I’m sorting out much of what I read of Gregory Bateson (1904-1980). And in his tradition, I’m going to make connections and then try to stand above it. Come and play.

My entry point was Steps to an Ecology of Mind (1972), then I shot off into A Sacred Unity: Further Steps to an Ecology of Mind Edited by Rodney E Donaldson (1991) and then Nora Bateson’s Small Arcs of Larger Circles (2016).

I’ve been thinking a lot about the question David Graeber and David Wengrow asked in The Dawn of Everything (2021): why do groups of people differentiate? Bateson’s observation of schismogenesis – a combination of the word schism and genesis – is “a process of interaction whereby directional change occurs in a learning system” – was useful in that respect. Along with a whole nest of connections he drew, like focusing on the edges of a graph, regenerative systems, the nature of information and dimensions themselves, information as differences that matter, double binds (loosely meaning: damned if you do, damned if you don’t), and evolution. One concept leapt right off the page and burrowed into my chest: the definition of flexibility.

Bateson defines flexibility as holding back uncommitted potential for change. And it sparked thinking about productivity, the Production Possibility Frontier (PPF), and how business systems are designed. Flexibility enables differentiation in design, doesn’t it?

Heading into 2020, most business systems were optimized for cost-minimization. Humanity, in aggregate, values getting it cheap. And that’s logical. Getting it cheap means most people get it. Very few people can afford to get it good or get it fast. Luxury goods are luxury goods for that very reason: even if quality isn’t scarce, artificial scarcity creates the quality attribute of scarcity just the same. If an organization held any uncommitted potential back, then it was punished. Firms adapt to that environment. They had to. Some of my favourite stories from the era were about entrepreneurs in rapidly developing countries got so clever about lowering barriers, creating whole products, opening up new, lower, price points and opening new markets by sometimes zooming out, or zooming in, increasing scale, or shifting time.

And yet, “adaptive changes limit the possibilities for future adaptation in other directions.” (Bateson in The Birth of a Matrix, or Double Bind and Epistemology). And that inflexibility would come to bite us.

Suddenly, many things changed all at once. Tom Hanks got COVID and supply chains broke. Shocks cascaded: Russia invaded Ukraine, wind blew a ship sideways and it got lodged in the Suez Canal, La Niña ended, and instability spread. There wasn’t a whole lot of flexibility built into the system heading into these crises. There wasn’t a whole lot of uncommitted potential. There was a lot of lag. There still is. And the effects of the shock still aren’t done travelling around the planet. Lots of people are going hungry, today, as a result of supply and demand shocks. Just as we didn’t feel the full effects of the 2008 financial crisis until 2017, we won’t feel the full effects of 2020 until 2028, and perhaps longer.

It is a bit of a double bind (damned if you do, damned if you don’t) isn’t it? If a firm holds back for flexibility, it loses out on a dollar today. If it doesn’t hold back, it loses out on a dollar tomorrow. And of course, if you can’t compete, you can always cheat and get both. Why fix the process when you can fix the price? The modern Canadian, new family compact variety pack of responses is to have a supper with your customer and a couple competitors and come to an agreement about fixing a price for the products. Fixing is such an ugly word isn’t it?

Isn’t it interesting about the way that competitors can shape a pricing environment?

In searching deeper about this double bind and coordination, I came across The Red Queen effect. I immediately thought about ants. But it isn’t about ants. It’s a reference to Red Queen from Alice in Wonderland. Amrit Tiwana (2014) wrote “The Red Queen effect, referring to the increased pressure to adapt faster just to survive, is driven by an increase in the evolutionary pace of rival technology solutions (Barnett and Hansen, 1996)…In platform markets, this means that in order to survive, a technology solution must evolve faster just to match the rate at which competing solutions are evolving. If the pace of adaptation of one competing solution increases, it puts much greater pressure to increase their pace of adaption just to remain in the game….Intensification of a rival platform’s efforts to get ahead of others leads to intensification of effort by rivals, gradually raising the bar for them all. (This behavior is also called escalation in systems thinking; Meadows, 2008, p. 124)”

Red Queen effects are associated with innovation. I suppose it’s also possible to associate it with cost reduction for those firms engaged in the cost race. What’s great about linking Tiwana, Barnett, Hansen, Meadows and Bateson together is the focus on edges, the relationships between nodes in a network.

An important relationship in private enterprise is between the market and the firm. At a high level, it can be thought of as a single edge. A firm’s continued existence depends on a link to a market. It depends on that relationship. If you zoom into that link, a single line explodes into hundreds of them. I subscribe to Moore’s (1991) definition of a market: a group of people who refer to each when making a purchasing decision. A market is a dynamic network object. A firm, in getting connected to that market, may be linked to dozens or thousands of other firms for placement, promotion, pricing signals, and procurement.

Another important relationship is between the market, the firm, and competing firms. Again, at a high level, it can be thought of as a few edges in a graph. Depending on your perspective of cause and effect, a firm’s relationship to the market could be said to be confounded by competitors. Maybe, if you think a lot about competition, you might think of the relationships amongst competitors as a system. What’s evolving in a Red Queen, escalatory, competitive system aren’t simply the firms themselves, but the relationship among the firms and the market.

Why do groups of people differentiate? In the commercial context, maybe it’s to compete? It’s to generate a preference for a given offering, culture, or outcome by making a difference within a difference. By simply repeating what makes them different, they creating a belief that they’re different. Many things gain the perception of truthiness with enough effective frequency. The greater the uniqueness of the framing, perhaps, the better the insurance against the Red Queen? It is a learning process, something that has to be experienced to be understood enough to dance with. The group has to be flexible enough to be able to engage in that experience – they need enough space and security for that activity.

Maybe there’s enough thread in here for a cloth? If you squint, maybe you can see the pattern?