Esko Kilpi on Interactive Value Creation

The art of interaction, the design of digital work and the science of social complexity

Tag: Duncan Watts

Blockchain represents a novel form of organization

The Internet can be seen as the combination of two much earlier innovations. The first was the telegraph, which allowed information to be transmitted electronically. With the advent of the telegraph, people could communicate instantaneously across long distances, which was unimaginable before that time.

The second innovation was the computer, which allowed information to be processed and stored with unimaginable speed and almost limitless storage capacity. Both the telegraph and the computer solved huge problems by themselves, but combining the two facilitated truly new and transformative social innovations that led to the network era we now live.

Our present understanding of the logic of networks is largely a result of the work of Duncan Watts and Steve Strogatz, who connected the research done by Mark Granovetter and Stanley Milgram.

Following their findings, let’s think of people instead of computers and links of acquaintance as telegraph lines connecting them. This social world has not been designed by anyone. It has evolved through countless connections between chance and choice: people meeting people. Our social network is neither ordered nor random, but something in-between.

The potential of the network we are part of is mostly invisible to us in our ordinary social lives. We can only see as far as those to whom we are directly linked. We do not normally know, or think about, the people our friends know. But in a network-science sense these people are important to us. The friends of our friends act as ties that sew the larger social network together. They are the shortcuts to people far away. They make the world small for us. You typically have strong links to family members, friends and co-workers. The weak links, the connections of our connections, and the people we have met only once or meet very seldom, are bridges between worlds. An example of this may be the person from New Zealand whom you met at a conference a few years ago. Without that link you might not be connected to anyone in New Zealand. But because of it, you are linked in two steps to his friends and in three steps to everyone they know. This is called a small-world network.

Order, design, strong links and local proximity have been the leading principles of the world of work, but what if easier and more valuable work were in effect based on dynamic connections and interaction with people in the larger network? Finding these people is now possible with the help of digital social networks. The small-world geometry offers a way to see order and design in these apparently disordered networks. Digital, purpose-driven proximity may replace local proximity in the future world of work.

But the way we work needs to change. As people do their own thing, they also need to act as links for others. That is the new role in all work. People need to be fluent in connecting, curating and re-publishing.

What kind of technology would enable this to happen? I don’t believe the future of digital work is built on platforms like Facebook or LinkedIn.

The “Blockchain”, the engine on which Bitcoin is built, is a new distributed consensus/authority system that allows transactions, or other data, to be securely stored and verified without any centralized authority at all, because the entire network validates them. Those transactions don’t have to be financial and the data doesn’t have to be money.

The future of work may be built on connecting small-world networks and the Blockchain technology. The network is then the market and commons for exploration, coordination and value creation without any central authority. The importance of Bitcoin may not lie in digital currency. It represents a novel form of network-based organization.

This kind of work, I think, may be unimaginable today.


Thank you Rob Wile, Mark Buchanan and Mike Hearn

More: The future of Blockchain.

Resilience, rationality and how we make decisions

We have been studying companies’ connections and disconnections for more than twenty years and have worked inside a huge number of them. Across all this research, common themes have emerged and intensified during the past few years: good communication in the era of the Internet and the new interactive tools does not mean any more that companies should listen carefully to their customers or that leaders should talk clearly with their subordinates. The linear view of communication, the movement of messages or sharing of content between people is giving way to a totally new understanding of what interaction, and work, are all about.

The first emerging theme is that communication is in fact a process of continuous coordination and knowledge creation. Knowledge is not shared as contents, but arises in action. Knowledge is never transmitted from one mind to another. It is a change from the movement of messages to a joint movement of thought. The future and viability of an organization depend on this process.

Economics still makes the assumption that individuals, the agents, as they are called, operate autonomously, separately from the influences of others. When choosing something, making a decision from a set of alternatives, the agent compares the attributes of the alternatives and selects the one that corresponds to her preferences. It is a world where independent individuals carefully weigh up the costs and benefits of any particular course of action.

However, scientists have emphasized the limits of our understanding. An important point is that these limits apply to everyone. They apply to politicians, to central bankers and to top executives of multinational companies. John Maynard Keynes once wrote that we have, as a rule, only the vaguest idea of the consequences of our actions. Herbert Simon and Stuart Kauffman on the other hand have argued that the number of future paths open to us at any point in time is so vast that it makes no sense at all to speak of the best or optimal decision.  But we still think the world works like a predictable machine operated by rational agents

Behavior that does not follow an economist’s definition is often called irrational, but it may be that in a world of ubiquitous networks, a proliferation of choice and an abundance of information, the economic definition of rationality has itself become outdated and irrational.

We need a new model of rational behavior and a new understanding of how we make decisions. We need a new decision model!

The second emerging theme is that the assumption that people make choices in isolation, that they do not adopt opinions simply because other people have them, is no longer sustainable. The choices people make, their buying decisions and their political views, are directly influenced by other people. That is to say that we construct our world together in communication. Network scientists such as Duncan Watts and Mark Granowetter have proved that the world comes to be what it is for us in our relationships. In the end it all depends on the company you keep and the conversations you have.

This leads to the importance of emphasizing relations instead of reductionism and separations. Reductionism means that the organization is understood as being split from its environment and one functional team is seen as being separate from another function. The worst mistake we make as a result of reductionist thinking may be that we assess and reward employees as if they were disconnected from other employees.

Links and communication are at the centre of organizational life. Depending on the quantity of interdependent links and the quality of communication, the organization lives or dies. Work is interaction between interdependent people.

The third emerging theme is that communication creates patterns. Words become what they are through the responsive actions of the people taking part. The relational view means in practice that if a conversation goes badly, it is always a joint achievement. On the other side, a conversation can only be successful if both participants join in and make it so as Ken Gergen points out. In management, it means that there is nothing one person alone can do to be a good manager. Good ideas don’t count as good ideas, if other people don’t treat them as such.

New leadership is about an awareness of creative and destructive patterns and having the ability to influence what is going on. In a creative pattern, the participants build on each other’s contributions. The conversation, thinking and action are in a process of forward movement.

Destructive patterns are the most harmful in terms of organizational viability. These patterns don’t contain forward movement but running in circles. People and organizations get stuck! People slow down in bitterness and silence, or even to the breaking of the link. The most destructive patterns often begin subtly, but unless they are worked with soon, not only will relations suffer but the whole network will deteriorate.

Being aware of the patterns includes being aware of the roles that we play. Whenever we speak, we do two things: we subtly define ourselves and define the other. Does the speaker in a company context define herself as one who can talk down to others or as an equal? What we say is important to the viability of the organization but the way we say it can be equally important. Talking down or talking up between people creates an asymmetry that leads to bad decisions and inefficient movement of thought.

The machine metaphor meant that we tended to think that the people “above” us have significant power. They are in control. We thus talked up to them. They should decide. They should do things for us because they were the ones who were responsible, not us. Knowing that they are not in control raises the question of a need for a new distribution of responsibility. Bottom-up as a metaphor is as harmful as top-down when the common goal is resilience.

There is no aspect of work or leadership that takes place outside the realm of communication. Human agency is not located or stored in an individual, contrary to mainstream economics. The individual mind arises continuously in communication between people.

Being skilfully present in the forward movement of thought and relational action is the new meaning of being rational.


Thank you Ralph Stacey, Doug Griffin, Ken Gergen, Marcial Losada, Katri Saarikivi and Paul Ormerod

Links: “Resilient Performance in an Age of Uncertainty” “Possibilianism” “Stanley Milgram and the uncertainty of evil” “The fluid core“. “On functional stupidity and trust“. “Tulipmania” “Neuroeconomics

Small worlds

I was taking part in a training course on the management during an extreme national emergency. As a part of the program, we went through an exercise that simulated a deep global crisis with severe implications for the governance of Finland. Although the gravity of the situation as it was expressed in the daily briefings was beyond anything we really experience, or can think of, at home today, all aspects of the apocalyptic views presented are actually a reality somewhere in the world at this very moment. This led me to reflect on my learning.

Another reason for writing this was what is actually happening in real life at home. Finland has traditionally been one of the most pro-European Union countries. But now the government seems to be blindsided by the rise of the populist anti-euro party. In the face of the assault of the “True Finns” the Social Democrats too seem to be abandoning their pro-EU roots. If this trend continues after the elections, where are we heading?

The experience brought by the Internet is that all people on our planet are only a few links, or handshakes, away from each other. The claim is that even when two people don’t know each other or do not have a friend in common, only a short chain of intermediaries separates them. Stanley Milgram performed his first famous experiments even before the era of the mobile phone and the web. His results indicated a median chain length of less than six (degrees of separation). The research was groundbreaking in suggesting that the whole global human society is an interdependent network characterized by extremely short path lengths. If the median was just below six in 1967, it is safe to assume that the number is even lower today.

The dominant ways of thinking about the world have their origins in Newtonian mechanics in which the universe was simply the sum of independent parts. At the moment, this part – whole thinking is being directly applied to the ways we think. Interdependence plays a minor role and is anyway seen as the result of a deliberate choice. The populist thinking follows the logic that we can choose not to be interdependent.

I learned last week that leaders cannot know what the outcomes of their actions are. This is because what really happens arises in the complex interplay of many actors with many intentions, which is why leaders cannot choose outcomes although they can choose their next action. We often create things together that nobody wants to create

Nothing ever happens in an independent way.

Interdependent individuals relate to each other in a responsive manner, with a gesture from one party calling forth a response from another. George Herbert Mead was the first social psychologist to take the stance that meaning arises in the responsive interaction between gesture and response. The important implication is that meaning does not then arise independently in each actor first to be then subsequently expressed in action. Actions are not independent. Meaning is not attached to any single act but is perpetually created in interaction.  Knowing is then a property of the interaction. Cognition is relational.

Our perception of the world is confined to groups of immediate acquaintances. Sometimes this is good news, sometimes very bad.

The old ways of understanding human behaviour are not up to the task any more. In contrast to Newtonian traditions, the science of social networks offers an entirely new way of understanding the interdependent human society.

Let’s imagine your house is on fire. Luckily there is a lake nearby. But you are alone. You run back and forth but without some help you may not be able to carry water fast enough. Lets then suppose that you are not alone, and people around you want to help. If you have seen old movies where this happens, a peculiar form of organization emerges. People form a line from the lake to the house passing full buckets of water towards the house and empty buckets back towards the lake. What is happening is called a “bucket brigade”. It is not about the individuals or the community but about a particular form of emergent linking that at the same time distributes the task at hand and integrates the efforts of the people in a coordinated way. If we take the idea of the bucket brigade and connect it with the notion of the small world network, we have a global concept of participation.

A better understanding of social networks is essential for facing the new threats in the world. They are only a few handshakes away, whether we want it or not. This better understanding of interdependence also leads to the necessity for empathy and participation. Stanley Milgram proved that the distance between the fires and the lakes in our world is very, very short indeed. This is why we need to take part in the bucket brigades, and not only when our own house is on fire.


Thank you Duncan Watts, Ralph Stacey, Kim Mattsson, Torsti Astrén, Arto Kujala, Marjo Korkeamäki and Anna-Mari Pesonen. Thank you Olli Haikala for coaching. Thank you Lapin Lennosto

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