“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.”Kwame Appiah (Hat-tip to Alex Danco’s excellent post for the quote)
We discussed in our last post the difference between simple, complicated, and complex systems. While it is generally acknowledged that family businesses / enterprises are in fact systems – meaning that actions are inter-connected, rarely do members of family enterprises behave if that is the case. We highlighted in our prior post that while we may understand that things are inter-connected in a system, we often forget (or fail to adapt) to the reality that a system is more than the simple sum of the parts.
As a result, it is extremely difficult to make predictions about the effect one action will have on the system overall. For members of family enterprise and their advisors, this lack of predictability should dramatically change how we attempt to solve problems.
Today, would I would like to propose there are 5 key types of behavior that are required to function in a complex system environment.
The first behavior is that complex systems require learning. In an environment where cause and effect are discontinuous, you must have an ear to the ground to understand what is actually occurring. This provides the feedback necessary to determine whether a course of action is successful. It will also quickly alert you to changes within the system.
The best example of building this learning mechanism is Gen. Stanley McCrystal’s seminal work Team of Teams which discuss the steps he took in leading special forces work in Iraq. Stagnation is death. Learning must occur at an aggregate system wide level, in addition to an individual level.
The second key behavior is probabilistic thinking. There are others who have covered this topic in great length and better details – see Annie Duke’s Thinking in Bets . The point being that we need to think in terms of probability and ranges of outcomes vs. attempting to precisely develop a cause and effect. Ultimately, this means we are less confident in our ability to ‘call our shot.’
The third key behavior is to expect non-linear outcomes. There are cases in complex systems where an outcome will produce a non-linear outcome – either extreme upside or downside volatility. Like a ‘super-bounce’ on a trampoline in which two events merge to create one sizable event, the same can occur in systems.
The key is whether or not the system can survive the unexpected outcome, or as Taleb described Antifragility, actually become stronger during periods of stress.
The fourth behavior is learning to engage in integrative thinking. Nonlinear environments often mean that simplistic solutions to problems are unlikely to be effective. If that is the case, having a systematic methodology for developing and testing novel solutions is of vital importance. See our post on Integrative Thinking here.
The final behavior is speed. Counter-intuitively, in an environment where predictability is challenged, waiting until complete data is attained is both unlikely to ever occur, nor likely to improve the prediction accuracy. As such the ability to iterate, namely developing and testing solutions to problems, is of vital importance. As John Boyd highlighted in developing his concept of the OODA loop, the speed with which we Observe, Orient, Decide and Act can be a significant factor in in driving success.
I recognize that this post may feel a bit theoretical. But understanding the game that you are playing is of vital importance. At the very least, it may help lower feelings of futility in being able to affect change in a complex environment.