Monday, 28 January, 2013 Leave a comment
The Lorenz attractor displays chaotic behaviour. These two plots demonstrate sensitive dependence on initial conditions within the region of phase space occupied by the attractor. (Photo credit: Wikipedia)
We don’t need an understanding of ‘Chaos Theory’ to know about the “Butterfly Effect”, nor do we need a medical qualification to grasp that (hitherto) unseen flaws in human DNA can have life-changing consequences for individuals.
In business terms, those of us who are concerned enough with ‘risk’ to look beyond what conventional “wisdom” tells us, KNOW that in the Digital Age of networks of inter-connected systems and sub-systems, apparently minor errors can have a MAJOR effect:
HILP – high impact, low probability events
Power Laws [fat tail] NOT Gaussian [thin tail]
Beyond probability…to the possible and plausible.
Yet, still, risk carriers, such as banks and insurers, think and rate in terms of “old world”.
It is gone. Past. An era that will not return and the problems that are being stored-up, because they fail to embrace the facts, CANNOT be funded by informed customers!
Production did not drive our lives in the old world, but the complexity of the new societies is turning our lives into gears of a big machine. Thinking that human life has the only aim of being productive for the society is the first error of any organizational system. Engineers design the pieces of a machine in order to be manufactured with a certain level of precision that provides a good performance; however, human organizations cannot design the behaviour of the people with the required precision…