“The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.”

Walter Bagehot (1826-1877) (Physics and Politics)

Ever since the European Enlightenments, the English and Scottish “sociology of virtue” has been in conflict with the French “ideology of reason”. For the British philosophers the essence of human nature was a moral sense of right and wrong and a natural empathy for others. For the French philosophes, however, reason was paramount, the equivalent of “what Grace is to the Christian”. Of course this strife didn’t begin in the 18th Century – it dates back through Aristotle and Plato, to much earlier times. Since then, however, the battle between what Adam Smith called “moral sentiment” and pure reason has taken many forms and has been fought by proxies in many different places. Sometimes the war has been “hot” as it was in the Methodenstreit between the German Historical School of economics and the neoclassical Austrian School. The former emphasized the importance of power, values and history in the development of institutions, while the latter advocated the use of methodological individualism as a guide to understanding markets. Out of this strife, through a complex series of developments, would emerge mainstream, neoclassical economics, with its use of logic to come up with universal principles of human action for self-interested actors.

At other times the war has been “cold” and the conflict barely acknowledged. In the field of management in America in the 1950s, the ideology of reason triumphed in a walkover and was installed as the foundation of what was intended to become a social science. Management was to be placed on a sound footing of positivist philosophy and modernist assumptions of progress and the cumulative nature of knowledge. The manager was seen as a detached, knowing actor/agent in a knowable world, rationally calculating (predominantly) his options and issuing crisp, actionable instructions. The mind of the manager was idealized as factual and forensic, rather like that of the hyper-logical Mr. Spock in Star Trek. Neoclassical economics, as the social science closest to this ideal, came to exercise a huge influence on the development of the fledgling discipline. Not surprisingly, the “dismal science” imparted to management a gloomy view of human nature. Just as was the case in neoclassical economics, moral sentiment was banished from the picture in the interest of making the new discipline “values-free”. What neoclassical economists dubbed the “rational-choice” theory and the “rational-agent” view of managers has been hugely influential.

Initially this view of human nature served the business schools and their corporate clients well. In the aftermath of World War II, America was the only large industrial nation to survive with its infrastructure intact. The preoccupation of major corporations was managing growth and scale and producing “more of the same”. Workers were hired for their “hands” rather than their “heads” or their “hearts” and innovation was relegated to the R&D departments. The siloed faculties of the business schools mimicked those of their customers, delivering the functional skills that every manager needed.

Over the past decade and more it has become clear, however, that the view of managers as rational-agents is deeply flawed. We never were and never can be rational like Mr. Spock and, if we were, our colleagues would rightly regard us with suspicion. New findings about human nature from many different fields, including behavioral economics, evolutionary biology, evolutionary psychology and neuroscience are now emerging. There is growing evidence that our minds are collections of myriad special-purpose “apps”, cobbled together by evolution. They have evolved a practical wisdom based upon experience and contingent upon context.

There have been two different interpretations of the new findings about human nature. The first is Nobel Laureate Daniel Kahneman’s work, under the banner of “heuristics and biases”. Kahneman identified two fictional systems in the mind (fictional because they do not actually exist as separate systems). System 1 is an automatic, fast-acting, associative system that is continually searching for familiar patterns. System 2 is a slow, effortful, logical system that can make complex calculations. This is the system that we associate with the concept of managers as rational-agents. To the chagrin of many economists, however, Kahneman’s work shows clearly that System 1 dominates System 2. Unfortunately the pejorative “biases”, together with his failure to outline his own concept of rationality, has resulted in a “glass half-empty” view of our cognitive powers. It has left the “gold standard” with the management scientists and the economists by default. Thus it leaves untouched the gloomy ideology on which modern management was founded.

There is, however, a second, more optimistic take on the new discoveries about human nature. This “glass half-full” view is the concept of “ecological rationality”, which also featured in the 2002 Nobel Prize for economics, but in the acceptance speech from the other recipient, economist Vernon Smith. Ecological rationality suggests that our minds have evolved to extract cues to action from the contexts in which we find ourselves. This is our System 1 that is geared to making fast, “good enough” decisions under pressure of time and conditions of uncertainty. Proponents of ecological rationality argue that it is this essential, practical wisdom – Aristotle called it phronesis – which has allowed us to survive as a species for 100,000 years or more, that should be the gold standard for rationality. Indeed, evolutionary psychologists have suggested that our minds have evolved to be “better than rational.”

A natural ally of the concept of ecological rationality is that of embodied cognition and the embodied mind. The idea of embodied mind denies the validity of the Cartesian separation of body from mind. Instead it implies that we can “think” (learn and inquire) about the world in just as many ways as we experience it! Thus contexts matter, history matters and stories matter.

This Change is Relevant and Meaningful

The relevance and scope of such a fundamental change in our assumptions about human nature is difficult to overstate. No aspect of society will be untouched by it and one of the areas most affected will be the practice and theory of management. Currently that field is a morass of complex mental models. Fifty years ago one leading academic called it a “management theory jungle.” Today it is more like one of those exploding galaxies filmed by the Hubble telescope, bursting apart as the stars rush away from each other at the speed of light.

The concepts of ecological rationality and embodied cognition have the capacity to change all this. If we can indeed learn and think about the world in just as many different ways as we can experience it, then all of the liberal arts and even the fine arts are swept back into management. They do not come back in chaos but, as I show in The New Ecology of Leadership, they can be integrated into a new ecological understanding of how complex human systems work. An ecological perspective allows us to understand how new enterprises are conceived in passion and born in communities of trust. They grow through the application of reason and mature in power. As reason supplants passion and trust, however, people are increasingly hired for their technical skills, rather than their belief in the “cause”. As a powerful hierarchy emerges, for the very best of reasons – to embed a recipe for success – people become instruments of power. The resulting loss of excitement and engagement steadily drives out creativity and innovation. Thus power tends to freeze organizations and they can easily fall into a competency trap, where they cannot abandon the habits and processes that got them to where they are. They become brittle and vulnerable to Schumpeter’s gales of creative destruction.

An ecological perspective also suggests how this destructive-creative process works. Destruction, whether by disease, flood, wind or fire opens up spaces in an ecosystem, where small-scale innovation can proceed unconstrained by lack of resources. In human ecosystems innovation and creativity flourish in communities of trust and practice with a strong sense of mission and purpose. The process is clearly visible in such disparate places as the Florence of the Medici, the Quaker and other Nonconformist communities in 18th Century England, Vienna at the turn of the 19th Century and today’s Silicon Valley. An ecological framework also reminds us – as we are currently all too aware – that the pace of destruction is very fast and that innovation and the creation of growth and wealth take much longer.

This Change Offers Great Opportunities – If We Can Change Our Mindsets

Cartesian management, with its stress on objectivity and logic, locates the manager at a distance from the organization being managed. The emphasis is on analysis and calculation, conducted from a high vantage point. It views management as a technical practice, akin to engineering. If contexts matter, however, then reality is complex and multi-faceted. The facts never speak for themselves – they have to be selected and interpreted. This brings identity, ethics, purpose and power back into the picture: management becomes a moral practice not merely a technical one. Thus, from an ecological perspective, the view of an outside observer is only one of many and can never be truly “objective”. “Instead of the silly and empty claim that an observation is objective if it resides in the brain of an unbiased observer”, wrote Churchman (1968, p. 86), “one should say that an observation is objective if it is the creation of many inquirers with many different points of view,” True objectivity, then, is not a position; it is an achievement. It is the view from everywhere.

Effectively an ecological perspective places every manager in a field of existential tension. It is the tension between the twin poles of continuity and change, structure and movement, form and flux. It is a place of paradox, where from the outside these concepts look like irreconcilable opposites, requiring an “either/or” choice. From the inside, however, the antinomies demand a “both…and” integration, something that only an effective organization can deliver. The challenge is to weave together two forms of time; succession and intention. Succession is the familiar clock time, when past-present-future run in a sequence; intention is the time of “Now”, when memory, attention and expectation come together in a single moment of opportunity. The relationship between these two types of time is best described as one of figure and ground. We oscillate between succession and intention, time flowing by and then us flowing with it, in the flow. One instant we are lone spectators; in the next we are collaborative participants. Both succession and intention are always present and while we cannot “see” them at the same time, their integration is critical. We call the result “meaning” and the making of meaning is the primary concern of leadership.

A Field Too Far?

The field of management was a latecomer to the modernist project, one of the last landscapes to be inundated by the apparently inexorable advance of positivist science. In retrospect it may prove to be a field too far; the high-water mark for modernity. For in management the contradictions between the “sociology of virtue” and the “ideology of reason” are felt most keenly. Everyday effective managers have to deal both with people as subjects, as ends-in-themselves, and people as objects, as instruments to the purposes of others. If they veer too far to the “left”, organizational purpose may be lost and worthwhile goals for community and society remain unrealized. If, on the other hand, they steer too hard to the “right”, organizational goals may be achieved but at the expense of the development of people and to the detriment of society. Knowing how and where to steer depends on the different kinds of uncertainty that the organization faces. Sometimes managers need data and calculation, at other times they need judgement and experience and they always need power (but of different kinds). Thus professional, situated judgement (and the values it entails) are central to management. Managers are only occasionally detached, objective observers; they are mostly passionate, immersed participants.

The challenge is to achieve a “both…and” integration, where the goals and narratives of the society are a weave of the goals and narratives of its people, organizations, institutions and communities. We need a new interpretive framework to legitimize this essentially ecological perspective on management. This philosophy will have much in common with American pragmatism. Neopragmatist Richard Rorty put it well: “Pragmatism, by contrast [with positivism], does not erect Science as an idol to fill the space once held by God. It views science as one genre of literature – or, put the other way around, literature and the arts as inquiries, on the same footing as scientific inquiries. Thus it sees ethics as neither more “relative” or “subjective” than scientific theory, nor as needing to be made “scientific”. Physics is a way of trying to cope with various bits of the universe; ethics is a matter of trying to cope with other bits. Mathematics helps physics do its job; literature and the arts helps ethics do its. Some of these inquiries come up with propositions, some with narratives, some with paintings. The question of what proposition to assert, which pictures to look at, what narratives to listen to and comment on and retell, are all questions about what will help us get what we want (or about what we should want.)”

This post-rational, post-modern framework is one of hope rather than gloom. From this perspective the goal of inquiry is not truth but action: “…to bring consensus on the ends to be achieved and the means used to achieve those ends.” It brings us back to management as a practice that can both create and conserve, a calling with both moral and technical strands inextricably entangled with each other. This is where it was, is and always should be.

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Himmelfarb, G. 2004. The Roads to Modernity: The British, French, and American Enlightenments, London: Vintage Books

Quoted in Himmelfarb (2004) p.18.

Kahneman, D. 2011. Thinking, Fast and Slow, Canada; Doubleday Canada.

Smith, V. L. 2003. “Constructivist and Ecological Rationality in Economics.” Ameri- can Economic Review 93(3) (June). See also Todd, P.W. et al. 2012, Ecological Rationality: Intelligence in the World, Oxford, U.K.: Oxford University Press.

Gigerenzer, G. 2007. Gut Feelings: The Intelligence of the Unconscious. New York: Penguin.

Cosmides, L., and J. Tooby. 1994. “Better than Rational: Evolutionary Psychology and the Invisible Hand.” American Economic Association Papers and Proceedings 84(2) (May): 327–32.

Lakoff, G., and M. Johnson. 1999. Philosophy in the Flesh: The Embodied Mind and Its Challenge to Western Thought. New York: Basic Books.

Gardner, H. 1983. Frames of Mind: The Theory of Multiple Intelligences. New York: Basic Books.

Koontz, H. 1961. “The Management Theory Jungle.” Journal of the Academy of Management 4(3) (December): 174–88.

Hurst, D. K. 2012. The New Ecology of Leadership: Business Mastery in a Chaotic World. New York: Columbia University Press.

Schumpeter, J. A. 1962. Capitalism, Socialism and Democracy, 3rd ed. New York: Harper Torchbooks.

Rorty, R. 1982. The Consequences of Pragmatism, Minneapolis, University of Minnesota Press.

Rorty, R. 1999. Philosophy and Social Hope, London, Penguin Books