Musings Report 2018-2 1-13-18 Why Systems Fail
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Why Systems Fail
Systems fail for a wide range of reasons, but I'd like to focus on two that are easy to understand in the abstract but hard to pin down in real-world organizations.
1. Systems are accretions of structures and modifications laid down over time. Each layer adds complexity which is viewed at the time as a solution.
This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income.
In short order, insiders and outsiders alike habituate to the higher complexity, and everyone takes it for granted that "this is how things work." Few people can visualize alternatives.
Those benefiting from the status quo will fight tooth and nail to retain their jobs and benefits, and so deep reform is essentially impossible, as the insiders and constituencies of each layer resist any reform that might diminish their security/income.
As a result, new layers rarely replaces previous layers; the system becomes more and more inefficient and costly as every new layer must find work-arounds and kludgy fixes to function with the legacy layers.
Eventually, the system becomes unaffordable or too ineffective to fulfill its mission.
2. The organization is incapable of responding to crises / instituting deep reforms due to organizational sclerosis and leadership who only wants to hear "good news." Organizational sclerosis isn't just the result of insiders clinging to their jobs; the structure itself has lost the feedback loops and accountability needed to radically restructure a failing organization facing crises.
It's easy for leadership to start demanding what it wants to hear rather than the troublesome truth. Due to the tendency to "shoot the messenger bearing bad news," managers fudge their delivery dates and numbers. Lacking real data and metrics, management fails to recognize the gravity of the situation and makes catastrophically erroneous decisions based on false or massaged reports.
These dynamics can manifest in both private-sector corporations and public-sector agencies. Many public school districts have failed for these reasons despite ever-rising budgets, and the former leader of mobile telephony, Nokia, self-destructed in large part as a result of #2.
One of Steve Jobs' first actions when we took control of failing-fast Apple in 1997 was to slash product lines and products and strip out all the layers that had accumulated to service this ineffective complexity.
All of this contrasts with self-organizing networks which lack the hierarchy necessary for sclerosis, self-serving insiders and fatally blinded management. Since "this is the way the system works," we have a hard time imagining how public agencies and corporations might be obsoleted by self-organizing rules-based networks. Yet this is clearly the trajectory of technology.
Summary of the Blog This Past Week
Social Change Will Upend the Status Quo 1/10/18
Yes, But at What Cost? 1/8/18
Best Thing That Happened To Me This Week
The warning of an incoming missile headed for Hawaii turned out to be a false alarm.
Market Musings: If this isn't a blow-off top,then what is it?
Here's a chart of the Dow Jones Industrials (DJI-30) from 2002 to the present. There are two noteworthy features: one is the record RSI (relative strength index), which has reached extremes far above previous peaks, and the astonishing ascent from November 2016, a steep parabolic curve that can only be described as a blow-off top, i.e. the final leg of a nine-year orgy of central bank stimulus.
What I find interesting is the psychology in play: central banks sought to convince private-sector players that central banks would never let markets decline, and so the smart strategy was to buy the dips, and buy new highs--in essence buy buy buy and don't bother hedging the long positions, as "central banks have our backs" and so there was no need to squander money on hedges against declines that would never happen.
Now the central banks are facing runaway asset bubbles that are the direct consequence of this psychology of "central banks will never let markets go down."
So how do central banks deflate the bubbles gently? How do they change the market psychology without triggering a crash? If central banks cut off the stimulus, and send messages that "now we will let markets decline," then what's the rational response? Sell, and sell everything rather than ride the bubble collapse down.
In other words, the central banks have guaranteed a bubble collapse as the only possible output of the system they've created.
From Left Field
What If Everyone Got a Monthly Check From the Government? -- report from Finland; people go back to school but for what purpose? Do they actually get a better job after more schooling in a over-credentialed economy?
The class allegiance of China’s de facto voters (via Maoxian) -- long read, worth the effort: is the middle class self-serving or progressive?
The Rich Are Getting Richer in Abe’s Japan -- a global phenomenon, not limited to USA...
The Real Cuban Missile Crisis -- Everything you think you know about those 13 days is wrong. -- not quite everything...
HTTPS explained with carrier pigeons -- just switched to https, everybody wants a "secure site"...
How Wealthy Are Americans? Most of the household "wealth" is home equity... strip that out and very little remains...
Is the Answer to Phone Addiction a Worse Phone? Go gray... we're apes, and attracted to bright fruit colors...
What the Data Tells Us About Bitcoin in 2017
Bitcoin Obituaries - Bitcoin has died 235 times... i.e. its death has been publicly proclaimed by a pundit...every one has been wrong, and there is no evidence to support the claim that the next obit will be accurate...
When Philosophy Lost Its Way -- this needed a sharp edit/ rewrite...
The Rockefellers vs. the Company That Made Them Rockefellers -- guilt of the gilded?
Can Your Hip Replacement Kill You? -- sensationalist title but makes a good ;point...
"I am prepared to go anywhere, provided it be forward." David Livingstone
Thanks for reading--
charles |
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