In this post, we’ll unpack all you need to know about systems, defining exactly what they are, their key elements, why understanding the nature of them is important and more.
What Is A System?
A system is a set of interconnected elements, referred to as agents, that interact with eachother towards a common goal, referred to as function.
It must therefore consist of three things: elements, interconnections and a function. Interconnections operate through the flow of information. Information holds systems together and plays a fundamental role in determining how they operate.
Stocks, Flows & Dynamic Equilibrium
Stocks refer to the accumulation of resources. Flows refer to the movement of resources either in (inflows) or out (outflows) of the stock. Equilibrium refers to the balance that occurs when the inflows and outflows result in a stable stock level.
If the sum of inflows exceeds the sum of outflows, stock levels will rise. When the sum of outflows exceeds the sum of inflows, stock levels will fall. If the sum of outflows equals the sum of inflows then the stock level will not change resulting in a dynamic equilibrium.
For example, in a bathtub, the water represents the stock and the tap and drain represent the flows. If the inflow of water from the tap is equal to the outflow of water from the drain, then the level of water will remain constant which represents a state of dynamic equilibrium.
Feedback Loops
Feedback loops are cycles that occur where the output in the system influences its input. There are two types of feedback loops: positive (reinforcing) and negative (balancing).
Positive feedback loops increase changes in a system and can lead to exponential growth or decline. For example, the more people that are infected with a virus, the more they can infect others.
Negative feedback loops decrease changes in a system and work to bring it back to a desired state. For example, a thermostat-controlled heating system works to maintain a set temperature.
Information delivered by a feedback loop can only effect future behaviour because it can’t deliver a signal fast enough to correct the behaviour that drove the present feedback.
All decentralised systems rely extensively on feedback for both growth and self-regulation.
Shifting Dominance, Delays & Oscillations
Shifting dominance refers to how different feedback loops become dominant at different times, leading to changes in the behaviour of the system. Delays refer to the time it takes for changes in one part of the system to affect other parts. Oscillations refers to the fluctuations in the behaviour of a system.
Constraints
Constraints refers to factors that limit the ability of a system to achieve its goal. They can arise from either internal or external factors. For example, in a manufacturing system, a bottleneck in a production line is a constraint that limits its output.
Resilience & Self Organisation
Resilience refers to a system’s ability to survive while maintaining its function and structure. Self-organization refers to the process by which systems evolve and adapt over time.
Hierarchy
Hierarchy refers to the subsystems within systems. The fundamental purpose of a hierarchy is to always is to help its subsystems do their job more effectively. In other words, the purpose of the upper layers of hierarchy is to serve the purpose of the lower levels of hierarchy. Hierarchical systems evolve from the bottom up.
To be a highly functional system, hierarchy must have a balance between enough centralisation to provide coordination toward the large system goal and enough decentralisation to allow enough autonomy to keep all the subsystems flourishing.
When a subsystem’s goals dominate at the expense of the total system’s goal, the resulting behaviour is called sub-optimisation.
Open Versus Closed Systems
Open systems can exchange energy and matter with the external environment. For example, an economy. They are therefore unpredictable.
Closed systems cannot exchange energy and matter with external environment. For example, a snow globe. They are therefore predictable.
Open systems can evolve and adapt. Closed systems cannot evolve and adapt. Recurring behaviour is only possible in an closed system.
Emergence
Emergence refers to the distinct patterns and behaviours that arise out of complex systems. It is the movement of lower-level rules to higher-level sophistication. When you combine two existing disconnected things you create something new.
Local rules lead to global structures. For example, scatter a thousand businesses across a landscape at random and turn on the clock. No matter what the initial configuration, the firms will gather into a series of distinct clusters evenly spaced from each other.
Systems are patterns in time.
System Traps
System traps are common patterns where intended solutions produce unintended consequences, often amplifying existing problems or creating new problems. Below are some of the most common.
- Policy Resistance: When various actors pull a system in different directions, causing it to resist change.
- Tragedy Of The Commons: When individuals use a shared resource for their personal benefit, depleting it for everyone.
- Drift To Low Performance: When low performance standards are reinforced over time, leading to even lower performance.
- Escalation: When competing entities continually try to outdo each other, leading to exponential growth in conflict or competition.
- Success To The Successful: When winners are rewarded with resources that increase their chances of future success, leading to inequality.
- Shifting The Burden: When a short-term solution is applied to a problem, diverting attention from long-term solutions.
- Rule Beating: When actors find ways to work around rules, undermining the system’s intent.
- Seeking The Wrong Goal: When a system’s measure of success is poorly defined, leading to undesirable outcomes.
Success
The success of any system is determined by how efficiently (speed) and effectively (accuracy) Truth (as information) can be transmitted.
Why Understanding Systems Is Important
Systems thinking provides us with a holistic lens to understand the world around us. This perspective allows us to better predict the behaviour of systems, solve problems more effectively and make more informed decisions.
Summary (TL;DR)
A system is a set of interconnected components that interact with eachother towards a specific common purpose.
The key elements of a system are stocks, flows, dynamic equilibrium, feedback loops, shifting dominance, delays, oscillations, constraints, resilience and self organisation and hierarchy.
Understanding how systems work provides us with the ability to more accurately predict the behaviour of systems, solve problems more efficiently and effectively and improve decision making.