've not heard anyone mention it before) of people being willing to take in boarders instead of ending up in foreclosure on their houses. Of course, perhaps many tried and failed to find people, but I haven't heard that in news reports.

On the other hand, you write, "Our real pleasures and joys and values in life can be increased unboundedly ..." I wonder. Presumably pleasures and joys are intimately wrapped up with the firing of certain neurons (no, I'm not an expert in this). If that's so, if we have a finite number of neurons, and if there's a limit to how fast they can fire (all true, I think), then it would seem that pleasures and joys are limited indeed.

You might argue that we're far away from that limit, so far that we can ignore it, but I think we've said that about petroleum consumption and pollution not so far back in our past. Is it a problem if we hold out for unlimited growth in seemingly non-physical effects when it's not possible? Might holding out for unlimited growth there lead us to try for unlimited growth in physical effects, as well? Would that delay us adopting a new mindset we may need? Would focusing on increasing our pleasures and joys lead us to try to continue exponential growth for ourselves instead of trying to fix some of the problems that exist today, which sounds more like a goal-seeking feedback loop?

By the way, while some of you know I practice and teach system dynamics, I don't see these questions as intimately associated with system dynamics. I think system dynamics and many more approaches will be needed to make sense of all this. I'd highlight some of the other areas I see, but I'm worried that I might anchor and limit people's thoughts by failing to mention still other approaches, so I'll stay silent on that topic now.

Back to questions. Anyone got more?

12 January, 2009 15:08  
Blogger robertwb said...

I will first pose a hypothesis, then follow that with my question.

H: Assume for a moment that Adam Smith, and other free-market economists (and some ideologues) are correct that un-regulated markets will deliver the best solution to distribution and creation of wealth. However, assume that the correctness of this paradigm hinges on a state of dynamic equilibrium -- a state that is implicitly contradicted by economic expansion (expansion <> equilibrium). To help visualize this, of course, the age old example of English wool traded for Portuguese wine comes to mind -- nothing in this transaction implies any growth, merely an opportunity for two groups of people to maximize their utility through an exchange.

Q: Will a state of zero net growth become a state of dynamic economic equilibrium, and will this new state actually make markets MORE efficient, and effective at elevating the state of the common man??

12 January, 2009 17:34  
Blogger Bill Harris said...

Thanks, Robert, for your interesting question.

12 January, 2009 17:46  
Blogger Dave Gardner said...

Why is our world so hung up on growth to begin with? If I'm reading between the lines accurately, the questions initially posed carry the subtle implication that even as Bill genuinely wants to explore this subject, deep down inside he feels giving up growth is tantamount to giving up air travel, or sex, or grande non-fat, no-whip mochas. Or like deciding the Earth is flat, after all.

How did growth get into our DNA? Has it always been there or is it just since the invention of the steam engine?

Dave Gardner
http://www.growthbusters.com

12 January, 2009 21:56  
Blogger Bill Harris said...

Dave, thanks for stopping by. While I won't reveal what's between the lines here except to say that I am truly trying to explore, your question is very valid and a good addition to the list. Thanks.

13 January, 2009 08:38  
Blogger Craig Larson said...

I am very glad to have come across you blog and site.

I have training in Action Science when I was in the Boston area for a couple of my advanced degrees years ago.

This past year I planted 1,000 haskap plants...a totally new and untried fruit - with great potential. Argyris is my companion every day as I make my way through the maze of espoused theory that is riding the coat-tails of expected prosperity.

Liked your review of: The Age of Heretics

It's good to see a practitioner doing a blog. You are now a link.

Cheers

http://haskapwine.blogspot.com/2009/01/heresy-of-haskap-mental-models-vs.html

14 January, 2009 09:46  
Blogger Bill Harris said...

Craig, thanks for stopping by and for linking, and welcome.

I liked your pointers on action science in the posting to which you linked. Thanks, too, for the introduction to haskap; that's a new one for me.

14 January, 2009 10:31  
Blogger Tom Fiddaman said...

Per Bill's request, I'll resist the temptation to comment, and just question.

First, I second Dave's question, How did growth get into our DNA? and add, What do you do if evolution favors individuals or groups who aspire to growth?

A more pointed version of the above might be, what if the US and EU go green and China and Russia don't?

What if growth had to be -X% per year for Y years in order to reach a sustainable steady state (in material throughput)? How might social systems accommodate that peacefully?

What if technology has limited potential?

What would an evolutionary landscape that favored sustainability look like?

15 January, 2009 16:46  
Blogger Bill Harris said...

Tom, thanks for your great questions and for seconding an existing question. I really want to comment, too, but I'll follow your example and live by the guidelines I set up.

Any more questions out there? I may let this sit for a day or three more, and then I'll organize them and start looking at how we might answer them together.

Thanks, all!

15 January, 2009 17:21  
Blogger Tracy said...

It seems to me that increased aggregate wealth is, on the face of it, better than its absence. This is so "by definition," for the measurement is of how much benefit has been obtained by productive action.

My guess is that people tend to confuse increase in wealth with increased use of raw materials or increased creation of things-on-the-market, especially tangible things.

Materials will always be used and things made, of course, but satisfying a given need with less material use and less manufacturing is (ceteris paribus) an increase in wealth. In this manner economic growth tends to dampen its negative effects, at least proportionally.

Tracy Harms

12 February, 2009 10:47  
Blogger Tom Fiddaman said...

Tracy -

I agree that, all else equal, more is better, and that satisfying a need with less material is also an improvement.

However, I'm not sure I follow what 'dampen' means exactly here. If it means that growth is partially offset by what one might call intensity improvements, so that material use goes up more slowly than wealth, then it merely delays the day of reckoning.

The real question, in my mind, is whether and how wealth can go up while the material flow goes down.

12 February, 2009 16:12  
Blogger Bill Harris said...

John Scherer of the Scherer Leadership Center sent me a question by email and then said it was okay to post: "What will we need to let go of, or 'surrender' at a profound level, in order to embrace the concept of zero growth?"

Thanks, John!

17 February, 2009 22:08  
Blogger Ari said...

It seems the two paradigms presented in the questions are positive growth and equilibrium.

What about negative growth?

Equilibrium assumes that we are currently at a sustainable state, and need to maintain it.

I believe it's more likely that we are in a situation of pretty drastic overshoot in terms of population, resource usage, etc. etc.

Furthermore, if we accept the premise that key resource production such as oil has peaked, we are looking where the net inputs to our society are declining, not steady.

I believe our best case scenario is a graceful "power down" of our civilization. Do I think that will actually happen? Not most days...

18 February, 2009 00:45  
Blogger Bill Harris said...

Ari, welcome. Good question. Rather than giving any attempt at an answer, I'll leave it here for a bit for us all to ponder (and, when I get a moment, I may edit it into the followup posting).

Cool boat, BTW!

19 February, 2009 05:54  

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