Fascinating new post by Clay Shirky: The Collapse of Complex Business Models. Shirky takes Joseph Tainter‘s theories around social complexity and collapse (less well-known than Jared Diamond‘s) and draws parallels to business complexity – and collapse.

This paragraph from Tainter’s wikipedia page expands on the differences in Tainter’s and Diamond’s approaches:

Tainter begins by categorizing and examining the often inconsistent explanations that have been offered for collapse in the literature. In Tainter’s view, while invasions, crop failures, disease or environmental degradation may be the apparent causes of societal collapse, the ultimate cause is an economic one, inherent in the structure of society rather than in external shocks which may batter them: diminishing returns on investments in social complexity. For contrast, Jared Diamond‘s 2005 book, Collapse: How Societies Choose to Fail or Succeed, focuses on environmental mismanagement as a cause of collapse. Finally, Tainter musters modern statistics to show that marginal returns on investments in energy, education and technological innovation are diminishing today. The globalised modern world is subject to many of the same stresses that brought older societies to ruin. (source)

Shirky’s piece takes Tainter’s economics-based analysis of social complexity and applies it to analogous complex systems, such as specific businesses or industries themselves.

Reading the piece, it struck me that collapse or survival comes down to what sounds like resilience (or its absence). Shirky describes Tainter’s proposition, that societies build up to benefit from complexity, but that then, something goes wrong:

Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.

Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.

The ‘and them some’ is what causes the trouble. Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t. (source)

In other words, complexity without resilience becomes a precondition for collapse.

So the question might be, how do you bake in resilience? Is it feedback loops? Early warning systems? But those (by themselves) don’t guarantee action – it’s really easy to keep on the same path, even if the red lights are blinking and sirens are sounding.

Tainter wrote that “under a situation of declining marginal returns collapse may be the most appropriate response,” and Shirky adds: “Collapse is simply the last remaining method of simplification.”

He describes a mid-90s conference call with ATT, where the company couldn’t conceive of running a simple, failure-prone system. Its internal culture valued perfection, because the latter depended on a high degree of complexity, bureaucracy, and failure-aversion (naturally). ATT’s problem was diminishing returns on investment: how could it make money on a (quite possibly flaky) $20 per month web-hosting model when the company culture valued its famous “five 9’s” reliability (services that work 99.999% of the time)? Furthermore, it would be impossible to sign up enough users at $20-a-month to deliver that level of service and still make a profit.

Since then, as Shirky puts it, “the supply part of media’s supply-and-demand curve went parabolic, with a predictably inverse effect on price.” That is, returns on investment have not perked up. Yet, “a battalion of media elites have lined up to declare that exactly the opposite thing will start happening any day now.”

See the parallels to Tainter’s analysis of social collapse? “When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.” Substitute “companies” for “societies,” and that’s where a lot of companies are at.

After running through the assertions of several famous representatives of the media elite (Barry Diller of IAC; Steve Brill of Journalism Online; and Rupert Murdoch of News Corp), who all claimed that users will just have to pay for news again, Shirky adds:

Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:

“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”

Again: the analogy to Tainter’s view of complexity and collapse is clear: “When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.”

Next, Shirky looks at bureaucracy (which can, as he notes, “temporarily reverse the Second Law of Thermodynamics” because for them “it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one,” all of which explains why change management in a bureaucracy is akin to squaring the circle). I was very interested in the bureaucracy angle since I live in a government town (Victoria is the capital of British Columbia), but the bureaucracy Shirky describes here is an industry-specific one (the Writer’s Guild and its role in the television industry), not government.

Within the television industry, simplicity is turning into a game-changer: if success is measured by how many times something is viewed, then simple, often user-generated videos (outside the complexity orbit of traditional television production) uploaded to sites like YouTube are winning the game.

Hence all the quailing about barbarians at the gates, just like in the days of ancient Rome…

When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future. (source)

That’s Shirky’s closing paragraph, something to think about.

Shirky’s article has given me lots of food for thought, not least because part of me clings to the complexities of the past, that’s for sure, in spite of my latent iconoclasm. I’d like to think that with resilience, it may be possible to carry forward those things that have not just served well in the past but continue to inspire in the future.

PS:

For more on Shirky, see Mat Wright’s April 1 post, Why Online News Paywalls Will Fail, which includes a pointer to the excellent video of Clay Shirky describing “the changing news landscape that has put accountability journalism at risk, and outlin[ing] a ‘journalistic ecosystem’ that is needed to preserve essential watchdog role of the press.” (source)

A note: I wrote this late in the evening, excuse the nonsense title. Of course complex systems need resilience…

Posted: 04|3|10 at 11:44 pm. Filed under: futurismo, ideas, media.
Tags: clay_shirky, collapse
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