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Understanding Complexity
“We are seeing an extraordinary failure of our current political and economic system” - Geoffrey West, Santa Fe InstituteA systems view of the world
We live in a highly globalized world, where people and places are becoming increasingly interconnected. Our social, economic, technical and environmental systems are therefore becoming more complex. With it follows new opportunities but also major challenges. For example, complex systems give rise to new types of problems which often are systemic in nature, including: Financial, economic and debt crisis, Social and political instabilities, Environmental degradation and climate change, Organized crime, cyber-crime and Quick spreading of emerging diseases. A major challenge is thus how to organize ourselves in the best possible way to achieve both individually and socially beneficial outcomes. Both free market radicalism and dictatorial state control have failed us utterly. We need another way of studying and managing social, financial and environmental systems in an increasingly complex world. “Business as usual” is no longer an option.
Complex systems
Complex systems is a field of science studying how parts/actors of a system give rise to the collective behaviors of the system, and how the system interacts with its environment. Complex systems behave qualitatively different from old world simple systems. Complex systems are dynamic and behave in non-linear ways, giving rise to abrupt changes which can in worst case scenario lead to collapse, sometimes irreversible e.g. fish stock collapse. Complex systems often give the illusion of control because of this feature. For example, many economists believed that they had eradicated depression type crises with their neo-liberal free market policies from the 1980s onward. When in reality, all they had done was to build up a major instability in the system (built on debt) which took a long time to mature, then when a shock hit the system it suddenly collapsed. In complex systems it is the interactions between different parts/actors of the system which are important, giving rise to emergent behavior of the overall system. Studying parts of the system separately will therefore not tell you anything about the system as a whole e.g. studying banks but not in relation to the rest of the economy. Attempts to “control complexity”, i.e. to force a complex system to behave in a certain way, are often counter-productive, ineffective and costly. This is why central planning always fails. Design principles such as rules, norms and incentives which influence actors collective behavior are key to understanding and influencing many complex systems.
Fig. 1 Evolution of civilizations: organization and control structure
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| Source: New England Complex Systems Institute |
Building more resilient systems
Because there is a poor understanding of complex systems, attempts to only optimize for efficiency often leads to a loss of resilience i.e. increase in systemic risk. Other common drivers of systemic risk include: loss of redundancy, loss of diversity, more networking, and faster dynamics. Building more resilient systems will be key to avoiding major crises and ensuring future development and well-being. Ways of enhancing resilience includes:- Increase redundancy: have reserves, alternatives, plan B
- Simplify: limit system size
- Lower connectivity: decoupling strategies
- Increase diversity: having a multitude of species or assets
- Real-time monitoring: adaptive feedbacks, self-regulation
- More transparency and awareness: more data and analysis
- Suitable incentives: norms and rules governs actors behavoir from the bottom up
Governance
The need for more participatory systems follows from the need to move towards more distributed control and decentralized management of increasingly complex systems. In a rapidly changing world, politics and business becomes increasingly similar to disaster response management. From top-down control towards bottom-up response (Fig. 2). The trend to decentralized, bottom-up approaches is growing because it is more efficient and enhances resilience in a complex world. Examples include: self-controlled traffic systems, peer-to-peer lending, peer review systems, Uber and self-driving cars, intelligent swarms, and self-generation of electricity.
Fig.2 From top-down to bottom-up control
Comparing three common ways of trying to organize complex systems
The most common but outdated way of trying to organize a complex system is through a) top-down control, but this way is very inefficient (costly) and reduces resilience (Helbing, 2013). The second way is to allow individuals to b) self-organize from the bottom-up with a focus on self-interest, which is efficient but often lead to “tragedy of the commons” problems (e.g. overfishing, climate change, pollution). A third way is to allow c) bottom-up regulation but with a focus on other-regarding preferences and coordination with neighbours, which is resource-efficient and promotes resilience. The differences in options is made visible in Fig. 3. According to recent research, option c) is the best choice when trying to organize complex systems given proper design principles. Reputation systems and meritocratic matching can provide institutional frameworks to overcome “tragedy of the commons” and create societal benefits.
Fig. 3 Table highlighting the differences between governance options, including difference in system dynamics and outcomes.
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This kind of research is very important as it clearly shows that there are alternatives for how to organize and govern a market based society. Old ideologies and ideas about human nature should be disregarded in favor of science-based knowledge about how our modern world actually works. Moreover, with our new digital tools and big data a more participatory and self-regulating society is truly possible. And it is needed as we are entering a world full of complexity. Setting up simple systems that enables real-time feedbacks can lower costs and enhance resilience of any complex system such as a society, a company or a market place.
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