Complex Systems
Jason Badeaux and
Complex Systems
Jason Badeaux and
When a complex system is far from equilibrium, small islands of coherence in a sea of chaos have the capacity to shift the entire system to a higher order.
“leverage points.” These are places within a complex system (a corporation, an economy, a living body, a city, an ecosystem) where a small shift in one thing can produce big changes in everything.
The systems analysis community has a lot of lore about leverage points. Those of us who were trained by the great Jay Forrester at MIT have all absorbed one of his favorite stories. “People know intuitively where leverage points are,” he says. “Time after time I’ve done an analysis of a company, and I’ve figured out a leverage point — in inventory
... See moreCounterintuitive. That’s Forrester’s word to describe complex systems. Leverage points are not intuitive. Or if they are, we intuitively use them backward, systematically worsening whatever problems we are trying to solve
NZS Capital poses that the economy and the stock market are best studied as complex adaptive systems akin to biology. They emphasize investing in companies that are adaptable, long-term focused, innovative, possess long-duration growth, and maximize non-zero-sum outcomes. The approach involves fewer, larger positions in companies highly adaptive to disruption, high levels of quality, growth, and context, and smaller positions in companies with a wide range of potential outcomes.