Every Revolution Needs To Anticipate Its Own Counterrevolution
In 1954 the economist Paul Samuelson received a postcard about an obscure dissertation. Written in 1900 by a long forgotten mathematician named Louis Bachelier, it implied that market behavior could be predicted using statistical techniques. Based on that foundation, Samuelson pioneered a new era of financial engineering.
As the eminent sociologist Max Weber pointed out, while material interests govern people’s conduct, ideas act like switchmen, determining the tracks that we travel down. Samuelson’s discovery of Bachelier’s paper was a moment when the track was switched. If markets could be engineered, the thinking went, they could be trusted.
We need to be careful about the stories we accept. Once the switchman changes those tracks, a zeitgeist forms and the wheels of society turn to keep the train going. We begin to judge progress on how far and fast we can get the train to go, rarely questioning whether we are on the right track or how we got started in that direction. Inevitably, we miss the backlash.
The Engineering Mindset
Samuelson’s discovery of Bachelier’s paper revolutionized economics. If economic behavior could be mathematically predicted, then systems could be built to drive decision making. Rather than rely on human judgment or fuzzy intuition, policy could be built on a much more concrete foundation. The hope was that the endless cycles of economic boom and bust could be eliminated, significantly reducing human hardship and pain.
This engineering approach to human affairs was not an altogether new idea. It was, in fact, early similar to the logical positivist movement that arose in the 1920s. Many felt that we need to take a more “scientific” approach, making sure that we logically verify each proposition we intend to accept and act on. In a short time, however, a young logician named Kurt Gödel would show that approach was hopelessly flawed.
In much the same way, a young mathematician named Benoit Mandelbrot soon exposed unfixable cracks in the foundations of financial engineering. Essentially, he showed empirically that the world was far more volatile than Samuelson and Bachelier assumed and their mathematics assumptions were unsound. He predicted these flaws would eventually lead to a financial meltdown, which they did in 2008.
Financial engineering isn’t the only effort to take human judgment out of policymaking. The realist school of foreign policy advises us to act on our interests rather than our values. The consumer welfare standard suggests that economic analysis, rather than the concerns of regulators, should govern antitrust matters. The doctrine of shareholder value dictates how corporate leaders make their decisions.
It’s no accident that these approaches gained steam in the 1970s, in the wake of the phenomenal engineering accomplishments of the Apollo program. The logical positivist movement in the 1920s arose in the wake of historic advances in physical sciences. Unfortunately, trying to apply those approaches to social sciences courts disaster.
The Pervasiveness Of identity And Dignity
The idea that we can govern our decisions by pure logic is tantalizing. We can analyze the factors at play, apply an objective standard and execute the resulting decision. Yet there is a reason that these ideas consistently fall short. As Gödel showed in his famous theorems, every logical analysis is necessarily incomplete. One of the most often overlooked factors that govern human decisions is identity and dignity.
Consider the ultimatum game. One player is given a dollar and needs to propose how to split it with another player. If it is accepted, both players get the agreed upon shares. If it is not accepted, neither player gets anything. If the world was completely rational, the second player would accept an offer of even a single penny. After all, a penny is better than nothing.
Yet decades of experiments across different cultures show that most people do not accept it. In fact, offers of less than 30 cents are routinely rejected as unfair. It offends people’s dignity and sense of self. For many of the same reasons, there is increasing evidence that financial targets don’t motivate employees. No one wants to be a cog in someone else’s wheel.
This may seem impractical, but it is in the service of a greater logic. In a study in which a public goods game similar to the ultimatum game was played it was found that cooperative—as well as punitive—behavior is contagious, spreading through three degrees of interactions, even between people who haven’t had any direct contact.
Behavior isn’t just about transactions, it’s about setting norms. People need to make sense of the world and they do that through narratives. Those narratives, in turn, drive behaviors.
Building The Power Narrative
The march of history has been a succession of narratives. Centuries ago people marched into battle, bled and died gruesome deaths because they believed in the divine right of kings. The American revolution marked not just a change in government, but a change in the stories people told themselves. World Wars were fought based on competing narratives.
Over the past 50 years, we’ve seen a quick succession of failed storylines. The excesses of Johnson’s Great Society gave way to the Reagan Revolution, which told us that government was the enemy and needed to get out of the way. Then, in short order, we had a Savings and Loan crisis and it seemed that unbridled free enterprise had its shortcomings.
The growing distrust in government led to a new era of celebrity CEOs. Lee Iacocca paved the way for Jack Welch’s management revolution that hollowed out our industrial base and helped lead to scandals such as Enron. We believed the tales Alan Greenspan told us about self-correcting markets until a meltdown in mortgage bonds brought on the Great Recession.
With big business discredited, we put our faith in Silicon Valley, which looks increasingly like a doomsday machine. We no longer assume the good faith of idealistic tech entrepreneurs, but fear being manipulated and controlled by big tech monopolies. Unions, once pilloried as corrupt underminers of capitalism are now enjoying a surge in popularity.
As MIT professors Daron Acemoglu and Simon Johnson point out in their book, Power and Progress, narratives are often pushed by elites for their own purposes. It makes sense for government bureaucrats to wax glowingly about the virtues of public service, while CEOs preach the joys of the free market even as they undermine competition and get fat off of government contracts. There’s always somebody selling us something.
If Power Corrupts, What Contains It?
Saul Alinsky noted that every revolution inspires its own counter-revolution. “Once we accept and learn to anticipate the inevitable counterrevolution, we may then alter the historical pattern of revolution and counterrevolution from the traditional slow advance of two steps forward and one step backward to minimizing the latter,” he wrote.
We are at an inflection point, with multiple pendulum’s beginning to swing the other way. The Business Roundtable denounced shareholder capitalism, Russia’s failures in Ukraine, military and otherwise, exposed not only the bankruptcy of the realists but the importance of values and living up to them. The New Brandeis movement is beginning to strengthen antitrust enforcement and promote greater market competition.
Underlying these trends is a convergence of power shifts the most important of which is demography. The Boomer generation, because the Generation X which followed was so small, has wielded political dominance since the 80s, but is now being displaced by Millennials and Zoomers who hold vastly different values and priorities.
Yet as power is shifting, we need to ask where it is shifting to, who will benefit, what narratives they will build. The ultimate adversary of genuine, lasting change is excess. The ideas that are now being discredited arose for a reason. They filled legitimate needs and produced real benefits. That’s how they gained traction in the first place.
That’s why if we really care about change, we need to learn to love our haters. They’re the ones who can keep us in check, point out flaws in our ideas and even point us toward shared values and shared purpose. Transformation can’t be an end in itself, it needs to be in service of the people it affects.
Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com and follow him on Twitter @DigitalTonto and on LinkedIn.
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