The system will defeat itself. Nothing stays in a steady state. It overheats and melts. It only feeds itself the system.— Systematic (DJ Shadow featuring Nas)
If you are using a mobile device to read this, the idea of a hyper-connected world is likely not new to you; the idea of a fractured world, on the other hand, may come as a surprise. Time spent on social media reveals fault lines linked to economic status, political views or cultural identity. You might also sense that misinformation online has surged. Although the corrosive impact of “fake news” is hard to measure, the feeling that we are more divided than united – locally and globally – nonetheless lingers.
Yet this concern about our connectivity is largely a red herring in the context of why the world seems fractured. Connectivity creates systems that are integrated but also complex. Instead, our attention should be on the systems, such as digital, trade and manufacturing, that connect us globally. My colleague, Sebastian Buckup, warns that these systems are not only “testing the boundaries of scale in unprecedented ways” but are promoting the mistaken economic belief that “scale makes us stronger and safer.”
In fact, a relatively small number of big cities drove economic growth in the past two decades whereas, today, cities account for 80% of the world’s GDP. Yet new research is showing that cities (mostly in emerging economies) have also become more fragile in the past 15 years – and nearly two-thirds of the world’s population will live in one by 2030. The unsustainability of this demographic trend underscores why we need to think of a city as being a “system of systems”. And in this regard, Buckup’s salient observation is that when a system grows (i.e. scales), it does not necessarily maintain or repair itself along the way. As in nature, the size of the system may retard its rate of decay which is why bigger mammals outlive smaller ones. But the collapse of a system is rarely a linear occurrence but more often an exponential one – the death of a species (extinction) is nature’s example of exponential decay.
Now consider a related observation by economists Ian Goldin and Mike Mariathasan that globalization has transformed the entire world into one complex system. And such an interconnected global system would be highly vulnerable to the “butterfly effect” where there is the “potential for a ripple in one part of the world to be amplified and lead to major disturbances in another.” They presciently warn that “[w]hile systemic risks come from globalization, they also pose the gravest threat to continued globalization” because “[t]he political and psychological response to growing complexity is to try to become more local.”
We can see today that the balance of power between nation-states and the international framework that managed them in the last century is now frayed as protectionism, nationalism and xenophobia erode global solidarity. If complexity is at the root of a fractured world, then what can leaders do to change this? The first leadership requirement is to be able to differentiate between a complicated and complex system. Gilbert Probst and Andrea Bassi contend that this is a critical step in tackling complexity.
Complicated systems, according to Probst and Bassi, “are composed of many different interacting parts whose behaviour follows a precise logic and repeats itself in a patterned way.” In contrast, complex systems “are dominated by dynamics that are often beyond our control.” What is common to both is that every system has a rationale and a purpose. We think of the transportation system with interacting parts to move people and goods – and depending on where you live, you expect it to function in a predictable manner. But in a complex system, the variables involved never work in exactly the same way each and every time. Complex systems, particularly of the socio-economic variety, exhibit unpredictable or uncontrollable behaviour.
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The second leadership principle, therefore, is to examine complexity from a scientific perspective. Complexity science is an interdisciplinary field focusing on human systems. Examples of complex system dynamics (i.e. where small changes have big effects or vice versa) that can impact our daily lives include:
• A single breakdown of a transformer in a small electrical substation that leads to a massive disruption of an electrical power grid.
• An illness in a remote locality impacting a few individuals is actually a new pathogen that could give rise to a regional pandemic.
• A popular financial derivative (widely promoted to reduce risks) triggers a massive stock market collapse.
Therefore complexity science entails identifying patterns and tendencies to determine how to positively influence a system’s behaviour often to mitigate such risks. According to the OECD Global Science Forum, characteristics of a complex system include:
• Adaptability: “Complex systems are formed by independent constituents that interact, changing their behaviours in reaction to those of others, thus adapting to a changing environment.”
• Emergence: “Novel patterns that arise at a system level that are not predicted by the fundamental properties of the system’s constituents or the system itself are called emerging properties.”
• Non-linearity: “When a system is linear, a change in one property produces proportional change in others (…) In some cases, small changes might have large effects on a non-linear system, while large ones could have little or no effect.”
• Phase transitions: “System behaviour changes suddenly and dramatically (and, often, irreversibly) because a 'tipping point', or phase transition point, is reached.”
• Self-organization: “A system is formed that operates through many mutually adapting constituents is called self-organizing because no entity designs it or controls it.”
The third requirement for a complex, fractured world is to combine the knowledge of complex systems with the practice of system leadership.
Jane Nelson and Beth Jenkins co-authored a Harvard Kennedy School case study that characterized system leadership as not only distinct in practice but also particularly well-suited for complex global challenges such as food security, climate change, job creation, and gender parity. Their research of the World Economic Forum’s New Vision for Agriculture Initiative identified three dimensions of system leadership which they define as follows:
- “An individual system leader is someone who plays a leadership role in his or her organization not for its own benefit, but for the benefit of the broader system in which it operates”;
- “An institutional system leader is an organization that pursues its own interests in ways compatible with, and that intentionally contribute to, the health of the system in which it operates”;
- “Interactive system leadership comes from a special type of organization that mobilizes supports, aligns and coordinates the efforts of individual and institutions across the system to accelerate progress and achieve scale.”
All three dimensions of system leadership come into play if we accept the premise that the world is a complex, interconnected system. And further flows of goods, services, capital, people and data are the working assumption as the global economy appears to have entered into a strong cyclical recovery according to the International Monetary Fund’s outlook for 2018. Yet the risk of a fractured world remains because efforts to curb or curtail any one of these flows would have network effects that we cannot predict in terms of their impact.
We need to remind ourselves, as Mark Dodgson and David Gann do in Innovation: A Very Short Introduction, that “[a]ll economic and social progress ultimately depends on new ideas that contest the introspection and inertia of the status quo with possibilities for change and improvement.” And it’s also worth reflecting on the sage advice of someone who thought quite a bit about complexity. Albert Einstein observed: “We cannot solve our problems with the same thinking we used when we created them.”