My Way - Three Stories - Part 3

Part 2 focused on the largest of three stories - namely, the one about creation and the creative impulse.  In Part 3, I'll try to focus more on the medium and small stories: finding "my way" at Sage Garden Ecovillas (the medium story), and what that way is (the small story).  Before I continue, I remind myself 1) the way I'm describing is not necessarily the way for anyone else, and 2) my knowledge of whatever way I call mine is colored and limited by whatever reference I compare it to - in this story, that reference is the prevailing theory and practice of business, or "business as usual."

Here's where I left off in Part 1.  The white nodes represent ideas important to business as usual, and the green nodes are the corresponding alternatives in my way.  When I continued to "pull" the green nodes away from the white nodes, some new differences emerged along the fissure between how / why, inclusive / exclusive, and all / self.

Development: Growing vs Building
The next difference to emerge was development by growing vs building.  Because growing fosters stronger connections to the surroundings and stronger connections across scales, growing and inclusivity are mutually supporting.

Time Frame: Long vs Short
Development by building and making decisions for the benefit of self encourage focusing on a shorter term than development by growing and working for the benefit of all.

Organizational Changes: Evolve vs Evaluate
This difference has to do with the way organizations change over time.  The standard business as usual way to direct organizational changes is by evaluations, which in some cases occur at fixed intervals, or in others, at the completions of a building cycles.  The guidelines for evaluation focus more on how than why.  Development by growing allows an organization to evolve continuously under the direction of the why.

Abundance vs Scarcity
The self-fulfilling belief in scarcity - the idea that there is not enough to go around - supports the attitude of competition, while the belief in abundance facilitates cooperation.

Convenience vs Mindfulness
Continuing to "pull," one result of focusing on the "how" is placing a high value on expedience and convenience, whereas focus on the "why" leads to valuing mindfulness.

Accounting: Owning vs Tending
The series about Making and Taking describes the standard approach of financial accounting, which naturally results from the idea of scarcity and benefiting self.  That series has just started to scratch the surface of an alternative accounting approach based on material well-being.  Standard financial accounting is based on owning, and because its fundamental metrics are in currency or derivatives of currency (whose value is in trade advantage) it favors taking over making.  But this emerging alternative approach is based on tending, and its metrics favor instead the creation of material well-being.

Guidance: Purpose vs Rules
In standard business culture, driven by the ideas of scarcity and expedience, you take as much for yourself as you are allowed under the applicable rules.  Individuals are expected to subjugate or channel their own avarice to the rules and the chain of command.  The ideas of abundance and mindfulness give you the latitude to be guided instead by your purpose.

Deliberations: Sincere vs Convincing
How do people behave while making collective decisions?  In Business As Usual cultures, where the "how" and convenience are emphasized and people are guided by what they can get away with under the applicable rules, deliberations are characterized by convincing arguments.  You co-opt the operational agreements - such as company rules, or de facto patterns, or quarterly objectives that everyone agreed to, or the shallow vision statement that everyone pays lip service to - as leverage to convince the other stakeholders to support your desired outcome.  So your interests are first projected if you will onto an outcome that you think will meet them, which is then projected onto these co-opted operational agreements, which is projected onto the decision makers' responses, and so on until action and actual results.  And each of these projections introduces distortion.  My conjecture (I haven't tested this yet) is that in cultures that value the "why" and mindfulness,  people can sincerely express their interests, which makes it possible to negotiate directly on how to fulfill those interests.

All of which brings us to this:

What's next?

I hope these three stories have demonstrated what can be done - that with a little patience, persistence, and self-examination, you can develop your own insights, your own "hey, wait a minute" ideas (whether they're attitudes, values, beliefs, perspectives, or practices) into a coherent, self-sustaining system.  And I hope it has inspired you to do so.  If it has, I hope I get to hear about your ideas and learn from your experience.

I'm sure I'll continue to develop and critique the system in the "small story," and some of the singular ideas (like the accounting system based on tending instead of owning) will develop into their own systems.

Making and Taking - Part 2 - Examples

Part 1 showed how to decompose a favorable transaction into a taking part and a making part, using a plot on what we can call a "payoff plane."

But why single out this particular decomposition out of the many possible ways to dissect such a transaction?  Sure, the word "taking" may evoke the intrigue of moral judgment, or an opposite reaction to justify taking, but beyond such emotional reactions is there any rational, objective reason to pay special attention to the taking / making decomposition?  Yes there is.  If your way of understanding material well-being doesn't start the way finance does, by drawing that boundary around the individual or other entity, or if, for instance, you're considering global customs, international law, or ideas that have global influence, then the distinction between making and taking is a crucial one, and here's why.  If a rule or idea influences people to take more, what is the net benefit to our global material well-being?  Zero.  On a global scale, we gain nothing and lose nothing when one entity takes from another.  But a rule or idea or anything that influences people to make more has a positive impact, because every single act of making more material well-being contributes to our global material well-being.

A variety of metrics for comparing alternatives can be derived from the payoff plane, one of which is defined as the benefit to self + the benefit to others.  We can call this metric the "making metric" or synonymously, "value creation."

Let's look at some example situations that illustrate the difference between evaluating according to today's financial conventions and evaluating according to this unconventional making metric.  But before we do that, I'm going to take another crack at the difference between assets and material well-being - which I downplayed in part 1, but I'll insist on making the distinction here, because the two ideas (viz the making metric and material well-being) reinforce each other, and because the distinction will affect the axes of the payoff plane and greatly enhance the illustrative power of the upcoming examples.

On the one hand we have "asset," which is an additive attribute of items that are assigned to an entity through the artificial relationship of ownership.  On the other hand we have "well-being," with synonyms like contentment, health, happiness, and more generally, good condition.  Material well-being is access to goods and services that contribute to good condition.  Unlike the idea of asset, material well-being cannot be exactly divided and accounted for among the whole set of goods and services a person has access to, but that's not to say it can't be understood quantitatively.  If a certain material condition is given as a premise, then the singular contribution of any one good or service either added to or removed from that condition can be evaluated and quantitatively compared to other goods or services.  The financial value of an asset is based on how much it can fetch in trade in a market, whereas the well-being value of a good or service is based on how much the condition of a life is improved.

For clarity, in upcoming graphs where I'm plotting gains in financial assets, I'll label axes in the positive direction with the word "acquisition," and where I'm plotting well-being, I'll use "benefit."

Now we're ready for some example situations.

The first example I'll call "barter."  In this example, two people willingly swap one good for another.  Let's say a shepherd gives a farmer a fleece in exchange for wheat.  It may happen that the market value of the fleece is equal to the market value of the wheat, in which case, from a financial perspective, this trade has zero effect on either party.  In that case, the barter is neutral (no financial change - that is, no change in net worth) to both parties.  In this case, the one-dimensional plot of the financial effect on the shepherd looks just like that for the farmer:

Namely, it shows zero net effect.

But what do we see on the payoff plane when we plot material well-being and use the metric of making?  Now instead of the trade value of assets, we're talking about the effect of goods on the parties' material well-being.  Because the shepherd has more fleeces than he can use, but he doesn't have much wheat to eat, this trade has a positive effect on his material well-being.  And because the farmer has more wheat than she can eat, but she doesn't have enough wool to make the new clothes she needs, this trade also has a positive effect on her material well-being.  The plot (two-dimensional this time) of the effect for the shepherd looks roughly like that for the farmer:

So in the first example, the financial effect (for either party) is zero (neutral), but the creation of value (which is by definition the same for both parties) is positive (beneficial).  Let's look at an example where the contrast between these two perspectives (the perspective of financial assets vs that of material well-being) is even greater.

I'll call the second example "bad loan" after the toxic mortgage loans that led to the housing bubble of 2008 and consequent foreclosures.  Let's consider the effect of one of these loans on a decision-maker - let's say a CEO of a lender whose practice was to sell sub-prime mortgages, pay for favorable securities ratings, and then package and sell the mortgages to investors as low-risk, high yield investments.  Financially, this is a win for the lender, which gives the CEO a bigger bonus, so it's a win for the CEO.

In terms of value creation, this transaction scores the CEO some bonus money, which marginally (because he has no shortage of money to start with) improves his material well-being.  It negatively affects the investor who buys the mortgage, which is later defaulted.  It has an even larger negative effect on the borrower, who loses his house in a foreclosure.

So in the second example, the financial effect for the CEO is positive (beneficial), but the making value is negative (harmful).

The last example I'll call "freecycle" after the internet service that helps people give away unwanted stuff.  In this example, a gardener has removed a walkway of pavers, maybe to make room for a new garden plot.  The gardener has an asset - a stack of pavers - that she gives away to someone else who wants them.  Financially, this is a loss for the gardener.

But because the pavers weren't contributing to the gardener's well-being - in fact, because they took up space, they were diminishing her well-being - and because the new owner had a use for them, this is a gain for both parties in terms of material well-being.

So in the last example, the financial effect for the gardener is negative (harmful), but the value creation is positive (beneficial).

In the next post on this topic, I should talk about the inverses of taking and making, show a more detailed and comprehensive breakdown of the regions of the payoff plane, introduce some other metrics that suggest themselves (besides value creation, which is the making metric), and explain more what this has to do with sustainability.

Making and Taking - Part 1

Why would a for-profit business freely disseminate its trade secrets?  Why would it intentionally undermine its own competitive advantage?  These are variations on a question I'm often asked when I describe the objectives of Sage Garden Ecovillas.

To answer that question, I want to talk about a blind spot in our "Business as Usual" or mainstream understanding of business.  This particular blind spot comes from our financial metrics.  I'll describe a way to broaden one of the core values underlying our concept of finance, and then see what specific re-thoughts and un-learning are suggested by this broadened perspective.

Every idea and every practice in our financial body of knowledge serves the objective of owning more.  Financial accounting starts by drawing a boundary around an entity (an individual, a household, a firm, a government), and from there on, it's all about what assets are assigned to that entity through our concept of ownership.  Once the identifying line is drawn, it becomes difficult to answer one deep, self-reflecting question: "What's the point of owning?"  It may sound like a rhetorical question, but I think it's worthwhile to try to answer it.  If you can imagine for a moment dissolving that identifying line, it's easy to see that the point of owning things is material well-being, i.e. access to material goods and services that make our lives better.

I should clarify a few things.

Thing one: Material well-being worth paying attention to.  Eating food, using shelter, receiving healthcare - these are all aspects of material well-being that can improve lives.

Thing two: I'm not denying the benefit of understanding and applying our financial body of knowledge, any more than I would deny the benefit of food to feed our biological bodies.  When I'm hungry, seeking out and eating food improves my life.  Analogously, when my income and expenses are out of balance, financial analysis can improve my material well-being and thereby improve my life.  (But just as it would be unfulfilling to spend my life focusing exclusively on amassing and consuming food, staying stuck on a financial mode of thinking - or any mode based on exclusive ownership - would mean missing vastly more meaningful and beneficial ways of relating to material well-being.)

Thing three: This blog might start to sound like a critique of an economic system or systems.  It's not.  I suppose I'm describing attitudes toward economy that may be more encouraged in some economic systems than others.  However, the empowering point to get is that an individual's attitude is her or his own either to choose or to yield to outside influences.

So this is the broadening I mentioned in the beginning - from assets to material well-being.  But this is more than a matter of vocabulary policing.  If you can use the word "assets" and not mean something about exclusive ownership, be my guest.  It's just easier for me when I use the term "material well-being" to think of something other than exclusive individual ownership.  The words "material well-being" sound more to me like something that could refer to the global population than "assets."

Here's the gist of the blind spot I mentioned earlier.  Our way of understanding and measuring finances is blind to the difference between making and taking.  You can't determine from any numbers in a budget, balance sheet, profit & loss statement, or ledger how much material well-being is created vs taken away from someone else.  My assets and income carry no memory of how the material well-being of others was affected in the transactions when I obtained them.  Stay with me, because this is something we're not used to acknowledging, but every transaction in which I gain assets can be divided into a making component and a taking component.  You know what?  Some pictures will help me explain exactly what those components are, and why they are invisible in our current methods of financial accounting.

Let's look at the case of personal finance.  Personal financial accounting measures material well-being in the form of net worth, which is one dimensional.  Therefore the net change in material well-being associated with any ledger entry is also one dimensional, whether it's a positive change (a gain), a negative change (a loss) or zero change.  Whatever the change, it can be represented as a point on a number line.

For the purpose of financial accounting, that one dimension is enough.  But we start to see some interesting things (including what I mean exactly when I say "making" and "taking") when we add a dimension for the net change in material well-being of others.  Every entry in the ledger can affect the material well-being other people.  We can total up all the effects on other people and come up with a second number that represents the total change in material well-being of everyone else.  Now the effect of any entry in the ledger is represented by a two-dimensional value, that could be plotted as on point on a plane like so.

Any change plotted in the upper right quadrant has a win-win effect on material well-being; any change in the lower right, a win-lose (a personal gain and a loss for others).  The lower left is lose-lose, and the upper left is lose-win.

Finally, I can show exactly what I mean by "making" and "taking."  (Notice I chose a point in the win-lose quadrant, so I can show an example of a non-zero taking component.)

The extent to which the total material well-being of the global population (including myself) is increased - that is the making component.  The extent to which my material well-being is increased by reducing the net well-being of everyone else - that is the taking component.

Notice this distinction transcends all customs, laws, morals, and other systems of rules.  Such systems often endorse taking under specified circumstances.  That endorsement can make it hard for us to apply the word "taking," because we give the word "taking" an unjust connotation, and anything endorsed by an accepted system of rules is considered just.  But the senses of the words "making" and "taking" that I'm using are unaltered by any legal system, or social norms, or religious doctrines.  Taking is taking.

This is probably a good place to take a break.  I'll continue in a future post and talk about why the making-taking decomposition is so important, what it has to do with sustainability, and why our obsession with money and ownership-based accounting encourages unsustainable habits.

Fun and Games

One way to discover and answer questions about the theory and practice of regenerative business is to sit and think.  A second way is to do: to open a business and see what it takes to use that business to have a regenerative effect on the environment and society.

A third way is to play games.

(Wait-- seriously?)

Sure.  Why not?  Many successful games have premises based on real-life, relatable pursuits, questions, or problems.  Think of Monopoly, Risk, Clue, Battleship, Scrabble, ... ok, maybe not Scrabble so much.  And the variety of strategies that arise from a simple game is often much richer than the content of the rules.  So why not use game design and game playing as a way to explore regenerative business?

That's it - I'm making a game about regeneration.  At the very least, this exercise will give me yet another model to suggest and try out concepts, methods, and strategies for regenerative living.  And who knows?  If this project results in a game that's actually fun to play and educational, it could potentially 1) help raise awareness of alternatives to the destructive prevailing ideas and practices surrounding material well-being, 2) give players an entertaining way to examine our own ideas and practices about material well-being, and 3) facilitate the global conversation about what to do next.

I won't bore you with the details (which are still in flux anyway), but in its current form, this starts as a competitive game where one player can win by dominating the economy, but players who are more interested in the long view can quickly turn it into a cooperative race to build an alternative economy and avert the extinction of our species.

My ten year old son recently helped me test a prototype, and we learned some things that will help us refine the design.

My Way - Three Stories - Part 2

Part 1 started developing three simultaneous stories: a large one about creation and the creative impulse, a medium one about finding "my way" at Sage Garden Ecovillas, and a small one - told partly in diagrams - about what that way is.  The diagrams I've used so far show a mirrored relationship between "Business As Usual" and "My Way," and that's intentional.  It's an admission that 1) what I perceive as my way is not the thing in itself, but only how it differs from the prevailing "right" ways (business as usual), and 2) the prevailing ways are just as self-consistent as my way.  But does that mean the perpetuating business as usual is just as good?  Maybe it's time to continue the large story.

... we ask, "But which way is my way?"  Now that the world of ways to do is no longer void or formless, and we have spent some time practicing the "right" ways, we start accumulating consequences.  Only now can we start to see the limitations of model that we used to call some ways "right" and others "wrong."

It's like the development of any living being.  Before we're born (or hatched, or sprouted, or whatever our emergence looks like), we operate on a model of interaction with the universe that works for us, but only temporarily.  That model could be summed up as, "do nothing, and the universe will take care of you."  After we operate under that model for a time, our physical size and the evolutionary significance of that model demand that we emerge as an individual organism and move on to new model, which for human organisms could be summed up as, "kick and scream when something feels wrong, and then the universe will take care of you."  This model is a vital improvement over the prior one, and it keeps us alive for another stage of development, but it is also temporary - another stage in a long progression that starts like this:

Let's return to the question that started this: "Is it just as good to perpetuate business as usual, or is my way (or your way or the way of any of us) any better?"  In a sense, if we step outside of time and our historical context and look at the whole timeline of the development of human wisdom and the accompanying behaviors, today's business as usual is just as valid and important as any other model at any other stage of development.  But in another sense, from the perspective of our current time, failing to move on from business as usual would be as dangerous to our species and our planet as refusing to be born (when it's time) would be to a fetus and her mother.  I say "would be" instead of "is" because it's inevitable that we will move on, even if it's with as much kicking and screaming as any infant.

I really got caught up in the large story there, didn't I?  I didn't mean to.  Next time I write about this topic, I'll try to focus more on the medium and small stories.