What is Missing in the WEF 2015 Global Risks Report?

ScreenHunter_446 Jul. 24 21.12Complexity-induced risk. In the WEF 2015 Global Risks Report, the word ‘complexity’ is mentioned only 8 times and in a colloquial manner, never as an independent source of risk. Complexity is not mentioned in the Executive Summary of the report. And yet, as the complexity of the global society increases, it becomes probably the most formidable threat of all. The laws of systemantics, some of which are cited below, may appear to be funny but they do indicate correctly some of the salient and nasty properties of highly complex systems:

  • Le Chatelier’s Principle: Complex systems tend to oppose their own proper function. As systems grow in complexity, they tend to oppose their stated function.
  • The Functional Indeterminacy Theorem (F.I.T.): In complex systems, malfunction and even total non-function may not be detectable for long periods, if ever.
  • The Fundamental Failure-Mode Theorem (F.F.T.): Complex systems usually operate in failure mode.
  • A complex system can fail in an infinite number of ways.
  • The larger the system, the greater the probability of unexpected failure.
  • As systems grow in size, they tend to lose basic functions.
  • Colossal systems foster colossal errors.

The global economy has been crippled by the financial meltdown of 2008. This has created spillover effects into the real economy. The resilience of the global society (i.e. not that of  just the economy) is today is approximately 70% – it is not dramatically low but at the same there is little to celebrate. With an interdependency of over 60%, contagion will be extremely fast. The Eurozone, for example, is not a champion of resilience. At a mere 50%, Europe could very well be the trigger of a massive shock to the global economy and all this due troubled Greece, which accounts for 1.3% of the continent’s economy. This points to high fragility. And high complexity is the cause.

But why should high complexity be such a threat? There are three main issues:

  • A highly complex system is difficult to understand and govern. Tens of thousands, even hundreds of thousands of variables make it almost impossible for any organism to govern or steer such systems. A simplified analysis of the World as a system – we perform such analyses every year using data from the World bank – contains ‘only’ 250000 variables, about 1000-1500 per country!
  • Because of the huge number of variables involved, there is no such thing as ’cause’. Patterns and modes of behaviour emerge dynamically as a result of interaction of thousands of variables. These interactions change all the time, making it impossible to actually isolate the cause of a particular event.
  • Highly complex systems can fail in very many ways. This means that they can also function in very many ways (modes). Usually, the behaviour of a system is the result of a superposition of many modes of functioning. More complexity means more modes. This, in turn, means that a system can suddenly jump (transition) from one mode of functioning to another without any early warning.

This means that in order to prevent our global society (not just the economy) from collapsing, even partially, we must focus first on understanding its dynamics and its weak points. The 2015 WEF Global Risks Report lists many of these weak points but fails to identify the most important one arising from the combination and interaction of them all – complexity.  The global risk map in 2012 look as illustrated below.

 

dd06a-risks-chartThe corresponding 2012  Complexity Map looks like this:

GRisks_CMap

In a highly interconnected system, risks with apparently low impact and low likelihood can trigger a sequence of events which ultimately leads to collapse. In highly complex systems a single failure is insufficient to cripple the system and multiple failures are what ultimately leads to catastrophic collapse.

Uncontrolled complexity growth, which finally leads to critical complexity – complexity that cannot be dealt with – is probably the most formidable source of risk for our global society. This is because critically complex systems are so fragile that it is not necessary to resort to massive natural disasters or international conflicts to collapse them – they can fail suddenly and from within, without an apparent cause. As the complexity of our society increases, complexity-induced risk becomes our number one enemy. Right after linear thinking.

 

 www.ontonix.com

 

 

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