Saturday, June 2, 2012

Peak Compartmentalism

Like most vices, specialization started out as not a bad thing. Without it we’d still be hunting and gathering in poorly dressed family tribes. But one of your ancestors came up with a brilliant idea – I’ll stay home and tend the crops if you’ll take care of the hunting and building of huts. Everyone wins: The good hunters hunted, farmers farmed, and sewers sewed. Life was good, or at least better.

If the farm is where specialization was born then the factory is where it found religion. The Industrialists took it to a whole new level. Farmers became factory workers became riveters became robots. And life was better… at least for the factory owners.

Specialization has crept into every aspect of our lives. Today, most of us wouldn't try to fix our own cars or plumbing, any more than it would occur to an octogenarian to call in a closet organizer. Your grandparents lived in a world without pet groomers, estate liquidators or personal coaches. .

Specialization has not only impacted the functions we perform but the way we think. We compartmentalize our lives in a way that would baffle our ancestors. We have a time to work, a time to work out, a time to play, and a time to think about God. We schedule phone calls, play dates, date nights, and down time (if you’re lucky). Creating wealth is done in one compartment called business which isn’t, by the way, personal. But don’t worry because there is another compartment called philanthropy or community service where your personal part is encouraged to give back.

But as with most great ideas, there comes a tipping point where the benefits diminish and the tradeoffs start to get silly. Many of us pay others to do the heavy lifting in our lives and then pay to work out at a gym. Or take philanthropy. Your 401K may well be invested in companies that create problems you try to help solve with your charitable contributions.

When we reach these tipping points there is a desire to go back and a need to move forward, to some new paradigm and there are signs all around that this is happening. The New York City Council has decided that is no longer content to give their Billions in deposits to big banks, and allow these financial beohemoths to do whatever they like so long as they deliver an acceptable financial return. Now, in exchange for their deposits they want banks to report what they are doing for the city. Joining other cities, New York wants to know - what are you doing in our city and for our city?

What a powerful question! It recognizes that not everything can be or should be compartmentalized. Investing in local businesses, or providing low interest loans to local entrepreneurs might not offer the sexy financial returns, but if it provides jobs, boosts the local economy, creates city rent and tax revenues, and helps eliminate the blight of boarded up store fronts, there's a lot more than simple financial returns to be considered. It’s a big, complicated, messy, human picture.

Smaller banks, community banks and credit unions get it. They understand that their existence is tied to the communities in which they serve. If our towns and cities invested in these smaller financial institutions that are invested in us, we all win. Big banks, not surprisingly, aren’t happy. They have benefited from the black box approach of highly specialized compartmentalization. It has enabled them to make huge profits regardless of the collateral damage. They argue that a city’s demand to consider the bigger picture is really increased regulation getting in the way of their ability to do their job. But it isn’t regulation, it is our right to think holistically and our recognition that focusing on one thing (financial return) means we ignore the externalities like climate change, peak oil, and pollution) that are mounting in costs and consequences.

Thank you New York!

We have apparently reached the tipping point – Peak Compartmentalization may be here at last, and we’re starting to reach beyond to a more integrated, holistic approach where we embrace our interdependence and the responsibility it entails. And it demands that our institutions play more than a one dimensional role in our communities.