Revealed: the capitalist network that runs the world – New Scientist

I recently wrote "If you think "ruling elites" are a fantasy…think again" and have been boring regular readers about complexity and the threat of excessive complexity, particularly when the inter-connections are "closely coupled" (see below). Amongst others, the World Economic Forum have attempted to highlight the issues.

Financially “influential” firms SHOULD BE, as they have historically been, sources of “systemic resilience”. Instead, in a turbulent, debt-laden, global economy they can, effectively, act as “superspreaders”…hubs of systemic risk:

The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue <i>(Image: </i>PLoS One<i>)</i>AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

….Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates."

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The Complexity Conundrum: MBA business-speak a source..?

Here is an extract from an article that makes so much more sense than does the modern business-speak that I must confess to “understanding” and using! In my defence can I say that I hear it as a foreign language, interpret it and, on occasion, respond in that language ONLY to make myself understood.

On refection that last statement isn’t actually true! Sometimes I respond in this alien language to test the range of vocabulary and/or actual (useful) knowledge of the other person. Once the façade starts to crack good old (BS free) down-to-earth English can have the impact of a WMD…**BOOM**…get the contract or “I’ll get my coat and leave you with your (bruised) ego”!!!

…”The strange thing about my utter lack of education in management was that it didn’t seem to matter. As a principal and founding partner of a consulting firm that eventually grew to 600 employees, I interviewed, hired, and worked alongside hundreds of business-school graduates, and the impression I formed of the M.B.A. experience was that it involved taking two years out of your life and going deeply into debt, all for the sake of learning how to keep a straight face while using phrases like “out-of-the-box thinking,” “win-win situation,” and “core competencies.” When it came to picking teammates, I generally held out higher hopes for those individuals who had used their university years to learn about something other than business administration”…

This is THE question that grabbed my attention…and how! Are MBA programs up to the challenge of developing leaders who can manage complexity well? via The Complexity Conundrum – BusinessWeek. Unfortunately there just wasn’t enough space for my full response. So, here is the unabridged, unedited, version: Put simply…”NO”. Of course I am not in a position to pre-judge every MBA course BUT, on the basis that Academics cannot agree on a common la … Read More

via Get “fit for randomness” [with Ontonix UK]

The Complexity Conundrum – BusinessWeek

This is THE question that grabbed my attention…and how!

Are MBA programs up to the challenge of developing leaders who can manage complexity well?

via The Complexity Conundrum – BusinessWeek.

Unfortunately there just wasn’t enough space for my full response. So, here is the unabridged, unedited, version:

Put simply…”NO”. Of course I am not in a position to pre-judge every MBA course BUT, on the basis that Academics cannot agree on a common language, let alone theory it is extremely unlikely.

Add to that the Global Consultancies, such as KPMG, IBM, PwC, McKinsey and (no doubt) others that seem to view “complexity” as a term used to scare  CEO’s or other C-level Exec’s into opening discussions and justifying large consultancy fees! None of these appear to have a coherent definition, means to measure, or credible solution. Not a great starting point!

To their credit, AT Kearney do, at least, appear to have a clearer understanding but, from what I can understand of their proposed means of analysis (BEFORE any corrective steps can even be taken) a considerable amount of work and additional complexity would be necessary.

New MBA’s, even endowed with such knowledge, could assure themselves of very short careers in many organisations, by importing something that challenges current belief systems. Financial institutions (like political institutions) often consider “new” solutions as a threat to their power-base and react accordingly…although tear gas or water canons are not often seen in the workplace!

Although I am not an MBA, I do run Ontonix UK and we offer the only 100% quantitative, model-free, analyses of complex systems. I and my colleagues know, very well, that, despite a sufficiently rigorous scientific pedigree to be used in Aerospace design, Air Traffic control, cardio. surgical, High dependency medical care and other “critical processes”, when we are asking business leaders to open their minds to complexity, systems and information theory they tend to prefer the familiarity of flawed or limited concepts so as MPT, VaR, conventional risk management, risk models, etc. Of course there are always people within major organisations for whom the status quo serves their purposes very nicely!

Trust this input helps!?


Conventional risk management…a waste of money!?

Apologies to any hardcore risk managers who are offended that I even pose such a question…PLEASE read on and (I hope) you will understand why I pose the question. I make no apology for “recycling” extracts from earlier blog items to TRY to convey a supremely important message:

A recent item referred to a Report by US National Academies/NRC & Fed. Reserve Bank of NY and I wanted to revisit this from my summary:

Two particularly illuminating questions about priorities in risk management emerge from the report. First, how much money is spent on studying systemic risk as compared with that spent on conventional risk management in individual firms? Second, how expensive is a systemic-risk event to a national or global economy (examples being the stock market crash of 1987, or the turmoil of 1998 associated with the Russian loan default, and the subsequent collapse of the hedge fund Long-Term Capital Management)? The answer to the first question is “comparatively very little”; to the second, “hugely expensive”.

“We can’t solve problems by using the same kind of thinking we used when we created them” Einstein

We knew about this threat and did little about it. Now, some may say post-crisis others mid-recession, we are STILL failing to address the underlying issues. Preferring to waste even more time and money on ad hoc or ill-considered regulations. That is one of the reasons why we, at Ontonix, believe that we offer genuine solutions to the underlying problem of assessing the complexity and robustness of system(s).

Institutions are under pressure like never before and it will only get worse because they are more intent upon defending the indefensible and to fight to retain power and wealth…worryingly reminiscent of the words of Dr Joseph Tainter referring to The Collapse of Complex Societies:

Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.

buiding-collapse In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden de-coherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.

When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.

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Updated – Complex Systems and Ecology: Report by US National Academies…

If you don’t already know WHY I am so intent upon “banging on” about complex systems then you must have stumbled upon this item quite by chance! If so…welcome! I sincerely hope that you will take on board a lesson that WE NEED TO LEARN.

But this blog is not merely about recycling someone else’s words just to look smart or well-informed. There is a “greater purpose” and that is to alert people, not just to the problem but to the solution that we, at Ontonix have developed. S-l-o-w-l-y an understanding of the need for an entirely new view is gathering momentum and Ontonix have the tools to: map interdependencies; measure [their] effectiveness; manage robustness; monitor complexity within systems. Conventional risk management tools, risk and rating methodologies are no longer adequate.

Quantitative Complexity Management is advanced risk management

Well before this recent crisis emerged, the US National Academies/National Research Council and the Federal Reserve Bank of New York collaborated on an initiative to “stimulate fresh thinking on systemic risk”. The main event was a high-level conference held in May 2006, which brought together experts from various backgrounds to explore parallels between systemic risk in the financial sector and in selected domains in engineering, ecology and other fields of science. The resulting report was published late 2007 and makes stimulating reading.

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