Is the Deming Management Philosophy Socialist?

Win-Win, Everybody Win. Are You Against It?

Education, industry, and government should interact as a system, with cooperation— win, win.

- Deming, Dr. W.E., The New Economics, 3rd Ed. (p. 22)

Who would wish to do business with a loser? A woman wrote to me as follows:

My marriage went from rough to rocky, rougher to rockier, eternal trouble, win, lose, each one jockeying to be the winner. I took your seminar and learned about a system, cooperation, win, win. I explained it to my husband. We thereupon worked together on every detail, seeking win, win: both of us win. We both won. Who would wish to compete in a marriage? The winner would be married to a loser. Who would wish to be married to a loser?

This letter raises a good question: who would wish to do business with a loser? Would anyone wish for his supplier to be a loser? his customer? his employees? the employees of his supplier, of his customers? Of course not.

- Ibid. (p. 51)

THE AIM for this entry is to share with you a rare recording of Dr. Deming from a podcast that I came across earlier this year while researching my review for John Dues’ excellent book, Win-Win, which I wrote about in our June 16/23 newsletter. Within, Deming is responding to a question from a seminar participant about whether his management philosophy is advocating for a socialist society. This exchange shocked me as I had this very same question levelled at me during a senior managers’ study group session on The New Economics about five years ago. While I never got to articulate my response at the time, it would have been really useful to share Deming’s own thoughts on the matter, such as they were.

Dr. Deming, In His Own Words:

The recording in question is an excerpt from an older episode of the Deming Institute Podcast that is no longer maintained on their site, Podcast #31: The Win-Win of Dr. Deming’s Message. It features Deming responding to a question from a presumed attendee to one of his four day seminars, date and location unknown. (Transcript follows)

Attendee: Our participants up here are wondering if you are proposing a socialist society.

Dr. Deming: Well, I never said any such thing. Maybe you did. You brought it up. I didn't. [audience laughter] Win-win, win-win, everybody win. Are you against it? Nobody against it. Win-win. Everybody win.

Attendee: But is that socialism, Doctor?

Dr. Deming: [Audible sigh] Oh, that's nonsense. Let's get a little sense into our heads. Socialism means this.

[Proceeds to draw and explain a diagram on the overhead projector - my interpretation below]

Dr. Deming: Alright? We're trying to win-win everybody win. Everybody get ahead.

Attendee: Well, I'm concerned that your ideas might be perceived as socialist and that people, Americans, tend to have a negative view of socialism as opposed to capitalism.

Dr. Deming: We're just trying to find here, aim here is to survive. We've been describing a system and a system is one in which everybody comes out best. A system must have an aim. The aim that I propose is that everybody gain. Everybody come out ahead. The stockholders, quality of life for everybody.

Deming’s Win-Win Proposition

If you watch videos of Deming delivering his seminars, you’ll know he favoured the pre-PowerPoint technology of his day, the overhead projector, which allowed him to freely write and make illustrations on acetate sheets to convey his thinking to the audience. He was also quite fond of explaining complex topics with simple two-axes charts, which you will find throughout his writing.

Podcast host Tripp Babbitt explains what he drew during the seminar:

What Dr. Deming goes on to draw here is a bell curve, a very wide bell curve. People on one end of the bell curve were the people that have a high income, and then on the lower end, it's people with a low income, and then obviously a lot of people in the middle. And what he describes socialism as is moving the people on the high end and the low end to the middle, as opposed to what he's talking about is shifting the entire bell curve to the right so that everybody has higher incomes, but a much narrower bell curve.

My interpretation follows - your mileage may vary:

Deming’s illustration comparing/contrasting socialism to his “win-win” proposition which can be extrapolated as the totality of his management theory.

NB: Deming’s response: “We're trying to win-win everybody win. Everybody get ahead.” In his interpretation, socialism as a system was designed to force some to get ahead while others fall behind. His proposition was to move toward a system where everybody moves ahead rather than being coerced into an arbitrary “average”. It would have been instructive if he also included a curve for the prevailing style of management, just for context.

Nevertheless, it is clear is that he was trying to explain to people still trapped in Plato’s Cave that there was an alternative way to think about the way we design and produce goods and services for others as a cooperative system rather than a collection of adversarially competitive components, as he’d later show in The New Economics:

Source: The New Economics, 3rd ed. (p. 39, 46) - Production viewed as a cooperative system, and as a collection of isolated, competitive parts with targets, quotas, etc.

Isn’t This Just Socialism?

In the summer of 2018 I was working with a small group of senior managers in a large organization. We’d agreed to a bi-weekly study group for The New Economics and were a couple of sessions in when one of the participants asked me towards the end of our time almost the same question Dr. Deming was asked: “Isn’t this just socialism?”

I was intrigued, but we needed to wrap up so I said we’d have to pick that up in our next session, but we never did get to it. It’s notable that the manager in question was a couple of months out from retirement at the time and was noticeably more relaxed and less afraid to speak his mind than his peers. The comment has stuck in my head ever since, and it was a little startling to discover Deming had dealt with it in his time, and certainly articulated a better response than I’d have mustered — my understanding wasn’t as deep, then.

Nevertheless, I can appreciate where the misinterpretation comes from, and is itself a meta-commentary about the challenge in appreciating what Deming was advocating for with respect to transformation, ie. a total departure from how you currently think an organization is best led, its values, its rules, its place in the market and the world. Win-win? Everybody win? Isn’t this just another way of saying “from each according to his ability to each according to their need”?

Well, not quite. Deming loved his country and dedicated his life to improving it, even if the Japanese responded better to his teachings than back home. In my opinion, his philosophy is a love-letter to capitalism as it should be, with an emphasis on studying a system to improve the quality of products and services it produces. Per his Chain Reaction, higher quality begets less and less rework that in turn drives down the costs of production, which in turn means customers get better goods that don’t need to be replaced and repaired as often, improving the quality of life for everyone. It’s inherently about improving the capitalist system of exchange, predicting what the customer will need and then designing systems to make it a reality.

However, there’s an even more to this story…

The Tale of Vladimir Kvint

An eleventh chapter was added to the third edition of The New Economics entitled “Why Deming? Why Now?” with a collection of anecdotes and real-world stories to contextualize Deming’s influence and impact since the original edition was released. One of these stories is about a Soviet economist, Vladimir Kvint, who defected to America and predicted in a 1990 Forbes article that the Soviet Union would collapse no later than 1992 - a bold call at the time, Berlin Wall notwithstanding.

How did he make this prediction? By costing-out the Soviets’ expensive production systems that were rife with defects:

Kvint says his forecast… was possible because of his analysis of economic and political trends, “but the core of his analysis was the study of the category of Quality and its role in different societies.” He said he could make his prediction about the fall of the U.S.S.R. with such confidence because of what he learned from reading Dr. Deming’s Out of the Crisis. Specifically, Kvint learned about the Deming Chain Reaction, and the insights and methods for making predictions. Because Kvint was a senior bureaucrat in the U.S.S.R. government he had access to real data on quality, costs, and productivity—not just data created for propaganda purposes. The real data revealed the U.S.S.R. methods for managing the economy were not driving down costs while increasing quality as Deming taught. Instead, just the opposite was taking place: high costs to produce low quality. Applying what he learned from reading Deming to the real U.S.S.R. economic data, Kvint was able to plot the trend line and timeline to inevitable bankruptcy and the fall of the U.S.S.R. Kvint has been a fan of Deming’s work ever since.

(pp. 196-197)

A very interesting insight, no? Central to both systems of governance was the problem of quality, just that one was more expensive than the other in the long run owing to their prevailing economic system. It’s rather ironic that for all its faults, the US system of over-production and burying defects helped them outlast the Soviets.

Does this mean the USA is off the hook? Well, no, and Deming dedicated the entirety of The New Economics explaining why this wasn’t the case and why transformation away from their system of tolerating defects was needed: it could eventually take them down, as well.

Nonetheless, the story puts Deming’s management philosophy into an interesting historical context, one that was above the fray of politics. Imagine what you could do with such knowledge in your own organization!

Reflection Questions

Today’s topic is a bit weighty and perhaps controversial, but I thought it worthy to take on in case anyone else has either had similar questions put to them, or has had them themselves, and needed to know they’re not alone! What do you make of Dr. Deming’s analysis? The story of Vladimir Kvint and his prediction of the fall of the U.S.S.R. using Deming’s theory? The relationship both systems shared with respect to quality? Based on your understanding of his theory, how would you respond to the question of whether his philosophy of management is advocating for a socialist society? How would you explain the benefits of cooperation as a system in a capitalist context?