{"id":16839,"date":"2020-10-22T16:38:37","date_gmt":"2020-10-22T20:38:37","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=16839"},"modified":"2020-10-31T23:44:06","modified_gmt":"2020-11-01T03:44:06","slug":"elements-of-a-system","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/elements-of-a-system\/","title":{"rendered":"Elements of a System: The Fundamentals"},"content":{"rendered":"\n<p>What are the elements of a system? How do these elements work with <a href=\"https:\/\/www.shortform.com\/blog\/stocks-and-flows\/\">stocks and flows<\/a> to enable to system to run smoothly?<\/p>\n\n\n\n<p>The elements of a system are the same no matter what type of system it is. Knowing the elements of a system can help you understand systems basics, and how to ensure a system&#8217;s success. <\/p>\n\n\n\n<p>Read more about the elements of a system and what they mean. <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Elements of a System and Stocks and Flows<\/strong><\/h2>\n\n\n\n<p>What are the elements of a system that make it work? How do the attributes of the system work together?<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Parameters<\/strong><\/h4>\n\n\n\n<p>First on the list of the elements of a system are paremeters. Parameters are numbers described in the system. These include the level of the stock, the quantity of the flows, and more generally it includes swapping individual elements in the same system.<\/p>\n\n\n\n<p><strong>We spend the vast majority of our time worrying about parameters, but the author argues this is definitively the <\/strong><strong><em>least<\/em><\/strong><strong> effective place to intervene.<\/strong> For example:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>When concerned about the national debt, politicians spend much of their time negotiating incremental changes to budgets and tax rates. Yet the national debt continues growing, regardless of who\u2019s in power.<\/li><li>The Federal Reserve tinkers with interest rates, but this hasn\u2019t ever stopped economic cycles from happening.<\/li><\/ul>\n\n\n\n<p>Adjusting parameters doesn\u2019t work well because there are stronger system effects at play, such as <a href=\"https:\/\/www.shortform.com\/blog\/feedback-loop-meaning\/\">feedback loops<\/a>, <a href=\"https:\/\/www.shortform.com\/blog\/what-is-incentive-meaning-and-definition-economics\/\">incentive<\/a> structures, and delays. If a system is described by a runaway loop, tweaking linear parameters does not meaningfully change the system\u2019s behavior. You&#8217;ll have to look at other elements of a system. <\/p>\n\n\n\n<p>A minority of parameters <em>can<\/em> become effective leverage points when they affect higher leverage points in this list, such as the growth rate in a reinforcing feedback loop or the time delay. But the author argues these are rarer than most people think. Parameters are important characteristics of a system. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Stocks<\/strong><\/h4>\n\n\n\n<p>Stocks are also important attributes of a system. We\u2019ve learned that stocks are buffers that can stabilize the system over fluctuating flow rates. Your bank account is a stock of money that helps you withstand volatility in your income and expenses.<\/p>\n\n\n\n<p>Changing the stock changes the behavior of the system. You can stabilize a system by increasing the stock, but this comes at the cost of efficiency\u2014larger stocks cost more to build or maintain. In contrast, you can increase efficiency by decreasing the stock, but this comes at the cost of lower robustness.&nbsp;These highlight the characteristics of a system. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>For example, just-in-time manufacturing decreases the size of the inventory while relying on more frequent deliveries. This makes it more agile to shifting customer demand, but makes it more vulnerable to supply disruptions.<\/li><\/ul>\n\n\n\n<p>Stocks can be effective leverage points, but they are often slow to change, especially when they\u2019re physical in nature.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Once a dam is constructed, the stock capacity is fixed &#8211; it would take a lot of effort to change the stock.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Stock-and-Flow Structure<\/strong><\/h4>\n\n\n\n<p>Changing the stock-and-flow structure means changing which flows are connected to which stocks. This can change the behavior of the system and the elements of a system. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>In constructing new highways, roads, and parking lots, urban planners reconfigure how traffic flows the stock-and-flow structure.<\/li><li>(Shortform example: A government could change how money flows\u2014currently it receives taxation from citizens and allocates budget to departments, which then returns to citizens. Changing the structure of this could lead to different system behaviors.)<\/li><\/ul>\n\n\n\n<p>However, the stock-and-flow structure is hard to change once it\u2019s set, especially if it\u2019s physical. It\u2019s better to design it well first\u2014understand the structure\u2019s limitations, and prevent fluctuations that exceed the structure\u2019s capacity.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Delays<\/strong><\/h4>\n\n\n\n<p>Delays are other attributes of a system. As we\u2019ve seen, delays in feedback loops tend to cause oscillations. In turn, oscillations worsen the effectiveness of your decisions, because you\u2019re making decisions with delayed information. Furthermore, the results of your actions are delayed\u2014by the time your actions have results, the situation may have changed so that your actions have become inappropriate.<\/p>\n\n\n\n<p>Changing the length of delays affects <a href=\"https:\/\/www.shortform.com\/blog\/system-behavior\/\">system behavior<\/a>:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Delays that are too short cause overreaction, leading to higher-frequency oscillations.<\/li><li>Delays set just right can dampen oscillations and introduce stability.<\/li><li>Delays that are too long can lead to exploding oscillations, or push a system past a breaking point beyond which it cannot return (such as overfishing to extinction).<\/li><\/ul>\n\n\n\n<p>Changing delays can cause big changes to system behavior. Just make sure you change delays in the right direction\u2014decreasing delays may seem intuitively good, but they can lead to unwanted overreactions.<\/p>\n\n\n\n<p>However, many delays can\u2019t be changed\u2014a baby takes a certain number of years to grow to become an adult; fish can only reproduce so quickly. In these cases, you\u2019ll need to intervene elsewhere in the system and evaluate other attributes of a system. <\/p>\n\n\n\n<p>These characteristics of a system are all important to the way a system works. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>What are the elements of a system? How do these elements work with stocks and flows to enable to system to run smoothly? The elements of a system are the same no matter what type of system it is. Knowing the elements of a system can help you understand systems basics, and how to ensure a system&#8217;s success. Read more about the elements of a system and what they mean.<\/p>\n","protected":false},"author":5,"featured_media":16848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,14],"tags":[139],"class_list":["post-16839","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-management","tag-thinking-in-systems","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Elements of a System: The Fundamentals - Shortform Books<\/title>\n<meta name=\"description\" content=\"What are the elements of a system? Though systems are different, they all work using the basic elements of a system. 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