Recent news has seen significant fallout in the banking sector. From SVB to Credit Suisse, depositors have fled these banks out of fear of a collapse. The case of Credit Suisse is particularly interesting. To put a complex case very crudely, when a Bank comes under stress there is a hierarchy of assets which become wiped out in a sequence. This happens so risk can be assessed when buying an asset (such as shares in a bank or Bonds), and you get a sense of what will happen to your asset if the Bank you have invested in, or who you Bank with, comes under threat. The rules allow individuals and organizations, and their collective behavior expressed in markets, to make sense of a complex and changing environment.
The fallout from Credit Suisse has attracted controversy because it has not followed the rules associated with the hierarchy of assets. Normally, the equity goes first, the stock price falls. If you invested in stock, then the negative sentiment affects the value of your shares. Next comes the Bonds, the packaged debt. However, what seems to have happened is that equity has been propped up by the Swiss Government while the Bonds have received no such support.
What is significant is the confusion this has caused beyond the lack of perceived fairness. The rules allow investors to make sense of complexity. When there is a mismatch between sense making and environmental demands, the adaptability of an individual, and in this case, market, reaches its limit. This provoked some thinking on how this situation mirrors the conditions for autopoietic life, a topic we have examined before.
Autopoiesis refers to an organism which can take care of itself. The organism achieves this care by exchanging materials with the external environment. A human being is an example of an autopoietic organism, so is a bacterium and so is a biological cell (Thompson, 2014).
An autopoietic organism defines itself from a chemical soup, what we could perhaps call a chaotic formless environment, by forming a barrier around itself to make itself distinct from its environment.
*pictured above, a biological cell
This barrier contains and protects its internal structure, preventing essential parts of its function from being separated from itself by the turbulence of the external environment. The barrier allows elements of the external environment in, whilst keeping certain features of the external environment out; it allows the organism to take care of itself through a process of exchange.
The barrier makes an organism distinct. From this distinction the organism can set about making sense of the external world. This provides the foundations for being able to move towards conditions which are favorable, while being able to move away from conditions which are not favorable,.
*A bacterium (pictured above) swims towards sucrose and tumbles away from higher levels of acidity.
The below points illustrate three key features essential to self-care associated with autopoietic organism-
Cognitive- autopoietic organisms situate themselves within their environment to optimal effect.
Adaptive- autopoietic organisms can avoid harm and move towards benefit.
Sensemaking- autopoietic organisms can give meaning to objects around them, such as good/ bad (Based on Thompson, 2014)
If the external environment were to change suddenly and in an unexpected away, then the ability of the organism to take care of itself would be thwarted (Whitehead, 2010). The autopoietic organism could no longer maintain it’s boundary, it would struggle to make sense of what to let in and what to keep out from the external environment, and it would dissolve back into chaotic chemical soup. This crudely explains how a biological cell collapses (Thompson, 2014).
*pictured above, a collapsing cell
These conditions are essential for the survival of single cells, for human beings, and for the societies and communities we form. Which leads back to Credit Suisse. When the rules pertaining to the hierarchy of investments contained within the Credit Suisse ecology changed, it destroyed the sense making ability of individual and collective investors. If the rules could be discarded here, could they be discarded anywhere? This immediately puts under pressure the ability of an investor to take care of themselves. The investor no longer knows what to move towards in order to gain benefit, and what to move away from to avoid harm. The boundary which keeps the investors together (whether individual or collective markets) among a changing and chaotic environment is more likely to collapse, and dissolve.
The above points illustrate what happens when things we depend on are removed, in this case rules which informed investments and risk. Sometimes this is beyond our control. However, sometimes, as within the Credit Suisse case, there is a choice about what to do with these dependencies; in this case, the hierarchy of assets. What remains true, is that human beings are autopoietic organisms and can break apart when environmental demands exceed sense making.
Unlike other autopoietic organisms, human beings have greater creative input into their environments. Therefore, we have the potential to create conditions which allow people and organizations to endure and thrive, while creating conditions which confuse, interrupt, and break apart. Being mindful of this capacity allows us to explore whether our decisions have the potential to exceed the limits of current sense making and ensure we do not leave people wondering where to move for benefit and where to move to avoid harm. This can dissolve situations into chaos as the boundaries which negotiate the internal and external environment are removed.
Reading
Whitehead, A.N., 2010. Process and reality. Simon and Schuster.
Thompson, E., 2014. Mind in life: Biology, phenomenology, and the sciences of mind. Harvard University Press.
Thompson, E., 2014. Waking, dreaming, being: Self and consciousness in neuroscience, meditation, and philosophy. Columbia University Press.
