MODULE 2: Dr.

Tuan Truong
SYSTEM AND US
CONTENTS
Why a system works
System traps and opportunities
System wisdom – Optional learning
ANYBODY KNOW WHY
DOES
A SYSTEM WORK?
 THE ABILITY OF A SYSTEM TO
BOUNCE BACK AFTER A
LARGE PERTURBATIONS

Resilience – Khả năng

phục hồi

Dynamic systems need to be “There are always limits to

resilient – this resilience needs to be resilience” – DHM p76
managed
EXAMPLES OF RESILIENT SYSTEMS
 RESILIENCE!=STATICOR CONSTANT
The resilient status quo could have short-term
oscillations, periodic outbreaks, cycles of succession,
climax, and collapse
“...systems that are constant over time can be un-resilient”
Stability is easy to see; resilience is harder to see
“...people often sacrifice resilience for stability, or for
productivity, or for some other more immediate
recognizable system property.”
LOSE OF RESILIENCE
Large organizations typically lose
resilience because their sense and
respond systems have to travel
through too many layers of delay and
distortion
Systems often have the ability
to self-organize, to learn,
diversify and become
increasingly complex

Self-organize

Fractal geometry – elaborate shapes

created by relatively simple rules
 “LIKE RESILIENCE, SELF-
ORGANISATION IS OFTEN
SACRIFICED FOR
PURPOSES OF SHORT-
TERM PRODUCTIVITY AND
STABILITY.”
 Produces heterogeneity and
unpredictability

Likely comes up with new structures

and new ways of doing things
SELF
ORGANIZATION... Requires freedom and
experimentation and a certain amount
of disorder
... scares individuals and threatens
power structures
CAN YOU NAME AN EXAMPLE OF SELF-ORGANIZED?
Example:
Physic
Chemistry
Technology
Economy
Politics
Religion
…
 “AN ARRANGEMENT OF SYSTEMS
AND SUB-SYSTEMS IS CALLED A
HIERARCHY.” DHM P82

Hierarchy – phân cấp

In hierarchical systems relationships within each

sub-system are denser and stronger than relationships
between sub-systems
EXAMPLE OF HIERARCHY OF SYSTEMS
 HIERARCHIES...
➢Give system stability
➢Give resilience (unless they
increase feedback delay)
➢Reduce the amount of information that
any part of the system has to keep track
of (aka “information hiding”)
➢“The purpose of the upper layers of
the hierarchy is to serve the purposes
of the lower layers.”
EXERCISE 2.1: DOES ANYONE
HAVE ANY EXAMPLES OF
HIERARCHY FORGETTING ITS
PURPOSE IS TO HELP SUBSYSTEMS
DO THEIR JOBS BETTER? (DISCUSS
WITH YOUR MEMBERS)
 Coordination toward larger
HIGHLY system goals

FUNCTIONAL
SYSTEMS NEED... Autonomy to keep subsystems
flourishing, functioning, and
self-organising
OVERALL THOUGHTS
OR QUESTIONS?
THE STORY OF
HORA AND
TEMPUS
Hora and Tempus were
both fine watchmakers
but Tempus was losing
money whilst Hora
was very successful.
Why?

Hierarchy
Each watch was made
of 1000 pieces.
Tempus constructed
his watch one piece at
a time. When the end
of day came and the
watch was not
complete he would lay
the pieces down and
the watch fell apart.
 Hora on the other
hand built his watch
in 100 units of 10
pieces that held
together. So at the
end of the day, if the
watch wasn’t
finished the most
work he lost was just
the one unit.
TRAITS OF
HIERARCHICAL SYSTEMS
• Self-organising systems modify
hierarchies
• Hierarchies evolve from the
lowest level – up
• The goals of a subsystem can
subsume the overall goal –
resulting in suboptimisation
• Autonomy and control need to
be in balance
• The purpose of the ‘upper levels’
is to serve the purpose of the
lower ones
 Evolution
started with a
single cell
Systems start from the bottom
• A cell to an organ
• An organ to organism
• Individual to team
• Production to management of
production
 “EVERYTHING WE THINK WE
KNOW ABOUT THE WORLD
IS A MODEL” (DHM P87)

Models have a strong correlation

with the reality but fall far short of
‘being reality’

Systems are our longer term

perspectives – avoiding short term
distractions and focusing on the
bigger picture
 Systems are not represented by sequential events -
events are the outputs that occur from the black box of a system
 EXAMPLES OF SYSTEM
BEHAVIOURS
Event analysis does not predict the future; has no
ability to change behaviours or achieve stability in
the stock market

Behaviour based models emphasise the ‘system

flows’ and play down the ‘system stock’ since flows
move quickly and stocks respond slowly.

Feedback between flow and stock is ignored placing

the focus on changing the flows.

FLUX
LOOKING FOR THE LINEAR – AND NOT RECOGNISING IT!
NONLINEAR –
MORE OFTEN
THAN NOT
 NONLINEAR
RELATIONSHIPS
• As stock shifts strength of
flows change
disproportionally
• Nonlinearities in feedback
produce shifting
dominance in loops
• Behaviours are complex
 BOUNDARIES – WHERE ARE THEY?
Beware the clouds –
• Main source of system surprises
• Mark the beginning an end of flows
• Clouds = Stocks, sources and sinks
• Mark the ‘boundary of a system model’
• Greatest complexities at the point of the
boundary
• Can be the greatest sources of creativity and
diversity
• Boundaries drawn around systems are
dependent upon the purpose of the
discussion
 Layers of
Limits
“At any given time, the input
that is most important to a
system is the one that is most
limiting.”
 GROWTH ITSELF DEPLETES OR
ENHANCES LIMITS

Limits
There always will be limits to growth.
Any physical entity with multiple
inputs and outputs is surrounded by
layers of limits.
Limits to growth – self-imposed or
system imposed
UBIQUITOUS
DELAYS
 Delays
When there are long
delays in a feedback
loop – foresight is
essential
Bounded Rationality
“To make reasonable
decisions based upon
the information they
have”
“The bounded rationality
of each actor in a system
may not lead to decisions
that further the welfare of
the system as a
whole”
“Tính hợp lý có giới hạn
của mỗi tác nhân trong
một hệ thống có thể không
dẫn đến các quyết định
làm tăng thêm lợi ích của
toàn bộ hệ thống "
– DHM p110
 EXERCISE 2.2
Pick a system and identify the following:
➢Input and output
➢Behaviors
➢Boundary
➢Delays
 SYSTEMS
TRAPS….. AND
OPPORTUNITIES
 PROBLEMATIC
BEHAVIOUR
• Delays
• Non-linear properties
• No firm boundaries

How they mimic the real world

– information is subject to
delay; life outcomes are non-
linear and all boundaries
depend upon the problem
itself.
 ARCHETYPES

Those systems that ‘produce truly

problematic behaviours such as:
• Addiction
• Drift to low performance
• Escalation
We call these ‘Archetypes’ -system
structures that need changing because
they are destructive.

Our response – tinkering at the edges

which will never change the systemic
risk
mày mò ở các khía cạnh sẽ không bao
giờ thay đổi rủi ro hệ thống
TRAPS
 THE TRAP: POLICY
RESISTANCE
•Various actors pull the stock toward
various goals. New policy actions, if
they are effective, just pull the stock
further from other actors goals
adding to the resistance. The Way Out
•No one likes the direction and Let go! Seek out ways that satisfaction
everyone fights against it. Energy that can be achieved through compromise and
is expended and has no value. negotiation.

See the bigger issue – unite the direction

through this
POLICY RESISTANCE – FIXES THAT FAIL
Examples of fixes that fail
• Farming cycles that create gluts
• War on drugs – no change despite billions
spent
• Banking regulation to stop excessive risk
taking

Policy resistance comes from the ‘bounded

rationality’ of the actors – multiple goals and
multiple directions
Resistance happens when goals of
subsystems are incongruent and misaligned.
 “Ruin is the destination toward which
all…rush, each pursuing his own best
interest”
A COMMONLY SHARED RESOURCE THAT
BENEFITS ALL FROM ITS DIRECT USE.
WEAK FEEDBACK (DELAYS) FROM THE
CONDITION OF THE RESOURCE
ALLOWS FOR ‘OVERUSE’ LEADING TO
EROSION AND EVENTUAL COLLAPSE.
The Way Out

Give & restore feedback through

The Trap: The Tragedy of the education to the users of the common
resource. Privatise the resource so that
Commons all users feel the impact of its declining
availability and quality. Regulate access
which further emphasises the
vulnerability.
THE TRAP: DRIFT TO LOW
PERFORMANCE
“The actor tends to believe bad news
more than good news so that the
desired state of the system is
influenced by the perceived state”

If past performance has disappointed The Way Out

we use this to reset the goals creating
a feedback loop that erodes goals and Maintain standards and keep them absolute.
the system drifts to ever lower Set the goals in a state of betterment not
performance discouragement. Reverse the cycle and set up
a positive reinforcement loop
 THE TRAP: ESCALATION
Competition between two stocks
seeking to out-do each other. This
creates a reinforcing feedback loop
that creates the exponential
escalation and eventual collapse of
one party.
Examples of this include – The Arms
Race, tit-for-tat killings between
factions.
‘Escalation’ can be in a good direction
– but again not always of benefit
since they lead to the wrong goals
Goals are not absolute since they are The Way Out
dependent upon the state of the
other actor. Best way out – avoid it in the first place. If
you’re in – then unilaterally disarm and leave.
Manage the system with balancing loops that
control escalation
THE TRAP: SUCCESS TO
THE SUCCESSFUL
Those who win are rewarded by the
means of winning again. A person
who owns land, rents the land and
uses the rent to buy more land.
It is pervasive and creates inequality
because it is biased towards the
successful.
Winner takes all – losers are The Way Out
eliminated
Diversification – get out of this game and start a
new one. Limit the pie – company law and
antitrust laws. Progressive taxation systems that
aim to rebalance the system. Start a fresh at each
round – inheritance tax to remove the ‘leg-up’
children get.
 THE TRAP: SHIFTING THE BURDEN
TO THE INTERVENOR
The shifting of the burden to an
intervenor is when the enacted
solution to a systemic problem does
nothing to actually eradicate the
underlying problem – it simply
disguises or covers up the symptoms.
Atrophy can then set in as the self-
maintaining functions of the system
are weakened. The system becomes
even more dependent on the drug.
The Way Out
Examples – a businesses need for
perpetual funding; health and our Avoid getting in – but of you are in, be aware
reliance on drugs to fight disease of all the signs and symptoms of masking.
weakening our immune systems; Move the goals of the system from short
children’s ability to do mental term to longer term.
arithmetic – replaced by a calculator
THE TRAP: RULE BEATING

Rule beating stems from the

desire to pervert the system in
some shape or form. It is
following the ‘letter of the law’
but not the ‘spirit in which the The Way Out
law was created’. In a hierarchy –
Let creativity redesign the rules so that the energy
rule beating stems from lower
is redirected into achieving the goals of the system
order rebellion against rules
not the defeat of the rules.
from above.
Reacquaint the actors with the higher purpose and
a set of principles
THE TRAP: SEEKING THE
WRONG GOAL
If the goal of a system is poorly
defined, cannot be measured
effectively then the system will not
function in the way it is designed to.
If you set the goal of society to be
measured by GNP – it will aim for this.
If we seek to measure well-being then
this will be the desired target. The Way Out
What we aim for – the system will Understand the most desirable system
obediently work to produce it behaviours and be specific. Take care not to
create a system of effort but not results –
since you will end up with effort and no
results
 CREATING
CHANGE – IN
SYSTEMS
AND IN OUR
PHILOSOPHY
 EXERCISE 2.3
Discuss through examples of 3 different traps of system and how your group can prevent
them?
 CHANGING THE
STRUCTURE OF SYSTEMS
THROUGH ‘LEVERAGE
POINTS’
 INTUITION
- CAN LEAD TO
“PUSHING WITH
ALL YOUR
MIGHT IN THE
WRONG
DIRECTION”
Systems are
often
‘counterintuitive’
Complexity
Finding some leverage
points in a hierarchy of
stocks and flows
12 POINT LIST OF ‘LEVERAGE
POINTS’
 12. NUMBERS –
CONSTANTS AND
PARAMETERS SUCH AS
SUBSIDIES, TAXES,
STANDARDS
Parameters become leverage
points when the act as the
catalyst to some more powerful
leverage point. System goals
are parameters that can really
change the system.
 11. BUFFER –
THE SIZES OF
STABILIZING
STOCKS RELATIVE
TO THEIR FLOWS
Big stocks relative to their
flows are more stable –
these are known as ‘buffers’.
Stores hold inventory; banks
hold our life savings; certain Big buffers can lead to
soils are more stable inflexibility, slow reaction or
because there is a large response times and the
stock of nutrients. prospect of large systemic
errors leading to failures
10. STOCK-AND-
FLOW STRUCTURES
physical systems and
their nodes
of intersection
The only way to fix a
poorly designed system –
rebuild it! This leverage
point is hard to change,
can create bottle necks
and have unintentional
consequences. The real
leverage point is to design
it well at the beginning.
 9. DELAY – THE
LENGTH OF TIME
RELATIVE TO THE
RATES IF SYSTEM
CHANGES
Delays in the feedback loop
determine the way the system will
behave. Rates of change in a stock,
impacted through delays in
feedback, can make the difference
between success or failure. Delays
though are not easy to change – it
is easier to change the ‘rate-of-
change’ itself.
 8. BALANCING
Whistleblowers – given protection to call time on
FEEDBACK LOOPS bad practice.
Balancing Feedback Loops are self-correcting

The strength of feedbacks

relative to the impacts
they are trying to correct

Ubiquitous in systems – either

occurring naturally or through human
intervention they are essential to the
long term health of the system. The
purpose is to keep the stock at or near
its goal but this depends upon all the
parameters, the ability to monitor and
respond appropriately. Price is often
used by the market to keep supply and
demand in check.
 7. REINFORCING
FEEDBACK LOOPS
The more soil erodes, the less vegetation it can support,
– The strength the greater the run-off, the more soil erodes

of the gain of
driving loops.

Self-reinforcing loop that

eventually will explosion,
erosion or collapse of a system.
It is normal for a balancing loop
to kick in at some point.
Slowing the growth is a
powerful point of leverage.
 6. Information
Flows – The
structure of who
does and who
does not have
access to
information
Missing information the most common
cause of system malfunction. Adding
this is a powerful point of leverage. Fish
stocks are low – price rises – more
people fish – price is not a great piece
of information – fish stocks would be.
There is a tendency for humans to avoid
accountability – a reason for missing
feedback loops.
 5. RULES –
INCENTIVES,
PUNISHMENTS,
CONSTRAINTS
Rules – define scope and boundaries of a
system, Rule of gravity – but laws,
punishments, incentives and social
agreements are weaker forms of rules.
Leverage comes from restructuring the rules
and understand the power of them
 4. SELF-
ORGANISATION –
THE POWER TO
ADD, CHANGE OR
EVOLVE SYSTEM
STRUCTURE
Rules for self-organisation – complexity is
evolved from simplicity – grown by a set of
rules. DNA – governing evolution; technical
advancement through innovation. Leverage
comes from encouraging experimentation –
but pushing the lever in the wrong direction
and we could wipe out eco-systems
 3. GOALS – THE
PURPOSE OR
FUNCTION OF
THE SYSTEM
The goal sets the direction of all other
leverage points. If the goal of the system is
to bring about radical social change then all
levers must push in that direction. Systems
can have multiple goals under which the
whole system goal sits. The goal of keeping a
market competitive trumps the goal
organisational monopoly.
 2. PARADIGMS – THE
MIND-SET OUT OF
WHICH THE SYSTEM – ITS
GOALS, STRUCTURE, RULES,
DELAYS, PARAMETERS –
ARISES

Our social model has one embedded

assumption – money is the measure of a
person’s worth, if you do not have money
you are simply worth less. This is our Changing a paradigm: - Point at anomalies of the existing
understanding of fairness and why we repel system, failures that standout and that you can identify as
the notions of redistribution. Paradigm's like reasons for change. Act with braveness, be bold in those
this are the source of the system, they are actions and promote those who have already made the
hard to change because they are ingrained. shift. Work with active change agents – open minded
A powerful leverage for change. advocates for change. Build a model of life inside the new
 1.
TRANSCENDING
PARADIGMS

Realising that ‘no paradigm is true’ and

getting comfortable with this. Let go of ‘not
knowing’ and reach the point of tranquillity
or enlightenment. Mastery over paradigms –
relieves of the burden of dependency of
inclusion and the basis for radical
empowerment.
 GENERAL NOTES ON THE ‘LIST OF LEVERAGE POINTS’

❖ The higher the leverage point the

harder the change will be resisted.
❖ The order is by no means set in
stone
❖ The direction that the point of
leverage will take you is not always
intuitive correct.
❖ Be humble – not knowing is the first
step towards mastery of knowing
❖ Dance with the system – observation
and engagement with the outcomes
creates clarity
LIVING IN
A WORLD
OF
SYSTEMS
“Life is not an illogicality; yet it is a
trap for logicians. It looks just a little
more mathematical and regular
than it is.” – G.K. Chesterton
 Prediction
and Control
It is one thing to
understand how to fix
the system but it is
entirely different to
actually fix it.
 Questions
lead to
questions System thinkers cannot reduce the complex to a set of rules from
which to control or predict an uncertain future. The ability to
utilise the tools of system thinking opens up a whole world of
“A system insight … can possibility of design. It allows us to envision a different future, to
raise more questions!” – design and then redesign in a more purposeful way. To profit
DHM p167 from uncertainty as surprise and chance events reshape the
future design or what we strive to build.
• Remain awake
• Listen to the system – what it is telling us beneath the surface
• Learn to ‘dance with them’
SYSTEM WISDOMS
Optional learning
GET THE BEAT OF THE SYSTEM
• Do Not Disturb – spend time listening
to and watching the behaviours of a
system
• Learn its culture, history and map its
outputs over time
• Focus on facts
• Recognise your assumptions and
misconceptions
• Look at the data
• Remain observant, objective and
emotionally detached
• Question – dynamic analysis not just
static observation
• Clear articulation of a problem
• Listen in at meetings
• Watch people leap to solutions
• What is the system doing and why is it
doing it?
 EXPOSE MENTAL MODELS TO THE LIGHT OF DAY
• Be aware of all your assumptions and
articulate them
• Mental models are slippery – you resort to
a model to fit a purpose – be aware of this
• Diagrams help
• Clarity of thinking aids speed and accuracy
• Practice mental flexibility – redraw
boundaries; be observant to paradigm
shifts
• It’s all only a model – get it challenged by
others with evidence
• Be diverse in your thinking – don’t hang
your hat on one model
• Rigorous models – mean scientific models
HONOUR, RESPECT AND DISTRIBUTE INFORMATION
• Information is the glue of the
system
• Delays, inaccuracies and
missing information leads to
broken outcomes
• Decision makers need timely,
accurate, complete
information
• Information is power
• Information is regulated,
policed and filtered by those
who have a short term interest
to do so
USE LANGUAGE WITH CARE AND ENRICH
IT WITH SYSTEMS CONCEPTS
• Information is transmitted primarily
through language
• Mental models can be verbalised
• Avoid language pollution
• Expand our language to be able to
communicate about complexity
• A society that talks about
‘productivity’ but rarely mentions
‘resilience’ – will become productive
but not resilient
• We are what we communicate
• Go for concrete, meaningful and
truthful
• Enlarge language to match our
enlarged understanding of systems
• Learn the language of systems
PAY ATTENTION TO WHAT IS IMPORTANT, NOT
JUST WHAT IS QUANTIFIABLE
• What we can measure is no more
important than what we can’t
• We make quantity more important
than quality
• Put emotive and emotional labels
into systems things like – self-
esteem, quality of life, prejudice
• Make up quantitative scales to
measure qualitative experience
• If it’s hard to quantify but essential
to understanding include it
MAKE FEEDBACK POLICIES FOR FEEDBACK SYSTEMS
• Set the feedback policy to change
dependent upon the stocks and
flows of the system
• Policies that include the ability for
the system to learn by establishing
dynamic feedback loops
• Example – to protect the ozone layer
the Montreal Protocol was signed. It
set chemical manufacturing targets
based on scientific feedback. If there
was an accelerated expansion in the
ozone hole – the list of damaging
chemicals to be controlled increased.
This is a feedback policy designed for
learning
GO FOR THE GOOD OF THE WHOLE

• Don’t focus on the one sub-system

within hierarchy while ignoring the
whole
• Hierarchies exist to serve the
bottom layers not the top
• Focusing on relationships without
spending time on health is a short
term fix
LISTEN TO THE WISDOM
OF THE SYSTEM
• Before contemplating changing a
system focus on the value of what is
already within
• Don’t destroy the areas of system
that are designed to self-serve it
• Example – the difference between
the micro finance initiative in rural
India vs. a macro government
response was the micro finance
worked directly with the people. It
took what was good and worked to
make it better. The macro response
was to bring in big business and
build what was not wanted
LOCATE RESPONSIBILITY IN THE SYSTEM

• Intrinsic responsibility – creating

systems where the feedback is
directed to the decision maker and
is compelling, direct and quick.
• A pilot sits at the front o the plane
because the actions they take have
a direct impact on them
• Focus on what can be controlled
from within – do not seek to
apportion blame to activities,
inputs and resources beyond the
scope of the system
STAY HUMBLE – STAY A LEARNER
• Listen to your gut, go with your
intuition
• Keep building mental models
• Don’t bluff – don’t freeze –
experiment & learn
• To learn – take small steps,
constantly monitor outcomes,
embrace change if the direction is
not correct
• Make mistakes and admit them
• Error embracing – seeking, using &
sharing information about goals and
why they have not be achieved
• Be the kind of person who truly
accepts their responsibilities
CELEBRATE COMPLEXITY

• The world is messy – non-linear,

turbulent and dynamic
• The world is – self-organizing and
evolving; it creates diversity and
uniformity
• The world is beautiful
• As humans we embrace linear,
structured and whole but we must
learn to embrace chaos, the
incomplete and the unknown
EXPAND TIME HORIZONS
• We focus only on the first
generations – we need to look
longer
• In systems there is no long or short
term distinction
• Actions today have immediate but
also long-term ripple effects
• Embedded within systems – nested
• Kondratieff Wave – economic
patterns set at 50 year intervals
• You are a fool just to look at the
path directly ahead of you without
looking at the long term
destination.
• Whole systems require an
appreciation of short and long term
DEFY THE DISCIPLINES

• The system’s journey is not the

specialist one
• Be able to step from each discipline
with a learning hat on
• Systems cross borders and
boundaries
• Systems require a focus on the
desired future state and the ability
to communicate this across
disciplinary boundaries
• Systems require learning
EXPAND THE BOUNDARY OF CARING

• Embrace the morality and ethical

codes
• All systems are interconnected and
interdependent
• If the rich succeed at the expense of
the poor then that is not success
• If our lungs fail our heart cannot
succeed
• If the human race is to survive the
eco-system we inhabit must also
survive
DON’T ERODE THE GOAL OF GOODNESS
• System architype - “Drift to low
performance” – the modern
industrial culture has eaten away at
our morality
• Cynicism is everywhere – distrust of
authority and an inability to talk of
love and compassion but an easiness
to talk about hate
• Expectations are lowered, the goal of
the system no longer uplift
• Don’t way the bad news MORE
heavily than the good
• Set your standards in absolute terms