Systems, Flows, and Resilience

tl;dr: Some days, the writer’s block is there. Today’s one of them. An effort to think about systems and flows as well as decentralization of governance.

We all know the world is in a state of flux right now. You don’t need this blog to tell you that. The challenge-and the opportunity- then is to figure out what lens is the most appropriate for assessing the environment.

A recent article by David Galbraith in the Exponential View newsletter “Our world in flow change” (paywall), helped me think about it from a systems and flow perspective.

The essay was wide-ranging and, if I’m following it, one of the key points is this one:

“Well-balanced systems are tuned between efficiency of flows in an existing environment, and resilience via adaptability to a changing one. ”

Systems and Flows today

Galbraith has been studying the topic for years and I’m just riffing on it right now, but let’s consider his definition.

• do we have well-balanced systems that have efficiency of flows in an existing environment?

I’m not so sure.

At the time of this writing,

• the price of oil is negative.
• The Fed’s balance sheet as the “lender of last resort” continues to expand.
• The US government (and I’m sure others as well) are looking at additional stimulus packages.

and I’m sure we could come up with 100s of others.

If you want to get really deep down the rabbit hole of finance, read Doug Noland’s weekly post. It’s got everything you could ever want.

Bottom line, as was touched in the post on chaos theory. is that inflows and outflows are far from efficient now.

But that’s just a part of the challenge.

• are we seeing evidence of resilience via adaptability to a changing one?

In Sascha’s excellent guest post on the system change he experienced in East Germany, we are reminded of what happens when operating systems come under heavy stress.

Sadly, we are seeing that in many places as well, be it the WHO, the CDC, the President, the Congress, and others.

These models are, at the moment, not showing resilience to adapting to a new environment.

To be fair, it’s early and the crisis wave is still hitting the shore, but if the test is “effective global coordination and fast response,” we’re not quite measuring up.

I know I can get dark (and I do often), so I’m going to say that, while this is really disappointing and sad to witness, I don’t need to automatically assume that things are apocalyptic.

Stressful? Sure. End of the world? Maybe, but it reminds me of a story I just read recently, even though I can’t find the source right now (apologies).

It goes like this:

A young trader in the early 60s hears rumors that the missiles in Cuba are on their way to the US. In a panic, he sells everything.

His boss comes to him later, when it is clear that the world hasn’t been vaporized, and says,

“You idiot! On missile rumors, you BUY!!! If you’re wrong, we’re all dead anyway.”

But in the midst of the failure of existing systems, we are seeing new systems and new flows emerge.

Some are obvious like the spread of virus information and misinformation over social networks instead of through traditional outlets and government.

Some are non-obvious…and those are the ones that I am trying to notice.

Systems and Flows tomorrow

One of the areas where new systems may be slowly emerging is a return to a stronger governance at the local/city/regional level.

Whether its governors of east coast or west coast states banding together, a mayor in southern Italy printing local currency , or the need for corporate bailouts, trust may be devolving from the large, centralized systems because they are showing a lack of resilience.

I’ve been thinking about this idea for a while now, though not in these terms.

I’ve wondered if we’d see a return to the Venice/Florence model (with Singapore digital infrastructure) of powerful city-states?

To paraphrase Tip O’Neill, “all trust is local.” Will people start aligning more with their cities than with their countries?

According to Galbraith, centuries of data show us that cities are more adaptable than countries or corporations.

“cities outperform corporations because they are diverse, heterogenous and have enough weirdos and contrarians to be adaptable. This can be messy and inefficient in the short term, but in the long run, it is more sustainable as it allows for adaptation to a new environment or ecosystem.

This ecosystem view is why modern portfolio theory works in investment and why, when there is a shock like a pandemic, paradoxically, businesses that look to cut back and optimise will fail, as they need to invest to traverse to a new local maximum in a changed fitness landscape.

It is why investment in innovation is now more crucial than before. (Azeem discusses the limits of efficiency here.)

https://www.exponentialview.co/p/-our-world-in-flow-change-01d

Perhaps, then, the clues about where to look for optimism and inspiration is not in the hundreds of countries and how they respond, but in the thousands and thousands of cities around the world and how they are responding.

It’s like we can watch thousands of real-time experiments in system/flow resilience.

The clues for a new equilibrium may be there.