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Jamais Cascio explains the cognitive benefits of good futurist methodology:

Foresight exercises that result in a single future story are rarely as useful as they appear, because we can’t predict the future. The goal of futures thinking isn’t to make predictions; the goal is to look for surprising implications. By crafting multiple futures (each focused on your core dilemma), you can look at your issues from differing perspectives, and try to dig out what happens when critical drivers collide in various ways.

Whatever you come up with, you’ll be wrong. The future that does eventually emerge will almost certainly not look like the scenarios you construct. However, it’s possible to be wrong in useful ways–good scenarios will trigger minor epiphanies (what more traditional consultants usually call “aha!” moments), giving you clues about what to keep an eye out for that you otherwise would have missed.

Yes. I would add that such thought experiments also help to improve pattern recognition in analyzing reality. From teasing out logically sound, if fictional, consequences, we become more discerning about recognizing causation and potential second and third order effects of events or policy choices.

Useful.

Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable and Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, had an op-ed in FT.com entitled “Ten principles for a Black Swan-proof world” (Hat tip to John Robb and Pundita). Taleb was addressing the global economic crisis, but I was particularly drawn to Taleb’s fifth principle, which has a more general implication:

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

Taleb has encapsulated many important concepts very well here. Up to a certain point, increasing complexity represents a advantage for an evolving system (biological, financial, physical etc.) by increasing efficiency through adding specialization, interconnection, diversification, redundancy and checks for mitigation of risks. Complexity, in the earlier part of a development curve can add to a system’s overall resiliency - to a point.

Superfluous complexity, that which goes beyond the minimum required for additional gains in systemic efficiency or productivity, is a net drag on the system, an economic waste, a source of friction, a cancer,  a useless eater of resources and the earliest sign of the system’s inevitable decay. Worse, excess complexity represents an increasing probability of systemic failure by multiplying the number of variables involved in the normal process of the system. There are more things that can go wrong and more choke points where a catastrophic failure can occur. Increasing the degree of complexity moves the system away from simplicity and reliability and toward chaos and the creativity of emergent properties, but like an ice skater seeking ever greater range, go too far and the ice will crack under one’s feet.

This is an effect familiar to engineers and scientists but one that appears to escape the majority of politicians, corporate executives and economists. My co-blogger at Chicago Boyz, Shannon Love,  took GE to task for trying to get on the Federal dole by advocating needlessly complicating the nation’s power grid:

If Your Grid Had a Brain

GE is advertising to build political support for Obama’s plan to purchase billions of dollars of GE tech in order to make the power grid “smart”.  After all, who would want a “dumb” anything when they could have a “smart” something? 

The reason we should keep things dumb is that in engineering the word “dumb” has a different connotation. In engineering, “dumb” means simple and reliable. 

Increasing complexity in any networked system increases possible points of failure. Worse, the more interconnected the system, i.e., the more any single component affects any other randomly selected component in the system, the faster point-failures spread to the entire system. Power grids are massively interconnected. Every blackout starts with a seemingly trivial problem that, like a pebble failing on a mountain side, triggers an avalanche of failure. 

In the social and political domain, back in the 1990’s Philip K. Howard wrote a book called The Death of Common Sense: How Law is Suffocating America in which he detailed example after example of how the overlawyering of regulatory systems in America by an emerging and hyper-aggressive legal class was producing neither restraint on government abuses nor fine-tuned social outcomes but instead created a state of paralyzed rigidity, risk aversion, perverse incentives and general dysfunction; in other words, chaos instead of order.

The Obama-ites in the White House are not “socialists” ( at least not most of them) but there is a great love of liberal-minded technocracy there, and a seemingly boundless self-confidence in the ability of high-minded, upper-middle class, progressive, wonks and lawyers from the “good schools” (or investment houses - in some cases, both) to micromanage not just our lives for us, or even the United States of America but the global economy itself. Sort of a Superempowered Oligarchy of Good Feelings.

The ancient Greeks had a word for that: hubris. More importantly, the Obama-ites are wrong here - adding endless amounts of regulatory complexity is not going to give them the kind of granular control or positive returns that they seek to obtain from the system. Counterintuitively, they should be radically simplifying where and to the degree they safely can instead.

Go here.  Hat tip to Chadmalik.

They are talking not “Great Depression” but a system perturbation  on an epochal scale that causes an economic Black Hole.

Makes John Robb look like Pollyana on antidepressants.

Shane Deichman reviews Nassim Nicholas Taleb’s The Black Swan: The Impact of the Highly Improbable and finds it wanting:

Perhaps it’s my naïveté (or perhaps that I’m a product of the California public school system), but I honestly don’t see our civilization marching toward “Extremistan”. Quite the opposite: While our awareness of remote events has increased, and our networks have grown exponentially, I believe that the diffuse topology of our networks actually dampens the impact of an extreme event. Consider the “Butterfly Effect”. Do you really think a butterfly flapping its wings in Jakarta is going to eventually cause a hurricane in New York City? Or do you think the minor perturbation is absorbed locally without cascading into some kind of resonance? Yes, there are examples that illustrate the dire consequences of unplanned resonance. Taleb (who waffles at the end of his book as half hyperskeptic, half intransigently certain) abandons the Gaussian bell curve, yet — with only a single mention of Albert-László Barabási — firmly embraces Power Law scale invariance as normative.Despite Taleb’s too-casual treatment of scale, I think he would agree with George E.P. Box’s statement (c. 1987) that “…[A]ll models are wrong, but some are useful.” Abandoning our dogmatic devotion to certainty is essential in any creative, innovative enterprise — and can reveal hidden opportunities, and hidden abilities.

Read the whole thing here.

Unlike most reviewers, Shane could go head-to-head with Taleb on things mathematical ( though you hardly need a math background to understand The Black Swan) and Shane is right that networks that are intrinsically and generally resilient are better suited to enduring unexpected, system perturbing, black swans.

Hope to have my review up Sunday evening.

Dr. Chet Richards gives his take links to a review by Robert D. Brown III. on The Black Swan: The Impact of the Highly Improbable ( my apologies to Mr. Brown):

“The Black Swan: The Impact of the Highly Improbable”

The scandalous malpractice, as Taleb shouts, is that the rules that apply to Mediocristan are too often misappropriated to understand and manage systems that don’t obey such laws, often at the expense of lives and immense fortunes. The most pointed cases involve applications of options and modern portfolio theory in which billions of dollars of investors’ fortunes are lost by the malpractice of Nobel “intellectuals” who should know better (anyone remember the tragedy of the Amaranth fund or the trading company Long-Term Capital Management?); the poignant disaster of the unsinkable Titanic; the current woes of Bear Stearns and the sub-prime lending industry; and, in Taleb’s case, the decade and a half long civil war in his centuries-long peaceful Lebanon, a war that he and all too many others sadly believed would end soon after it started.

How does understanding the black swan inform our understanding of maneuver conflict? Consider the martial arts version of the Ludic Fallacy offered by Mark Spitznagel.

Organized competitive fighting trains the athlete to focus on the game and, in order not to dissipate his concentration, to ignore the possibility of what is not specifically allowed by the rules, such as kicks to the groin, a surprise knife, et cetera. So those who win the gold medal might be precisely those who will be most vulnerable in real life. (Black Swan, pg. 127)

John Boyd leads us to understand that conflict is often a non-cooperative contest for limited resources by novelty generating agents. Novelty is the black swan of conflict. When we become convinced that our side will win on the basis of strength or numbers, when we believe that the other side will follow our rules of engagement, we will be exposed to cruel novelty. This is precisely what Chet Richards describes as a disease of orientation called fixation: “…attachments to appearances, conclusions, institutional positions, dogmas, ideologies - pretty much anything that keeps the people inside the organization from recognizing that the world is changing or being changed by competitors.”