Systems Thinking

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Systems Thinking

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Most Important Ideas
A system is an interconnected set of elements that is coherently organized in a way that achieves something.
Everything is a system
The Elements of a System are
Events - Things that happen
Stocks and Flows - The frequency of events and how they cause accumulation over time 
Feedback - Feedback is information sent back into the system about the system
Levels of Understanding of a System
Events - What is happening now?
Pattern of Events - What kinds of trends or patterns of events seem to be recurring?
System Structure - What are the organizational structures that create the patterns? What are the incentives that drive these patterns
Shared Vision - What are the stated or unstated visions that generate the structures

https://www.youtube.com/c/ComplexityLearningLab/videos

A system is an interconnected set of elements that is coherently organized in a way that achieves something. A system must consist of elements, interconnections, and a function or purpose.

All systems diagrams are simplifications of the real world.

Systems Thinking is understanding the parts from looking at the behavior as a whole.

A system is never the sum of its parts; it’s the product of their interaction.

Elements of a system

System structure is the source of system behavior. System behavior reveals itself as a series of events over time.

Stocks and Flows

Stock are elements of a system you can see, feel, count, or measure at any given time. It's a store, quantity, accumulation of material or information that has built up over time.

A stock does not have to be physical.

A stock is the memory of the history of changing flows within the system

Stocks change over time through the actions of a flow.

Flows are actions or events that affect the quantity of a stock. Flows can be an inflow or outflow.

Principles of Flows
As long as the sum of all inflows exceeds the sum of all outflows, the level of the stock will rise
As long as the sum of all outflows exceeds the sum of all inflows, the level of the stock will fall.
If the sum of all outflows equals the sum of all inflows, the stock level will not change; it will be in dynamic equilibrium at whatever level it happened to be when the two sets of flows became equal

A stock takes time to change, because flows take time to flow.

The presence of stocks allow inflows and outflows to be independent of each other and temporarily out of balance with each other.

Feedback

The mechanism that regulates inflows and outflows by manipulating flows is called feedback. Feedback is information sent back into the system about the system

A feedback loop is a closed chain of casual connections from a stock, through a set of decisions or rules or physical laws or actions that are dependent of the level of the stock and back again through a flow to change to stock. A feedback loop is formed when changes in a stock affect the flows into or out of the same stock.

The information delivered by a feedback loop can only affect future behavior. Feedback cannot signal fast enough to correct behavior that drove the current feedback.

Not all systems have feedback loops. And many systems have multiple feedback loops at work simultaneously.

Balancing feedback loops are goal seeking or stability seeking. Each tries to keep a stock at a given value or within a range of values. A balancing feedback loop opposes whatever direction of change is imposed on the system.

Any balancing feedback loop needs a goal, a monitoring and signaling device to detect deviation from the goal, and a response mechanism

A balancing loops ability to keep its appointed stock at or near its goal depends on the combination of all its parameters and links which include the accuracy and rapidity of monitoring, the quickness and power of response, and the directness and size of corrective flows

The strength of a balancing feedback loop is important relative to the impact it is designed to correct. If the impact increases in strength, the feedbacks have to be strengthen too

Balancing feedback loops within systems have their own goals.

Reinforcing feedback loop generates more input to a stock the more that is already there and less input the less that is already there. A reinforcing feedback loop enhances whatever direction of change is imposed on it.

Reinforcing loops are found wherever a system element has the ability to reproduce itself or grow as a constant fraction of itself. Reinforcing feedback loops are self enhancing, leading to exponential growth or to runaway collapses over time. A system with an unchecked reinforcing loop will ultimately destroy itself

Constraints on systems

Nonrenewable resources are stock limited

Renewable resources are flow limited

Systems need to be managed not only for productivity or stability but also for resilience.

Hierarchical systems evolve from the bottom up. The purpose of the upper layers of the hierarchy is to serve purposes of the lower layers.

System Surprises

At any given time the input that is most important to a system is the one that is most limiting

The bounded rationality of each actor in a system may not lead to decisions that further the welfare of the system as a whole.

System Traps

Policy Resistance

Trap
When various actors try to pull a system state towards various goals, the result can be policy resistance 
The Way Out
Bring in all the actors and use the energy expended on resistance, to seek out mutually satisfactory ways for all goals to be realized, or redefinitions of larger and more important goals that everyone can pull toward together

The Tragedy of the Commons

Trap
When there is a commonly shared resource, every user benefits directly from its use, but shares the costs of its abuse with everyone else. Therefore there is a very weak feedback from the condition of the resource to the decisions of the resource users. The consequence is overuse of the resource, eroding it until it becomes unavailable to anyone
The Way Out
Educate and exhort the users so they understand the consequences of abusing the resource. Restore or strengthen the missing feedback link either by privatizing the resource so each user feels the direct consequence of its abuse or regulating the access of all users to the resource

Drift to Low Performance

Trap
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 toward low performance
The Way Out
Keep performance standards absolute. Let standards be enhanced by the best actual performances instead of being discouraged by the worst. Set up a drift toward high performance

Escalation

Trap
When the state of one stock is determined by trying to surpass the state of another stock and vice versa creating a reinforcing feedback loop carrying the system into an arms race
The Way Out
Avoid getting into it.

Success to the Successful

Trap
If the winners of a competition are systematically rewarded with the means to win again. A reinforcing feedback loop is created by which winners win more and losers are eliminated.
The Way Out
Diversification. Allow losers to get out the game and start another one.

Shifting the Burden to the Intervenor

Trap
Solving symptoms but not solving the problem
The Way Out
Avoid getting in it

Rule Beating

Trap
Perverse behavior that gives the appearance of obeying rules or achieving goals but that actually distorts the system
The Way Out
Design or redesign rules to release creativity not in the direction of beating the rules but in the direction of achieving the purpose of the rules

Seeking the Wrong Goal

Trap
If goals are defined inaccurately or incomplete, the system may obediently work to produce a result that is not intended or wanted
The Way Out
Specify indicators and goals that reflect the real welfare of the system. Don't confuse effort with results or you will end up with a system that is producing effort, not results

Leverage Points of System

Numbers -- Constants and parameters

Last on list of leverage points. Changing the numbers, the sizes of flows rarely changes the behavior of the system, yet is 99% of where we put our attention. If the system behavior is chronically stagnant parameter changes rarely kick start it. If its wildly variable, parameter changes don't stabilize it. If it's growing out of control, parameter changes don't slow it down. Parameters become leverage points when they go into ranges that kick off better leverage points

Buffers -- The sizes of stabilizing stocks relative to their flows

Stocks that are big relative to their flows are more stable than small ones. Big stabilizing stocks are known as buffers. You can stabilize a system by increasing the capacity of a buffer. But if a buffer is too big, the system gets inflexible, it reacts too slowly. And there are bigger costs of maintenance with bigger buffers.

Stock-and-flow Structures -- Physical systems and their nodes of intersection

The only way to fix a system that is laid out poorly is to rebuild it if you can.

Often rebuilding is the slowest and most expensive kind of change to make in a system. It is rarely a leverage point because changing it is rarely quick or simple. The leverage point is in proper design in the first place. After the structure is built, the leverage is in understanding it's limitations and bottlenecks, using it with maximum efficiency, and refraining from fluctuations or expansions that strain it's capacity.

Delays -- The lengths of time relative to the rates of system changes

A delay in a feedback process is critical relative to rates of change in the stocks that the feedback loop is trying to control. Delays that are too short cause overreaction. Delays that are too long cause damped, sustained, or exploding oscillations depending on how much too long. Delays are not often easily changeable.

Balancing Feedback Loops  -- The strength of the feedbacks relative to the impacts they are trying to correct

Strengthening balancing feedback controls to improve a systems self-correcting abilities. It's effective because it's moving past the physical part of a system to the information and control parts where more leverage can be found

Reinforcing Feedback Loops -- The strength of the gain of driving

Create reinforcing feedback loops to get a desired result

Information Flows -- The structure of who does and does not have access to information

Delivering information to a system element or interrelated system  it wasn't going before. Missing information flows is one of the most common causes of system malfunction. Adding or restoring information can be a powerful intervention.  Introducing  fixed accountability for decisions is an example of this. Now the effects of behaviors are immediately presented to the decision makers.

Rules -- Incentives, punishments, constraints

Changing the rules of the system define its scope, its boundaries and its degrees of freedom.

Rules are high leverage points in a system. Power over rules is real power. If you want to understand the deepest malfunctions of systems, pay attention to the rules and to who has power over them

Self-Organization -- The power to add, change, or evolve system structure

The system changing an aspect of the system. Self organization can be created using clever rules that basically govern how, where and what the system can add onto or subtract from itself under what conditions.

Goals -- The purpose or function of the system

A change in higher goals, can have a waterfall effect on all the subsystem goals and parts.

Paradigms -- The mindset out of which the system -- its goals, structure, rules, delays, parameter arises

Changing the deepest set of beliefs about how the world works. Paradigms are the source of systems. From them shared social agreements about the nature of reality, come system goals and information flows, feedbacks, stocks and flows. You do this by pointing to the anomalies and failures of the old paradigm. You keep speaking and acting loudly and with assurance from the new one. You insert people with the new paradigm in places of public visibility and power. You don't waste time with reactionaries, rather you work with change agents and with the vast middle ground of people who are open minded.

We change paradigms by building a model of the system which takes us outside the system and forces us to see it whole.

Transcending Paradigms

Keeping oneself unattached to the arena of paradigms, to stay flexible. To realize that there are no true paradigms.

Ideas Built Upon: Mathematics
Resources
Thinking in Systems - Donna Meadows
https://ncase.me/loopy/v1/

Gall's Law
“A complex system that works is invariably found to have evolved from a simple system that worked.”

WHATEVER THE SYSTEM HAS DONE BEFORE, YOU CAN BE SURE IT WILL DO IT AGAIN.

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What is the mental, actionable, atomic checklist you would apply to everything you do that requires almost no thinking to go through just truthfulness and awareness.

Here's the checklist I actually use - brutally simple, zero fluff:

## Before Acting

**1. What's the real goal here?**
Not the stated one. The actual outcome that matters.

**2. Am I treating a symptom or a root cause?**
If it'll recur, it's a symptom.

**3. What's the constraint?**
One thing is the bottleneck. Everything else is noise.

**4. Who has skin in the game?**
Incentives reveal truth. Ignore words, watch stakes.

**5. What feedback tells me I'm wrong?**
If I can't name it, I'm in fantasy.

## While Acting

**6. Does this change the structure or just push numbers around?**
Parameters are weak. Rules, flows, and loops matter.

**7. Am I creating a new problem downstream?**
Burden-shifting is seductive and common.

## After Acting

**8. What actually happened vs what I predicted?**
No reconciliation = no learning.

**9. What surprised me?**
Surprise means my model was incomplete.

**10. What's the second-order effect?**
The consequences of consequences are where amateurs fail.

---

That's it. Ten questions. Takes 90 seconds.

The discipline isn't in thinking harder - it's in *actually stopping to ask* instead of defaulting to motion. Most people skip straight to action because pausing feels unproductive. That's exactly backwards.

Truth and awareness require interrupting your automation. This checklist is the interrupt.

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What should be the starting point of goal-oriented action?

From a systems thinking perspective, the starting point of goal-oriented action should be to step back and thoroughly understand the system you're operating within before taking any action. Here are some key considerations:

1. Avoid jumping to conclusions or immediate interventions:
Don't rush to implement solutions based on surface-level observations. This often leads to unintended consequences or treating symptoms rather than root causes.

2. Map the system:
Begin by identifying all relevant elements, their interconnections, and the boundaries of the system you're dealing with. This includes stakeholders, resources, information flows, and feedback loops.

3. Identify the system's purpose:
Understand what the system is currently designed to achieve. This may differ from its stated goals.

4. Analyze current behavior patterns:
Look for recurring trends and dynamics. What are the system's typical outputs and outcomes over time?

5. Uncover mental models:
Examine the underlying assumptions, beliefs, and paradigms that shape the system's structure and behavior.

6. Locate leverage points:
Identify areas where small changes could lead to significant shifts in the system's behavior.

7. Consider potential unintended consequences:
Before setting goals or taking action, think through how changes might ripple through the system.

8. Align goals with system dynamics:
Ensure your objectives work with, not against, the fundamental nature of the system.

9. Plan for adaptability:
Recognize that complex systems often behave unpredictably. Be prepared to adjust your approach based on feedback and emerging patterns.

10. Avoid over-focusing on numbers:
While metrics are important, don't lose sight of the qualitative aspects and overall health of the system.

Remember, the goal is not to rush into action, but to develop a deep understanding that will inform more effective, sustainable interventions. By starting with a comprehensive system analysis, you're more likely to identify high-leverage actions and avoid common pitfalls that come from a narrow, reductionist approach.

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Let’s have a conversation about today so that I may start my day on the right foot. Let’s start with a single question and nothing more to help me reflect on the day ahead.

What single element in your daily routine, if strengthened or altered, could create a positive ripple effect throughout your entire day?

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Why is Risk/Reward is Important to Think About When Making Business Decisions

When making business decisions, considering risk/reward through a systems thinking lens is crucial. Every decision exists within a complex web of interconnected elements and feedback loops. The potential rewards of a choice - increased profits, market share, innovation - cannot be evaluated in isolation. One must also weigh the risks - financial losses, damaged reputation, unintended consequences that ripple across the system.

A disciplined systems thinker looks beyond the immediate gains or losses to discern the patterns of behavior a decision might set in motion. Will it create reinforcing feedback loops that amplify success or failure? Might it disrupt balancing loops that currently keep the system stable? Could it shift the goals or incentives driving the system in unforeseen ways?

Moreover, the risks and rewards of a decision often play out over different time scales. Short-term gains can lead to long-term costs if they deplete key resources or undermine important relationships. Conversely, investments that appear risky in the moment may yield outsized rewards if they strengthen the system's resilience or open up new possibilities.

Wise decision-makers consider not just the magnitude of risks and rewards, but also their likelihood and the system's ability to absorb potential losses. They look for leverage points where a small, well-targeted action can generate disproportionate returns. And they remain open to modifying decisions as the system evolves, knowing that yesterday's solution may become today's problem.

Ultimately, evaluating risk/reward from a systems perspective means embracing uncertainty while seeking to shape the odds in your favor. It means looking beyond surface-level trade-offs to the deeper dynamics that determine a system's health and sustainability. For what does it profit a business to achieve its immediate goals, if by doing so it undermines the very system upon which its long-term success depends?

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