Thinking in Systems, Ch. 6: Leverage Points in Systems

so I'm going through this book chapter by chapter and I'm on the second to last chapter which is leverage points and these are basically places where you can go into the system and try to improve the system by focusing on a certain leverage Point she lists these leverage points in reverse order least effective to most effective and I'm going to Clump some of her leverage points together because there are a lot of them and I'm going to go from the end of the chapter the most important l points to the least important she identifies Paradigm

shifts as the most important leverage point and her example here is taxes where um the the Paradigm is what does the population view as being a fair tax like if you live in a society where no one's ever paid taxes and suddenly the government comes along and says you owe us money then that's going to get a ton of resistance and the population won't buy it so the population sort of view that it's a fair deal for the government to take some of your taxes and spend them on goods for everybody the public good security

the fact that that's sort of in people's heads as the way the world works it's shaping their expectations shaping their notion of fairness that is a really important thing driving the system and other examples of paradigms that she points out are things like people can own land so you might imagine if you live sort of just as a tribe on the land and nobody owns any land it would totally change the way you think about the world and property rights and everything if suddenly people could own a plot of land if they could sell a

plot of land that completely restructures how the social system is working but someone had to actually introduce that paradigm shift to make it work other Paradigm shifts she lists include growth is good which is of course going to orient all policy makers another Paradigm she lists is people who are paid less are of lower value so that's something that could get embedded into people's heads and hearts even perhaps if they don't acknowledge it and shifting that Paradigm Shift could really shift how people are treated the goals that people pursue uh the ways you might incentivize

different things and she gives a few tips to people who want to shift paradigms in particular she thinks about a paradigm that might be not very useful or could be improved often times that that shift is going to require pointing out the problem with the current Paradigm and doing that over and over so that people see why it's a problem and ignoring the people who resist your Paradigm Shift not putting too much attention on those who are upset about the paradigm shift who might be benefiting from the current Paradigm she recommends not wasting too much

time with reactionaries but instead putting people with this new paradigm shift in key positions influencer positions that people are listening to and in that way you can sort of shift the public ethos about the way the system works and what is considered good behavior Fair Behavior work with active change agents is the way she puts it and she also says to Target the vast middle of people who might be open to the Paradigm Shift rather than focusing energy on uh the few who resist it now her last little section transcending paradigms I think this is

more for the person who's looking at paradigms I think this is more of a warning not to get too embedded in your own paradigms even if they're good because of course they can have unintended consequences um and I think having the whole population transcend paradigms is probably not something that's going to happen now her next paradigm shift is system goals and this is sort of what everybody in the system is trying to do you might imagine a CEO who sort of sets the goals for the company and she actually says even though she's said in

previous parts of the book that the person embodying the role doesn't matter that much it's sort of if they're embodying that role there are already inside this incentive structure with the goals sort of set out for them she says one exception to this is leaders who had the capacity to actually shift system goals now she points out the fact that sometimes the apparent goal is not the real goal so she uses profits as an example and of course companies are charged with uh maximizing profits in fact they're held accountable to that so a CEO o

could come in and and they're going to have to report to the board of directors that they're actually maximizing profits but a lot of times she says um the the goal of the company is something different it's sort of uh how do people who work for the company perceive the more altruistic goal which might actually influence their behavior and their effort level a lot um she basically says profits are um a requirement to stay in the game like you can't lose profit and still pursue your altruistic goal but as long as you're making profit and

sort of continuing to have people invest in the company then you can have these other goals that sort of structure people's incentive inside the system the next one is self-organization which is basically a system's ability to change itself through some kind of evolutionary process or Market process or incentive for techn olical change and she says the key to using this leverage point is to set up the rules for reorganization so you're looking at a system you're like we need to reorganize this in some way but the people perhaps inside the system may have better knowledge

and better ability to change it from within the system in which case you as a system designer go in and set up the rules for reorganizing and perhaps the goals as well in a way that is going to naturally leave the system to evolve in a Direction that's better her next leverage points are rules and information flows where rules are of course rules like you uh the president can only serve four years before being reelected or it can only serve eight years total it's these rules that sort of structure the system and of course um

when we were talking about using rules for the reorganization these rules are rules uh in number three that have to do with the reorganization whereas these rules are more just rules of the system in general in this section she says if you want to understand the deepest malfunctions of systems pay attention to the rules and who has the power over them and information flows are also a good leverage Point especially when there's some kind of natural incentive associated with the information flow for example um giving feedback regularly to students is something that professors have figured

out sort of motiv moates them to learn they're constantly uh learning about their quiz scores to see how well am I doing so adding information flows where previously there were there was no information is a good way of incentivizing she uses the example of a fishery um where if we're trying to solve the problem of over fishing and reducing the fish population which might collapse then perhaps we want to have some sort of measure of the fish in the pond so that the people fishing out of that pond can sort of know are we headed

toward collapse or is this system sustainable and that piece of information might actually influence behavior her next leverage point is the feedback loops and with reinforcing feedback loops of course this is where you have exponential growth which will often lead to collapse and sometimes problems in the system can grow exponentially so she points out one thing you can do with these exponentially growing problems is to try to introduce more time more of a lag in that feedback loop so that the balancing feedback loops in the system have more time to sort of catch up and

get the reinforcing feedback loop back under control and her example here is systems naturally sort of reward the rich with more opportunities to get even richer that's a natural phenomenon and it can spiral out of control of course so introducing things like Universal education and progressive tax systems is going to slow the pace at which the system sort of channels resources towards those who already have them when it comes to balancing feedback loops of course balancing feedback loops can stop these outof control reinforcing feedback loops but a lot of times people will get rid of

balancing feedback loops because perhaps they matter in the long run but maybe not the immediate run and sometimes balancing feedback loops people don't understand their purpose so they get rid of them which feeds into an escalating problem and she gives a bunch of examples of this so one of them is that the human need for rest and vacation and Restoration in order to perform our best so sometimes it can be not exactly obvious what purpose rest and weekends and sabbaths are so people get rid of those and they just work around the clock and never

take vacations and uh therefore they're taking that balancing feedback loop out of their system and that's going to reduce the the quality of their work so the leverage point is to stop eliminating the balancing feedback loops another example is antitrust laws so of course antitrust laws are meant to stop um consolidation of companies and industries where if two really big firms are trying to merge to create that Monopoly power uh the Department of Justice or the Federal Trade Commission can evaluate that and stop the merger from happening and that's a balancing feedback loop that stops

the accumulation of Monopoly power and certainly some of these larger companies are going to try to Lobby to get rid of these balancing feedback loop antitrust laws other legal examples from the chapter include truth and advertising laws uh laws that protect whistleblowers and the Freedom of Information act if you think through those examples they all act as some kind of balancing feedback loop so protecting those balancing feedback loops from actors within the system who want to come in and get rid of them next we have delays and buffers and a buffer is a stabilizing stock

so this is like the inventory in the back room in a company where um if you're worried about not having enough inventory to sell and having customers come in and be disappointed with not being able to get their food or their product so maybe they're not going to come back to you and that leads to this uh problem that's escalating of customers coming less and less frequently the The Leverage point there is to increase the stock in the back room to stop this disappointment people experience when you don't have their thing in stock so stabilizing

stock is uh is a leverage point but of course now we're getting down into the Leverage points that she says are not the first ones to look for because a lot of times building up this buffer is really expensive like maintaining a big stock of something it's expensive and not always practical she does point out in this system that stocks that are large relative their to their flows create stability in the system she uses the example of rivers and lakes which one of those is more likely to cause a flood which is of course a

problem with the flow and it's Rivers because the stock in a river is relatively small compared to its flow whereas Lakes have a large stock relative to the flow so they're much more stable so buffers are important for stability but they're difficult to change expensive to change and of course she's talked earlier in the book about the way delays in a system and in the information and the feedback loops that can cause oscillations in a system so if the problem relates to ation uh one of the leverage points is to think about could you speed

up or slow down the information feeds of these feedback loops she talks about physical stock and flow structures such as infrastructure like roads and bridges in a in a system and while it can be transformational of course to change the physical stocks and flows it's also really expensive and hard to do which is why she puts this lower on the list of uh leverage points to think about first so the least effective leverage point in her opinion is numbers this is like the minimum wage and spending on Aid tax rates service charges for a company

caps on campaign contributions basically uh she doesn't think this is a very effective leverage Point tweaking the numbers up a little bit or down a little bit because the way the place all the action is taking place is in these flows and stocks and sometimes changing the numbers uh just doesn't have a big effect on the flow of the overall system now she acknowledges that numbers can matter a lot for the people who are standing right in the middle of the flow associated with that particular number like the person who makes $40,000 a year is

going to really feel it when you increase their tax rate by 3% that's going to have a huge effect on them but it's probably not going to have a big effect on the overall structure of the bigger system however even though she puts this at the bottom of the list she says sometimes the numbers or the parameters can become really important when they affect something higher on the list