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. Read more of this post

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). Read more of this post

“Helping Banks is Hurting Insurance Industry” Geneva Association Tells G20


Collapse_smallPlease forgive me for not reaching for the paper tissues  THE real story is that helping banks is hurting …SOCIETY!

Without doubt, the activities of billions of ordinary citizens did not give rise to systemic risk! FACT!

Do we really need to ask, in whose interest is it for the insurance industry to tell only half a story?

OK, so the language is clever “…traditional insurance activities do not give rise to systemic risk”. Hard to argue with. But this communiqué smacks of insurers’ girding their loins in anticipation of the fallout from further, inevitable, global financial turmoil.

Presumably choosing to distance themselves and pointing their fingers at the banks is intended to stave off the threat of further regulation. Even if that is, ultimately, unsuccessful, it may serve to delay unwanted scrutiny and provide the opportunity to adapt the current model. It could also be touted to hard-pressed businesses as a “justification” of a potential tsunami of premium increases that may follow the next financial earthquake: growing seismic activity in the markets serve as a warning.

The insurance industry is, hardly, in the “innocent bystander” category!

Read more of this post

The second economy: McKinsey Quarterly – Strategy – Growth


If you haven’t read any of my previous blogs or the rapidly growing catalogue of articles and reports on the subject, this article from McKinsey illustrates the sheer scale and pace with which complexity features in much of what, already, underpins life in modernity.

Every so often—every 60 years or so—a body of technology comes along and over several decades, quietly, almost unnoticeably, transforms the economy: it brings new social classes to the fore and creates a different world for business. Can such a transformation—deep and slow and silent—be happening today?

via The second economy – McKinsey Quarterly – Strategy – Growth.

Quite apart from a couple of "everyday" examples, one involving air travel and the other Global Supply Chain, I think that this extract really conveys the message:

If I were to look for adjectives to describe this second economy, I’d say it is vast, silent, connected, unseen, and autonomous (meaning that human beings may design it but are not directly involved in running it). It is remotely executing and global, always on, and endlessly configurable. It is concurrent—a great computer expression—which means that everything happens in parallel. It is self-configuring, meaning it constantly reconfigures itself on the fly, and increasingly it is also self-organizing, self-architecting, and self-healing.

These last descriptors sound biological—and they are. In fact, I’m beginning to think of this second economy, which is under the surface of the physical economy, as a huge interconnected root system, very much like the root system for aspen trees. For every acre of aspen trees above the ground, there’s about ten miles of roots underneath, all interconnected with one another, “communicating” with each other.

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