By Ichak Kalderon Adizes

The Insight in which I expressed my opinion about the financial crisis generated a bigger response from readers than any of the over 60 Insights I have written in the last five years.

Almost all asked me what I think should be done.

I do not have the solution, and there should not be a single solution anyway. This crisis is complex to the point that it demands an interactive, organic solution, ie. continuous monitoring and changing of whatever the solution is. In management parlance, we need a continuous improvement system rather than a solution we apply and then forget about.

What should this “continuous improvement” solution look like? (To explain it I will be using the tools of the Adizes Methodology which, because of time and space, can not be fully explained here. For those the readers who can not follow this “alphabet soup,” please review the material in my book “Managing Corporate Life Cycles,” or at least the chapter on life cycles in my first book, “How to Solve the Mismanagement Crisis”.)

Let us have a historical perspective first:

The 1929 Depression gave birth to the New Deal.

Where was the USA on the life cycle then?

Up to the crash, the USA was in the roaring, Go Go stage of the life cycle, and the uncontrolled market caused a crash (predictable for a system in Go Go). The system required (A).

Keynes’ theory of economics gave us the theoretical foundations that legitimized the role of government and gave it the tools to regulate the market forces. The New Deal was born, and the government took it upon itself to share responsibility with the “hidden hand” of the market forces.

With this new economic theory and practice, the US crossed the Adolescence stage of the life cycle and reached, somewhere around the 1950s, Prime.

The US is now at the end of Stability and starting its slide into Aging.

What caused it to get to Prime is what is causing it to get out of Prime: (A), the role of government. Government’s regulatory role needed to be born, but it grew to be too big and too involved, which is typical for the (A) role.

In Hebrew there is an expression: “Friends come and go. Enemies accumulate.”
Using this expression to explain the above phenomena, I would say: Entrepreneurs come and go. Bureaucrats accumulate.

I suggest that the increase in (A)-the role the government plays, what everyone calls “the bureaucracy in Washington”-is what got the system out of Go Go, but it is also what is causing it now to age. The New Deal, which was functional once, became the system of entitlement which is dysfunctional now.

The beginning of aging of the system explains why both presidential candidates are promoting the idea of “change;” it is what the system needs.

But what kind of change is needed?

The cause of the breakdown in 1929 is similar to the cause of the problems we have now. The problem was then, and is now, systemic in nature.

Then, the risk associated with excessive inventory of each company was manageable. Accumulatively, in the whole system, it was a disaster. We have a different systemic problem now: For individuals taking loans, the risk was a manageable risk, but when mortgages were collateralized and amalgamated to be insured, the magnitude of the problem changed. The common denominator is that there were, and are, no systemic checks and balances.

The systemic solution of 1929 was increasing (A), giving the government a role to play in economic regulation. While it was the systemic solution that was needed then, employing the same systemic solution now will be a disaster.

We are not at the same place in the life cycle.

More of the same- more regulation, or more intervention- will not work. Increasing mechanistic regulation, more government intervention, will only accelerate the system’s slide down the life cycle curve. We will bureucratize the system even more. We will suffocate the market.

The bailout and government’s taking over the banks is not a solution either. It is arresting the problem, keeping it from becoming worse. That is all.

Where is the solution, then?

To use Watzlaviks’s conceptual framework, we need a change of order two and three, not of one.

Change order one is to change what we do. That means more or, in this case, less of what the government does. Change order two is to change not what we do, but how we do it, to change the system. Change order three, which is deepest and thus the most difficult, is to change who we are, and what we stand for.

In other words, the old model does not work. No use tinkering and fixing it anymore. We need a new model. A new conceptual framework. Almost a new ideology.

The solution needs (EI) if we are going to avoid the aging predicament.

(EI) means a systemic, organic solution which looks at the system and how it operates, how the pieces inter relate.

What is needed is something like the New Deal. We need a strategic departure from where we are. We need a new Keynes in economic theory; a new theory which defines the role of government in the economy.

What we need is not “more” or “less.” We need “different.” We need to re engineer how the total system works.

That brings me to compare the presidential candidates on whom the responsibility of re engineering the system will fall.

I have worked with air force fighter pilots. I consulted to the Israeli Air Force, and reorganized the premier testing ground for the American Naval Air Force. A good jet fighter has to be (PE)in style: Think fast. Make choices fast. Be creative and be flexible and shoot first. That is McCain. His values are impeccable. His loyalty to this country is to be admired. His intentions are honorable and his integrity beyond any doubt. And he has experience, a proven record of crossing the aisle to do what is best for the country. That is all well and good… But he is a fighter pilot. He makes decisions on the run. He is sharp, fast thinking, impatient, very flexible (thus the image of maverick), and he is quick with the trigger. Evidence? How did he choose a running mate?

If he is elected, he will make decisions fast and change direction at a whim. He cancelled the presidential debate, flew to Washington to solve the financial problem as if he were indispensable, and then reinstated the debate, all in one week or so. He has replaced his top campaign team more than once, too. Fighter pilots do not make decisions by consultation. They are alone in the cockpit and make their decisions in seconds.

In short, McCain is not a systemic thinker. Expect action, but taking into account the complexity of the system, his style can produce solutions with collateral damage.

While McCain’s style is (PE), I read Obama as (EI).

He is creative, but he seems to listen well. He has good judgment of people. He has not changed his campaign team, and this team has made good decisions all along. He does not have experience, true. But experience is gathered from the people with whom a leader surrounds himself, as long as the leader listens and can make good judgments.

As I have said in many of my lectures, what makes a good leader is not what he or she knows but what he or she is.

We are at a point in the life cycle that calls for a strategic re engineering of the system. We need another Franklin Roosevelt. Charming. Giving us assurances along the way that there is hope. One who can listen and think with others. One who can learn and teach at the same time.

Less action, more thinking is what we need.

I can not predict, though, if Obama will have an understanding of the depth of changes needed, or whether he will have the courage and dogged commitment to make these systemic changes. Whether he will have the strength of character to continuously improve the system, which means not sticking to any one doctrine.

We need fresh, new, systemic thinking. We need a leader who can design it.
And that is the platform, the prerequisite, for the solution to emerge.

www.Adizes.com

-Dr. Ichak Adizes