Peter Compo Part 2: A Primer on Adaptation and Emergence

that i loved, " change and innovation in human endeavors follow adaptive, evolutionary mechanisms akin to change in innovations in biological nature." Maybe we'll start off there,

And ever since then, there's been efforts to make that connection, but the one that really, for me established the, the modern thought on it was a, psychologist and a sociologist named Donald Campbell in the sixties and seventies, who said essentially that creativity and innovation, creativity in humans, And learning in humans is an adaptive system, essentially in the mind, the ecosystem of the mind.

And I believe that more and more that's being brought out now as how how we're creative and how we discover new things in, in any field, arts, science, business, And, what makes it so remarkable is that like in nature, creativity is a destructive process. It's constantly taking away the unfit so that the fit can emerge over time as the winner, essentially. And it's a very tricky thing to accept that creativity can actually be a destructive discipline process.

But that's what the theory of adaptation is.

the difficult part is actually taking away the excess at the end what do i get rid of when i write because it's easy to write a lot of you know it's like that i think it's a tribute twain, i wrote you a long letter cause i didn't have time to write you a shorter one and i love the serendipity that comes with doing the show and reading it ecletically every week, i write an article every week and i was writing one recently about the survival of the fittest.

And then came your chapter on adaptive systems. And that's actually how my own writing emerges. Peter is that , I'll have these articles and drafts sometimes for years, and then something will spur me to go finish that. And the piece that pushed me this time was your rendition of the cultural selection of early automobiles. I'd love if you'd give us an overview of that. Cause I absolutely love this piece that you wrote.

There were many, many designs for automobiles that were created at first. Some may not know that in, at Benz and Daimler both patented an automobile, one, a three wheel and one, a four wheel, and I don't remember which had the three wheel and the four wheel, but there were so many different designs of engine. and of design of the overall automobile and countless small aspects of it. But look just at the engine, right?

Electric cars were at first the most desirable, steam engines, Which were the most high performance were the most powerful, but they took a long time to start up. 30 minutes you had to start up the heat to get the car going. And then of course they could explode and they were messy. It was a difficult operation.

And the internal combustion engine required a crank start, which was very difficult, and they were noisy, and they were terrible polluters, and they were gas fumes and exhaust fumes, they were very inefficient. So it turned out electric cars were, at the time, the most desirable, but their batteries were so primitive that , they couldn't survive. And it's so ironic, what killed the electric car?

It was the electric starter on internal combustion motors, which eliminated the crank and started to make the internal combustion engine successful. But there's such an analogue here with nature, with biological nature. People talk about the Cambrian Explosion all the time, right? Where so many different forms of organisms were created in a relatively short period of time, somewhat over 500 million years ago. But the vast majority of these experiments didn't survive.

And we ended up with the more common forms that we have today. The same thing occurs at the beginning of new industries, like the automobile industry. And of course it's market forces that drive these changes that make the demand for an engine that won't need to be recharged every 20 minutes of operation. The cars back then, the electric cars back then had. By the way, there was even a hybrid electric at the time, but it was , too primitive. It wasn't fit. It wasn't fit enough for the market.

And so it died away.

Maybe the other thing that you're, reacting to is the story of the Ford Motor Car Company. And, I think Ford is such a great example of a strategy. People think his strategy was an assembly line, but that wasn't his strategy at all. His strategy was, I will never sacrifice throughput, the ability to make as many cars as possible and cost of those cars to our customers, the price. I will never sacrifice those two things in return for style or options. That was his guiding strategy rule.

And beautifully stated, whether he stated exactly like that, I don't care, because that was the rule he followed. And the best strategies are telling you what not to do. And that was a, that was what drove everything he did. And many people don't know that his famous assembly line, which of course, He copied from Oldsmobile and the meatpacking industry. Evolution always has an antecedent, right? Things don't come out of the sky fully formed, just as in nature.

But people don't know that , the famous assembly line didn't appear until five years after the Model T was launched. The Model T was launched in 1908 and the assembly line was first put into use in 1913. This is a terrific example of the strategy was there, but the specifics, the choices yet, and the designs that followed that strategy and adhered to that strategy weren't yet known. And he stuck with that strategy for 20 years. And of course, in the first 15 or so, it was brilliant.

And it allowed essentially the creation of the automobile world that we know today, creating the ecosystem of roads and gas stations and parts manufacturer and parts repair. And so many people that did bicycles were now doing automobiles. But then his strategy became incorrect. Why? Because he was so successful that now everybody was doing it.

And the new differentiator in the twenties was, well, we do want style and we do want options and GM and Chrysler and European car companies were now saying, yeah, we can, we can do that. But he was so hardheaded. He stuck with his strategy, his Model T strategy, and he lost his dominance.

Of the book and the key principle of this chapter is this concept of levels and i have a little quote here to help us. Enter into this idea of levels you said, " discipline at high levels that is imposing high level constraints, demanding a given result, tampering, demanding that results meet plans and predictions is outcome thinking that leads to paralysis and poor results. Planned economies are an extreme example.

Freedom at low levels leads to slipshod thoughtless results, innovative people and organizations are free because of their confidence, conscious or not in their low level discipline not despite it. And then you finish this section by saying "deep creativity and intuition are an emergent result of low level discipline and analytical thinking that leads to internalization, not direct Eureka! Creative acts. Creativity, Is a harsh process."

That may seem like a poetic excerpt from the book but it's loaded with information and one of them is this idea of high level vs low level and how, things change and therefore the thinking at the levels need to change as well also behind all this is The idea that we hopefully planted the seed of in part one is constraints are important

This is the theory of emergence that interactions, disciplines, adherence to rules, at what we call low levels can lead to new things, new structures, new ideas, new capabilities at high levels. So what are the two levels? Other language to describe them are the micro level, the, action level, the things you actually can do, the local level where you're, you can only interact with your local world. And then the high level is the emergent level, the global level, the outcome level.

In Henry Ford's situation, he didn't just say, okay, everybody, we want an automobile for the masses. That's going to be cheap and wildly available. that's our strategy. Our strategy is to produce enormous numbers of inexpensive, practical cars for the average person. And also let's not forget small businesses. and businesses in general, which was a big part of that. Think about the delivery, he had many different versions of the Model T all based on the same platform.

The delivery aspect of the Model T was really very important, but that wasn't leading to anything. We will create, this new thing. That's our strategy. Go do it. It was this constant adherence to this rule of never sacrificing, cost and speed for style and options. That rule embedded everything they did. It also meant that they had to start going after craft production. And they had to start going after the fact that up to his time, and this was why he revolutionized all industry.

Up to that time, products like automobiles were produced by craftsmen who fit parts together and made them work together as a unit. He standardized all that. So, another strategy that he had, essentially, And there's always multiple strategies and each system has its own strategy in a larger organization. His adherence to the methods to getting rid of craft production was what let the automobile emerge at the high level.

The local action to eliminate all special activities to have to make parts fit to eliminate part suppliers that could not supply standard fitment, standard specifications. The constant elimination of those barriers led to the emergence of the mass produced, the mass produced car. So the low level was adherence to these strategies and principles and rules. The high level was the emergence. of a truly revolutionary automobile that could become, produced and bought by the masses.

And I, I want to link it to Tesla. It's really interesting what Tesla responded to when asked, how come you succeeded? In launching electric cars on a mass scale when other companies failed. And I think they were talking about Fisker and, and maybe, maybe some others. And what was the first thing out of his mouth? It was we're, we're an engineering company. And to me that resonated completely with what Ford did. Elon Musk talks about being on the shop floor.

He talks about being in the engineering room where he spent his time versus, Oh, we're creating, we're creating an electric car vibe. We're creating look at this beautiful design. Look at this we're out marketing. We're out, of course.

We have to be cautious because he was at one man marketing show, but I don't think it should be lost that his view of how to make an electric car industry emerge and be a revolutionary thing as he did was to be an engineer, was to be an engineering company and be on the shop floor. And I think this was the same as Ford. That was the low level activity that was addressing the bottlenecks. The emergent level was the outcome that he got and that Ford got. I'll throw in one quick thing.

I saw an article just the other day that asked, has Musk gone too far with his strategy? Meaning, does he have to market, does he have to get more involved with style, because there's so much competition now? It'll be very interesting to see if he plays the same pattern that Ford played back in the 20s. The 20s in both cases, actually. 100 years later. Yeah.

I mean, there's many more things we have to go into on this levels concept. Maybe I'll just summarize what I, I went through and what you went through there. The idea of levels, and this comes from the theory of complex adaptive systems and emergence, innovations, new structures, new capability, new ideas cannot be directly created or managed. They must emerge from work, interactions, disciplines, low levels, and they emerge out of those.

Low levels to the high level and the reason it connects so much with strategy is that the strategy is not a description of that high level that you want to achieve the goal. It's the rule, and many rules for many systems in a large organization, also an overall rule, for leadership. It's the rules by which those interactions can occur that make them coherent, that make decisions and actions that you can take coherent, such that they lead to the emergence of innovations at the macro level.

So the environment is changing that in a way is customer choices, access to funds, all this kind of stuff. Maybe the environment, the actual physical environment and sustainability, for example, these change , my decisions but because i'm so far removed from the lower level i start to ignore things and there's a famous story of people in Ford tell him mr Ford oh, here's a prototype what do you think any smashes the pieces with a hammer and because it didn't fit.

his level and this is something i really understood is my levels appear at the beginning of the organization as it emerges i'm willing to listen to the people at the lower levels because they're actually coming on hey, we found a way to make this quicker and cheaper and you're gonna go well don't keep it going my good son then over time as we have the perfect system, we become a prisoner to that perfect system and i thought that that's, outtake alone was

so valuable to share with our audience and there's a quote here that maybe i'll just throw in here because i don't want to take all the time on this this chapter of this chapter by the way you said that " "Innovative organizations like apple and Ford are extraordinarily disciplined about following principles but at the same time enormously intuitive and free thinking.

-So it's not paradox that's so difficult to nail -Yet discipline, thought and freedom of thought are seemingly at odds with each other. So much so that business and military strategists offer a solution to the paradox. So that teases you up nicely to go on a different route with this but it is such an important idea to understand because people from their level are always right.

But they very rarely come back to listen to each other anymore when the company successful because they're making money and new boss becomes the shareholder, the stakeholder wall street in many ways.

Okay, we're going to, we're going to be disciplined and rigorous for a little while here and analytical. These are some of the words that are used to describe this, right? Analytical, disciplined, rigorous, hard thinking. Okay, but wait a some time. On creative thinking and imagination and and, and free free thinking. These are the words we used to describe that other end, right? I think maybe you can see where this is going to go relating to that levels discussion in a minute.

But this has been the traditional view. And I, I, I referenced several people that give different explanations of that, that this is an alternating exercise. And it makes some sense. Thanks. We're going to go over here and be loose. And then we're going to over here and we're going to be tight and doing both will help bring us good ideas. But I don't think that's how it works. I don't think creativity is the opposite of discipline.

And in fact, we talked about this a lot in the, in the earlier session, discipline, the right disciplines with the right awareness of the ecosystem you're in as connected to your point around Ford, is the cause of the free, of the creativity, of the innovation. So we just went through that levels concept, local and global, the action level to the outcome level, instead of an alternating model, that you're alternating between that low rigorous, level and that high outcome level.

No, turn it around. It's the low disciplined, rigorous action at the low level that leads to the creativity and the innovation at the high level. And visually, if you go into that chapter, you see these things lined up. That instead of being side by side, one follows from the other. And this is a, we started with this when we talked about why it's so hard people to accept that creativity is a destructive process. Well, here's the explanation.

It's destructive at low levels where you're constantly saying, does this fit? Is this correct? according to our theory, according to our strategy and our strategy framework. Does this make sense? And when you're doing music, yeah, this bit that we just wrote, this looks really attractive. I love this melody. I love this harmony. I love this rhythm, but does it fit with the whole is the real question. You can't just stick any melody in any piece, right?

So it's the discipline at low levels to constantly destroy that which does not fit the theory of the case. That leads to the outcome of new emergent innovations. And I know we don't have a lot of common language on this yet. But a big part of the effort is to give examples and, and, and show how it works.

I'd like to give one historical example of how. this understanding came about. Probably the most famous is ants and social insects. 50 years ago, the people looking at complex adaptive systems said the ants are incredible. They're, they're amazing. Look what they do. They have coordinated defense of of the nest. They have coordinated care of the young and they can decide when it's time to make a male, a female, or a queen. They have graveyards.

They have ways to tell others where a new source of food is and how big it is and how to get to it. They have They have, garbage dumps. They can control the temperature of, of the nest with coordinated actions. I could go on and on. Pretty remarkable. Why is it remarkable? Because they don't talk. All they do is react to chemical signals and a few visual and physical signals. but mostly to pheromone signals and gradients of these pheromone signals. Well, how the hell can that be?

How can it be that all of this sophisticated machinery and structure can occur when not one ant in the nest has the slightest idea of what's going on and only reacts locally at the low local level to what its local environment is.

Also we had Geoffrey west from the santa fe institute have done a lot of work on this type of thing the book is called "Scale" i'll link to that in the show notes and James Gleick books on complexity's another good one, i think it's brian goodwin a book called how the leopard changed his spots something like that as well which Dee Hock told me about before he passed away so this stuff is absolutely beautiful beautiful to read as well. But there's a line that I, I knew I went through my notes.

It was like, there's a line I have somethin' there. Cause you talked about this transmission of information through pheromone. And I was like, Oh, I've seen that written somewhere. And you wrote that, " if people truly internalize their endeavor and focus on the low level disciplines and not the high level outcomes, The resulting tension will drive them to generate variations and will enable them to be sensitive to information transmitted to them.

So having that been salient to them, so that information is , really salient to them because it's at their level, their level of understanding as well. And an example you give here is Intel CPUs, which brings this to life.

Whether you follow it is a different question, but that rule is, we're going to put the most profitable orders at the top of the production schedule. And we're going to produce the most profitable first and then go on to the next most profitable and so forth. So that always every month, the most profitable products were were used on the asset. What they found was because of that rule, CPUs were starting to come to the top of the list. And one day somebody said, Hey, wait a minute.

What what's going on here? Somebody said, Hey, that's funny. We're a memory maker, but CPUs are coming to the top of our, of our lists. And they were sensitive enough to this because they were following the rule. They were adhering to this low level rule that it revealed something to them about the ecosystem. And it revealed to them that CPUs were starting to become interesting because people were making small computers. And it revealed to them that RAM was starting to become commoditized.

And they were so sensitive to that signal and aware that they started the investigation into making this huge transition to becoming a CPU company. And they became the great company that we know that we know today after that. But can you imagine how many companies would have said, Oh, come on, we're, we're a memory business. Our customers care about memory and we're serving our best customers. And, Maybe they'd even get advice from consultants, right?

Don't be distracted by these little piddling things that come up. Stay to your core, whatever. So I, I use that as a powerful example of where low level, very, very simple, rules can reveal the road to innovation. And the other thing that I find remarkable about it is that this rule was not some brilliant business rule, some brilliant marketing or innovation rule. It was a pathetic operations rule to always produce the products that they believed had the highest profitability first.

Could you imagine such a pedestrian everyday rule leading them To the truth about the ecosystem and , where they could go.

we're gonna end this episode and keep it tight keep within the constraints of this chapter and Peter's gonna kindly one last time connect the idea of levels to the idea of strategy and how they link together because i really do want you to get this and Peter's so generous with his website as well, maybe before we do that last piece where can people find out more about you where can i find more about the chapters and all that content that you give away on the website.

So Peter, over to you to close today's show by just bringing together one more time the idea of levels and strategy

Who do we partner with? And even smaller things. These are the local actions and choices you can make. And you hope to make them in a way that will lead to new outcomes. and great ways to achieve all of those aspirations you have. The way to connect the levels concept to this is that you cannot achieve those high level things directly. You only have the ability to make local choices and take local action. Where is strategy? Strategy is the overarching concepts.

The strategy framework is your guiding light, your north star for how to make all those low level local. Take actions and make choices such that you have a higher probability of gaining that overall aspiration, that future state that you want. And that's the connection between the theory of complex adaptive systems and levels and strategy definition. And in fact, the next place we're going to go, the next place we're going to go on the killer problems of innovation.

We'll dig into that whole process.