The past year has served to highlight the fragility of how society supports mental health, and how critical it is to our very existence. Those who have seen the statistics will know that the picture of the future they portray is not rosy. Pre-pandemic WHO estimates stated that mental health disorders would cost the global economy $16 trillion in terms of lost productivity by 2030, and that 1 in 5 people worldwide were set to develop a mental health condition over the course of their lifetimes. While such predictions convey a sense of urgency and the need to take immediate action, they can also feel overwhelming and disheartening, as if all has already been lost.
Part of what makes us human is our fascination with the future and the predictions we make about it. Many authors, politicians, future tellers, and businessmen have garnered prestige because of their supposedly unique ability to foresee future events, but most fail miserably. It seems there is a distinction between predicting the future and envisioning the future you wish to call into being.
In his 2019 book ‘Human Kind,’ Dutch historian Rutger Bregman writes: “What we believe, is what we become. What we seek, is what we find. What we predict, is what happens.” This is what sociologists refer to as a self-fulfilling prophecy. If enough people believe in a vision of the future, the possibility of it becoming a reality (and becoming a de facto prediction) is imminent.
Envisioning the future, therefore, comes with responsibility. Accepting that responsibility means daring to imagine the future, with beauty and optimism, and taking an active role in shaping it. A rapidly growing number of startups are doing exactly that by addressing the mental health crisis with evidence-based, innovative solutions. Numerous startups have begun tapping into the rich potential of new technologies such as AI and digital therapeutics, which are fundamentally shifting how we access, and who accesses mental health services. We are also starting to see a much-needed shift in the way we approach mental health — from an emphasis on treating mental illness to promoting mental wellness through the development of psychological abilities and emotional resilience.
At Masawa we’re investing to create the workplace of the future. This future will be one that rebalances what we value and where employees are able to thrive as whole human beings. Leaders embrace humility, show sincere openness to talking about their personal experiences with mental health, and invite others to do the same. As a society, we continually question our own worldviews and biases to learn how they affect the wellbeing of others and our planet. In this world of holistic mental wellness, the stigma surrounding mental health will continue to dissipate through advocacy, education, and increasing our capacity to live and lead with vulnerability and emotional intelligence.
Whether you’re an investor, startup founder, mental healthcare practitioner, or advocate, we all have stakes in envisioning the future of mental health. Let’s imagine it together, so that we can be guided by a common vision and start realizing it today. Are you with us?
Learn more about Masawa’s vision for the future of mental health and the role it sees itself taking on to realize it by following the blog and joining the conversation. We’re open to ecosystem collaborations that have the potential to more effectively achieve our vision of creating a world where mental wellness and prosperity are accessible to all.
“The success of an intervention depends on the interior condition of the intervener.”
– Bill O’Brien
“Until we make the unconscious conscious, we will be dictated by it and call it fate.”
-Jerry Colonna, Reboot; Leadership and the Art of Growing Up
This understanding sits at the core of how we think of impact at Masawa. If founders and organizations aren’t investing in their own wellbeing, then they can’t be expected to meaningfully contribute to solving today’s massive mental health crisis. You have to walk the talk.
This is of course easier said than done; the path to impact is non-linear.
External impact – your theory on how you are going to change thousands (millions!) of lives – is at best, based on a combination of solid evidence and sound assumptions about your product or service and its business delivery. But it also requires continuous flexible, creative, and critical thinking to incorporate new information as it becomes available, and upgrade the initial impact model. Just as early stage business models pivot for survival, impact plans must continuously evolve, especially for start-ups, and as they scale.
There is a vast opportunity to make meaningful social change without compromising on substantial financial returns. The internal rate of return (IRR, a key profitability metric) of impact funds is 2.1X greater than that of comparable non-impact funds. This is why at Masawa, we invest in companies that share our laser focus on measurable impact and create products or services that meet real needs. We work with these investees to craft a theory of change, co-create impact metrics, and provide hands-on expertise to support measurement, evaluation, and research. This approach leads to outsized gains, both financial and social.
However, none of this is achievable in the long run if the business at its core isn’t healthy, if the humans who are the business aren’t healthy. This is what we think of as internal impact. At Masawa focus on supporting our investees’ organizational health more broadly – that is, their organizational ability to effectively use resources to execute a vision, and to respond to changes and setbacks with resilience and innovation. Masawa co-creates a development plan with each investee, tailoring our suite of offerings to address the goals and needs of each organization. This includes services like coaching and training, key connections across our network, and advisory services to maximize wellness and organizational effectiveness.
This is because we’ve known for years that culture – how people work together – is a strong predictor of financial performance. We also know that what founders do early on matters for the organization’s long-term success – evidence points to strong path dependence of early choices on future outcomes. Unfortunately, a focus on founder resilience and organizational culture is not the type of support that traditional investors focus on, (although it seems like the even banks are finally catching on to the importance of workplace mental wellness).
2020 has been a year that has challenged us all to aim higher and dig deeper; it has slapped us awake to the need to take care of ourselves and each other, and to pour our efforts into drastically changing the doomsday future that awaits us in only 100 seconds. We cannot reverse the train of doom if we aren’t mentally well, a wellness that, for our part, is accomplished by emphasizing and enhancing both investees’ internal impact of organizational health and external impact of increased mental wellness.
Tuesday, we hosted our 1st anniversary gameshow, #Mindgames, which was a great success, thanks to our five incredible contestants. It was fun, we played some games and had some open and honest conversations about mental wellness. To those of you who couldn’t be there – don’t worry, we’ve got you covered. We’ve recorded the whole thing so that you could watch too. Enjoy!
The world is a beautiful place, inhabited by beautiful creatures ☺. But there’s a whole lot of unbeautiful imbalance going on ☹.
A year ago, today, on my 40th birthday, I announced that I was starting Masawa, the mental wellness impact fund. So what’s been happening this last year?
Most exciting is that we have brought together an impressive group of people (now a full team and advisory board!), raised some money, and are making our first investments. More significantly, we’ve done a lot of learning, testing our assumptions, and crafting a structure that aligns to our values as an organization dedicated to using capital to address the mental health pandemic. A few key things have stood out:
Even before the COVID-19 crisis, which has brought more attention to this largely stigmatized and under-budgeted dilemma, depression was the leading cause of disability worldwide + mental illness was poised to cost the global economy $16T in lost productivity cumulatively by 2030. This year swiftly brought this to the front of everyone’s awareness.
Encouragingly, the number of scientifically-backed approaches + corresponding private sector innovations, are quickly increasing. It is thus the perfect time for Masawa to invest in teams transforming mental wellness, while nurturing that capital to ensure maximum impact, internally (org health) and externally (financial + social returns).
Start-up capital, a needed accelerant for increased innovation and social change, is inefficiently and expensively deployed and measured. (Frankly, the entire economic system needs a fundamental overhaul. But baby steps). In the start-up market, investor competition and an exclusive focus on financial returns are caustic to founder mental wellbeing – 2x depression rates, 2x suicidal ideation. How this isn’t seen as a risk to success (even just financial) is shocking.
Moreover, capital is still not being leveraged in a transformational way, one that recognizes the world as complex and adaptive, embeds systems-thinking in the investment life-cycle, and nests financial power synergistically among non-investable components.
Seemingly intractable existential problems like rapid climate change, biodiversity loss, economic inequality, deep seeded historical social injustice, as well as increased polarization and radicalization, stem from a society that is fundamentally mentally unwell.
Ours is a society driven by a fear of scarcity expressed through over-consumerism, a lack of safety making us retreat from and other that which we do not know or understand, and a need to be seen that leads us to hunger for power over others and cling to it at all costs.
We need to return to basics: to first and foremost check in with ourselves and make friends with what we find. To be open, honest, genuine, and imperfect, while equally valuing the same in every other being we encounter. This also means recognizing that our own prosperity and well-being does not – cannot not! – come at the expense of someone else’s. Quite the opposite.
This is why so much of our focus, both within Masawa and with the investees that we will support, centers on making sure founders, and founding teams are putting in the work to be mentally healthy themselves. Only with that grounding, can successful and resilient businesses grow, that are equipped to take on the problems of this lifetime and have lasting impact.
In closing, here’s a poem I wrote as part of the Shuttleworth Foundation application, in response to the question “What change do you want to make in the world?”:
In ten years…
We talk openly about mental illness
with a refreshing, joyful, happy willingness.
My depression and anxiety isn’t seen
as any different than a sprained leg or COVID-19.
Life made whole, much more enjoyable
by a surplus of innovation and proven explorables
like mindfulness, nutrition, gene therapies
software, hardware, AI, entheogens.
My company is measured by the lives it embetters,
not only by profits or its ability to repay debtors.
My investors believe that my mental wellbeing
is paramount for creating the changes we’re seeing.
New incentives to cooperate openly with competitors
has completely shut out the financial predators
who now find it difficult to maintain their cause
of single-focused greed and avarice without pause.
Innovations abound in function not just form
those like convertible grants, reverse bonds are the norm.
Success based on birth location is not left to chance
the system cares for all through regenerative finance.
Climate repair, economic justice, and social equality
are trending topics on everyone’s wall you see:
we address hard topics as communities, immersed,
because we are now okay with ourselves, first.
But life is not only about finding happiness,
it’s about appreciating that struggle is also bliss.
I am enough. I lead with vulnerability
open to my humanness, content with humanity.
…balance is repowered.
Our global society is facing one of the biggest challenges of our time: climate change. Immediate, bold action and resolute international, and interdisciplinary cooperation are required in order to moderate and, ideally, reverse the potential effects of climate change on our planet and its people.
Among these effects, and possibly the least discussed, is the impact on global mental health. Scientists have well-documented the severe mental health consequences of extreme weather events. Because our climate is changing rapidly, extreme weather events such as droughts, flooding, and large storms are likely to become more frequent and intense. Past natural disasters, such as hurricane Katrina, have exposed to us the suffering, both psychical and mental, they can cause. The psychological trauma of such a disaster can lead to severe conditions such as Post-Traumatic Stress Disorder (PTSD) and more prevalently, increased levels of stress, anxiety, and depression.
In addition to direct psychological responses to natural disasters population, the effects of climate change such as displacement and migrations, breakdown of community infrastructure, food scarcity, loss of employment, and poor sense of social support and connectedness have serious consequences for mental health.
Furthermore, climate change will seriously impact inequality in all of its forms. Not everyone experiences climate change in the same way. Like most social and environmental issues, those hit hardest by extreme weather events are also the most vulnerable members of our society. Children, pregnant and postpartum women, people with pre-existing mental illness, people who are economically disadvantaged, those who are homeless, and first responders to the disaster are set to be at higher risk for mental health consequences from weather-related events. Targeting mental health support and mental health literacy campaigns towards these populations is priority in order to prevent health and eventually, gender and economic inequalities from exacerbating.
More than just climate change affecting our mental health, our mental health condition also affects our ability to deal with the social and environmental challenges that lie ahead of us. For example, studies have shown that anxiety disrupts the prefrontal cortex: the decision-making area of the brain. When anxiety takes over, we are less capable of determining future consequences of current activities, prone to revert to rut-like thinking patterns, and impaired in our ability to plan for the long-term. So we need a sense of mastery over our anxiety to make rational decisions that benefit ourselves, those around us, and the broader natural environment we live and thrive in.
This ability to exert control over distress and anxiety is indispensable for making considered decisions and ultimately, for increasing mental well-being. Even more so, we need our political leaders to prioritize their own mental health and that of the people they represent. After all, their decisions have direct consequences for us all. Our elected representatives are the architects of our reality. They shape the institutions and design the policies that will set the future course of the planet.
Climate change is an enormously complex and systemic issue. One that touches upon all aspects of society. Yet we often tend to overlook how it connects to other structural issues including mental health.
Cultivating awareness of the interconnectedness of such issues, and understanding that climate change has and will continue to have far-reaching effects on all facets of personal and public life is crucial. But that idea in itself need not be fear or anxiety-inducing. As outlined in the report by the American Psychological Association, we can give people confidence that they can psychologically prepare for the effects of climate change. This can be achieved by enhancing psychological resilience and building it into every aspect of our social fabric. One way is to inspire people to appraise their own potential to cope and act positively, and spread hopeful messages and practical solutions to act proactively.
And what about our business leaders? We need them to establish organizational cultures that both support and nurture their employees’ well-being and resilience in face of adversity. This starts with business leaders recognizing the importance of their own mental well-being, and encouraging them to speak up, with humility and honesty, about their personal mental health struggles. Business leaders must open up the conversation and support their employees on their learning journeys to well-being and resilience. This way, we empower each other to live up to our full potential, learn to cope with the stresses of daily (work) life, and develop the capacity to tackle the multifaceted challenges ahead of us.
Mitigating climate change and limiting its psychological impact is a daunting, yet possible undertaking. It requires a global and interdisciplinary approach. We need governments to provide more, and better access to mental health services, particularly for those who are most vulnerable to the mental health consequences of climate change. We need media to spread hopeful messages that inspire action and self-care, rather than induce overwhelming feelings of helplessness and despair. We need businesses and the capital allocators that enable their existence to prioritize the mental wellness and resilience of their employees and partners. And on an individual level, we need to work on strengthening our mental dikes. These will help us better cope with the crashing waves of adversity and protect us against the deepening seas of uncertainty.
Does what you eat impact your mental health? Or do people eat an unhealthy diet because their mental health is impaired? And what is the chemical link between diet and mental health? These are fascinating questions that have been tackled in a growing body of research that tends to point to the conclusion that your diet can directly impact your mental health.
Several recent meta analyses, which combine the results of multiple scientific studies, support the conclusion that there is a link between diet and risk of depression. Specifically, one study concluded:
“A dietary pattern characterized by a high intake of fruit, vegetables, whole grain, fish, olive oil, low-fat dairy and antioxidants and low intakes of animal foods was apparently associated with a decreased risk of depression. A dietary pattern characterized by a high consumption of red and/or processed meat, refined grains, sweets, high-fat dairy products, butter, potatoes and high-fat gravy, and low intakes of fruits and vegetables is associated with an increased risk of depression.”
Another meta-analysis combined only prospective studies that reported on exposure to dietary patterns or food groups and the incidence of depression or depressive symptoms. This meant that they looked at a baseline diet and then calculated the risk of study volunteers developing depression in the future. The study found that “adherence to a high-quality diet, regardless of type (i.e., healthy/prudent or Mediterranean), was associated with a lower risk of depressive symptoms over time.”
It is not exactly understood yet from a chemical perspective why a healthier diet leads to better mental health. One chemical that experts often cite as important in this area of research is serotonin. Serotonin is an important neurotransmitter, a chemical that transmits messages between nerve cells, in the human body. It is believed that serotonin helps to regulate mood and social behavior, appetite and digestion, sleep, memory, sexual desire, and function.
A key theory in the cause of depression in the last 50 years is that it may involve an imbalance of neurotransmitters or hormones in the body. One neurotransmitter which has been used as a treatment is serotonin. Normally, once a neurotransmitter has transmitted its neural impulse it is reabsorbed into the body. SSRIs, Selective Serotonin Reuptake Inhibitors, a major category of antidepressants, prevent serotonin from being reabsorbed, leading to higher levels of serotonin in the synapses. However, it is unclear whether low serotonin levels contribute to depression, or if depression causes a fall in serotonin levels.
If low serotonin levels indeed contribute to depression, there are two potential ways in which eating a healthy diet could impact serotonin levels and as such prove the link between diet and depression.
Firstly, tryptophan, which is a precursor, a main ingredient that the body needs to make serotonin, can be found in whole foods such as:
In addition, bananas contain serotonin.
Could a healthy diet that includes whole foods such as eggs, salmon, and bananas be the cause of the diet-depression connection by directly increasing serotonin levels?
Secondly, there’s a potentially more interesting hypothesis, which relates to the fact that approximately 95% of serotonin is produced in the gastrointestinal tract. There is growing support for the idea that gut health can impact mood through the ‘Gut-Brain Connection’, which refers to the bidirectional communication between the central nervous system and the enteric nervous system that connects cognitive and digestive behavior. Experts hypothesize that the production of serotonin is highly influenced by the billions of “good” bacteria that make up the intestinal microbiome.
Could it be that eating a healthy diet means better gut health, more serotonin produced in the gut and therefore improved mood through the Gut-Brain Connection? These are important mental health questions which don’t yet have definitive answers, but which scientists are continuing to research.
Billions of people worldwide are suffering from a mental health condition and the COVID-19 pandemic has only aggravated the situation. What’s more, according to the WHO, countries spend only 2% of their health budget on mental health, despite the fact that for every US$ 1 invested in scaled-up treatment for common mental disorders such as depression and anxiety, there is a return of US$ 5 in improved health and productivity.
At Masawa, we’re serious about our commitment to investing and nurturing capital for better mental health. However, we don’t want to stop there.
We’re also advocating for more mental health awareness and public investment. How? All team members commit to writing letters to public health officials demanding more attention and investment for MH, every day, for the rest of the month. And we invite you to write with us! Together we can make change happen.
I, (YOUR FULL NAME) would like to draw your attention to the lack of accessible mental health support, the absence of preventative measures, and low mental health literacy, which fuels the prevailing stigma.
Currently, all of us are struggling with the COVID-19 pandemic, but there’s another crisis lurking around the corner yet is often overlooked—the mental illness pandemic. Mental illness is currently the leading cause of disability worldwide and, in the next ten years, is set to cost the global economy $16 trillion.
1 in 5 people worldwide is set to experience substance abuse or mental health disorder at some point in their lives. COVID-19 is actively increasing these numbers – at least half a million more people are likely to experience mental health problems in the UK alone (CAN ADAPT BY COUNTRY). The pandemic disproportionally affects those experiencing mental disorders and highlights the shortcomings of mental healthcare systems. The isolation, the risk of contagion, and the strict measures can have highly detrimental effects when unaccompanied by adequate solutions to support those whose mental health is affected negatively.
Next to that, talking or caring about our mental health is still perceived negatively in many communities. The stigma around mental health and treatments for it is outdated, yet still prevalent. The pressure to stay silent, hide it, “get over it” is costing people’s lives every day. Increasing mental health literacy and accessibility, as well as dedicating time to bring people’s stories to the public space, are the only ways to reduce this burden.
With the challenges that are shaking up our society, we are continuously reminded that mental health is heavily dependent on various socioeconomic determinants. It’s affected by our jobs, our financial status, living conditions, our communities. Recognizing the effects of poverty, long-term stress, violence, isolation, and acting to reduce them can help prevent mental health disorders from developing and mitigate long-term negative consequences on a global scale.
We wish to see these things happen:
The (YOUR COUNTRY) Government / … needs to act now to avoid the current situation developing into yet another public health crisis and make sure that we do not replicate the same patters of the mental health care that keep producing unsatisfactory results. It’s time for us to build a system of kindness, care, and respect, so that billions live life.
(YOUR NAME, ADDRESS, SIGNATURE)
In part one of this series, we expressed the need for a more inclusive and sustainable capitalism in order to cope with today’s wicked problems. We must start taking real ownership of the unanticipated side-effects that are continuing to take a heavy toll on the planet and its people. Solving one superficial problem while creating a myriad of others over time and generations is highly unsustainable. Let’s start thinking holistically about impact. This requires a new mental model that better appreciates the intricate interconnections between people and the planet, and among the systems in which we live and thrive. One that is better suited for thinking about complex, interdependent and real-world problems. One that combines the learnings of Systems Thinking and is driven from day one by its purpose to create a positive and lasting impact on society and the planet writ large.
To begin, let me take you on a journey to Medellin, Colombia. While backpacking through South-America with my girlfriend, one of the most memorable places we visited was Medellin. Most of us who know little about Colombia, mistakenly associate the city it is today with the dreadful picture created by narcoterrorist Pablo Escobar of the 80s and early 90s. At the time, Medellin acted as the operating base for Escobar’s cartel and was the leading supplier for the West’s detrimental cocaine habit. Violent homicides, gang fights, kidnappings, and robberies were a horrendous, but daily reality for many Paisas (the inhabitants of Medellin, a name they bear with great pride). At its nadir in 1991, Medellin witnessed a homicide rate of 380 for every 100,000 citizens (the equivalent of 6,349 killings) which made it the “most violent city in the world.”
With this chilling picture of Medellin’s turbulent history in the back of our minds, we decided to take a group walking tour through the city of eternal spring. We were guided by Julio, who was born and raised in Medellin and previously worked as a Spanish teacher in the US. With great honesty and enthusiasm, he told us about the phenomenal transformation the city has undergone after the assassination of Pablo Escobar in 1993 (a man highly despised by the Paisas. We were asked not to mention his name out loud in order to not upset anyone). Julio told us how one particular event sparked that grand transformation: the arrival of Medellin’s metro in 1995. This sounded odd, at least to many of us gringos who grew up in highly developed countries where public transportation has been around longer than our grandparents. But for Paisas, he explained, it wasn’t just about the metro, it was a manifestation of a desperately needed and welcomed reform. It was a sign of hope; the start of a new beginning, for the city and its people. Even to this day, citizens from all walks of life ride the metro not just because they need to be somewhere, but because they want to live the experience that propelled their city forward.
The biggest positive changes are often credited to former mayor Sergio Fajardo, holder of a doctorate degree in mathematics and an advocate of urban architecture as a catalyst for social inclusion and well-being. In 2004, his administration finished the construction of a metrocable system that connects the elevated shanty towns with downtown Medellin. Prior to its completion, many people living in these suburbs were isolated from the city center and therefore had limited access to work and education opportunities, and health services. For this reason, many citizens were the victim of poverty and fell into crime. However, for locals the metrocable network made the city center better accessible than ever before. It also raised widespread international praise. In 2012, some 20 years after obtaining the title of “most violent city in the world”, Medellin was named “the world’s most innovative city”.
We visited one such shanty town or barrio, Comuna 13, located on the eastern slope of Medellin. An absolute no-go zone some 15 years ago, now a buzzling hotspot for tourists wanting to get a sense of the city’s metamorphosis. Together with local residents, the city counsel built an outdoor escalator system that allowed citizens and visitors to move around the neighborhood quickly. It connects parts that were previously only reachable after a steep climb via a sewage-laden path. This intervention contributed to a significant reduction in violent crime, a surge in tourism and as a result, the emergence of an increasing number of small businesses.
These are just two of the many ‘integral urban projects’, or in the words of Sergio Fajardo ‘urban acupuncture’ (a term pioneered by Brazilian architect Jaime Lerner), that have been executed over the past decades. Although small and low-cost, interventions like these have significantly ameliorated the quality of life of Medellin’s citizens.
Nevertheless, not all is rosy in Medellin. Since 2015, homicide rates, although almost three times lower than in the 90s, are on the rise again. And unfortunately, Colombia is still plagued with corruption in every corner of society. But what I’ve learned from my time in the city is that the Paisas are very hopeful and optimistic people. Focused on the future, not hampered by the past. They are proud of their city and the remarkable progress it has made. And rightly so.
Deliberate public interventions, regardless of their size or budget, can have profound and long lasting social impact on communities and cities. By seeing cities in terms of systems in which every intervention potentially triggers a broad set of consequences, and by identifying and targeting those leverage points where most impact can be made, we are able to produce a chain of positive outcomes.
The conventional mental models that guide our economic thinking are ill-suited to deal with the increasingly wicked problems we are facing as a global society. What we used to call negative externalities, have now turned into defining social and environmental crises. Globalization has brought these effects to the surface, clearly exposing the unintended consequences of our actions on society and the planet.
However, we can leverage capitalism as a force for good by first deepening our understanding of the problem we want to solve, rather than immediately treating symptoms with inadequate, short-term solutions. This requires us to take a holistic perspective on the broader context of the problem, and to uncover those leverage points in the system where a small intervention or change can create significant impact. In this article, we explore how we can think in terms of systems to help us make sound business and economic decisions. This way, we can ensure to maximize social impact and avoid the creation of consequences we didn’t anticipate.
In the previous article, we saw that by expanding the boundaries of existing and adopting new mental models we are better able to understand the complexity and interconnectedness of the broader systems in which we live and thrive. But what exactly is a system?
Systems expert Donella Meadows defined a system as an interconnected set of elements that is coherently organized in a way that achieves something (a function or purpose). Systems are all around us. A city is a system. So is a school, a government, a football team or a global economy. You are a system. Humans are complex systems comprising many smaller subsystems (e.g. a digestive system) each made up of a multitude of elements (e.g. teeth, stomach, intestines) that are interrelated (e.g. the physical flow of food through your body) and have a distinct purpose (e.g. break down food into basic nutrients). Systems exist in an environment, have boundaries, exhibit behaviours, and are made up of both interdependent and connected parts, causes and effects.
Most importantly, it’s the interconnectedness between constituent parts that makes a system work. For example, If you take away a vital organ from a human body, sooner or later the system will cease to function. Take the engine out of a car (the system) and it will soon stop functioning.
Mental models are the frames through which we perceive and make sense of the world around us. They are people’s deeply held assumptions and beliefs that ultimately drive behavior. Mental models help us simplify complexity. But every simplification of something complex runs the risk of leaving important information out of the picture.
For most of human history, it was just fine to work with narrow mental models. After all, our main concern and raison d’être was survival and reproduction. And the impact of our decisions was small and limited to our direct environment. As hunter-gatherers, chopping down a tree or killing a wild animal had little to no impact on people elsewhere. But nowadays, we live in an overpopulated, globalized and highly interconnected world in which even the smallest decisions, like what food we buy or how and where we go on holiday, can have huge consequences.
This is also true for the mental models that guide our economic behavior and the actions ensuing from it. We live in complex, dynamic and open systems consisting of many different and interdependent entities. Small interventions have the potential to produce a big impact in the system. In order to make the right decisions and avoid unintended, yet harmful consequences that stem from our decisions, we need to expand the boundaries of our mental models and start seeing the big picture.
Seeing the big picture or looking at the world through a holistic, wide-angle lens is one of the key properties of systems thinking. However, this approach goes against the traditional scientific paradigm in which the world is perceived through a reductionist, macro lens. Through such a lens, we try to understand reality by breaking down a complex system into its more basic, constituent parts. By looking at each part in isolation from the whole, we can study its behavior in relation to one or several other parts. If we then combine the understanding of all those parts, we are able form a complete picture of the phenomenon as a whole.
The biggest downside of this way of thinking is that it sees parts as perfectly independent of one another, and that it disregards other (external) forces that might play a role as well.
Imagine if we want to explain why humans (unique, complex systems) exhibit a specific behavior, let’s say aggression. To explain such a phenomenon from a reductionist point of view, we could look at how and to what extent a single hormone, such as testosterone, contributes to aggressive behavior. In a study, scientists have found that testosterone can induce aggressive behavior in humans. However, only when a person is already predisposed to aggression, and more importantly, if aggression is what’s needed to maintain social status. In many cases, and against common knowledge, testosterone made people behave more prosocially with the goal of securing one’s own social status. The researchers noted that the interplay or interaction between testosterone and the socially differentiated environment of humans, and not testosterone itself, causes aggressive (or fair) behavior. In other words, human behavior can be seen as a complex web that is extremely difficult to untangle to the level of meaningful cause-and-effect relationships between two constituent parts. What’s necessary is a holistic view that takes into consideration the broader environmental context.
While reductionism describes the whole as the sum of its parts, systems thinking teaches us that the whole emerges from the interactions and interrelationships that transpire among its parts. And it’s that very whole that gives meaning to the parts.
So in order to understand and optimize a system, and to intervene in the most effective way possible, one must first be aware of the interconnectedness and interdependence that exist among its elements. And that’s exactly the fundamental idea that underlies systems thinking: In the interconnected web of life, every living organism is dependent on something else for its survival.
Or in the words of Systems Expert at MIT John Sternman: “If the world’s peoples developed a more holistic appreciation of the intricate interconnections binding us to one another and to nature(…), we would internalize social and environmental externalities, consider the welfare of future generations in making decisions today, and act in consonance with our collective longterm best interests.”
Leverage points are places in a system where small changes can have a major impact, producing a ripple effect throughout the whole system.
Recall the case of Medellin, a city once in the hands of street gangs and ravaged by violent crimes and poverty. For years, the general approach to tackling such problems has been the use of strong police force. However, such an approach lacked effectiveness and the underlying problems persisted. In contrast, we saw how (as part of a much larger urban improvement program), the metrocable system and outside elevators, both interventions relatively small in size and low in cost, proved a lot more effective in catalyzing positive social change.
These interventions are examples of high leverage points or ‘urban acupuncture’ i.e. the use of small-scale, highly focused interventions to transform the larger urban system. Solving complex urban problems starts with seeing cities as dynamic and interconnected systems, or in the words of journalist and author Jane Jacobs, as “problems of organized complexity” that are “dealing simultaneously with a sizable number of factors which are interrelated into an organic whole.”
The next step is to leverage the system by identifying those places where small interventions can have far-reaching effects, and where policies can be designed to achieve a stated objective. This entails moving beyond the mere attempt to treat the observable symptoms of a problem, and fix the root causes.
In The Fifth Discipline, Systems Scientist at MIT Sloan Peter Senge expands on our tendency to focus on inadequate, symptomatic solutions, rather than systemic fixes:
“To me, the bottom line of systems thinking is leverage—seeing where actions and changes in structures can lead to significant, enduring improvements. Often, leverage follows the principle of economy of means: where the best results come not from large-scale efforts but from small well-focused actions. Our nonsystemic ways of thinking are so damaging specifically because they consistently lead us to focus on low-leverage changes: we focus on symptoms where the stress is greatest. We repair or ameliorate the symptoms. But such efforts only make matters better in the short run, at best, and worse in the long run. “
One way to better understand systems thinking and identify high leverage points is through the use of the Iceberg Model. Icebergs have only 10% of their mass above the water surface while 90% is underwater (I’m sure this isn’t news to those who saw “Titanic” and reenacted the “I’m flying” scene countless times). The expression “the tip of the iceberg” is used to show that what one can see, represents only a fraction of the whole situation. Likewise, most of what happens in the world is hidden from view. The Iceberg Model tries make this explicit by depicting it as a number of layers that sit beneath everyday observable phenomena. It argues that events and patterns, which we can observe, are caused by systemic structures and mental models, which are often hidden.
The first layer that sits above the water level are the events. These are the facts and discrete activities that tell us something about the state of things in the world. For example:
The iceberg model illustrates how altering the top, or reacting to an observable event without finding a solution to the underlying cause, has little impact on the whole system: the buoyancy of the ice underneath would simply push up to recreate the tip (i.e. the event) again. Most of the low leverage, symptomatic solutions are found on this level.
As we move below the surface, leverage increases. We start noticing patterns of the events (or trends) higher up in the pyramid, above the water level. Seeing patterns allows us to anticipate events over time. Identifying them helps us understand that an event is not an isolated incident, but a systematic recurrence.
Patterns explain the question: “What trends have been there over time?” For example:
To quote Systems Scientist Peter Senge again: “(…)the essence of mastering systems thinking (…) lies in seeing patterns where others see only events and forces to react to.”
Below the pattern level lie the structures responsible for influencing the observed patterns. They are rules, norms, policies, guidelines, power structures, distribution of resources, or informal ways of work that have been tacitly or explicitly institutionalized. And it’s the structures that determine 85% of the problems, not the people. The good thing is that structures can be (re-)designed or changed, people can’t.
Structures explain the question: ‘What has been influencing the patterns?’ For example:
At the lowest, mental model level (the level where a small change can create most leverage in the system) we try to uncover people’s deeply-rooted assumptions, beliefs, values, expectations, identities, and culture that define the thinking that then creates the underlying structures that in turn, manifest themselves in patterns and events. Mental models are not static. Through deliberate action and the right interventions, they can be transformed.
Mental models can provide an answer to the question: ‘Which beliefs keep the system in place?’ For example:
Like we discussed earlier, many solutions fail in the sense that they react to momentary events, i.e. treat symptoms, rather than identify and address the root causes. Such solutions are limited in their ability to go below the surface and change the underlying structures that produce observable events. Most leverage can be made when we transform the prevailing mental models. When we succeed in shifting paradigms and make people view the world differently, through a new lens.
Over the past decades, capitalism hasn’t particularly enjoyed a good reputation. But are the claims justified? As we’ll see, capitalism is at the source of many structural issues in today’s society. However, it also accelerated human progress by providing incentives for solving human problems. But rather than turning our backs on the system, we can challenge some of the fundamental ideas that underpin modern-day capitalistic thinking. In this three-part series, we dive deeper into how we can turn 21st century capitalism into a force for good by first reassessing some assumptions our models are built on. Then we’ll explore several ways countless pioneers are already actively working on gearing up capitalism for social impact. By seeing the systems in which we live and ought to thrive through a holistic, wide-angle lens, and by focussing on impact first, we can create a better and more sustainable world for generations to come.
There is no escaping to the fact that capitalism is at the source of many structural issues in today’s society. The continuous focus on near-term, financial goals, as well as the endless pursuit of shareholder value maximization, has resulted in harmful, irreversible consequences on people and the planet. One such blatant issue was the 2008 financial crisis which clearly exposed the flaws in our financial system and the poor understanding of the economic dynamics at play.
Another issue often devoted to capitalism is income inequality. The modern-day cradle of capitalism, the United States, has seen a steep increase in income inequality since the 1980s. From 1979 onwards, the richest 1% in the US has become substantially richer (they enjoyed an average annual income growth of about 6%) while the incomes of the poorest haven’t grown for over 34 years. Importantly, rapidly growing income inequality isn’t a universal phenomenon. Although continental Europe also experienced an increase in inequality, the bottom 50% saw their pre-tax income increase by 40% over the last 3 decades. And what about global income inequality? Over the last 40 years, the incomes of the poorer half of the world’s population have risen faster than those of the richer half, resulting in falling global income inequality.
So the question here is not if capitalism produces inequality but how inequality arising from capitalism could be redistributed more equally. The reality teaches us that in shaping economic inequality, institutional and political forces play a central role.
Another major issue with capitalism is the so-called “negative externalities”. Externalities “occur in an economy when the production or consumption of a specific good or service impacts a third party that is not directly related to the production or consumption of that good or service.” More on this shortly.
That is not to say that capitalism hasn’t contributed to humanity’s well-being. Before the Industrial Revolution, at the dawn of the 19th century, no country in the world had a life expectancy longer than 40 years and almost everyone (95%) lived in what today would be considered extreme poverty (less than $1.90 a day).
Fortunately, this poignant depiction is nothing but a mere remnant from a history long bygone. A person born today, regardless of their country of birth, can expect to live as long as someone who lived in one of the richest countries in 1950. What’s more, the average person on the planet today is as rich as the average person in the richest country in 1950, and ‘just’ 1 in 10 people live in extreme poverty (earning less than $1.90 a day).
Besides getting richer, we’re also well on the way to becoming immortal. The UN estimates the average global life expectancy is 72.6 years; almost twice as long as only 200 years ago. Smallpox, an infectious disease that killed more than 300 million people in the 20th century alone, is the first ever human disease to be eradicated. This striking improvement was thanks to British surgeon Edward Jenner, who pioneered the first ever vaccination against an infectious disease, and the World Health Organization, which in 1957 set the ambitious goal of eradicating the disease globally (the last infection occurred in 1977 in Somalia).
Although we still have a long way to go to ensure everyone has a prosperous, healthy and fulfilling life devoid of poverty, hunger, and illness, we must be proud of the astonishing progress we have already made as a global society.
The far-reaching improvements in the human condition observed since the early 19th century can largely be explained by a radical shift in the prevailing notion of how the world works and how its members can best lead their lives. Born was a progressive intellectual movement that questioned the deeply held beliefs and values which were previously stored in a sacred box, tightly secured by the lock of dogma: The Enlightenment. In a 1784 essay “What is enlightenment?” Immanuel Kant wrote “Enlightenment is man’s emergence from his self-incurred immaturity (Unmündigkeit)” arguing that “the immaturity is self-inflicted not from a lack of understanding, but from the lack of courage to use one’s reason, intellect, and wisdom without the guidance of another.”
Minds freed from religious dogma started to see people’s problems no longer as part of the immutable human condition or as a fierce punishment of God, but as scientifically explainable challenges for which solutions could be found. And while unraveling humanity’s biggest mysteries, we also figured out a way to make plenty of money off them. And that’s when capitalism saw the light.
In other words, we could argue that capitalism has grown out of the recognition that enormous private wealth can be amassed by providing solutions to human problems. In a recent article, economist Eric Beinhocker and venture capitalist Nick Hanauer argue that “the genius of capitalism is that it both creates incentives for solving human problems and makes those solutions widely available.”
The invention of the automobile solved one of the greatest problems of its time. Mobilized transportation allowed people to move around quicker and easier than ever before. Rising demand for and the subsequent mass production of cars meant that motoring was no longer an exclusivity for the super rich. Soon, cars became a widely available commodity. And as a result, more and more roads were constructed to accommodate the West’s new favorite Sunday outing.
But what about the other side of the picture? Building new roads to meet increasing mobility comes at the expense of natural ecosystems and the people who depend on them. More cars also mean more carbon emissions and consequently, higher levels of air pollution which in turn contribute to global warming.
Capitalism holds the power to solve human problems on a large scale. But how does one justify the myriad of problems that are simultaneously created elsewhere, for others or for future generations? Let’s start by looking at the traditional economist’s approach to solving this issue.
Imagine the following situation. If I were to throw a plastic bottle over my neighbor’s hedge once, he probably wouldn’t notice, let alone suspect I did it. I’m happy, I just got rid of my waste with minimal effort and at no cost. The second time will arouse suspicion, and he’ll be on guard. When the next day I toss yet another bottle in his garden while he’s quietly enjoying his morning coffee, he’ll be quick to notice it was me, at this point making a confrontation inevitable. Failing to recognize the wider implications of my actions will ultimately backfire and cause harm to the broader environment in which I operate. Seems rather logical, right?
However, the outdated 20th century economic models we’re using today teach us that, under certain conditions, annoying our neighbors with our waste is fine. Economists even coined a term for it: ‘negative externalities’. Again, an externality is defined as ‘a cost (or benefit) that affects a third party who did not choose to incur that cost (or benefit)’.
Consider the following classic example. A pollutant factory discharges hazardous toxins into a river to cut costs which simultaneously affects the neighboring communities living down-stream. How would a traditional economist react? He would propose policy actions that would lead to the internalization of indirect costs by imposing taxes on externality-producing activities (i.e. discharging toxins). Dumping toxic effluents in a river at the expense of society is fine, but it comes at a price.
However, this way of thinking has several implications. First is the realization that any polluting company driven by cost reduction and profit maximization will try to externalize as many costs as possible. For example, if the cost for internalizing externalities is too high, the polluter can decide to offshore its polluting production to a nation with less restrictive environmental regulations. This would only move the problem, not solve it.
A second implication arises when a price tag is put on the negative externalities (or side-effects) of harmful business activities. How do you effectively determine the cost of such side-effects? Can any monetary value really make up for the damage caused to society and the environment? And what if the committed damage has irreversible consequences, like the extinction of a species?
And what about the wider, global implications of our actions and inactions? Deforestation of the Amazon rainforest for soybean cultivation damages the natural habitat of the thousands of species that depend on it for their survival. But the preservation of the Earth’s lungs is also imperative for our own survival and well-being. In today’s globalized economy, no individual or organization operates within a vacuum, invincible to long-lived outcomes of their actions.
Many economists have therefore suggested dropping the notion of externalities after all. The systems dynamics expert John Sterman argues that ‘there are no side-effects—just effects. Those we expected or that prove beneficial we call the main effects and claim credit. Those that undercut our policies and cause harm we claim to be side effects, hoping to excuse the failure of our intervention.’ He goes on by saying that: “‘Side effects’ are not a feature of reality but a sign that the boundaries of our mental models are too narrow, our time horizons too short.”
Let’s zoom in closer on the concept of mental models and why they matter.
Every day, we’re exposed to thousands of details that tell us something about the world. But humans are limited in their power to observe this abundance of details and our brains incapable of processing and storing all of them. That’s why we subconsciously draw on a mental model: the cognitive filter that meticulously selects the information that seems most important to us and keeps superfluous data out of the picture. In other words, a mental model determines where we direct our attention to – what we see, and what we ignore.
A good example of how the mental models we carry in our minds determine how we perceive and interpret a given concept is provided by Farnam Street:
When a botanist looks at a forest they may focus on the ecosystem, an environmentalist sees the impact of climate change, a forestry engineer the state of the tree growth, a business person the value of the land. None are wrong, but neither are any of them able to describe the full scope of the forest.
The knowledge you have acquired and the experiences you have lived shape the mental model you use to make sense of the world around you. Taking a specialist view can provide deep insight into one or several features of a forest, but if we want to fully understand the notion of a forest in all its magnitude and complexity, we must take a holistic view. By expanding the boundaries of existing and adopting new mental models, we are better able to understand the complexity and interconnectedness of the broader systems (be it a forest, an economy, or a galaxy) in which we live and thrive.
As we saw earlier, the Enlightenment and the progress that ensued were the result of a change in the prevailing mental model of how the world works: the belief that we live under universal physical laws replaced conventional superstitious dogma. As people’s understanding of reality expanded, so did the mental models that conceived it.
Likewise, our improved understanding of the global economy has urged us to revise our economic mental models. It’s time to drop the narrow-minded, reductionist model that dominated 20th century economic thinking. Market failures, like externalities, are the product of oversimplifying the complexity of consumer behavior and the market systems at work.
The mental models we use today should be a reflection of how we want to see the world tomorrow.
Humans use mental models to easier understand the complexity of the systems around them. Thanks to the progressive Enlightenment thinkers who challenged the prevalent mental models of their time, we can now state with gratitude and confidence that we are living in a more prosperous, healthier, and safer era than ever before.
However, the world in all its complexity and dynamism changes rapidly. And so should the mental models making sense of it all. Globalization has made it easier for us to see that what we once considered externalities or ‘side-effects’ of our economic activities has turned into defining social and environmental disasters. This seriously threatens capitalism’s premise as an accelerator for human problem-solving. To restore its credibility, we must adopt a holistic mindset and start by recognizing the broader impact of our actions and business activities.
In the second part of this series, we take a closer look at how we can think in terms of systems, rather than mechanisms, to guide our business activities. And how taking a broad perspective on impact from day one ensures that while solving the problems of some people, we avoid creating different problems for others or elsewhere. Welcome to our world of Impact Thinking.
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