WSJ (Ryan Knutson) podcast covering the baby formula shortage was thought provoking, I had to conclude that it was poor journalism because it didn't ask some good questions.
If this is such a tightly regulated industry, why don't they perform regular stress tests? The US takes population growth so seriously. That makes sense, don't it?
There was no scientific thinking evident in the podcast. Sure, there was a bit about why Hayley cannot breast-feed, but that was about it. Where was the "systems thinking"? This is, after all, the country that pioneered it - Jay Forrester, Donella Meadows, et al. They should have asked, what do the inflows and outflows depend on? What is the stock? What happens if x,y,z? When was the last time there was a crisis of any kind?
In this case, the problem arose because one factory that was responsible for 20% of all production had to be taken offline. A valid question would be : "where are the strategic reserves?"
Jay Forrester, FYI, is the guy who, in Urban Dynamics (1969), explained why too much housing actually causes social problems. What is "too much"? Basically - accommodating more people than there are jobs. Now, you have people that are in an area, who need to be fed, but whom the local economy cannot support. Disgruntled people with nothing to do and stress to deal with is not a good situation. When you see how Silicon Valley has boomed despite the housing shortage, you get a sense of how this works. Contrast with places like Chicago which has never had the complaint (housing cost) and where you have sky-high crime.
As for Donella, the tragedy of her untimely death is tempered by her rich legacy in "Thinking in Systems" and "Limits to Growth". IN TIS :
Consider a fishery economy. What affects the balance? What does overfishing do? What affects the fish reproduction rate? (why is the rate low if fish density is high? Why is it low if the density is very low?)
There are three non-linear relationships at play :
- Price (scarcer fish are more expensive)
- Regeneration rate
- Yield per unit of capital (efficiency of the harvesting methodology)
You get a big change in the equilibrium if there is a change to the strength of the controlling balancing feedback loop through higher yield per capital. Suppose technology enhances the boats - sonar - say - to increase the catch. This can throw the system into instability - oscillations. You can get a wipeout of the fish and the fishing industry. Essentially, you converted the renewable resource into a non-renewable one. Desertification results. New England's logging industry is similar.
More and more, increases in technology and harvest-efficiency have the ability to drive resource populations to extinctions. How fragile is it? Depends on how well it can recover when severely depleted.
The System Plateau
"I think of resilience as a plateau upon which the system can play - performing its normal functions, and safely. A resilient system has a big plateau - a lot of space across which it can wander, with gentle elastic walls that will bounce it back if it comes near a dangerous edge. As a system loses its resilience, its plateau shrinks and its protective walls become lower and more rigid - until the system is operating on a knife edge - likely to fall off in one direction or another whenever it makes a move. Loss of resilience can come as a surprise because the system is paying much more attention to its play then its playing space. One day, it does something it has done a hundred times before and crashes. Awareness of resilience enables one to see many ways to preserve or enhance a system's own restorative powers. That awareness is behind the encouragement of natural ecosystems on farms - so that predators can take on more of the jobs of controlling pests. It is behind holistic healthcare (don't treat symptoms😊)
Self Organization
The most marvelous characteristic of some complex systems is their ability to learn, diversify, complexify, evolve. It is the ability of a single fertilized ovum to generate, out of itself, a mature frog, or chicken, or person.
Self-organization is such a common property, particularly or living systems, that we take it for granted.
The Koch snowflake - an example of something complex from simple rules
One thing a self-organizing system generates is hierarchy.
Groups devolve to their lowest common denominator. Where does this come from?
Allowing performance standards to be influenced by past performance, especially if there is a negative bias in perceiving past performance, sets up a reinforcing feedback loop of eroding goals that sets a system drifting towards low performance.
What is the answer?
Keep performance standards absolute. Better yet : let standards be enhanced by the best actual performances instead of being discouraged by the worst. Use the same structure to set up a drift towards high performance (thanks Donella. How about a few words about why this never happens? 😊 I have not seen this happen in even a single place that I worked at - well, maybe one - somewhat)
Escalation (you hit me so I hit you back a little harder, so you hit.. ) can be an insidious trap when the goal is something negative - think of an arms race. However, if the goal is something positive - like producing better and cheaper computers, it's not a bad thing.
The Matthew Effect - the right get richer and the poor..
Success to the successful is a well-k concept in the field of ecology, where it is called the competitive exclusion principle. This p says that two different species cannot live in exactly the same ecological niche, competing for exactly the same resources. Because the two species are different, one will necessarily reproduce faster or be able to use the resource more efficiently than the other. It will win a larger share of the r, which will give it the ability to multiply more and keep winning. It will not only dominate the niche, it will drive the losing competitor to extinction. That will happen not by direct confrontation usually, but by appropriating all the resource, leaving none for the weaker competitor.
Another expression of this trap was the critique of capitalism by Karl Marx. Two firms, competing in the same market, will exhibit the same behavior as two species competing in a niche. One will gain a slight advantage through greater efficiency or smarter investment or better technology or better bribes. With that advantage, the firm will have more income to invest in productive facilities or newer technologies or advertising or bribes. Its reinforcing feedback loop of capital accumulation will be able to turn faster than that of the other firm - enabling it to produce still more and earn still more. If there is a finite market, and no anti-trust law to stop it, one firm will take over everything as long as it chooses to reinvest and expand its production facilities. Some people think that the fall of the communist Soviet Union has disproved the theory of Karl Marks, but this particular analysis of his, that market competition systematically eliminates market competition is demonstrated wherever there is or used to be a competitive market. Because of the reinforcing feedback loop of success to the successful, the many automobile companies in the US were reduced to three, not one, because of anti-trust laws. In most major US cities, there is only one newspaper left. In every market economy, we see long term trends of declining numbers of farms while the size of farms increases.
The trap of success to the successful does its greatest damage in the many ways it works to make the rich richer and the poor poorer. Not only do the rich have more ways to avoid taxation than the poor, but, in most societies, the poorest children receive the worst educations in the worst schools, if they are able to go to school at all. With few marketable skills, they qualify only for low-paying jobs, perpetuating their poverty. People with low income and few assets are unable to borrow from most banks. Therefore, either they can't invest in capital improvements or they must go to local moneylenders who charge exorbitant rates of interest. Even when interest rates are reasonable, the poor pay them; the rich collect them. Land is held so unevenly in many parts of the world that most farmers are tenants on someone else's land. They must pay part of their crop to the landowner for the privilege of working the land, so are never able to buy land of their own. The landowner uses the income from tenants to buy more land.
Those are only a few of the feedbacks that perpetuate inequitable distribution of income, assets, education and opportunity. Because the poor can only afford to buy small quantities of food, fuel, seed, fertilizer, they pay the highest prices. Because they are often unorganized and inarticulate, a disproportionately small portion of government expenditure is allocated to their needs. Ideas and technologies come to them last. Disease and pollution come to them first. They are the people who have no choice but to take dangerous low-paying jobs, whose children are not vaccinated, who live in crowded, crime-prone, disaster-prone areas.
How do you break out of the trap of success to the successful?
Species and companies sometimes escape competitive exclusion by diversifying. A species can learn or evolve to exploit new resources. A company can create a new product or service that does not directly compete with existing ones. Markets tend toward monopoly and ecological niches toward monotony but they also create offshoots of diversity, new markets, new species, which, in the course of time, attract new competitors which then begin to move the system towards competitive exclusion again. Diversification is not guaranteed however, especially if the monopolizing firm or species has the power to crush all offshoots or buy them up or deprive them of the resources they need to stay alive. (think MSFT!) Diversification doesn't work as a strategy for the poor. The success to the successful loop can be kept under control by putting into place controls that prevent any competitor from taking over entirely. That's what antitrust laws do in theory, and sometimes, in practice. One of the resources very big companies can win by winning, however, is the power to weaken the administration of antitrust laws. The most obvious way out of the STTS trap is to periodically level the playing field - monopoly games start over each time. Sports have handicaps for weaker players, etc.
No comments:
Post a Comment