Can Simulation Technology Really Help Companies Do Business?
Thursday, 18 August, 2011 Leave a comment
A great quote from our Corporate blog “Simulation is useful but only in very specific cases and, evidently, only in the right hands. Simulation needs models and models are full of assumptions.” If only more people in the financial sector understood – or would admit to – the failings that brought us to where we are right now in economic terms!
…why are simulation techniques successful sometimes (mainly in specific, scientific/engineering applications) but not when it comes to the economy, business or traffic systems? Life and the economy are turbulent and irrational. Our modeling and simulation techniques reflect old ways of thinking and fall flat on their faces when it comes to dealing with reality. We cannot just automate old ways of thinking hoping that in virtue of abundant teraflops things will simply work out fine. Some things just cannot be modelled. Take for example risk.
There is a fundamental principle – the Principle of Incompatibility – which states that as complexity increases, precision and relevance become mutually exclusive. In other words, as things get complex (and they seem to be) your statements about it become less and less precise. This means that as something becomes highly complex you can forget building models. You need to change strategy. A new approach is needed. You must change direction. Large consulting firms claim otherwise.