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.
Be the first to receive news about Masawa the mental wellness, impact investing, and social impact space, and enjoy inspiring, thought-provoking content.