A quick, and different, way to gain insight into each of the levels is to think about how people at each level might be most easily insulted:
Level 1: Survival – not applicable
Level 2: Tribal – “you don’t belong here!”
Level 3: Power – “you are weak!”
Level 4: Justice – “you are wrong!”
Level 5: Achievement – “you are a failure!”
Level 6: People – “you don’t care!”
Level 7: Systems – “you don’t understand!”
Level 8: Global – too early to be sure but possibly: “you are a control freak!”
How the levels see each other
Stress Test: reflections on financial crises
In politics, the values driving decisions taken at a time of economic growth need to be pretty much opposite to those needed when addressing a potential financial meltdown. The former US Secretary of the Treasury, Timothy Geithner articulates this very well in his superb book “Stress Test”:
“The inconvenient truth of financial-crisis response is that the actions that feel right are often wrong. The natural instinct is to wait as long as possible before intervening, to escalate as gradually as possible, to minimise taxpayer exposure to losses, to impose stringent conditions on assistance, to teach the arsonists a lesson, to address the root causes of the crisis. Let failing firms fail. Let the creditors who financed their binges pay the price. But that is a recipe for making a systemic crisis worse. The public will want Old Testament justice, punishment for the venal. The moral hazard fundamentalists will want to send a message that irresponsible behaviour will not be rewarded. If policymakers listen, they will court disaster.
The principles of effective crisis response are mostly counterintuitive. The more you commit to do, the less you’ll have to do. If you take the extreme risk out of the market, you’ll assume less risk of extreme losses, and you’ll attract more private capital to provide stability that would otherwise require government capital. You should err on the side of doing too much rather than too little; you’ll make mistakes no matter what, but you should try to make the mistakes that are cheaper to correct. It’s easier to arrest a financial panic than to clean up after an economic disaster.
Eventually, you’ll want to address the root causes of the crisis, to reform the financial system, to rein in excessive leverage. But, as Saint Augustine said, “Give me chastity and continence, but not yet”. In an emergency, you need to lean against the forces of panic, to restore confidence, to reduce uncertainty, to make the system investable again. That means no messy failures of systemic firms and no haircuts that would encourage runs. The goal is to make it irrational to run away. There will be immense pressure to let major firms fail, avoid moral hazard, minimize government intervention. But that’s a formula for a larger crisis that will ultimately require greater government intervention and create more moral hazard.”
Although Geithner uses the language of leaning against the forces of panic, what he’s actually saying is utilise, and go with, those forces, rather than attempting to fight them. In other words, deliberately use the underlying values that are operating to get to a different, more positive, outcome. In the financial world an unhealthy Orange (level 5) bubble would traditionally be addressed by a rigorous application of Blue (level 4) values. However, by utilising the fear of losing everything, in an unhealthy Orange, we are more likely to get the result we want