RM needs “unity (and purity) of purpose”:: [re]building the Tower of Babel

If you are wondering what I am babbling about (I understand the word is derived from the bible story) and aren’t familiar with the story here is a brief re-cap:

Genesis 11:1-9, The Tower of Babel – Story Summary:

Up until this point in the Bible, the whole world had one language – one common speech for all people. The people of the earth became skilled in construction and decided to build a city with a tower that would reach to heaven. By building the tower they wanted to make a name for themselves and also prevent their city from being scattered.

God came to see their city and the tower they were building. He perceived their intentions, and in His infinite wisdom, He knew this “stairway to heaven” would only lead the people away from God. He noted the powerful force within their unity of purpose. As a result, God confused their language, causing them to speak different languages so they would not understand each other. By doing this, God thwarted their plans. He also scattered the people of the city all over the face of the earth.

The pace of globalisation may have faltered as a result of the financial crisis but consumer appetites and technology have provided the common language and tools to ensure that we become, if not more connected, then more aware of the “invisible” networks that determine (whether we like it or not) that the future is OUR, SHARED, FUTURE.

Problem is, rather than (co)operate as interdependent components of [non-linear] systems, sub-systems and networks, that transcend borders, sectors, domains and scales, we STILL think in linear terms: within man-made “boundaries”, whether real, imagined or enforced.

We understand competition and are (all too) familiar with quotes, such as, “it’s a dog eat dog world” and “survival of the fittest”, that are trotted out by pop-philosophers intent upon corrupting the wisdom of others, for their own purposes…”greed ISN’T good!”

Greed brought us to where we are today and until people start to question and challenge the business-people who purvey these cancerous clichés as “motivational” WE will fail to grasp the critical nature of the mission we MUST undertake. The exchanges I highlighted in this recent article should serve to illustrate the extent of the dis-harmony amongst some serious heavyweights in an industry that, patently, understands competition more readily than it does, obsolescence!

The nature, and scale, of the problems are such that there should be little room for ambiguity of PURPOSE. But, instead of UNITY and progress, we find the type of undignified hair-splitting and in-fighting surrounding the LANGUAGE of one or other “code” or set of rules! Ironically, NEITHER “solution” possesses the requisite variety to begin to fully understand, let alone address, the problems.

Unsurprisingly, God’s work has stood the test of time and, for us mere mortals, there is a great deal more understanding, humility and co-operation required, just to close the gates of hell…

Dogbert does Financial Planning:: applying myth or math?

Regulators want big, complex banks to hold larger buffers of capital to protect the financial system.

Big banks argue this is unnecessary because risk is diversified across their larger balance sheets.

Who is right? Natural sciences – especially epidemiology, ecology and genetics – provide clues…

 Complex systems: The FLAW of large numbers.

A “law of large numbers” is one of several theorems expressing the idea that as the number of trials of a random process increases, the percentage difference between the expected and actual values goes to zero.

If you REALLY want to get a deeper understanding of probability – and why it is wrong to assume too much from independent events (e.g. the roll of a dice) and apply that knowledge to the real world of inter-connected, non-linear systems – PLEASE check out the “Physics Envy…” presentation by Andrew Lo (link below).

Related articles

• From quantum complexity to monied tossers (fitforrandomness.wordpress.com)
• Haldane & May: Systemic risk in banking (fitforrandomness.wordpress.com)
• “Physics Envy…” presentation by Prof Andrew Lo: Risk & Uncertainty (in financial systems)
• Economics and the revolution in the field – LA Times.com (fitforrandomness.wordpress.com)
• UK Gov. report:: high impact, low probability events (fitforrandomness.wordpress.com)
• Nassim Taleb [Princeton Uni. presentation]:: Fragility and “Antifragility” [resilience] (fitforrandomness.wordpress.com)
• Organizations As Systems (fitforrandomness.wordpress.com)
• Even when the DNA is similar “we can’t fix today’s problems with yesterday’s tools”:: Part 3 (fitforrandomness.wordpress.com)
• Tim Harford:: Trial, error and the God complex I TED Talks (fitforrandomness.wordpress.com)

Even when the DNA is similar “we can’t fix today’s problems with yesterday’s tools”:: Part 3

WARNING THE FOLLOWING ARE BAD FOR THE HEALTH OF A BUSINESS SYSTEM:

EXCESSIVE COMPLEXITY can come in a wide variety of forms: flawed economic theory; excessive debt (measured in relation to the requisite complexity of the system); poor or misguided Governance [instead of homoeostasis for business]; general/risk management or accounting practices that “constrain” the system in pursuit of skewed rewards or excessive returns*; misaligned operational structure & IT;  or processes &/or products; product, culture and strategy ambiguity (that hamper information-flow);  lack of “requisite variety”; assumptions or decisions based upon correlations in incomplete or misleading data…all very dangerous for individual financial systems and those connected to it, irrespective of scale or domain.

*the assumption that, because we know (knew) how to manage complicated systems, we know how to do likewise with complex systems is, evidently, wrong and dangerous.

We continue to be limited by our own knowledge, thus, invite disaster. We prefer faux certainty (a projection of the future based upon our past) to the reality of uncertainty and, as a result, when disaster strikes, we are prone to “label” what was unforeseen as unforeseeable…that suggests that we have looked but did not see! When, too often, the truth is that we didn’t look but assumed. Or “overlooked” by failing to utilise the tools available to us.

Even when the DNA is similar “we can’t fix today’s problems with yesterday’s tools”:: Part 2

INFORMATION – INTELLIGENCE – INNOVATION have transformed our INVENTIONS, theories and practices to such an extent that we need to be aware of the limitations of our knowledge: we MUST question what we “know”…not so much a case of familiarity breeding contempt but leading to “ignorance” and increasing risk.

The complexity of some man-made systems has so outstripped our ability to manage them that, increasingly, we need to draw upon our observations of the complex systems found in nature 

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”

Practice without sound theory will not scale…but it WILL expose and “amplify”, wrong assumptions, errors & omissions

The irreversible complexity of man-made systems* e.g. communications, IT, transport, economic, financial, business, logistics, business, etc. have outstripped our ability to understand, maintain, manage or repair flaws without the tools and techniques that enable us to examine the relevant system components and relationships at a variety of scales [micro – macro – holistic]: Law of Requisite Variety (refer Part 1).

Systemic Risk:: deep collapse in “nested adaptive cycles”

I don’t write this blog because I am intent upon coming across as some smartarse, know-it-all, merchant of doom! Rather, accepting the limitations of my own knowledge, I want, as far as is possible, to inform readers (thanks for your interest!) of issues that affect each and every one of us.

I reckon, if I prompt individuals to ask questions of themselves, me,  employer, politicians, trusted advisors or media sources then that is good. If I can answer questions even better. If I cannot, then that may be all the motivation I need to consider a worthwhile topic further or from another perspective. After all, with the communication tools we have at our disposal in the Digital Age, this IS a “Knowledge Economy”.

Part of the problem, that bothers me, is that many of the established sources of information are not as reliable as they would have you believe. Some only see information through the lens of engrained belief systems – a form of blindness. Others rely upon a cocktail of manipulation and, deliberate, misinformation. If this sounds far-fetched please stop to consider: what we have learnt about the culture in Institutions, in whom we were “happy” to trust; how we came to learn of the nature and scale of “abuse”: how long before “abuses” were admitted; why, despite, such as WikiLeaks, Occupy, etc. so little has changed; when we can expect to see perpetrators held to account for their actions?