Complexity and Consequence: what financial and risk engineers MUST learn from mech. eng. (or anywhere)


Gadget craziness

Image by XuRxO via Flickr

Recently, I have found myself writing about the importance of ADAPTABILITY* & RESILIENCE in complex (business) systems. This is, partly, due to the fact that, the acceptance of the “shortcomings” of current risk models and tools, are becoming more widely “recognised” (in some instances “admitted”)!

*Boston Consulting Group recently cited “Adaptability: the new competitive advantage”.   

The number of Consultancies that – after many years of profiting from preaching the merits of (now-discredited) models and strategies – have now discovered, and wish to share, their “new found” expertise in “complexity theory” and “systems thinking”.

Unfortunately, their participation in the education process wont undo the damage done!

WE should be grateful that the damage their contribution to the prevailing culture has done is substantially reduced and that a higher level of business understanding is, increasingly, on the agenda.

However, I suspect that we have not seen the last of Consultancies promoting and implementing “solutions” that make (business)  systems and economies more fragile…because there are fees to be earned!

This extract (article link) is from the American Society of Mechanical Engineers (ASME). These guys understand that we are all in this together and simply CANNOT afford to design products and systems that fail to perform.

What the world needs is for Financial & Political engineers to ADMIT to limitations and failings, demonstrate exaptive qualities to learn and apply the lessons: to adapt and thrive. Continuing to defend the (indefensible) status quo and adding further energy to the current bubble is sheer, unforgiveable, folly: stagnate and die(!) or “too big to fail”?

Societies depend upon systems, and systems-of-systems that constitute their critical infrastructure. Too often, though, those systems are poorly understood and generally are taken for granted by the population that relies on them. And it isn’t just the megastructures and vast networks that are increasingly opaque: Modern society is filled with small gadgets—from cell phones and pacemakers to personal computers and automobile electronic systems—that are maddeningly complex, virtually indispensable, and scarcely noticed unless they fail.  

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