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The Logic of Failure

There is an old joke stating that prediction is difficult, especially regarding the future. Anyone that has ever tried to model or operate a complex system, or even gauge the effects of a change in business process, will understand how true that is. In his book The Logic Of Failure: Recognizing And Avoiding Error In Complex Situations, Dietrich Dörner explains why sometimes the best laid plans of mice and men oft go awry.

The Logic of Failure describes the problems we encounter when we try to model complex systems. It shows how even simple systems can confound the best efforts of their controllers.

By documenting a series of experiments where participants had to control simulated environments (an imaginary country, an imaginary town, and the temperature of a warehouse), Dörner shows just how difficult it can be to control any system. He documents the errors we tend to make and the poor results we achieve. All of these systems had simple parameters and simple goals. Few of them came close to the complexity of many real-life challenges. Yet, in each case the results were poor with the participants soon losing control of their imaginary systems.

In one experiment participants had to control the temperature of a warehouse by manipulating a dial. The dial had no numbers, so the participants had to ascertain how the dial worked. Most participants ended up creating wild fluctuations, with the temperature spinning between too cold and too hot. Even this simple system (turn the dial, observe the result, adjust according to the result) defeated most participants.

Experiments to manage the irrigation, pasture, and crops of an imaginary country met with equally dismal results. Most participants ended up creating population booms followed by collapse, over grazing followed by drought and starvation, and general misery for the citizens of their imaginary country.

An experiment to manage an imaginary town created the same misery for its inhabitants. Attempts to curb traffic congestion caused a business bust, attempts to create better housing created a congestion, attempts to manage the factory output created worker unrest, attempts to create worker satisfaction reduced factory output. In this case, like the others, the controllers soon lost control.

The author describes the frustrations the participants felt. He illustrates the different responses to that frustration: dictatorial decisions (of the “just shoot the bastard” type), “ballistic” decisions (panic stricken, fire-fighting, uncontemplative, quick fire), resignation, and micro focused (locked on some tiny detail that was unlikely to provide a solution).

None of the participants was stupid. None started with bad will. Most ended up defeated by the complexity of these simple systems.

Book Summary: Important but often overlooked features of complex systems

  • All the system variables interact with each other. You cannot change “just one thing.”
  • Variables can change through outside events, we do not have to do anything.
  • Small changes in one variable can have large changes elsewhere.
  • It is not always clear what the effect of changing any variable will be.
  • Any changes we make may have lags, so that the effect is not immediately clear.
  • Systems can evolve over time, what worked yesterday may not work today (or not work in the same manner)

Book Summary: Decision making errors

  • Possible conflicts in goals: e.g., higher customer service and lower staff costs.
  • Misunderstanding goals and priorities: e.g., is price or customer service more important?.
  • Reductionism: Due to our need to feel we have mastery, we tend to over simplify the systems we are studying.
  • Methodism: Failure to view the current problem or goal in context, but instead use “proven solutions.”
  • Fire Fighting: A focus on the immediate crisis instead of looking at the bigger picture. Lack of reflection or questions.
  • Not considering what we want to keep while focusing on what we need to fix.
  • Assuming lack of immediate change meant all was well.
  • Becoming wrapped up in pet projects and forgetting what is important.

Book Summary: Author’s Advice

  • State goals clearly.
  • Establish priorities, but realize they may change as the situation does.
  • Form a model of the system.
  • Gather information . . . but not too much.
  • Don’t excessively abstract. Remember common sense.
  • Analyze errors and draw conclusions from them. Change your thinking and behavior according to that feedback.

All systems involve feedback and the interaction of individual parts. Indeed most things that we manage are “complex.” If you are a manager then you are managing a complex system. If you are an employee, you are part of a complex system. If you are alive, you are part of a complex system. Whatever your field of endeavor this book is worth a read. Perhaps if the creators of some of those complex financial products (CDO, MBS, CDS) had read this book we may have avoided a lot of trouble.

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