Introduction

• Systems thinking transcends disciplines and cultures and when it is done right, it overarches history as well.
• “If a factory is torn down but the rationality which produced it is left standing, then that rationality will simply produce another factory. If a revolution destroys a government, but the systematic patterns of thought that produced that government are left intact, then those patterns will repeat themselves. There’s so much talk about the system , and so little understanding.” – Zen and and the art of Motorcycle Maintenance.
• A system is a set of things – (people, thoughts, molecules, or whatever) interconnected in such a way that they produce their own pattern of behaviour over time.
• Basis of systems theory is the relationship between structure and behaviour.
• The system to a large extent causes its own behaviour. An outside event may unleash that behaviour, but the same outside event applied to a different system is likely to produce a different result.
• Because of feedback delays within complex systems, by the time a problem becomes apparent it may be unnecessarily difficult to solve

---

Part 1 : System Structure And Behaviour

---

Chapter 1 : The Basics

A system is always more than the sum of its parts.

• A system is an interconnected set of elements that is coherently organised in a way that achieves something. Example, solar system, digestive system.
• When a living creature dies, it loses its “system-ness”. The multiple inter-relations that held it together no longer function.
• Systems can change, adapt, respond to events, seek goals, mend injuries, and attend to their own survival in lifelike ways.
• Systems can be self-organising and often are self repairing over at least some range of disruptions.
• Look beyonds players to the rule of the game.
• “You think that if you understand one that you must understand two because one and one makes two. But what you forget is the and.”

Understanding system behaviour over time

• Information contained in nature allow us a partial reconstruction of the past. The development of the meanders in a river, the increasing complexity of the earth’s crust … are information storing devices in the same manner the genetic systems are.
• Storing information means increasing the complexity of the mechanism. Stateless systems tend to be simpler than the stateful systems.
• A stock, is the foundation of any system.
• A stock is a store, a quantity, an accumulation of material or information that has built over time.
  Ex: Water in a bath tub, books in bookstore, money in the bank.
• Stocks change over time through the actions of flow.
• A stock then is the present memory of the history of changing flows within the system.
• The presence of stocks allows inflows and outflows to be independent of each other.
• System thinkers see the world as a collection of stocks along with the mechanism for regulating the levels in the stocks by manipulating flows.
  That means system thinkers see the world as a collection of feedback processes.

How the system runs itself

• You getting your bank statement is a feedback loop. You may decide to work more or less, spend more or less based on the feedback from the bank statement.
• Balancing feedback loop: Balancing feedback loops, or negative feedback loops, are circles of cause and effect that counter a change with a push in the opposite direction.
  Example: Supply-demand dynamics. An increase is demand is regulated by a opposite feedback of shortage of supply and increase in prices, which in turn reduces the demand.
• Reinforcement feedback loop: Reinforcing feedback loops, or positive feedback loops, occur when an initial change is reinvested to further that change in the future.
  Example: Interest payments due on a Credit Card account will increase exponentially if the card owner doesn’t pay off debt.

Chapter 2: A Brief Visit To The Systems Zoo

• The information delivered by a feedback loop can only affect future behaviour, it can’t deliver the information, so can’t have an impact fast enough to correct the behaviour that drove the current feedback.
• A stock can have one more more feedback loops.

---

Part 2: Systems and Us

---

Chapter 3: Why Systems Work So Well?

• Some characteristics of good systems are:
  – Resilience
  – Self-organisation
  – Hierarchy
• Resilience is a measure of system’s ability to survive and persist within a variable environment.
• Resilience arises from a rich structure of many feedback loops that can work in different ways to restore a system even after a large perturbation.
• Self-organisation is the ability of a system to make its own structure more complex and mature.
• Most marvellous characteristics of some complex systems is their ability to learn, diversify, complexify and evolve.
• Society as a system has also self-organised itself to achieve more complex results.
  From burning coal, to producing steam, to steam engine, to transport network.
• Self-organisation produces heterogeneity and unpredictability and it requires freedom, experimentation and a certain amount of disorder.
• Hierarchy is the arrangement of sub-systems within a system.

Chapter 4: Why Systems Surprise Us?

• Three truths that are humbling
  1. Everything we think we know in this world is a model. Every word and every language is a model. None of this is or will be the real world.
  2. Our models usually have a strong congruence with the real world. That’s why we as a species have succeeded and evolved in the biosphere.
  3. However, there’s a world out there that our models fall for short in representing.
• Layers of limit: Whenever one factor in system ceases to be a limiting, growth occurs. However growth itself changes the relative scarcity of factors until another one becomes limiting and impedes growth again.
• To shift attention from abundant factors to the next potential limiting factor is to gain real understanding of and control over the growth process.
• System delays: Delays are ubiquitous in systems. Every stock is a delay. Most flows have delays.
  Shipping delay, perception delay, processing delay etc.
• Bounded Rationality means that people take quite reasonable decisions based on the information they have. But they don’t have the perfect information, especially about more distant parts of the system.
• Fishermen don’t know how many fish are there, much less how many fishes will be caught by other fishermen and end up over-fishing and destroying there own livelihood.
• Right feedback and the right time:
  In a study done in a city for electricity consumption, the families with high electricity use were the ones with their meter installed in the basements, where people rarely saw it.
  Families who got constant feedback with the meter installed in their porch consumed electricity much more cautiously.

Chapter 5: System Traps and Opportunities

• The Trap: Policy Resistance
  Policy resistance happens when actors in the system have their individual goals. If one actor pushes the system, others pull it down.
• The Trap: Tragedy Of the Commons
  Tragedy of commons comes about when there’s escalation or just growth in a commonly shared, erodible environment.
  Example: Picture a pasture open to all. Every herder thinks “what’s the utility to me of adding one more animal to my herd?”. Since the herd man receives all the proceedings from adding an extra animal, the positive utility is nearly plus one. The negative utility of overgrazing is shared by everyone.
  Tragedy of the commons arises from missing feedback from the resource to the growth of the users of that resource.
• The Trap: Drift To Low Performance
  Allowing performance to be influenced by past performance especially if there is a -ve bias in perceiving past sets up a reinforcement loop of eroding goals that sets a system drifting towards low performance.
• The Trap: Escalation
  When two actors in a system are trying to one up each other.
  Example: Bidding war in an auction where two bidders are having individual goals to one up each other, but ultimately resulting in an over-valued sell of the item.
• The Trap: Success To The Successful
  This system trap is found whenever the winners of a competition are rewarded with the means to compete even more effectively in the future.
  Example: Monopoly game. More hotel -> More Rent -> More Money to build more hotel.
• The Trap: Rule Beating
  Whenever there are going to be rules, there is going to be rule beating.

• The Trap: Seeking The Wrong Goal
  Example: If the desired system state is good education, measuring that goal by the amount of money spent per student will only ensure money is spend per student.

---

Part 3: Creating Change In Systems And Our Philosophy

---

Chapter 6: Leverage Points – Places to Intervene in a System

• Leverage points are the points in the system where a small change could lead to a large shift in the behaviour.
• Here are some of the leverage points in a system ranked in reverse order.
• #12. Numbers: Constants and Parameters
  Changing parameters rarely changes the behaviour of the system but it can attenuate or amplify it to some degree.
  Example: Changing interest rate will probably not fix the economic slowdown.
• #11. Buffers
  The sizes of stabilising stocks relative to their inflow and outflows.
  Example: Changing inventory levels in a car showroom.
• #10. Stock and flow structures
  Adding or removing a stock or feedback loops can greatly affect system behaviour.
  Example: Collecting new data and using that to create feedback loop in a marketplace.
• #9. Delays
  The length of time relative to the rates of system changes.
  Example: Applying Just in time inventory replenishment in manufacturing.
• #8. Balancing Feedback Loop
  The strength of the feedback relative to the impact they are trying to produce.
  Example: Higher increase in prices when demand increases.
• #7. Reinforcement Feedback Loop
  The strength of the gains from the driving loop.
  Example: Using an increase in demand, to further lower the price, increasing demand even more.
• #6. Information Flows
  The structure of who does and does not have the access to information.
• #5. Rules: Incentives, Punishments, Constraints
  These can greatly affect the behaviour of the actors in the system.
• #4. Self-organisation
  The power to add, change or evolve system structure.
• #3. Goals
  The purpose or function of the system.
  Example: Changing the goal from increase in educational spending to increasing student skills in an education system.
• #2. Paradigms
  The mindset out of which the system, its goals, structure, rules, delays, parameter – arises.
• #1. Transcending Paradigms
  This is what buddhist call “enlightenment”.

Chapter 7: Living In A World Of Systems

• Systems thinking lens surfaces more questions than it answers when you look around.
• Why do people actively sort and screen information the way they do?
• How do they determine what to let in and what to bounce off?
• What are values?
• How do systems create culture?
• How is that one way of seeing the world becomes so widely shared that institutions, technologies, production systems, buildings, cities become shaped around that way of seeing?
• Get the beat of the system
  Learn the history of the system. History is not the study of the past, but the study the change.
• Expose your mental models to the light of the day
  Everything you know and everything everyone knows is only a model. Get your model out there where it can be viewed, invite others to challenge your assumptions.
• Locate Responsibility in the system
  Design systems with intrinsic responsibility.
  Working towards a greater good, each actor acting towards the best of the system are good examples of intrinsic responsibilities.
• Stay humble, stay a learner.
• Celebrate complexity.

---