“It is not in the stars to hold our destiny but in ourselves.”

— William Shakespeare

“Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.”

— Marcus Aurelius

“Prediction is very difficult, especially if it’s about the future.”

— Niels Bohr

“Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.”

— Dwight D. Eisenhower

“You can never plan the future by the past.”

— Edmund Burke

“The future is no more uncertain than the present.”

— Walt Whitman

“There’s no present. There’s only the immediate future and the recent past.”

— George Carlin

“The only thing we know about the future is that it will be different.”

— Peter Drucker

“The only way to predict the future is to have power to shape the future.”

— Eric Hoffer

“The problem with the future is that it keeps turning into the present.”

— Bill Watterson

You probably know all about System D. No? Well, neither did I until today. Maybe you know what’s coming, unlike myself. No? Well, nobody truly does. And this is just what System D is designed to handle. Dealing effectively with the unforeseeable and unknowable, like black swan events and situations. Vital to know about and use.

The world seems to be getting much more chaotic by the day. Major fires all over the globe. Wars and rumors of wars almost everywhere. COVID and similar threats widely reported and anticipated. Governments behaving badly, incompetently, and even worse. Or perhaps this is just how the world has always been.

Black swan events and situations – unforeseeable in nature, magnitude, and timing – once rare, have become rather frequent.

Strauss & Howe Fourth Turning Crisis phase?

Perhaps we are in the final throes of William Strauss’ and Neil Howe’s Fourth Turning theory. This, as you almost certainly know, sees U.S. history in terms of generational cycles of roughly 80 years each – a human lifespan. These cycles have four phases, or turnings, of about 20 years: “The High”, “The Awakening”, “The Unraveling” and “The Crisis”. The final, fourth turning is characterized by wars and chaos that flush out the social system for a new generation or saeculum.

The Revolutionary saeculum (1704-1794) had a Fourth Turning (1773-1794) ending with the Revolutionary War. The Civil War saeculum (1794-1865) had a Fourth Turning (1860-1865) ending with the Civil War. The Great Power saeculum (1865-1946) had a Fourth Turning that concluded with World War II. The Millennial saeculum (1946-present) has a Fourth Turning Crisis phase underway (2008-present) that potentially may end with WW III.

While this generational theory has quite a number of criticisms, it does seem to capture the saeculum turning points surprisingly and disturbingly well.

The Fourth Turning.
The Fourth Turning.

System D to the rescue

What on earth or thereabouts is “System D”? Well, it turns out France is the culprit, according to Wikipedia:

“System D is a manner of responding to challenges that require one to have the ability to think quickly, to adapt, and to improvise when getting a job done. The term gained wider popularity in the United States after appearing in the 2006 publication of Anthony Bourdain’s The Nasty Bits. Bourdain references finding the term in Nicolas Freeling’s memoir, The Kitchen, about Freeling’s years as a Grand Hotel cook in France.”

“The term is a direct translation of French Système D. The letter D refers to any one of the French nouns débrouille, débrouillardise, or démerde (French slang). The verbs se débrouiller and se démerder mean to make do, to manage, especially in an adverse situation. Basically, it refers to one’s ability and need to be resourceful.”

“In Down and Out in Paris and London, George Orwell described the term débrouillard as something the lowest-level kitchen workers, the plongeurs, wanted to be called, indicating that they were people who would get the job done, no matter what.”

“In recent literature on the informal economy, System D is the growing share of the world’s economy which makes up the underground economy, which as of 2011 has a projected GDP of $10 trillion. The informal economy is usually considered as one part of a dual economy. The concept of dual economy is where the economy is divided into two parts – the formal and the informal. The formal economy consists of all economic activities that operate within the official legal framework and are regulated by the government.”

“This is not to be confused with autarky or self-reliant economies. Economists define self-sufficiency or self-reliance as the state of not requiring any aid, support, interaction, or trade with the outside world.”

Umm …

To me, this explanation doesn’t explain much other than the French nouns connection. It seems to confuse two quite different concepts: (1) the ability to think quickly, to adapt, and to improvise when getting a job done; (2) the informal or underground part of the “dual” economy. The first of these strikes me as especially relevant today.

Agility, adaptability, and creativity

“System D” is certainly a crappy term, to me at least, but it does reflect something that I have been addressing since this blog began three years ago. See here and here for example. I should have guessed that it came from France.

Being able to deal effectively with black swans and chaos in general – where planning is virtually impossible – is a critical ability for today’s world. You have to handle whatever happens almost while it is happening.

Charles Darwin believed that survivors were not the fittest, but instead the most adaptable. I would add “most agile” here since you often have to think and act quickly as unforeseen happenings unfold.

Creativity and the ability to improvise are the third leg of this survival stool. Doing what has been done in past will rarely be what works in the present. This means that you need people who think outside of the box. People who can generate disruptive ideas.

Charles Darwin, thinking deeply.
Charles Darwin, thinking deeply.

Being adaptable and agile means that you need some new ways to try out, hopefully in small testing steps that provide on-the-fly learning. I described this approach in a recent post.

What I did not address in that post is the kind of people who can generate such disruptive ideas in real time. These people are fundamentally different and relatively rare. Some might even refer to them as “misfits”, such as the following …

Using “misfits” to drive adaptation and agility

Despite the disparaging nature of this label, the idea behind it seems quite interesting. The source appears to be:

The Misfit Economy: Lessons in Creativity From Pirates, Hackers, Gangsters, And Other Informal Entrepreneurs – a 2015 book by Alexa Clay and Kyra Maya Phillips about the innovators and entrepreneurs amongst the underground economies and grey markets of the world.

Business publication Forbes had a piece on this book a while back via David Slocum, faculty director at The Berlin School of Creative Leadership: “Five Questions With Alexa Clay On Misfits And The Dark Side Of Innovation

“If we want more disruptive ideas out there in the world then we need more disruptive sorts of people, which requires more insurgent behavior. Hustle, hack copy, provoke and pivot are just some of the core behaviors and principles we think misfits everywhere can tap into.”

“Intrapreneurs are really misfits on the inside. They are incredibly entrepreneurial and often going against the grain of their corporate hosts. As a result, they need a lot of emotional support because they are constantly at risk of being rejected by corporate antibodies that value business as usual. In many ways, it feels like intrapreneurship is a guerilla movement happening with Fortune 500 companies. These are employees that aren’t asking for permission, but are hell-bent on bringing their values and originality into the workplace. They aren’t there to merely maximize quarterly returns, but they are trying to jumpstart new business models and explore emerging markets. Companies are really only just beginning to figure out how to better harness their employees entrepreneurial potential and create the conditions for these types of misfits in the workplace.”

In my quite extensive experience with such people, both as entrepreneurs and intrapreneurs, the really good ones are rare and difficult (or impossible) to manage. They are far from “misfits” however, but instead highly talented, creative, independent thinkers and drivers. They are often business builders – within and outside established firms.

How might “System D” work in practice?

Hard to argue against a concept based on agility, adaptability, and creativity, but just how exactly might one go about practicing a System D approach? Each of us personally, and each of the organizations and businesses we manage or work in, must implement a System D approach to deal effectively with our chaotic world. Whatever System D may actually be in practice.

We can’t simply transform ourselves into “misfits” or equivalent, and we most likely can’t transform others in this manner. Given the apparent timeframe for implementation – perhaps 6 to 12 months is a reasonable guess, we pretty much have to work with what we have available today. People, resources, situations.

Personally, I have already implemented what appears to be possible along the lines of agility, adaptability, and creativity. At least as far as my abilities and resources permit. Without getting into my reasons for doing so, I am presently able to move very quickly and to respond “creatively” to whatever situations may present themselves. I am a System D microcosm, if you will.

What is very clear from this recent effort is that what one might do, and ultimately does, toward a System D approach depends hugely on the individual person, business, or organization. Everyone’s situation, resources, and people are different. There is no one-size-fits-all here so far as I can see.

What to suggest that might help others?

I know – what about a case study for a fictitious medical devices and software company … HGL Diagnostics …

Case Study: HGL Diagnostics

HGL Diagnostics, based in Cambridge, MA, develops, sells, and services specialized medical diagnostic devices and related AI-based diagnostic software. Founded in 1990 as a small analytical lab, the business grew steadily and somewhat profitably under the direction of its co-founder, CEO, and major stockholder Edward (Ed) Gage, MD, PhD. By 2023, the company had about 200 employees and sold its growing array of highly-advanced products to hospitals and labs worldwide.

Key employees in HGL besides Dr. Gage include: CFO/CIO Julie Warren, CTO and self-styled “resident genius” Dr. Paul Abbott, CSMO Beth Thomas, and COO Dr. Kim Liu. Also deeply involved was Dr. Karl Schmidt, Board Chairman and co-founder. The majority of its employees are high-level technical professionals.

Although U.S. headquartered, the company has offices in: Zurich, Switzerland; Taipei, Taiwan; Johannesburg, South Africa; and Sao Paulo, Brazil. Offshore locations were small mainly sales and service operations.

As of August 2023, the company’s leadership team had become quite concerned about major changes in its main markets, the rapid integration of AI technology into its products and operations, the apparent trend toward globalism, and the increasingly troubling financial and economic situation worldwide. Despite being modestly profitable, the team saw a number of operating weaknesses that had developed over recent years of quite rapid growth, especially the heavy investment required to keep technologically competitive. The company was privately owned by a small number of investors and key employees.

In the most recent executive meeting, three particular threats were discussed:

  1. Return to COVID-type lockdowns and restrictions
  2. Serious financial or economic disruption
  3. Civil strife resulting in some kind of martial law situation

While there were considerable differences of opinion about the likelihood of any of these actually occurring, they recalled the huge and almost fatal consequences to the company from the 2020 COVID-19 lockdowns, travel restrictions, and supply chain problems. This black swan occurrence argued strongly for being much better prepared should another situation of that magnitude come out of an increasingly chaotic world.

How best to approach such a serious but unforeseeable situation was unclear to say the least. No one on the executive team had any relevant experience in dealing with what they decided to call another “black swan” event. After much discussion, Dr. Gage suggested that they begin by trying to deal in some manner with the three actual threats now potentially facing them.

Dr. Schmidt – Karl – felt that it might be worth bringing in a consultant to facilitate their deliberations, but the team decided to make some initial efforts internally. Dr. Abbott – Paul – strongly supported Karl, arguing that the team hardly had the time to devote to figuring out even how to get started. This challenge resulted in Paul being appointed to lead the initial effort on behalf of his colleagues who were “… apparently too busy to deal with saving the company again [Paul]”.

The ever-resourceful Paul reluctantly accepted the challenge, but had in mind contacting a classmate and good friend – Jeff – from his doctoral program days. Paul and Jeff met frequently to discuss a wide range of topics that interested one or both. Paul felt that Jeff’s extraordinarily-varied background might help offset the largely narrow backgrounds of the HGL executive team.

Dr. Ed Gage, Chief Executive Officer

Dr. Ed Gage, Chief Executive Officer

CTO Paul informally contacts his friend Dr. Jeff

This contact was made privately in case it did not prove worth pursuing further. Over a quite lengthy lunch at the Harvard Club in Boston, Paul filled in Jeff on the details of HGL’s currently difficult situation and on the reasons the executive team had selected their three threat possibilities.

Jeff sat mostly without comment through this briefing, asking only a few questions for clarification. After concluding, Paul confronted Jeff directly with: “What should we do?” – adding the remark that no one in HGL including himself had the slightest idea about how even to begin. Jeff responded that he had never known Paul to ask such a question in all their years of friendship, and that Paul “… always had ideas and strong opinions about virtually everything.”.

After calling for a fresh libation, Jeff began by asking Paul: “Do you actually believe that any of this stuff has even the slightest likelihood of happening?”. Paul sat silently for several minutes, and then responded:

“Umm … yes, I truly do. Very low but definitely non-zero likelihood. The real point of our even considering such unlikely events is that we must prepare somehow for something big to hit us. We are, as I just explained, quite vulnerable in several critical areas. I have raised a somewhat similar question quite a few times with Ed, but he always steered me back onto something of major current importance. Ed is business, all business. Karl was the dreamer who conceived HGL. Ed was the guy who made it happen.”

Jeff responded by stating that Paul, as always, seemed to have the essence of a decent approach in his comment that “… we must prepare somehow for something big to hit us” and that “… [we are] quite vulnerable in several critical areas”. Jeff then elaborated:

“With the world right now misbehaving the way it is, ‘something big’ seems extremely likely. Another ‘black swan’ event, if you will. Unforeseeable in nature, magnitude, and timing. I read recently a short piece somewhere about a ‘System D’ approach for dealing with just such events or situations. The essential point as I recall was that you had to be both agile and adaptable to survive, probably echoing Charles Darwin. What think you, my ever-wise friend?

Paul thought for a bit, rather unusual for him, and then offered this idea:

“This may be a real opportunity to do something that I have been pushing for forever. HGL tends to be reactive rather than proactive on, well, almost everything. We often put off acting and even planning until the time left for serious planning is zero or less. But so many important things need a lot of lead time and careful execution. Our Dr. Kim [Liu] feels pretty much the same way, since she usually gets hit with the panic-phase stuff. ”

“I’d like to bring Kim into our conversation ASAP. She is probably the smartest person in HGL, even brighter than Ed. Kim started out as a lawyer, and became a very successful one. But she grew to hate lawyering and went back to school to get an engineering physics degree, an MBA in economics, and a doctorate in quantum physics. Perfect background for this place, yes?”

“Could you by chance be able to meet again, say here, tomorrow anytime? I want to light a fire under this effort and the place to start is with another COVID-type lockdown – like the one that nearly killed us two years ago. That will instantly get Ed fully on board. Beth also. Julie (CFO) and Karl we’ll have to drag along.”

Dr. Paul Abbott, Chief Technical Officer.

Dr. Paul Abbott, Chief Technical Officer.

COO Kim gets fired up

As Paul expected, Kim was eager to get involved. She had almost singlehandedly persuaded HGL’s banks and other creditors to give HGL enough time to regroup after the COVID-19 hit. Kim was most emphatic about preventing a repeat by any means. She also remarked that “… something in this feels very right to me. Lawyer’s intuition maybe. Let’s move.”

Dr. Kim Liu, Chief Operating Officer.

Dr. Kim Liu, Chief Operating Officer.

Paul, Kim, and Jeff reconvened early the next day. Kim ordered a large pot of strong coffee. Kim immediately took charge of the meeting. Her lawyer-background came through emphatically. Her introduction was brief:

“I am hearing more and more through reliable contacts that the government and medical folks are going to attempt another COVID lockdown in concert with many other countries. COVID 2.0 they’re calling it. To me, the rationale for our effort can be almost anything. What I’m looking for is quick, solid thinking and action. We think too much about everything … action gets squeezed in if there is any time left. Not on this one. Do you both agree? Yes, I think. Let’s move. ”

Kim it might be noted here was clearly the next CEO. Smart and dynamic. Even now, she was working to get Ed shifted more into research, his first love.

The kickoff meeting with HGL executives

Surprising even impatient Paul, Kim scheduled the executive meeting – which she termed “exceptionally urgent and important” – for the coming Saturday, two days hence. Her agenda statement was typically brief and provocative:

“We seem almost certain to face yet another pandemic-inspired lockdown along with who knows what else. The prior pandemic happening nearly took HGL out. The next one may very well finish the job. But only if we are not fully prepared. Our thinking time is very short. Quick action is vital.”

As was her way, Kim immediately took charge of the meeting. She began by stating her goal: some sort of action plan by noon. Something on which to get started – “… immediately, if not sooner”. Her courtroom training again came through forcefully. Topic #1: “Our target situation or scenario”. Kim:

“You all know what kind of hell we went through only a short time ago. Our survival was a major miracle. We can’t count on yet another miracle. This one is up to us. Keep in mind that the pandemic 2.0 target scenario is effectively a straw man. It may well not happen. But what will happen regardless is what we decide about how to strengthen HGL ahead of getting hit with another catastrophe. Kind of a new approach for us, but let’s see where it takes us.”

“Let me offer a brief scenario overview. Suppose that my ‘reliable’ contacts are correct and that we do experience another COVID lockdown fiasco in all its misery. Timeframe early Fall 2023 for the enabling emergency declaration. Think perhaps that it rolls out through Spring 2024 – say 6 months. It does not matter here if the pandemic is as anemic as 1.0. We want to be as ready as we can for whatever happens, including nothing. Well, except that my contacts’ reliability rating will take a serious hit if 2.0 is nothing. Let’s move.”

“We all experienced lockdown 1.0 and its difficulties and challenges. I think that we came through pretty well, all considered. Many things that were vital we now have in place. For example, we can switch to full-remote (almost, anyway) within a day or two. Our systems are up and running and everybody knows what to do. But maybe we need a drill to make sure, yes?”

Action planning for immediate action

Kim restated her greatest concern that HGL’s leadership too often over-thought things and under-acted or panic-acted as a result. She made clear that the plan would be a live tool and it would be revisited and adjusted regularly. She also suggested that actions be developed as much as possible to provide early feedback on what works and what doesn’t. Kim again:

“Paul, Julie, Beth: What might break under another lockdown, should it occur? So much broke the last time. What didn’t we fix, or fix properly? Ed: Can you hold your input until we have their ideas. You are often much too forceful and leading, yes?”

CEO Ed smiled, and nodded in agreement. Then CSMO Beth jumped in:

“We didn’t keep our customers and clients sufficiently informed and in a timely manner. We still don’t do this well. You can’t believe the amount of flack I get routinely over this and its consequences. Customers want to know what to expect from us and what we need from them. The same, incidentally, applies to our vendors and subs.”

“Kim’s suggestion about some kind of ‘drill’ to work out exactly what we should do seems excellent. I couldn’t agree more. Can we put a pandemic 2.0 drill of some kind as #1 on our action list draft?

Beth Thomas, Chief Sales & Marketing Officer.

Kim: “Already done. Thanks. What’s next?”

Paul: “Our suppliers, vendors, subs got badly hammered last time. We also found out quite a bit about which ones can cut it and which ones can’t. This job is far from done. In fact we really don’t know much about how to do it properly.”

Julie: “ Paul is absolutely correct. We had a fire drill on that one. We fortunately got fortunate and things worked out, sort of. The underlying problems are still there, and have probably gotten worse. Might item #2 on our ‘get moving’ action list be a small team to address supply-side problems, weaknesses, and such?”

Ed: “I like what I’m hearing. This is just great! Keep moving … let’s get a couple more on the list and then shift into action mode.”

Julie: “Here’s a suggestion for item #3: People. Since HR is under my wing, I get constant questions about the possibility of losing certain really key people due to disabling illness, or simply quitting. And yet, I still don’t have a list of such people, why they are ‘key’, and what we might do to make sure they don’t quit or to fill in somehow if they become long-term disabled. Our HR manager has been unable to do this for reasons I still don’t understand.”

Ed: “Okay, that’s a very good #3. I’m a strong believer that three is a good number of items to address at any time. Gets messy quickly when we have more, like our usual dozen or so. As Kim says, ‘let’s move’ with these three to get started. Next action meeting will be next Saturday same time, same place.”

“Oh, yes, and I have one more request. Break whatever you are thinking about doing into small steps so that something can get accomplished each week. Let’s try to do something real in each of these ‘small steps’.”

“One thing more: Karl, Paul, and I will try to address concerns 2 and 3 on our worry list – major global financial and economic breakdowns, and a civil-strife-martial-law kind of situation here. We probably won’t get anywhere, but I don’t want to lose sight of these possibilities until we understand how they might impact us and maybe even what we might be able to do to minimize the damage.”

“Let’s see what we can do productively in a week. Apart from our day-jobs, of course.”

Kim: “Please let us all keep in mind that the remote likelihood of our target lockdowns scenario does not matter. What we are looking for is actions to take should it happen – or not.”

Julie Warren, Chief Financial Officer & Chief Information Officer.

To be continued and concluded in Part 2

The second part of this case looks at what this hypothetical executive team might have come up with as a way to use current threats, however unlikely they may actually be, to develop and execute action plans aimed at creatively strengthening HGL’s agility and adaptability.

Note that this is not risk assessment or risk management, which generally deal with events and situations having at least some roughly quantifiable probability of occurring. What this case example is dealing with are a small set of events and situations having both completely unknown, tiny, but non-zero, likelihood, and unknowable in nature, magnitude, and timing. Black swans, effectively.

Planning and acting require concrete, real targets in terms of the organization’s specific nature and situation. Choosing threats of a black swan nature, magnitude, and timing turns this effort into one directed toward identifying and eliminating, or mitigating potential damage from, specific threats. It assumes, in practice, that while we have no idea what may actually happen, we are going to become as resilient as possible.

Bottom line:

System D in its relevant meaning here is the ability to think quickly, to adapt, and to improvise when getting a job done. My version of these is agility, adaptability, and creativity. I can’t think of anything more important to survival and even success than an organization having these core strengths.

But there is no one-size-fits-all here. Each organization is very different. To give an example of how this might work in practice, I offered this case study for a fictitious medical devices and software company, HGL Diagnostics. I hope that it helps.

See end of Part 2 for these.