Tag Archives: financial crisis

A Brief Summary of Where Economics Meet Memetics

A Brief Summary of “Where Economics Meet Memetics.”

Below are some excerpts from an interview I gave to  the Adizes Graduate School Newsletter. Some of the slides included here were distributed by Don Beck at a recent conference on Conscious Capitalism with leading CEO’s like John Mackey of  Whole Foods and Kip Tindell of The Container Store. I’m told Mackey, who uses Spiral Dynamics in his management philosophy, was taken with my analysis of how the UNHEALTHY STRATEGIC ENTERPRISE 5th level system can make an entire economy toxic. One of the primary goals of this blog is to help businesses evolve from answering to the Stockholder who’s misguided by the Wall Street philosophy of short term profits to the stakeholder who has a long term eye on People, Profit, and Planet. That’s  the integral equation for the new frontier in sustainable  practices.

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Said E. Dawlabani on Economics

The Memetics behind the Financial Crisis

At the Spiral Dynamics seminars in Santa Barbara, Dr. Don E. Beck invites a number of guest presenters. Some of these special guests help participants view complex issues through the simplifying lens of spiral dynamics. In effect, spiral dynamics helps in understanding Why and How major global events occur. Below, Said E. Dawlabani, who presents during Level 2, provides us with the benefit of his insights and opinions regarding the financial crisis that impacts our lives and decision-making processes today:

Q: From a Spiral Dynamics perspective, what were the major causes of the financial crisis of 2008?

Spiral Dynamics is the study of cultural value systems that emerge in response to changing life conditions. I concern myself with large scale socio-economic changes and interpret the interplay between the eight known levels of human existence, or value systems, particularly in the area of economics.

In Spiral Dynamics terms, Finance, or Capitalism in general, is just one sector of the fifth level system which has a focus on ‘Strategic Enterprise’. The financial crisis was precipitated due to the changing balance between the 3rd, 4th, and 5th level value systems in the United States. In a nutshell, what caused the financial crisis was the erosion of the fourth level system, the ‘Authority Structure’ system, in two areas of regulation. This allowed third level system dynamics, the ‘Empire Driven’ dynamic, to take advantage of the lapse in controls.

The first area of regulation that was impacted was the governmental regulatory structure itself, which started to slowly disappear with the first Reagan Administration. The second was monetary policy at the Fed. From the top down, government had begun to favor laissez-faire capitalism. For almost three decades, these policies gave us the illusion of prosperity but in the long term gave rise to an unhealthy version of the Strategic Enterprise (fifth level system) practices that became very difficult to reverse. Productive output that was measured through the strength of our manufacturing sector gave way to a more service oriented output.

As the fifth level value system found itself unrestricted, it transitioned beyond a service based economy into what was considered prohibited or sacred territory – the field of ‘financial engineering’. This is where the foundation for potential systemic damage was created.

Q: You mentioned that ‘life conditions’ are an important catalyst for change in evolving value systems. How did this transition from a healthy value system to an unhealthy system manifest in real life?

Corporations and consumers alike abandoned the ethics of the fourth level structural system which made the US a great model of Capitalism – for an ethic that was engineered on Wall Street. For more than three centuries, this evolving but sustainable model for Capitalism called on consumers to build equity through hard work. The system called on corporations to pursue organic growth through product diversification and healthy competition. Instead of hard, productive work to build equity, the Wall Street model for capitalism substituted impulsive speculative borrowing – a hallmark of the ‘Empire Driven’ third level system.

Consumers shifted their focus on spending from what they earn to spending from what they could borrow. Borrowing – thanks to Wall Street – was limitless, and was no longer tied to strict formulas based on actual earnings. Corporations shifted their focus from providing shareholder value by growing their product line organically, to acquiring corporations their financial advisers lined up for them regardless of whether these acquisitions served the long term health and viability of the corporation, or their mission. Wall Street, being virtually unregulated, had no regard for the long term consequences of its actions as its brokerage houses gave out money to collect commissions and placement fees and not to promote the distribution of wealth to all corners of society.

Q: You mentioned that the area of financial engineering was sacred or prohibited. Could you elaborate more on what that means and how that created the systemic damage to our financial system?

When a value system is healthy, it supports the needs and the emergence of all other systems on the spiral. When it is unhealthy it is very destructive. Historically, money has played a very important fourth level systemic role in helping cultures emerge. Pay had a direct relationship to the number of hours worked or the level of skill attained. Financial output had a clearly defined correlation to input and there was a great sense of personal responsibility. The belief in the role of money is what built nations and what helped humanity emerge in the last eight thousand years. A healthy, innovative fifth level system arose as a result of a healthy fourth level system.

Between 2000 and 2006 all this changed. Unprecedented levels of liquidity came to Wall Street with no legitimate investment vehicles to put it in. So Wall Street created Notional or Virtual securities called ‘derivatives’ that forced the participants in the system to downshift to a betting game on how real assets will perform in the future. These models provided the illusion of legitimacy as they flooded consumers and capital markets with money. Wall Street quickly became identifiable with the unhealthy version (exploitive) of the third level value system and, like the case is always with a system that focuses on immediate rewards, it had no staying power. When it collapsed it almost took the whole world down with it.

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Value Systems Science to Dubai: You Can’t Skip a Stage

In an effort to restore its credibility in global capital markets, the government of Dubai recently issued a 58-page report detailing its austerity plans as it works its way towards responsible, long-term planning. The report is being touted by the media as “unusually transparent” compared to most reports coming out of the Middle East that are heavily influenced by officials trying to paint rosy images of their centrally-planned economies. In the report, the government acknowledges the cancellation of close to a thousand real estate projects valued at tens of billions of dollars. The lack of demand was sighted as the primary reason for the cancellations. This comes at a time when a possible deal is being worked out on the restructuring of debt for Dubai World, the largest sovereign wealth fund to ever default on payments to its creditors at the onset of the financial crisis.

There is a statement in the report that may not stand out to the average reader, but has significant Memetic implications as to where Dubai is in its cultural emergence. The statement says that the government had completed a major reassessment of the “economic development” element of the Dubai Strategic Plan for 2015 (DSP 2015) which resulted in the cancellation of these projects. When DSP2015 was made public it called for the systemic development of Dubai.  In addition to economic development, it called for social development, modernization of the security apparatus (police), development of the judiciary and public safety, and for excellence in government. The report emphasizes that the government will now be focusing on those other aspects of the plan that were ignored during the boom years. So, why is Dubai emphasizing these aspects of their cultural development now? The answer is simple: In their rush to look like the West, government leaders trampled over this very essential developmental stage called the ORDER value system (vMEME), what is known in Spiral Dynamics as the all-important BLUE stage.

Thirty years ago, Dubai, much like the rest of the Middle East was mostly centered in the TRIBAL-EGOCENTRIC vMEME. Historically, cultures lingered in these value systems for centuries before life conditions propelled them to seek higher levels of complexity. But, the Gulf region of the Middle East was different; enter the role of money.  Immense wealth that appeared suddenly was thought of as the needed catalyst to rapidly develop the culture and in a few short years have it have Memetic complexity that rivaled that of the West. So with a charismatic ruler like , Sheik Mohammad Bin Rashid Al Maktoum, who embodied the HEALTHY expression of the EGOCENTRIC vMEME at the helm, the Emirate embarked on one of the most ambitious development plans in modern human history. Like the rest of the Middle East, having Western corporations and personnel in charge of their huge projects was thought of as cultural emergence; if it looked like the West, it must act like the West.  This false belief made the ruler of Dubai fall into the “build it and they will come” illusion that was further reinforced by opportunistic global firms offering “the higher, the bigger the better” sales pitch that built this desert oasis overnight. With most of the focus being on the real estate sector, little attention was paid to who was buying up Dubai. At one point during the boom, as much as 85% of buyers were speculators with value systems that thrived on the smell of money, short-term EGOCENTRIC vMEME that loved instant gratification with no complexity for long-term thinking. There were no laws similar to those in the US or other advanced countries that limited investor purchases to 25% within a project. These Western designed types of restrictions come from a vMEME that’s heavily entrenched in the ORDER value system, on which the ENTERPRISE value system was built. Leaders of Dubai thought they can skip this stage altogether. After all, having a good Judiciary system doesn’t land you on the cover of Fortune Magazine or get you on 60 Minutes. Anyone who warned of the need for this type of order was quickly dismissed. Absence of order needed to meet the growing needs of this city state wasn’t just in the real estate sector, it was felt at systemic levels and the general rule became that anyone sounding the alarm over anything that came in the way of progress was silenced immediately.

The strategy of avoiding the ORDER vMEME was very short lived and came to a halt when global liquidity dried up and Dubai was left with thousands of unfinished projects and no money to complete them. The most iconic humiliation the Ruler of Dubai suffered was having to change the name the tallest building in the world from Burj Dubai to Burj Khalifah after Sheikh Khalifah the Ruler of Abu Dhabi put up the money to finish the Tower. Many other failures continued to expose the short sightedness of an experiment that put one value system before the other. The thinking that money alone can bring on human emergence was proven wrong. If anything, money showed the pathologies and greed that are inherent in human nature. Europeans who’ve been known to belong to the EGALITARIAN/HUMANITARIAN  value system, descended to their past imperial/colonialist selves very quickly and became the pillagers of wealth. Americans running some of the world largest sovereign funds for Dubai embarked on buying worthless companies that were teetering on bankruptcy and collected enormous fees on both ends of the transactions. This was Disney World for Western business people where they saddled every business entity with enormous debt, filling their pocket with outrageous compensation without any of their activity ever being scrutinized by a proficient ORDER system that understood the nature of what was being done.  When all the dust cleared, the Westerners went home and the government of Dubai was left with hundreds of billions in liabilities. The Ruler soon realized you can only imprison so many executives before the practice becomes a public relations disaster. Not building on a solid foundation of an ORDER vMEME  is an open invitation for people and entities with EXPLOITIVE value systems and a great degree of intelligence to manipulate the absence of complexity of a lower vMEME. Even with enormous wealth at your disposal, YOU CAN’T SKIP A STAGE! A very tough lesson indeed in the science of value systems.

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Slides from March Spiral Dynamics Integral (SDi) Training

Some of the slides listed in this post were a part of a presentation I made at Adizes Graduate School in Santa Barbara during the March SDi training. The presentation makes the case for how the erosion in the ORDER value system (BLUE vMEME) that regulates money combined with unprecedented levels of cash flowing from TRIBAL-FEUDAL (PURPLE-RED) value system countries into Western capital markets were the main contributing factors that forever perverted capitalism. Understanding the financial crisis from a value systems perspective helps re-frame the the entire argument of how to regulate an UNHEALTHY EXPRESSION of the ENTERPRISE value system (vMEME)and anticipate its next move before it can become a threat and cause systemic damage and eventual collapse. Feel free to copy any of the slides for your personal use. You can also email me at  sdawlabani@ecovestadvisors.com if you have  any questions about vMEMEs and their relationships to the financial crisis or if you’d like for me to give a lecture to your group about the subject matter.

Dr. Beck, the co-author of the Spiral Dynamics Theory has shared my analysis with the Chicago Group (Paul Volker’s Group), Herman Wijffels (Dutch Economist and former Executive Director at the World Bank) and the office of the Prime Minister of Iceland. This blog provides a good chronology of where Economics meet Memetics specifically as it relates to the clash of value systems over the last two years. I highly recommend you browse earlier posts

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