March 14, 2009

Unexpected?!

Posted in Uncategorized tagged , , , , , , , , , , at 12:49 am by lindaslongview

As a veteran of understanding complex systems, it is not terribly surprising that sometimes the unexpected occurs. It is not so much that humans have poor intuition, it is more that we 1) oversimplify (we focus on a specific element and not the whole), 2) we underestimate the affect of randomness, 3) we do not account for a changes in underlying assumptions of our mental models, and 4) we overvalue the expected outcomes because we become emotionally attached to the outcome.

As a trivial example of the unexpected, I am whining about my sore hands after having returned to running and climbing after a month of ankle injury hiatus (the climbing calluses on my hands receded and my hands became soft). So even though I expected to be most challenged by my ankle, it is actually my hands that are unexpectedly sore — I did not anticipate the whole picture.

As a really BIG example of the unexpected, the core of the financial mess that the world is currently experiencing can be traced to an oversimplified quantitative model that failed to account for changes in market assumptions – see Wired (March 2009): “A Formula for Disaster.” (Very interesting yet short article).

My experience in managing complex systems coincides with all of the wisdom and experience of others before me — take the long view: pay attention to the capacity constraint of the system, be wary of process steps with similar capacity to the constraint either upstream or downstream (they could easily become the constraint), and stay aware of external factors that can impact the system. The most important advice is to assume that Murphy exists and plan for managing it. To that end, if you do not have good intuition under different scenarios and want to build it to plan for it (for example, recovery from disruption), I recommend discrete event simulation with Simul8.

I am sure that there are other reasons than the four (4) I listed for the unexpected to occur. I invite you to add reasons 5, 6, 7….