Monday, March 30, 2015

191. Senseless functionality

Here I connect the discussion of scripts with the discussion of meaning in items 32, 37, 167, and 168. There, I adopted the distinction between reference and sense. Reference (or denotation, or extension) is what ‘is given’: what a term refers to or what a proposition claims to be true. Sense (or connotation, or intension) is ‘the way in which something is given’: how we determine identity or truth.

While reference is social, inter-subjective, fixed, in what is considered ‘valid’, in some language game, sense is personal, fluid, filled with idiosyncratic, experience-based associations that churn in the mind. Reference disciplines, calls sense to order. Sense feeds the ambiguity, fresh views, and can shift reference.

Collaboration utilizes the unity of agreement as well as difference that is allowed to seep through. Together, they offer a dynamic of unity and diversity. In organizations there is cognitive ‘focus’ as well as some ‘distance’, as discussed earlier.

To connect with the discussion of scripts, as a structure of nodes, I now propose a link between reference and script, and between sense and node. This is related to the distinction that the architect Habraken made (see item 188) between the ‘outside’ view of a node, from the perspective of the script, as something that is given, functional, rule-based, serving the purpose of the script, and the ‘inside’ view from the node, which is more procedural, and sees the script as an environment in which to develop and exercise its activity.

The node offers specialized knowledge and capability, largely tacit and impossible to fully document. Practice in the node is richer and more variable than can be caught in protocols imposed by the script. It harbours a host of connections and associations built up in action, in variations upon the activity of the node, depending on context and novel conditions.

That resembles the repertoire of connotations that individuals harbour in sense, which helps them to establish reference, yielding different ways to see things and to argue the truth or purpose of a proposition or activity.

Remember that from the pragmatist perspective that I employ in this blog truth and practice are closely connected, in workability. Recall, also, Wittgenstein’s notion of ‘meaning as use’.[i]

A purely outside, functional view of activity has no sense, in that it leaves no room for variety of view and debate, and hence no room for novelty and change.  

Organizations and discussions often claim a finality, a clarity of purpose and disciplined action, a predetermined form and path, a script, which demands convergence and unity, eliminating the variety offered by sense, shearing off connotations that might have produced a different debate, outcome and script.

Habermas, in his ‘theory of communicative action’ talked of the ‘life world’ as opposed to the ‘system world’.

Richard Sennett, in his discussion of cooperation[ii], also argued for the value of difference, and of cooperation to utilise its potential. He distinguished between a top-down form of socialism, which he called the ‘political Left’, and a bottom up, grassroots form, the ‘social Left’. The first goes for solidarity as unity, the second for solidarity as ‘inclusion’ of variety. For the first cooperation is a tool, for the second an end.

The most extreme form of the first was Stalinist repressive regimentation. A form of the second is communitarianism, with its tradition in American church communities, for example, and appearing to emerge again in present society. I will consider that more closely in the next item. 

[i] Perhaps this is also what Hegel meant with his proposition that ‘the rational is the actual’.
[ii] Richard Sennett, Together; The rituals, pleasures & politics of cooperation, Penguin, 2013.

Monday, March 23, 2015

190. The script of financial crisis

How to account for the perverse behaviour of banks in recent financial crises?
Were the bankers irrational? Were they lacking in morality? In pursuit of high profits they
hived off the risks to society: the state is forced to save a bank when it defaults,
because it is ‘too big’ or ‘too connected’ to fail, bringing down the whole financial sector.  
Arthur Wassenberg[i] proposed that economics neglects social processes of interdependence
and thereby fails to understand the crises. In banking, actors are not autonomous, as assumed in
the ‘methodological individualism’ of economic science, but form systems of
interdependence, complicity, shared interests, imitation, accommodation,
lobbying, and the ‘revolving door’ through which career makers move between the industry
and the regulatory agencies of government.
Here also, one might use the notion of scripts. One can see a script for banks, with nodes
for their divisions and subscripts for the activities performed there, and superscripts of the
industry and political structures. Bank scripts share nodes, in shared activities, shareholders,
supervisory boards, and lobbies.
There are ‘nested games’, ‘prisoners dilemmas’, of workers in banks, banks in the financial
industry and capital markets, and government policy with respect to banks.
Individual workers might feel the appeal for morally more acceptable conduct but are willing
to adopt it only if colleagues do so as well, not to lose out in the internal competition
for positions and rewards.
Bank leadership may want to reform their conduct, but only if other banks do so as well, on the
pain of being fired by shareholders or taken over by financial raiders on the look-out for
businesses that leave profit opportunities unused.
National regulators do not dare to restrain banks unless other countries do so as well, for fear of
driving out their financial sector.
Here we are back at the ‘system tragedy’, discussed before. The system produces outcomes
that are neither intended nor desired. In the interconnections there is ‘loss of traceable and
attributable responsibility’.
What to do? A moral turnaround of bankers is necessary but will not have the desired
effect until also a break of the system is achieved.
The classic answer to prisoners dilemmas is government intervention to impose
the solution where everyone complies with desired conduct.
That happened in the tobacco industry, with a ban on a certain form of advertising. Producers had been wasting money on it, since advertising hardly increased consumption and was needed only to maintain market share. Each producer by himself could not afford to stop, for fear of losing market share. The ban om advertising broke through the dilemma, was welcomed by the industry, and profits rose.
But in banking, on the highest level, the PD between countries, there is no overarching authority, though in the EU attempts are made to arrive at joint regulation.
In terms of scripts, breaking the system entails cutting nodes loose from the script, and
allowing them to operate separately or to reconfigure them differently. Think of how
nodes in the script of a service restaurant were re-configured in the script of a self-service
One might break up banks into savings-and-loans banks and investment banks. Yet the old system tragedy seems to persist, ineradicably. Perhaps rather than trying to reform the system this is best done in the emergence of a new, outside, competing system. That is what happened in history when systems were unable to reform from inside.
We see signs of this. Fed up with the banks, people are developing alternative forms of finance, outside banks, in ‘crowd sourcing’ or in investors and entrepreneurs seeking each other out locally, on the basis of local reputations. These small scale local activities are no longer too big or too connected to fail.
To conclude, I make a connection with the preceding item in this blog. While in the old
system bankers view what workers and customers do ‘from the outside’, instrumentally, as nodes in their script, in the emerging system those components can act from their own perspective, as independent nodes, and let the resulting script emerge from that. 

[i] Arthur Wassenberg, Capitalist discipline: On the orchestration of corporate games, Palgrave-MacMillan, 2013.

Monday, March 16, 2015

189. Decentralization and self-organization

Here I use the notion of scripts to clarify the difference between decentralization and self-organization.

In decentralization, the overall structure (script) imposes minimal constraints on the components (nodes), delegating responsibility for their functioning, and yielding openness, allowing for alternative ways of ‘filling in’ the node. For example, teams are allowed a wide discretion in what they do and how they do it.

The advantage of this is that one takes into account that the nodal activity is a specialism that one engages because one does not oneself have the capability to perform it. Then it is odd to claim, nevertheless, that one can effectively monitor and control the activity from outside.

The next step is to apply ‘horizontal control’. Here one asks the nodal activity to propose how it is to be evaluated or controlled. This ensures that points of control are minimal, since the node wants minimal outside interference, and for the controller it minimizes cost of control. They are also effective, since they arise from the shop floor. If there is cheating in this, control falls back on full top down, outside control. I will discuss this in more detail in a later series on economics and markets.

Self-organization goes further than decentralization. There, nodes develop by themselves and subsequently seek partners to utilize opportunities for combinations and complementarities.

The nodes don’t follow the script, but vice versa: scripts emerge from interacting nodes, in connections that are more or less durable.

One should not overestimate, let alone romanticize, self-organization. As I argued in preceding items in this blog a combination is needed of unity and diversity, of the script perspective and the node perspective. The challenge is to forge minimal unity needed while allowing scope for diversity.

In a book[i] I proposed to see organization as a ‘focusing device’, while maintaining adequate scope for ‘cognitive distance’. The more innovative an organization is to be, the more scope for variety it needs. It can also access variety in collaboration with others, at a larger cognitive distance.

Some interdependencies do require integration or close coordination and alignment. This is illustrated by the failure of the separation, in the Netherlands, of a privatized organization for operating trains and a public organization for the rail infrastructure. They are operationally too connected to allow for that.

Also, as discussed earlier, in item 59 of this blog, there is a need for a certain durability of connections when those require investments that are ‘specific’, i.e. can be recouped only in that particular connection or relationship. Those will be made only when there is a perspective for a sufficient duration or volume to recoup the investment. One should go not for maximum but for optimal flexibility of configuration: durable enough for depth of collaboration, flexible enough to prevent rigidity.

The most extreme case of self-organization is the ideal market, without any outside coordination, with Adam Smith’s invisible hand’ of competition.

However, when specific investments require some minimal duration of joint activity, this entails temporary exclusiveness, limiting competition, which is then forbidden by competition authorities.

The perverse effect of that is that it yields an incentive to integrate the activities into an overarching organizational script, by merger or acquisition, which takes out the advantages of self-organization.

However, self-organization may produce undesirable effects. Worse, it may yield what earlier I called a ‘system tragedy’, where activities are integrated in scripts of interdependence, joint lobbying, imitation, complicity, and mutual protection, or hiding behind each other, with a loss of traceable and attributable responsibility, with everybody pointing to everybody else.

A salient example is the banking sector, generating economic crises. I discuss that in more detail in the next item.     

[i] Bart Nooteboom, A cognitive theory of the firm: Learning, governance and dynamic capabilities, Edward Elgar, 2009

Monday, March 9, 2015

188. Form, design and use

Architect John Habraken analysed the design of buildings in terms of the structured composition of components[i], in a hierarchy of levels (room in a house, house on a street, street in a neighbourhood, …).

This seems similar to the notion of a script that I use, as a structure of nodes. For a restaurant:  nodes of seating, ordering, eating, etc., while the restaurant is a node in a higher level script of location.

The nodes in a building script would be the different parts of the building (foundations, walls, staircase, roof), connecting to each other in an overall ‘carrying’ structure.

Habraken recognised that a type of building is connected also to the social practice in which it is used, the corresponding ‘language game’, one might say. Social practice is informed by the form and (re)constructs or transforms it. Much of the type and the practice is left unspecified because taken for granted, and is tacit, implicit.

In the restaurant it is taken for granted that food is to be eaten, not stuffed into one’s pockets. However, some places offer ‘doggy bags’ for taking leftovers home.

A system is ‘open’ when in a node there are alternative ‘substitutes’ that all satisfy standardised constraints on the node. Then one can delegate subsidiary actives, open them up to outside contributions.  

Openness increases when even the functionality of a node is not prescribed. Here, a space might be used for different functions, to be decided by the user: as an office, bedroom, bathroom or kitchen. But then one needs to build in redundancy: the possibility of inserting ducts for waste and supply of water when the space is used as a kitchen or bathroom.

Habraken distinguished between ‘machines’, where the user ‘stands outside’, seeing the machine (or device, …) as an instrument, with a certain functionality, and buildings, where the user is ‘inside’, and the structure offers a ‘capacity’ for activity. With machines ‘we are in its environment’ while with buildings ‘the thing is our environment’.

Some machines, however, such as boats and cars, form the environment for action. Note also that machines are embedded in user scripts. In their design, machine makers should position their machines in the ‘environment’ of their use.

I would say: from the perspective of the script a node is seen from the outside, instrumentally, while from the perspective of the node the script yields a capacity in which it can function, subject to constraints and enabling conditions.

In an organization, management may see a department or team instrumentally, from the outside, while from the inside its members see the wider organization as a frame for exercising some discretion in their activity.

This connects with the literature on ‘communities of practice’, where professional work is seen as incompletely specifiable, in contrast with the illusion of full outside control.

To function in a community, one must go through a period of ‘indwelling’ to develop the necessary tacit knowledge, absorbing and assimilating what is not and cannot be fully specified in a manual.

In architecture there is a sequence of design, making and using. In modern building and industry they are in different hands, with a division of labour between architect, builder and user. Then the question of control arises. Is use largely determined, and narrowly constrained, in rules, by design and making, or is the user involved in making, with an emergent design?

Habraken refers to bottom-up emergence of forms in traditional and some still existing Muslim cities. Instead of top-down injunctions, home owners negotiate their making with neighbours. The order is procedural and open rather than regulative and closed.

This leads up to Habraken’s effort to re-orient the design and making of buildings to allow inhabitants more scope for ‘filling in’ their idiosyncratic views and preferences into slots (nodes) left open in a basic ‘carrying’ structure (script).

Its organizational equivalent would be to allow workers to bring in their variety of skills, subject to minimal constraints.

That is another way of looking at ‘unity in diversity’.   

[i] John Habraken, The appearance of form, Awater Press, Cambridge Mass, 1988.