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The Daily Sabbatical/Rotman | Sep 16, 2010 | 12941 views

Bar-Yam: Balancing Scale with Complexity

The president of the New England Complex Systems Institute talks about the role of individuals in Complex Systems and the importance of balancing scale with complexity

How can one go about relating the nature of the problem to the nature of the solution?
This involves understanding the patterns that exist in the environment around you. By recognizing patterns, we can identify the structure of the problem, and then we can tackle the structure of the solution. Within the context of very highly-interacting systems, patterns allow us to recognize the key collective behaviours that are important to look at, and by identifying these, we can understand how to act.

You have said that there is a trade-off between complexity and scale and that the success of any organization depends on both complexity and scale. Please explain.
In general, larger-scale challenges should be met with larger-scale responses. Doing things on a large scale means doing the same thing many times over. The tradeoff between complexity and scale has to do with the understanding that if we want to do many different things then we cannot also do the same thing many times. In a manufacturing context, this is a very natural idea: if you want to mass produce the same item many times, you cannot at the same time produce many different items. In meeting the demands of the environment, an organization has to match the scale that is needed with the complexity that is needed. If what is needed is to make 100,000 copies of a product, the organization should be capable of producing that number of products; if what is needed is to make 1,000 different, customized products, then it should be capable of producing diversity. Basically, the organizational structure has to match the demands of the environment. This also applies to the effectiveness of a healthcare system or the military in achieving their goals.

What are ‘positive feedback loops’ and what is their significance to the economy?
Much of the economy works through positive feedback: if people buy more, more workers are hired, who in turn earn more money to buy more goods. The problem with positive feedback loops is that they can run in the opposite direction: if people buy less, fewer workers are needed, which means lower earnings and less purchasing. What stabilizes these loops has to do with the many different ways and places people can work, buy and sell, and interact with the market; more variety creates greater stability in the system as a whole. When there are many different ways for people to work, some will be going up while the others are going down, so the system as a whole doesn’t collapse.

The danger arises when too many people are doing the same thing, as when too many investors buy certain stocks, creating a bubble, or when too many people invest in mortgage-backed securities, as we recently saw. Having too much of a good thing is a common economic problem, but regulators often fail to recognize it. While free markets are a good thing, when they are too free, they self-destruct. For example, the SEC supports policies enabling short selling because amongst other things, it can help weed out the weak corporations and avoid market bubbles. This is fine as long as there aren’t too many short sellers. Even a strong corporation can’t survive if too many short sellers gang up on it. Some people call short sellers predators, and the comparison may not be too far off: having a few predators to eliminate weak and sick animals may be good for the herd, but too many can lead to extinction.

If too much of anything is not good, how do we prevent it?
Moderation is usually considered a personal virtue, but it is also an essential economic principle. Strong companies are a good thing; monopolies are bad. What is bad for markets is when one player, or a coordinated group, controls the movement of prices. Regulations can restrict the extent of short selling or rapid buying, rather than forbid or allow it.

You believe that the best way to coordinate people to perform complex tasks is to create an environment “where evolution can take place.” What does this entail?
The competition between firms is similar to the competition and selection process that exists in evolutionary processes in nature. Within organizations, traditionally, competition and reward systems have rewarded individual performance. In order to create a more effective process, we have to understand the dynamics of evolution, which enable us to work on team-based performance rather than just individual-based performance. All of this requires a fairly elaborate understanding of the evolutionary process in order to create planned environments for continuous improvement. Evolution is not easy to understand, so grasping this will be a major challenge for today’s leaders; but I believe it will become more and more integral to activities in the management context. This is a key area in our ongoing research.

What is the first step to tackling a complex problem?
The first step is to begin thinking about how the parts of a system affect each other. If you take one part away, how will the parts be affected and how will the rest of the system be affected? Consider the family or organization you are part of and ask questions like, ‘How strong are the dependencies between the parts?’ ‘What would happen if one part were taken away?’ and ‘Does it matter which part I take away?’ By asking these sorts of questions, we take an important first step towards understanding relationships and relatedness.

Looking ahead, are you optimistic about our collective ability to face complexity?

While the complexity of our society is often overwhelming, it also has the potential to create an increasingly protective and productive environment for each of us, linked to increasingly effective collective behaviour. The difficulties we face in providing the essential aspects of well being – education, health care, infrastructure and economic development – are happening largely because we don’t recognize the power of our complex collective. Once we gain this insight, these difficulties can surely be resolved.

Yaneer Bar-Yam is the president of the New England Complex Systems Institute and author of Making Things Work: Solving Complex Problems in a Complex World (Knowledge Press, 2004). He holds a PhD in Physics from MIT. Complex Systems is a new field of science studying how parts of a system give rise to the collective behaviours of the system, and how the system interacts with its environment. For more, visit necsi.edu.


[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]


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