In order to succeed in a certain action, we often develop an action plan, a process that defines sub-actions in terms of who, what, when and where.
To guarantee that we succeed as much as possible, we have to maximize the control of this process of sub-actions. Make the process manageable.
In managing this process it's important to identify the nature and co-dependency of your sub-actions.
In general it's important to characterize sub-actions as follows:
Examples
Always analyze and characterize the components or sub actions of your action plan.
Not doing so will certainly cause trouble.
Example
One of the causes of the 2008 credit crisis is that we try to manage an in essential 'chaotic process' as a 'complicated process'. More traditional regulation rules (or governance back up) won't stabilize the banking system on the long run (in fact they make it worse), because these rules would imply that the nature of the financial markets is known and can be captured in a controllable mathematical linear system.
Financial markets are complex and chaotic systems, just like the weather. This implicates that regulation should be much more focused on "Plan B" measures than on detailed rule based regulation.
This means that regulation has to be formulated in such a way that Banks, instead of proving more and more that they will 'never' be insolvent (e.g. calculated risk=0,5%, that can't be calculated!), are forced to deliver Plan B's in which they state how they'll act in the 'unexpected' case of insolvency or iliquidity (average at least once in 200 years).
Just like you've got an umbrella in your car (Plan B), because you know that even though the weather forecast was 'sunny', you never can tell precisely when it's going to rain.
Most processes in life turn out to be chaotic on the long run. Analyze and control them, but don't forget to (always) carry your "Plan B" in your pocket.
To guarantee that we succeed as much as possible, we have to maximize the control of this process of sub-actions. Make the process manageable.
In managing this process it's important to identify the nature and co-dependency of your sub-actions.
In general it's important to characterize sub-actions as follows:
| Characteristic | Understandable | Predictable | Solvable |
| Simple | ++ | ++ | ++ |
| Complicated | + | + | ++ |
| Complex | - | - | + |
| Chaotic | -- | -- | - |
Examples
| Characteristic | Example | Description |
| Simple | Doorbell | Single component/ process with defined output |
| Complicated | Watch | Several components working together with defined output |
| Complex | Weather | Many interdependent components with hardly predictable output. |
| Chaotic | Clouds (form) | No sub components to identify, output unpredictable |
Always analyze and characterize the components or sub actions of your action plan.
Not doing so will certainly cause trouble.
Example
One of the causes of the 2008 credit crisis is that we try to manage an in essential 'chaotic process' as a 'complicated process'. More traditional regulation rules (or governance back up) won't stabilize the banking system on the long run (in fact they make it worse), because these rules would imply that the nature of the financial markets is known and can be captured in a controllable mathematical linear system.
Financial markets are complex and chaotic systems, just like the weather. This implicates that regulation should be much more focused on "Plan B" measures than on detailed rule based regulation.
This means that regulation has to be formulated in such a way that Banks, instead of proving more and more that they will 'never' be insolvent (e.g. calculated risk=0,5%, that can't be calculated!), are forced to deliver Plan B's in which they state how they'll act in the 'unexpected' case of insolvency or iliquidity (average at least once in 200 years).
Just like you've got an umbrella in your car (Plan B), because you know that even though the weather forecast was 'sunny', you never can tell precisely when it's going to rain.
Most processes in life turn out to be chaotic on the long run. Analyze and control them, but don't forget to (always) carry your "Plan B" in your pocket.
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