In the blog I have been drawing out the role for government in stimulating, managing and coordinating the economy. I have pointed out that in modern society this question of the role of government in the economy tends to fall into a crude dichotomy between “planned economies” and “free market capitalism”, and I have been at pains to point out in various posts that the role of Government and the form of planning I am describing bears no relation to “planned economies”.
In addition, I have been emphasising that we have very little experience in human society of this form of governance. Indeed, the coronavirus crisis is now exposing the lack of capacity within governments for coordinated action to ensure that the basic necessities of life can be provided to all members of society. The urgency of the need to learn how governments can take effective, planned action in the economy has never been more obvious.
This week I’m going to bring these two ideas – the need for a new approach to planning, and the need for learning – together.
Planning as Learning is the title of a seminal 1988 Harvard Business Review article by Arie de Geus, who at that time was the Group Planning Coordinator for the Royal Dutch/Shell group of companies. Shell had developed an approach to planning know as “Scenario Planning”, in which staff in the organisation considered different scenarios that could unfold in the future, depending on the direction of travel of key variables. This reflection on different possible futures enables the organisation to respond more rapidly when one of these scenarios unfolds.
This may sound novel, but not radical. However, when you think about it, when most organisations make a plan, they just form one plan. They make assumptions about what is happening in the world and what will happen in the future, and base their plan on these assumptions. If (and when) these assumptions turn out to be false, humans are not very good at admitting their mistakes, and therefore not good at adjusting their plans. Scenario planning actually develops a capacity to think about different possible futures and therefore to adapt quickly and effectively.
Prior to the oil price crisis in 1973, Shell was the smallest of the big 7 oil companies, known as the “Ugly Sister” of the “Seven Sisters”. It weathered that crisis so well that it emerged from it as one of the two strongest oil companies (along with Exxon). Just such a crisis had been the first scenario considered using scenario planning, and had equipped managers throughout the organisation to respond rapidly and effectively. Scenario planning was also used with the South African Government to enable the transition from the Apartheid system.
The approach was actually based on the latest scientific research at that time into how people learn and also into the history of the longest surviving companies. However, I don’t actually want to look at it in detail. To learn more, I recommend Kees Van der Heijden’s book The Art of Strategic Conversations (Ven der Heijden worked with de Geus in Shell Group Planning) as well, of course, as de Geus’ own book, The Living Company (more on this below). And next week we will look at the work of Peter Senge, who built significantly on the innovations within Shell to develop a comprehensive approach to organisational learning.
But for this week, I want to look in more detail at the link between this approach to planning and learning, which brings us back to de Geus’ article mentioned above. The name of the article indicates its central theme – a plan is not a statement of what the future will be, it is a tool to assist learning. By being conscious of the decisions we are making, and the reasons we are making them, a plan becomes a reference to aid learning when the future inevitably fails to conform to our plan. The reasons we have for making particular decisions are rooted in the assumptions we make about a reality – a particular understanding of, or perspective on, the context in which we are taking action. When our plans don’t work out, it is very often because of deficiencies in these assumptions, and planning becomes the tool by which we can reflect consciously on these and refine and improve them.
The main theme of this section of the blog is that the dominant worldview of Western civilisation – individualism – has become the lens through which we all perceive the world, and it is a lens that wholly distorts reality. This worldview is seductively attractive to people because it justifies their position in society and their level of wealth and privilege. The worldview generates a kind of blindness in our perception of social reality, akin to the blindness of religious fanaticism. And in this context, orthodox economics acts as the “priesthood” of this religion. It presents itself as a “social science”, when in reality it is a pseudo-science: it’s main theories and tenets are based on ridiculous assumptions and flawed logic, and directly contradict all empirical evidence.
In the context of such ideological rigidity, you can see why I am excited about an approach to planning that explicitly recognises that our predictions of the future (i.e. our plans) are always going to be flawed. We can never know everything, so there will always be flaws in our understanding of reality, and therefore planning should be seen as a tool to aid learning and refine that understanding.
But it goes even deeper than that. De Geus wrote his book The Living Company after he retired. He was free to explain what he really thought, without concern for how this reflected on his professional position. It is a beautiful book reflecting on a life of rich experience. In it de Geus explains that he really wanted to call the article Decision Making as Learning, but he felt that the confident, macho culture of Western management wouldn’t be able to cope with this. Managers like to feel that they know best, that they are managers because they deserve to be, and therefore their decisions are right – we’re back to the desire of people to feel justified that leads them to embrace individualism! The idea that actually we are often wrong and should always be uncertain would be too much for his audience, so he softened the title to Planning as Learning.
This rigidity he describes is infinitely more pronounced within organisations than with individuals. Many people hate admitting they are wrong on any issue (particularly privileged Western people with a pronounced sense of entitlement). But within organisations it becomes even harder. Any organised group of people will have some common reading of reality that brings them together and enables some degree of unity and coherence. Challenging this reading of reality implicitly challenges the group itself, and can be scary and feel confrontational. Herd mentality and “group think” naturally develops. The rise of nationalism in the world could be seen as a response of those who find it too challenging when the myths of their national identity are questioned (for examples of these myths, see the posts on how Britain and the US grew rich).
In sum, “institutional learning” is much harder than individual learning – this is a central point of de Geus’ article.
Hence, I suggest that governments need to enter a mode of just such institutional learning in their approach to economic development. But it goes even further than that – this learning needs to be spread through the entire society. We all need to become committed to a vision of a better society, and to the part each of us must play in this, while at the same time accepting the leadership role of government.
So this week I’ve laid a foundation of understanding that a plan does not have to be seen as a statement of how we expect the future to be. Rather, it can be a framework for how we can learn about the world as we take conscious action in an uncertain, unpredictable and poorly understood reality. You can see how this brings together the need for a different way to think about planning and the need for governments and society as a whole to approach economic development as a process of learning.
Next week I will build on this by introducing Peter Senge’s seminal work on learning organisations, and this time will specifically draw out the relevance of the key concepts to the process of learning about building a new economy.
