Three Levels of Operations in Organizations

Humans are unspeakably complex objects, and the associations they form and the way their behavior affects those associations and is affected by, it even more complex. Nonetheless we can make some accurate predictions, the moreso when the number of individuals is higher. It's pretty difficult to predict if a single person will be worth more or less, or making more or less, a year from now (even with good information today), but we can make a decent guess about what the economy will do. That said, when we talk about groups of people - especially states - we oversimplify.

Level 1 thinking about organizational decisions and behavior - the single entity fallacy - is demonstrated when "Germany invaded Poland." "The Americans wanted to annex the territory all the way to the Pacific." "General Motors wants to buy Tesla." (I made that last one up.) These assertions are not meaningless, but they grossly (and probably necessarily) oversimplify the collective action of thousands or millions of people. We might picture a giant made of fused-together bodies serving the collective good. Something approaching this subsumption of identity and individual interests occurs more easily in smaller and more homogenous groups, and is easiest when individuals in those groups were programmed by pre-verbal and pre-rational early life experience to identify with the tribe and its authority. The leader in such a situation is showing transformational leadership, and this corresponds to Chapman's level 3. (See more about his model of levels at which humans derive meaning through their associations with each other.) Indeed, it has been argued from a philosophical standpoint that any group of people (married couple up to nation) cannot be said to have (consistent) preferences.

Level 2 thinking - the amalgamation of individuals fallacy - is more rarely seen, because it's more complicated and manifestly not how nations or individuals function. In this model, there are only individuals, constantly calculating what they're getting out of association with the group, and there is no group; or rather, the group exists only as a product of individual interests, and talking about the group's actions adds nothing to our understanding or to the accuracy of our predictions. Leaders in such situations are transactional, and this corresponds to Chapman's level 2. For obvious reasons, such associations tend to be unstable over time. This is more common in companies than states (since the former have a mostly or purely transactional mission), but even in companies, there is usually an identity-subsuming transformational aspect. And even in states, we do often see this in the a-ideological alliances and constant defections that occurred before the Enlightenment and democracy, and still occur in the developing world.

Level 3 thinking - There is a super-Pareto principle in how much the decisions of any individual in a (tribe, company, nation) affect every other individual, and this is helpful to come to a more useful and accurate model than the mere amalgamation of individuals. The people making the decisions are certainly influenced to some degree by personal interests that do not necessarily align with all the other individual members of the state (or company - for instance, institutional investors take note when a fund manager is nearing retirement, because s/he may start making decisions that benefit his/her retirement in the short term but not the company or its shareholders in the long term.) But they too likely have pre-rational tribal affiliation and also the concrete reality on the ground that this, and not some other tribe/company/nation is the one that they're in and helping to run. Furthermore, there is a constant feedback from the individual to the group (as in level 2) and then back from the group to the individual in the form of things like social norms. This is therefore the cyclic individual-within-group theory, and when companies or states seem to "make bad decisions", almost invariably they could be explained in the light of benefits or risks to individuals that don't track those to the organization overall. Interestingly, overproduction of elites is a core feature of Peter Turchin's predictions for the West and the U.S. in particular, and is an outstanding example of the cyclic individuals-within-groups model.