Wednesday 6 August 2014

The financial crash: rotten apples or rotten barrels?

I have just been reading Ha-Joon Chang's very interesting "Economics: The User's Guide". It was written for people just like me, who are conscious of the role economics plays in our lives but don' t really understand what it is. So it provides an explanation of key concepts and issues, relating them to the current economic difficulties in the world.

One chapter which particularly resonated with me as a systems person was Chapter 8, where he looks at the changing world of banking. What happened in 2008 was something of a mystery to me, as a crisis in the US housing market led to the collapse of the western economic system. Chang explains the phenomenon of 'asset-backed securities', and traces this back to the deregulation of the financial sector in the United Kingdom and United States back in the 1980s. Freed from the traditional role of taking savers' money and investing it, banks were increasingly able to create financial products that did not really exist and sell them on, over and over again.

What Chang describes is a classic feedback loop: deregulation made it possible for banks to create highly profitable financial products, the profit stimulated the creation of ever-more complex products which generated more profit and the merry-go-round just kept on turning. The risk protection that people thought was built into these products made it seem invincible, until, of course, the people at the bottom of the financial heap ran out of money. At which point it all came tumbling down.

At that time the British and American financial regulators said that this could not happen again, as the 'rotten apples in the barrel' lost their jobs (e.g. Sir Brian Pittman in 2009, or http://web.mit.edu/fnl/volume/215/silbey.html). Of course, no systems thinker would have believed that.

Apart from the dubious nature of this business, what also interested me were the emergent properties that Chang sees as coming out of this change.

Firstly, the magic of asset-backed securities encouraged even non-financial organisations to start playing in this new casino. In the short-term things were very profitable, much more so than tedious activities such as making things or research and development, and this made the shareholders very happy. Who cares what the future of the company is in the long-term if you can make big money in just a couple of years? So another feedback loop starts up.

Secondly, the banking industry suddenly became very attractive to young, clever people; people who in previous generations might have gone into manufacturing industry now became attracted to the big rewards and glamour of the banking world. So industry is deprived of talented people while the banking industry continues to grow. We can see here the start of another feedback loop where manufacturing in the UK and the United States becomes increasingly unfashionable and  irrelevant.

If these feedback loops continue, the outlook, in my mind, is not very bright. The Chinese manufacturing economy will continue to grow and Britain and America will just become places to recycle money. That may be good for the tiny minority working in the financial industry, but it does not bode well for the great majority in the rest of these countries.

As Peter Senge pointed out, the system always wins. This is not a system that looks very healthy for most people in the world.

Tuesday 29 July 2014

Music festivals, toilets and complexity

I spent three days last weekend at the magnificent WOMAD festival in Wiltshire, England, sitting in the sunshine listening to some of the world's best musicians doing their thing. It was a wonderfully therapeutic thing to do, leaving everyday worries and responsibilities behind.

But one thing none of us can leave behind is access to a toilet, and over the course of the weekend I started to become an observer of (largely) British toilet behaviour. If you have never been to a music festival I should explain that toilets are provided in specific areas, in a three-sided rectangular area. An occupied toilet is shown by a red indicator on the door and an empty toilet by a green indicator.

I started to watch how people behaved when approaching the toilets. At quiet times people could see a door with a green indicator and would go straight to one: at such times the toilet area would seem to be full of people moving in random straight lines. But when things got busier queues would form: in moderately busy times there would be a single queue and the first person would go to the next cubicle to become free, but at very busy times there would be separate queues in front of each cubicle. My wife also observed single queues forming in front of small clusters of toilets.

What was interesting to me were the transition points. When did a person or small group decide that the best strategy was to form a queue? When did queue formation stop? I reasoned that there were various factors such as the number of toilets, British social habits regarding queueing and so on.

It seemed to me that I was witnessing a complex adaptive system in action. How people behave in a situation that seems to be related to phenomena like birds flocking (which can be represented by a simple algorithm, such as in the various implementation of boids, e.g. http://processing.org/examples/flocking.html). Without any conscious decision-making, people change their behaviour in a way which suits the new situation that faces them.

Unlike me, most people were very happy in their unconscious decision-making and continued to enjoy the world music, untroubled by concerns about complexity and adaptation. What lucky people.

Sunday 13 July 2014

West Side Story - a parable for all times

Last night I went to see a stage production of "West Side Story". Although I seem to have known most of the songs throughout my life it was the first time I had actually seen it, either on stage or as a film, which was pretty surprising for someone of my generation.

Although it dates from 1957, its story is timeless. Racially-divided New York gangs fight over a small area of the city, one death leads to another and the cycle of revenge starts. It was relevant then, it was relevant to Shakespeare when he wrote the original 'screenplay' as "Romeo and Juliet", and it is relevant now.

When you think in systems and see a situation which never changes you recognise that there are systemic factors in play that are maintaining some sort of status quo. It then becomes possible to see the futility of many actions which are taken to try and stop the violence.

As the second act moved towards its tragic conclusion I started to think about the news I had heard earlier about another escalation of violence in the Middle East. Israeli youngsters kidnapped and murdered, tit for tat murder of an Arab youth, more rockets coming out of Gaza, Israeli tanks massed to invade Gaza. Such has been the story of my life, it seems.

So what are the systemic factors going on here? In 2002 David Peter Stroh wrote an interesting article for "The Systems Thinker" magazine (Volume 13, number 5, "A systemic view of the Israeli-Palestinian conflict"). Using a system dynamics approach, he identified an endless cycle:

1. Both sides fight for the right to exist - each side denies the right of the other to exist, so coexistence cannot be an option.

2. Tension escalates - retaliation becomes the strategy, as each side sees itself as a victim, and in the short term retaliatory activity seems to justify the right to exist.

3. Pressure leads to negotiations - at some point in violence becomes unacceptable, internally or to the external international community and peace talks start.

4. Peace efforts break down - extremists on either side take some action calculated to provoke a reaction, and the peace talks break down.

The overall result is that actions intended to create peace (negotiations) actually have the opposite effect, and provoke violence. To a systems thinker, this is not unusual.

Stroh captures these dynamics in a causal flow diagram (here, clipped from the PDF of his article).



He uses this to identify leverage points, where changes in strategy could actually lead to progress in reducing violence. For example:
  • Each side should think about what it can do to initiate change by reducing threats to the other side.
  • Administrations on each side need to take risks to stop the actions of extremists.
  • Each side should affirm the goal of peaceful coexistence.
  • The international community should not take sides and should come together to support both Israel and the Palestinian Administration to make the necessary internal changes.
Maybe, just maybe, this change in strategy could lead in the longer term to peaceful coexistence in the Middle East. And it is sorely needed. As a wicked problem, what happens in Palestine has a profound effect on events elsewhere in the world. For example, as Jason Burke points out in his very readable "Al Qaeda: the true story of radical Islam", many Muslims see western support for Israel as being a continuation of the mediaeval crusades, and the occupation of Jerusalem gave an initial twist to the current feedback loop of violent, fundamentalist terrorism. Systemically therefore, to deal with such terrorism we need to look at root causes rather than erode civil liberties through enhanced surveillance - but that is probably for another blog.

Disputes over land have always been problematic, whether it be in the Middle East or in the fictional New York of the 1950s. The deaths of Tony, Riff and Bernardo can serve as a parable to help us understand what we might be able to do better rather than embark on an endless cycle of violence.

Monday 30 June 2014

The NHS: fit for 1948 but for 2014?

This past weekend I decided to spend more time reading the newspapers and leaving the do-it-yourself projects for another day. Consequently I got stuck into an article in The Observer about the NHS' funding crisis, what might happen and what the King's Fund thought should happen.

All interesting stuff, but I felt that while many of their suggestions made some sense they were missing the point about what is really going on in healthcare in the United Kingdom. Maybe they need to reflect a little using Geoffery Vickers' idea of appreciative systems.


Vickers suggested that we observe the flux of time passing as manifested by ideas and events, compare them with our internalised standards and then decide how to respond. The NHS as it currently operates is based on society's needs in 1948: a war-wracked society where infectious diseases and poor living conditions were major problems. Illnesses could be treated and the people would return home to live out the rest of their harder but shorter lives.

But the flux of time moves on and by the time we react the situation has changed: our responses are therefore always that bit too late. So it is with healthcare: we now have a relatively affluent society characterised by good general levels of health leading to an ageing population where chronic diseases of old age are much more prevalent, and one where lifestyle illnesses such as obesity and lack of general fitness are placing increasing demands on the NHS. But the standards used in the monitoring process seem to be unchanged. Organisations like the King's Fund still look for ways to make the NHS work better within the 1948 paradigm.

The rich picture below tries to capture some of the issues that are affecting health today.


The food and drinks industry encourages people to drink sugar and alcohol and eat fat, all of which when consumed to excess cause health problems. The running down of public leisure facilities through austerity programmes, selling school playing fields and minimising the importance of competitive games in schools (as just a few policies) mean that people take less exercise and keep less healthily fit. Big Pharma relies on medicalising life so that it can sell drugs and treatments to the healthcare industry, so has little interest in a healthy population.

Seen in this light, current government policies to encourage more private enterprise to run parts of the health service seem like plans to let lunatics run the asylum - it's a great business plan if one part of the corporate empire makes people sick while another makes them better so they can keep consuming. Other plans to review targets and enforce more inspections and regulation will just drive problems to another part of the system. Scandals like that in the Mid Staffordshire NHS Trust will continue to reappear in different guises.

The problem is therefore one of system boundaries. While the NHS is seen to be there to treat illness rather than to promote health neither it nor associated politicians will look to take on the real causes of poor health, the systemic ones of poor public health policies, corporate interests in promoting illness and an increasingly sedentary population. Powerful systemic factors mean that it is likely to stay as it is.

The NHS is a fantastic service we in the UK should be proud of. But perhaps its past successes are stopping us from looking at what health systems should be about in 2014?

Wednesday 25 June 2014

Selling England by the pound

As the four-yearly cycle of hope and disappointment of England failing at the World Cup moves into the unpleasant memory stage it has been time for me to indulge in masochistic readings of why did it all go wrong post-mortems.

At least this time there was no ridiculous hyping of the team's chances so maybe this has made it possible for some more realistic analysis about why England's football team often does so badly in major competitions. So far reasons I have seen include:
  • English players do not have enough basic skills.
  • There are too many foreign players in the Premier League.
  • The style of football in the Premier League does not work in international competitions.
  • The players don't really care about playing for their country as they are paid too much by their clubs.
  • The manager was inadequate (but not too many of those).
  • English people have little sense of national identity.
  • "God save the Queen" is a poor choice of national anthem for a team which only represents a quarter of the Kingdom.
  • Not enough Old Etonians in the national squad.
It is good that various suspects have been arrested, but so far I have not seen much of what I would call 'systemic analysis' of drawing things together in any way. Given that England have  disappointed for many decades now it is time that people really did start to think that there is something systemic going on. Regular changes of managers has not had any real effect apart from making some people very wealthy men with no success to record.

At times like this Soft Systems Methodology calls to me, and I like to try and sketch out a rich picture to try and make some sense of my confused thoughts.


I don't want to go into the detailed process here, but just thought it might be interesting to throw out a few 'worldviews' that came to me as I drew on my whiteboard:
  • The Premier League is a good commodity for rich overseas investors to buy.
  • The Premier League is a good way for foreign players to learn how to beat English players.
  • Temporary immigration of foreign players is a good way to stop decent English players from emerging.
  • Football is mass entertainment, not a matter of life and death (thanks Bill Shankley) to particular communities any more.
The next step would be to draw up formal root definitions and conceptual models to explore these, but to be honest I'm not that desperate (however, if Greg Dyke reads this and is keen to buy some consultancy time from me, I'm available).

But what suddenly stood out to me is how football has just become another English business that can be bought, exploited and traded like anything else (e.g. AstraZeneca, Cadbury's, etc.). The influence of the City is here: who cares what it is as long as there is profit to be made. This is perhaps the fundamental reason why it has all gone wrong; sell kids Xboxes and get them to watch football onTV so they are protected from the dangers out there. More money to be made from that than from watching little kids run around football pitches. No wonder the numbers of people actually playing football is steadily declining, and we need foreign players to make up the numbers. To paraphrase Oscar Wilde, the people who really run football (Sky, the Premier League, to name a few) know the price of everything but the value of nothing. As long as the money rolls in nobody really cares about the England football team.

This is what I like about systems thinking: after days of trying to deal with the complexities I had a moment of clarity. I can deal with my disappointment: I've had a season ticket with Sheffield Wednesday for 10 years and know all about the systemic pain of football.

Tuesday 17 June 2014

Playing the (non-systemic) blame game

I have listened to a number of radio interviews in recent days talking about the Iraq crisis, and one of the themes has been playing the blame game.

It is always interesting listening to radio interviews with politicians. The politicians always try to blame somebody else and the radio interviewers almost always try to boil down a complex situation into a two-minute explanation: asking things like, "So who is to blame for the current situation in Iraq?"

So amongst others we have had:
  • Tony Blair saying the 2003 invasion of Iraq had nothing to do with the current situation.
  • Unidentified person on the BBC saying that Nouri al Maliki is to blame for having misused the democratic process (discussed in this Guardian article). 
  • Paul Bremer saying that the US and British troops pulled out of the occupation too early
Now, I know that you can find more nuanced discussions in the quality newspapers and online, but it always irritates me when the news sources that reach most people offer such simplistic analyses. In a time when fewer and fewer people are buying print newspapers and are relying on rolling radio and TV news sources it is disappointing and somewhat alarming when the analyses that most people have ready access to are so reductionist.

It is also dispiriting (although admittedly not surprising) to hear politicians coming out with comments which are (to my ears at least) one-dimensional and self-serving. Systems practitioners know quite well that in a wicked problem (such as Iraq) everything has an impact, and to say that the 2003 invasion is not to blame in any way for the current crisis is breathtaking. Commenting that had American and British troops stayed in Iraq longer would have prevented the current situation is based on an assumption that the Iraqi people would have been happy to see occupying troops in the country for all of this time. The notion that a prolonged occupation could have fuelled resentment leading to violent unrest, changing the dynamics of the situation in that way, does not seem to be considered, or at least articulated.

The art of being a successful politician is to deny systemic effects, to make other people believe that nothing that you do ever has any negative impact and that when things go wrong it is because of what other people have done. Of course, being able to do this well is what helps politicians have glittering careers in democracy, so maybe we should question whether or not democracy is something that should be imposed on countries around the world. It is pertinent to remember the title of Ken Livingstone's 1988 the biography, "If Voting Changed Anything They'd Abolish It".

Thursday 12 June 2014

Iraq - mission accomplished? I think not

The current alarming situation in Iraq is a classic example of what systems thinkers see as unintended consequences of acting in a wicked problem.

Back in the early 2000s great thinkers in the United States and United Kingdom presented a scenario whereby as soon as the dictator Saddam Hussein was removed there would be a linear progression of events embracing democracy, which would lead to peace and stability in the country. Of course, this has not happened, and it may be difficult to imagine that anyone would have really thought that it would.

Democracy takes many generations to take effective root in a society, and the typical pattern when dropped onto a non-democratic society emerging from a dictatorship is that political structures organise around ethnic or religious divides, and that a winner-takes-all mentality ensues, as everyone has learnt from the previous dictator.

One of the characteristics of wicked problems is that they are symptoms of other interrelated problems, and this is very clear in Iraq. The destabilisation of Syria has led to roaming, somewhat disorganised bands of militant groups, the tensions between Sunni and Shia Islam in the region plays out regionally and within Iraq's democratic processes, the massive amount of weaponry and trained personnel available as a result of the instability in the whole region, and of course there is the Israel question.

All of these factors and more are interacting to produce non-linear effects, and it is hard to see how this will all pan out. However, what is fairly certain is that democracy will not be a winner in the Iraq the near future.

Thursday 5 June 2014

Tragedy in Nigeria

Boko Haram is in the news again today for killing about 45 people in north eastern Nigeria. This organisation has been making the international news for several years now, even though they have apparently been in existence since 2002.

News reporting of Boko Haram tends to follow the same reductionist principles of most non-UK bad news events, focusing on specific details and ignoring context. It is possible to find out more about the history and politics of the organisation, but to the casual news reader they probably just come across as a crazy, murderous band. When seen in that light the response that seems logical for the authorities to take is to do whatever they can to crush and imprison its members, so that the problem will go away. However, further reflection suggests that this approach might not be so effective in the longer term.

Systems concepts can help to throw some light on why Boko Haram are operating. First, we can think about it as a 'wicked' problem. For example:
  • We cannot produce a single definition of the problem; are they terrorists, gangsters or just religious fundamentalists who are really troubled by the world that they see?
  • The current situation is shaped by its history, and will continue to evolve. Every intervention will cause a change in the situation, for better or worse.
  • What is the endpoint? Boko Haram ceases to exist, its members are dead, fundamentalist Islam is no longer a significant force in the region, or what?
  • It is not an isolated problem, and is deeply connected with other problems regionally and internationally.
The last issue is interesting and particularly relates to the systems idea of a boundary. News reporting, as described above, draws a tightly-defined boundary around Boko Haram, separating it from other issues. This gives the idea that we can simply solve the problem by eliminating it (i.e. killing or imprisoning them all). However, if we loosen the boundary other, very significant factors become apparent:
  • The western involvement in destabilising Libya unintentionally created to the availability of large numbers of fighting personnel and heavy weaponry.
  • For centuries there have been tensions between Islamic and Christian communities in sub-Saharan Africa.
  • Nigeria is potentially a very wealthy country due to the oil, but this wealth is concentrated in the Christian south. Endemic corruption means that wealth from the oil does not really benefit people in the Islamic north (nor many in the Christian south).
  • Western (which can be seen as Christian) oil companies are implicit in supporting corrupt government regimes and oil company practices.
  • Fundamentalist Islam has been growing in importance for several decades globally, and has been characterised by violent clashes and demonisation in the West.
The list could go on. Each of these is a major problem in its own right, which is feeding into the north-east Nigerian context. A causal flow diagram would show a number of positive feedback loops all coming together to make the situation worse.

From this analysis Boko Haram is just a symptom of huge regional and international forces, and crushing it will not in the long-term solve any problems, but could arguably add a further twist to the feedback loops driving Christian and Islamic peoples apart everywhere in the world.





Wednesday 4 June 2014

Biomass issues

As a vaguely environmentally-minded person I have been aware of some time about the apparent benefits of burning biomass for energy.

Cultivating quick growing vegetation which can then be burnt is a relatively carbon-neutral way of generating energy, and so would seem to be attractive from a renewable energy perspective.  As a result the UK Government has set targets for generating energy from burning biomass.

Ah, targets. One of the things you learn when studying systems is that targets have a funny way of distorting what happens. In order to meet the targets people will do all sorts of crazy things, and in the case of biomass they have started importing timber from the United States (http://www.bbc.co.uk/news/science-environment-22630815).  So the timber is transported within the USA to a port, is then put on a ship which burns diesel fuel to cross the Atlantic, and is then transported from the docks to a power station.

Now, I don't know what the energy cost for doing this is, but I wouldn't mind betting that the whole biomass system is far from carbon-neutral. 

Again, yesterday morning I heard a news item which said that subsidies for producing biomass were diverted land from food production, which was pushing up prices. Unfortunately the radio item did not go into detail and I have not been able to explore this further in order to fully understand the problem. But again, we see systemic issues kicking in.

Why systemic stories?

Since I started studying towards a Master's degree in systems thinking (the Open University Systems Thinking in Practice) I have started to become much more of a 'systems thinker'.

To me that means that I have become much more adept at spotting how single events or stories are part of a bigger picture, that there are connections and dynamic relationships, and that we are often looking at things with very narrow boundaries which make it difficult to actually realise why something is happening or how it can be resolved in some way.

This often happens when I am listening to the radio news in the mornings, and hear some expert talking about a current issue and they say something like, "It's a systemic problem." Ding ding. I might think about it for a while but then forget about it as the rest of the day overwhelms me.

But I thought it might be a useful exercise to try and capture these stories, and do some simple first-level thinking about why they are systemic and what the issues are.

And so this blog was born.