10/13 – Otto Scharmer: Theory U — Leading from the Future as It Emerges

Russ Volckmann

Tudd Volckmann

Otto Schamer

Otto Schamer

Russ:  I have the pleasure of introducing Otto Scharmer, who is Senior Lecturer at MIT and founding chair of the Presencing Institute, he also is well known as an author of what I can only describe as a major work – Theory U. He is also co-authored the books Presence, with Peter Senge, Joe Jaworski and Betty Sue Flowers, and Leading from the Emerging Future, with Katrin Kaufer.

I find Otto’s work particularly fascinating because particularly in Theory U, it’s clearly grounded in attention to more than what can be measured, more than the material world. For example, the bibliography includes a long list of publications by Ken Wilber, Robert Kegan, Bill Tolbert and others who are very familiar to the readers of Integral Leadership Review. Yet there is a quality of scientific exploration and attention to what can be directly observed and how it can be evolved. Otto I welcome you and thank you very much for joining us.

Otto: My pleasure. It’s a privilege to speak with you and to reconnect with the integral line of work, which has always been an important source of inspiration to me. It also reminds me of an interview I once did with Ken Wilber in his home in Denver. I felt like the conversation, his comments that he made on Theory U, went right to the essence of what I am trying to do. I really felt a deep connection. Back then we said, “Hey, let’s do something together; let’s write something together.” I always wished I had followed up on that, but so far I haven’t.

Russ: Would you summarize for us what that deep insight was from your point of view – the essence of Theory U.

Otto: Yes. Theory U basically is three things. First, it’s a framework. Second, it’s a method, a how-to. The third aspect is a way of being, kind of connecting to the more authentic or the higher aspects of our self. In terms of the first one, which is the framework, it introduces the variable of consciousness into management and the social sciences. It basically proposes that the quality of the results that we create in any kind of social system is a function of the quality of awareness, attention or consciousness that the participants in the system operate from.

Theory U takes a system perspective. That is, it looks at the micro, meso, macro and mundo levels – different levels of aggregation of social systems. It then looks at each of these levels from four different levels of consciousness. These four different levels can have different names and in different traditions they are called by or are pointed at with different distinctions.

In figuring out what are these different levels of awareness or consciousness that people in a system can operate from, I had a key insight when I was talking with the late Francisco Varela. In his cognition research he proposed that the blind spot in cognition science concerns experience.

He said in the first interview I did with him, “Everyone thinks they know about experience. I claim they don’t. We have a blind spot for experience in our Western sciences and other traditions.” Then, four years later I came back to him and asked him, “Did you find out anything more about this blind spot that you talked about in the last interview?” He said that actually this has been the main focus of his work. He explored different ways of accessing experience and he found that there are, in fact, three different methods that would deliver that.

The first one is psychological introspection, which is like a late 19th Century social sciences methods, coming out of Germany. Then the second one is phenomenology, also coming from central Europe. The third one is meditation. That comes from Eastern tradition. Varela then integrated these three methods into three core practices and said that at the core of these three methods is actually the same fundamental process that he referred to as the process of becoming aware.

Then he described this process by articulating the three main core practices, which he termed as suspension, redirection and letting go. When I heard this – suspension, redirection and letting go – I realized that I had seen these shifts in social processes many times.

Varela was observing it while studying the transformation of the individual mind, for example through a meditative or phenomenological process. But I had seen it in group process many times before. That was the moment when I realized that you can look at the individual, you can look at groups, and you can look at the transformation of larger systems – it’s the same thing that’s going on in terms of the transformation of consciousness. That really was the birth moment of Theory U. Theory U spells out the pattern language of these shifts in much greater detail.

Ken Wilber looked at these shifts and said, “Yes I very much recognize the distinctions that you make across the systems levels.” They are the distinctions that he studied in terms of different kinds of ontological levels that are differentiated by different wisdom traditions and philosophical frameworks around the world. I have been coming at these distinctions more from an epistemological point of view, studying Varela. But Ken Wilber pointed out that they are actually reflected in the different levels of reality: from the physical to the psychic, subtle and non-dual level, something like that. He basically spelled out the ontological dimensions that are inherent in Theory U, but that I hadn’t really extricated because my way of getting at them was based on an epistemological viewpoint that was inspired by Varela’s work.

Russ: So as you were doing the book on Theory U, you were able to integrate those two?

Otto: Absolutely! Ken really articulated that very well. Yet I haven’t been dwelling too deeply on developmental approaches. I thought that I know way too little about all these levels. I wanted to stay close to my own experience, to what I had seen with my own eyes, heard and studied based on my own experience. It felt more honest and more grounded to differentiate states rather than stages of development, as a starting point.

I then developed states of consciousness in Theory U. Of course they can be very easily blended into a stage-based developmental framework, but I felt not really entitled to that because I don’t think I have seen enough. It’s possible, but I don’t think I have the experience base myself to really propose that for all systems levels. Other developmental theorists will be doing that and I think there is a lot of supportive data. For me, that would have been premature. It’s not a long jump to use this state-based framework of Theory U and make it the foundation for a stage-based developmental approach to different system levels. In fact we prefer to do that in many cases when we apply it to practical situations.

Russ: I had noticed that in Theory U you referenced Robert Kegan, Bill Tolbert and others associated with adult development and yet they are missing from the references in your newer work. I think you have just given a good explanation for that. One other person who you mentioned in Theory U, who had a profound influence on me, is Charles Hampden-Turner. You referenced specifically his work with Fons Tropenaars on organization culture. But the book that really had a strong influence on me was one he wrote called Radical Man.

In that book he had a model of psychosocial development. Without getting into the model, one of the things that were powerful for me was that it not only represented a developmental sequence of processes, but an anomic sequence, as well. Then I found in Theory U includes a developmental process and you also identify the potential for an anomic process.

Otto: Anomic, what does that exactly mean?

Russ: Anomic, anomie; a negative direction of development, if you will; a loss of development.

Otto:: Okay.

Russ: In Charles Hampden-Turner’s terms, in a developmental process, in a psychosocial developmental process, you bridge the distance between self and others, but in an anomic process, the distance grows between yourself and others. The thing that struck me in your work was that you are attending not only to the developmental aspects, which many theorists do, but also to the risks of the anti-developmental aspects, if I can call them that.

Otto: Absolutely. That’s very correct. I think any framework that’s missing that, is missing something very important, because look around! What’s going on in reality? If we are missing that dimension we are blind in at least one eye. All you are seeing is half of an event or process. It’s a very important phenomenon that happens around us, within us. That’s why complementing the cycle of presencing with the cycle and space of ascending – not only talking about the social space of evolution where something is coming into being, but also where we have destruction and social pathology – is something very timely. It helps us to connect with what’s really going on. That I think is a key aspect of any framework today.

There are two reasons why Kegan, Torbert and other developmentalists are not mentioned in the most recent book explicitly. One, our publisher didn’t want another literature list. We only have a few footnotes. And two, the main focus of the new book really is on transforming economic theory and looking at the evolution, the transformation, of the old economic thinking that we refer to in terms of paradigms 1.0 and 2.0 and 3.0. Each is based on ego-system awareness.

This whole shift from ego- to eco-system awareness is a developmental shift. We try to articulate that by extending and expanding the old economic frame of reference.

Russ: In your newer work, you differentiate stages of development of economic systems 1.0, 2.0, 3.0 and ultimately 4.0. The earlier systems can be understood historically. Elements of all systems co-exist currently in the world. Would you characterize what distinguishes 4.0, which I think you would say is becoming in the world, which is developing in relatively early stages, with what’s come before?

Otto: The new book really starts off with the observation of different system levels and that the challenges that we face can be framed in terms of three major divides: the ecological divide, which is basically our separation and our disconnect between self and nature; the social divide, the disconnect between self and other; and the spiritual divide, which is the disconnect between self and self. If we drill down to the deeper systemic causes and root causes, we first identify a number of structural disconnects, like the disconnect between the financial and the real economy, infinite growth and finite resources, and so forth.

But at the end of the day, we propose that the most important root cause actually starts between our ears – the paradigm of economic thought that we apply when we approach a situation, in practical economics or in theory construction.

Then we trace the history of economic thought and the history of the economy. The history of the economy and the history of economic thought can be reconstructed as the embodiment of an evolving consciousness. That moves from 1.0, which is like traditional awareness, like loyalty, fitting into traditions and so forth, to 2.0, which is like ego system awareness, kind of connected with the birth of the private sector and the birth of entrepreneurial activity.

2.0 is what we teach at universities, today, at business schools. It’s basically the homo-economicus model. But when you look at reality, that’s not what is going on. When you look at real leadership and management reality in organizations today, it’s not ego system awareness based. It’s stakeholder awareness. So where you have different stakeholder systems that try to deal, negotiate with each other, make coalitions and come to terms for how they include each other’s interest this is the way they do business.

What we see in the ecological, social spiritual crises of our time is that both of these models, the ego system awareness 2.0 and the stakeholder awareness 3.0, are no longer really in sync with the challenges that we face. We believe the biggest challenge today that leaders and change maker’s face around the world has to do with transforming stakeholder systems that operate on ego system awareness into stakeholder systems that operate on ecosystem awareness. What we mean by ecosystem awareness is an awareness that tries to generate wellbeing for all stakeholders in a system, rather than just a few of them.

Russ: As I have listened to you describe systems one through four, there is a pattern in my mind that it relates to. One of my interests is Spiral Dynamics – Clare Graves and Don Beck’s work. I hear a movement from purple to red to blue orange, and 4.0 into green. How do you see this?

Otto: Well, I don’t think that 4.0 is green. 4.0 is yellow. And the reason is, that 4.0 solutions require us to address the ecological, social, and the spiritual divide simultaneously.

The green level of development is at home in 3.0, because you try to come to terms with environmental and social systems issues without inner transformation. In other words, your stakeholder awareness is still stuck in the ego, is still stuck in your old way of operating.  By contrast, the hallmark of 4.0 is that you go through a journey of transforming the whole system, which is exactly the opening process from ego to eco. This is the process that is described in the U process – where you let go of something old, an old form, and open up to something that wants to emerge through you. I think that’s really what the 4.0 is pointing to.

Russ: You’ve mentioned awareness and consciousness a couple of times and you tell some really interesting stories about your own experience. One that particularly struck me was you were recounting your experience with Master Nan, his retranslations of Confucius’ Great Learning and the like. What have been the major influences on you in your development consciously and spiritually over these years?

Otto: The encounter with Master Nan and his whole circle of students has marked my own experience and has been very influential on me in many ways, some of which I am probably aware and some of which I am not. But it really opened up a deeper understanding of the three main Chinese traditions; Confucius, Buddhism, and Taoism. It also opened the way these wisdom traditions of the East are not hidden.

There is like an overlay of materialism, Westernization and industrialization that’s going on worldwide. You find it in just about every country today, minus maybe a few places like Bhutan, where these changes nevertheless also start happening today.  There is this overlay that is covering up some of these deeper sources of awareness that originally have been there. Through encountering Master Nan, it only sparked my own interest in the study of some of these traditions. Through working with companies and governments in China and Asia, I find myself in an interesting situation where as a Westerner, my role is to give them permission to reconnect with the sources of their own culture. Like exposing them with some of these foundational texts of Confucius, Taoist principles or spending time in a Buddhist temple.

That’s how it is in the 21st century. You have some guys from the West who give “permission” to Chinese leadership groups to really reconnect with the deeper sources of their own culture, which of course has always been there. But sometimes what’s most close is the most difficult to access in a new way. All of that really started in a more meaningful way then. Personally I feel inspired through these traditions, and I also feel inspired through other traditions.

There is a deeper source in the Western tradition that has been hidden, including a scientific method that is more based on phenomenology. It’s along the lines that, for example, Goethe developed with his science. Then through Steiner it became more accessible to others. It is developing a method that connects to the whole.

There are two ways how you can connect to the whole. The first one is through stepping back and through using abstraction. The second one is by stepping in, immersing yourself into sensing a concrete microcosm, and to encounter the whole that is presencing itself through the part by using the intuitive mind. The late Henry Bortoft referred to the first whole as the “counterfeit” or abstract whole, and to the second one, where you step into the deep sensing of reality, as “authentic” whole. I always liked that distinction. But it has not been picked up by the scientific community as of yet.

Science needs to be performed with the mind of wisdom, as Eleanor Rosch has put it so elegantly. That means we need to bend the beam of scientific observation from third person knowledge (looking at others) to including second and first person knowledge (looking at the observing self)—we need to bend the beam of scientific observation all the way back to the observer, to the sources of self.

Russ: Your book has many different offerings in terms of principles and practices. I’m wondering, aside from your intellectual pursuits, what practices you follow in your own development.

Otto: I use my own evolving blend of practices. For example, I have much benefited from awareness training that I participated in with John Milton one day. It is a process that we described a little bit in the Presence book that you mentioned earlier. The version of the mindfulness practices I’m using have been mostly influenced by a set of instructions that Rudolf Steiner has given to bend the beam of observation back onto ourselves. So that’s a set of practices I have been using over the years.

Russ: You’ve referenced the work of Rudolf Steiner. I guess that’s been very influential on you?

Otto: Yes, very influential. If you trace the sources of the Theory U process, there are three main ones. One is the interviews with 150 thought leaders that are described in the books Presence and Theory U.  The second one is really practical applications that I and my colleagues have been immersed in over the years. Almost all key insights have been emerging from practical examples. Then the third one is the study of philosophy, the study of not only Confucius but also of some of the old masters in the Western philosophic tradition with Aristotle, Plato, Hegel, Nietzsche and so on. Steiner belongs into that tradition and he integrates the Western tradition with the Goethean scientific method, basically a deep sensing or phenomenological method, that turns the beam of observation back onto the observing self. That is why he matters. What I try to do is to develop methods and tools that allow collective entities – social fields – to go through that turn, to experience that shift that happens when a system starts seeing itself.

Russ: The word leading is used in the title of both Theory U and Leading from the Emerging Future. In the literature terms like leader, leading, leadership are used by many people interchangeably or without definition or they offer one of the 1500 definitions of leadership as are currently out there.

This way of conceptualizing that one could say is rich but also very confusing. You make some very clear points that leadership is not something that’s just about an individual. As we are moving to ecosystem there’s more and more decentralization and distribution of the individuals who are leading throughout human systems. When you were writing about the work of Master Nan and his translations of Confucious, you cited this phrase that he used, “Ancients who wish to illustrate illustrious virtues throughout the world.”

Then he makes a list of the things that they need to be doing. You refer to that as leadership. Could you clarify a little bit about why you saw that needing to be just about leaders and not about all individuals who seek to improve themselves and the world in which they live?

Otto: You’re right. It does apply to all. There is also a sentence attributed to Confucius that in order to become a leader, you first have to become a human being. In the interview with Master Nan he said, “In order to be a leader, at first you have to know yourself.” Then he described the different phases of self. So, yes you’re right. Leadership is something that applies to all of us. The most important aspect of leadership probably is self-leadership. It is about knowing yourself, which is the turning of the beam of attention from the world back to the sources from where our attention is originating, which is the self.

For years most people, think of leadership as about the few people at the top. Yet what I like about leadership is the unknown future, which suggests that leadership means basically to go forth and die. This means to let go and let come. This phenomenon of letting go and letting come, is the central mystery of our time. That’s why I kept it. The reason why I think it is still valid to speak about leadership is that the indoeuropean wordroot of the English word leadership literally means to die. To die means: to let-go, and to let-come. I use leadership as an entry point; obviously I’m interested in something much bigger.

I am interested in not only the entire transformation of organizations and communities, but also the entire civilization and culture that we as human beings collectively enact.

The other day I heard someone say, “Well, we don’t need more leadership; we need more mothership.” So that’s an interesting twist. But it’s pointing at something. For me a current substitute is talking about collective leadership, because the collective leadership is all about holding space. It’s all about bringing in some of the people. Listening capacities and preparing the soil is more upstream. It is also the more feminine aspects of leadership and the more collective ones that are really missing today. We need to draw our attention to this in order to make a difference.

Russ: I’m aware that the collective phenomena are really central to the economic or ecological system 4.0. You give a number of examples of how institutions have initiated and evolved aspects of what the 4.0 system could be like. Given the examples that you’ve sighted – ranging from automobile sharing to funding approaches – are you optimistic about the potential for 4.0 to become significant in the world?

Otto: Before I answer that question, let me just clarify one thing. I am not proposing that we already have realized society 4.0. I am saying that we went through the stages of capitalism 1.0 (state centric),  2.0 (free market), and 3.0 (social market). And now we are full speed hitting the wall.

When you look at the discourse, some people say we need to go back in history for more free market or more central government or more stakeholder dialogues, that is, we need more of 1.0, 2.0 or 3.0. What we are proposing is to actually go forward. We need to transform the operating system from the current version, which is basically an ego-system awareness, to one that’s based on eco-system awareness. That doesn’t exist today, but we think it could be come into being just as 100 years ago we shifted from 2.0 to 3.0. It didn’t happen overnight. It was a struggle and it happened, in stages that grew in one country and then in the next one.

That’s what we propose. Because the disruptive crisis that we face is so profound, it could actually happen much faster than people think. Disruption means there is a necessity to let go of one thing and encounter something else. So that’s the point that we are describing. We are not saying that 4.0 is already there, although and as you mentioned we give small examples. But those are seed examples often on a company or small system level or on a local level where we see a new economy already happening in some interesting seeds they’re evolving. But it doesn’t happen in terms of transforming the larger system.

To change the larger system it would take a simultaneous focus on eight acupuncture points of capitalism to gradually help us to move the system. So it’s not just leadership. That’s one of the eight points. But then there are others like ownership, collective conscious, conception, a new way of contextualizing money, new ways of contextualizing ownership, natural cycles and entrepreneurship and so forth. So what we say is that this is possible and all the beginnings, all the seeds are there, but we haven’t connected the dots.

So it’s possible but there is no guarantee that it will happen. That’s the situation that we are facing. Am I optimistic? Well it depends on which part of myself is speaking. There are probably only three options: being in denial of the situation that’s going on or if you’re not in denial, being completely depressed. The third option is be completely cynical, all right? Those are the three options that we have when we look with a clear mind, right? Denial, depression or cynicism. Yet there is a deeper perspective and that’s part of my response.

If I go to a deeper existential and more feeling level – more my real self – I would say, I’m not depressed at all, because I think there is an enormous possibility currently in the world that we are not leveraging for some reason. We are bounded by some experiences of the past. But so many people today know that we are heading in the wrong direction and are in principle willing to let go of current reality and move into some different space. It’s just that we haven’t really found ways to attend to that and creating space where the collective potential for an evolutionary leap is actualized and explored in more practical ways. There is a real ground swell of awareness that offers a different developmental space that we see emerging left and right, but we haven’t quite put our arms around it.

That’s really what the book is trying to contribute to us. Because we know from many experiences that when a family or a community is facing real distress, challenges and situations of loss, that is when we wake up and when we rise to the occasion, when we can. That’s really what the book is talking about. When we hit the moment of crises, sometimes we revert to the worst patterns of the past – we freeze. Sometimes we let go and open up, lean into the emerging future and then make it happen. What does that really depend on? That’s the way I think has the leverage.

Let’s face it. We are already so far down. There’s so much ecological damage and social polarization going on, we will be hitting some very rough spot in the next decade, anyhow. It’s too late to prevent that. But what we can control is, how do I respond to that situation? Am I squeezing, freaking out, acting on anxiety and fear or am I opening up and leaning into the future and providing help to others to do the same? That’s where our choice is and that’s where the opportunity is. That’s where I see an enormous amount of possibility in confidence and inspiration around us. Some of that is captured in the book.

Russ: I very much appreciate that answer. I think if there are generative opportunities in the examples you give in the book and in people who have contributed and been interviewed in Integral Leadership Review. There are many examples of others who are working towards the same kinds of ends and that has to give us a little bit of hope. Otto, is there anything I haven’t asked you you wish I had?

Otto: I think you probably asked all the questions. But staying a little bit with your closing thoughts, in fact since I happen to have the benefit to move out of different communities around the world quite a bit and to stay in long term partnership with a few of them over the years, I think it’s remarkable that number one wherever you go in the world today, no one is going to challenge you when you talk about our current global crisis–the ecological, social, economic and the crisis of consciousness. It used to be debated 10 years ago; those years are gone. I mean everyone knows this. So that’s like duh! It’s like a no brainer; it’s like a starting point of the conversation.

The conversation is no longer are we in a global ecological and social crisis, but how much are you aware of the spiritual dimension of it – yes or no? Then, what is it we are going to do about it? So that really has been shifting just over a very short period like the last 10, 12 years or so.

What gives me hope is that I see the beginnings of a global movement around us in which these three divides, the ecological, the social, and the spiritual divide, are seen as three different aspects of one and the same thing. Today, more and more people think that way. A significant part of the millennial generation and the generation that is coming after that think that way. They want to better integrate their professional, personal and social aspects of their lives. They want their work to really connect with their real self and with their networks. There is a new generation arriving. And working at a university I see a huge mismatch of the real aspirations that this generation has on the one hand and the set of current career tracks, types of companies, the current type of economy on the other hand. People are looking for companies with a social mission, companies that they can feel good about. But what’s available is often much more boring, just profit driven. We need not only a new economic framework but also a new type of company that, at its core, is about bridging the three ecological, social, and spiritual divides. For that to happen, bigger changes are needed, including political change. For example, we will need a restructuring of the way the financial and the real economy are organized, how Wall Street is organized. That’s where I believe our generation has a role to play, because you can’t just dump all of these challenges on young people. That’s where over the next decade we have a huge opportunity and task ahead of us.

It’s really about cultivating the dimension of mindfulness that has been practiced and evolved on an individual level for many centuries. We need to bring that into the shaping, reshaping and reinventing of societal institutions at large – in business, in politics, and in education. So that’s really the challenge. That’s the transformation that’s described in the new book. That’s where we need to be. That is where we try with the Presencing Institute to pull together new collaborative platforms that are all aligned with every single principle that’s outlined in the integral movement. Now that’s my source of inspiration. I wouldn’t say that I am an optimist, but I’m connected to all sorts of possibility, which actually can turn into real changes if we attend to them in the right ways.

Russ: I very much appreciate that and I’m certain that your work and that of others who are doing similar kinds of work, supportive work, are going to help those moving in that direction. I’m going to keep my fingers crossed. I thank you so much for this time. You’ve been very generous.

Otto: Thank you very much.



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