Course Handout - Systems Thinking: The Knowledge Structures and the Cognitive Processes

Copyright Notice: This material was written and published in Wales by Derek J. Smith (Chartered Engineer). It forms part of a multifile e-learning resource, and subject only to acknowledging Derek J. Smith's rights under international copyright law to be identified as author may be freely downloaded and printed off in single complete copies solely for the purposes of private study and/or review. Commercial exploitation rights are reserved. The remote hyperlinks have been selected for the academic appropriacy of their contents; they were free of offensive and litigious content when selected, and will be periodically checked to have remained so. Copyright © 2010, High Tower Consultants Limited.


First published online 08:00 BST 4th June 2004, Copyright Derek J. Smith (Chartered Engineer). This version [HT.1 - transfer of copyright] dated 18:00 14th January 2010


1 - What is "Systems Thinking"?

Readers unfamiliar with Control Theory in general, or with the concept of "feedback" in particular, should pre-read our e-paper on "Basics of Cybernetics".

This paper is about "systems thinking" and the rarity of that skill upon the planet. It is about how difficult it is for human beings to see "the big picture" in the world around them, or, having once seen that big picture, to figure out how this or that corner of it might successfully be influenced. It is thus a paper about the fragility of control; about what happens when things stubbornly (but in hindsight predictably) refuse to co-operate. Which means it is also a paper about brainpower, because it is our brains and their resident cognitive systems which are doing the controlling. Indeed, to cut a long story short, the explanation of control failure lies ultimately in the fact that we are cursed with a brain which regularly bites off more than it can chew, blunders on regardless until the damage has been done, and then blissfully denies all responsibility. And why should this be? Well in the final analysis, it is because our brain was bred for picking berries and having sex (although not necessarily in that order), and for fighting at the drop of a hat to defend those privileges. These time-proven skills have brought humankind many things (not least war, overpopulation, and runaway destitution), but in themselves have made no contribution whatsoever to the broader achievements of civilisation. They are survival skills in the rawest sense of that term. Top dog, "me-me-me", skills. Laws of the jungle, whose sole justification is to serve what Dawkins (1976) called "the selfish gene", which are inherited rather than learned, and which are certainly nothing to be proud of on any aesthetic or humanitarian level. More to the present point, they do not - to put it bluntly - require a tremendous amount of "joined up thinking", so that whenever joined up thinking is called for we mess up big time (witness the parade of disasters and debacles described in the various subfiles of our Disasters Database).

As for the technical and cultural achievements of civilisation, these are without exception delivered by systems, and the systems in question can all be accounted for historically by at most a couple of dozen flashes of individual inspiration, ever. For example, it was probably only one person who first invented the stone axe, or who found out how to control fire or fabricate shelter, or who fashioned the first pots and collected the first seeds. The rest of us, recognising a good thing when we saw it, simply imitated and improved. Our opening proposition, therefore, is that the quintessentially human skill is the ability to put somebody else's technology to work. We are awfully good at seeing something as a means to an end, and stringing together a sequence of behaviours accordingly. And this is where systems thinking comes in. Here are some suggestions as to the individual skills which might be involved ..... 

"Systems thinking. 1. a sensitivity to patterns, wholes, process, flow, environments and interactions. 2. the perception of, or attempt to articulate and model, the system dynamics that define and constrain systems. 3. pondering the mysterious connections between events and issues. 4. a rigorous, yet holistic way of describing the world. 5. a change in thinking." (Davison, 1996/2003 online)

Unfortunately, the equally quintessential human failing is to believe that we are running things well, even when there is no objective data to justify that belief (or, worse, despite objective data to the contrary). In Section 2, we propose our own seven-characteristic analysis of the true systems thinker, in Section 3 we present some indicative case material, and in Section 4 we cross-validate the one against the other.

2 - The Seven Marks of the True Systems Thinker

"With £5 million to spend, council leaders created a stylishly decorated state-of-the-art library. But there was one thing they neglected to budget for in their plans ... books." (The Daily Mail, 17th October 2003.)

In Section 1, we portrayed a world in which fundamental innovations were very few and far between, and in which the rest of us either (a) serviced the existing systems in some way, creatively making occasional non-fundamental innovations, or, more likely, (b) passively consumed whatever it was those systems provided or produced. Let us now define those who service systems as "systems thinkers", those (and they are numbered in their billions, remember) who merely consume the end product(s) as either "customers" or "end-users", and those who commission systems (for whatever reason, political or commercial) as "systems sponsors". We have no (printable) name for those who are paid to service systems, but who, by lack of aptitude, training, or application, allow them to go wrong. Our purpose is then to reflect upon what makes a systems thinker; to identify, for example, the skill(s) or state(s) of mind which might have prevented our anonymous library from being built without books. Is it common sense which was lacking? Or a scientific education? Or an eye for detail? Or a degree in local government administration? Or what? We propose seven candidate characteristics ..... 

Characteristic #1 - Systems Thinking as Adequate Perspective

Perhaps the most immediately striking characteristic of the true systems thinker is that s/he will be blessed with a fingertip feel for what is known as "systems boundary". This is the notional dividing line between a system [glossary] and its environment [glossary], and it is important because it defines which subsystems [glossary] are included in the system (and therefore need to be specified and controlled), and which are not (and therefore fall to someone else to specify and control). In practice, however, the criteria for boundary setting can often be vague and contradictory - so that the process can easily degenerate into an exercise in lassooing fish. In practice, you are regularly challenged whether to include such-and-such cluster of entities [glossary] in your system, or not. Boundary setting is thus the figure-ground issue [definition], borrowed from perceptual theory and applied instead to the jumble of entities and relations [glossary] making up the physical world. What you end up with is shown in Figure 1 .....

Figure 1 - Systems, Subsystems, Boundaries, and Interfaces: This diagram shows the system we have chosen to work with [bold yellow highlight left], set off against its environment - everything else, including a second system [faint yellow highlight right]. Both systems contain a number of subsystems [blue highlights] and entities [pink highlights]. Relations [curved black arrows] and interfaces [red arrows] link these components as necessary. Note (a) that there are both system-internal interfaces [dotted red lines] and system-external ones [solid red lines], and (b) that interfaces may only link subsystems, not loose entities nor whole systems [that is to say, each dotted or solid red line must clearly start and end at a blue subsystem, which, as a result, needs to be competent to service whatever it is which is being transmitted]. Note also that relations are not allowed to go beyond the system boundary, because it was required by our earlier definition of a system that no subset of entities "is unrelated to any other subset". And note, above all, that on another day or in a slightly different wind we might have placed the boundaries somewhere else altogether.


Developed from a black-and-white original in Kramer and de Smit (1977, p12; Figure 1). This graphic Copyright © 2004, Derek J. Smith.

Diagrams in the style of Figure 1 should be regarded as compulsory initial sketchings for any wannabe systems thinker, because they show which elements and subsystems fall within the system s/he is trying to get to grips with, and which ones fall outside it. This may sound something of a truism, nevertheless one of the best ways to be ineffective as a systems person is to take too "blinkered" a view of the world. Such systems people deliver a system-ground judgement of sorts, but (for whatever reason) they make it too cautiously. They see no far horizon, and when their systems start to misbehave this lack of perspective prevents them from seeing the totality of the problem, and thus solving it tidily. In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #1 can manifest itself.

Characteristic #2 - Systems Thinking as Awareness and Measurement of Flow

"For he who has not examined engines at work will never understand them clearly, or describe them correctly." (Tuckwell, 1869, in the first issue of Nature.)

The second characteristic of the true systems thinker shows itself the moment Characteristic #1 has succeeded in establishing a systems figure against its environmental background. It is the ability both qualitatively and quantitatively to identify what is flowing within a system, from where and to where, in what volumes, and thus what has to happen to it on the way. This, in turn, calls jointly (a) for the mental ability to see systems as in some way "circulatory" [for in their own way all systems are - the banking system, for example, "pumps" money around the economy in much the same way that the circulatory system pumps blood around the body or the National Grid distributes electricity], and (b) for the system itself to have been designed and built with lots of "dials" and "meters" - literal or figurative - so that its current operational status can be seen at a glance [for only then can bottlenecks be eased and leakages detected and rectified]. Skill (a), of course, is that of understanding the causal interaction of the parts of a complex mechanism; of grasping that which the 19th century physicist James Clerk Maxwell called "the particular go" of a system (Hutchinson, 1998/2004 online), and skill (b) involves a perhaps rather nerdish affection for possibly useful facts and figures .....

CASE: Modern life bombards us with possibly useful flow data. Here are some examples which we suspect are actually extremely significant, and which we would like to think are being closely monitored by someone somewhere who is in a position to do something about them .....

    • "The NHS employs eight management and support staff for every ten nurses. In comparison, the private sector manages to operate with only 1.8 management and support staff for every ten nurses" (The Daily Mail, 25th May 2004).
    • State jobs are up by 500,000 in five years" (The Daily Mail, 27th May 2004).
    • "An audit cited by the Home Office found that 16% of working-age Muslims had never worked or were long-term unemployed - five times the level among the population as a whole" (The Sunday Times, 30th May 2004).
    • "The amount of money chased by bailiffs has soared by 70 per cent in two years as a result of Britain's 'debt culture'. [.....] A study by experts at Leeds University Business School [.....] found that the typical household falling into difficulty owes £25,000 compared to £10,000 three years ago." (The Daily Mail, 15th October 2003.)
    • "More than 150,000 people a year are fleeing inner London for life in the suburbs or the country [raising] the spectre of 'white flight', the departure of middle class families from the city." (The Daily Mail, 18th June 2004.)

There is in fact a bewildering number of things worth counting. The following snippet comes specifically from the world of economics, but gives a good idea of the sort of sense which can sometimes lurk behind the apparently trivial .....

"Suggestions for other indicators [of national economic activity] included the 'crane count' (the number visible on the skyline), champagne sales (strong last year), and some of the usual suspects - the ease of getting a restaurant booking and taxi queues in the rain. [.....] Other imaginative suggestions included sales of personalised car numbers, dumped mattresses by the roadside (when people like that replace their bedding things must be looking up), Chinese takeaway prices, and waiting lists for car-park season tickets at commuter stations." (The Sunday Times, 30th May 2004.)

And this one relates to the so-called fight against terrorism, and shows just how unreliable a simple single measurement can be .....

"The Bush Administration faced deep embarrassment yesterday after having to admit that its claims for the 'success' of the war on terrorism were wrong. Instead of seeing terrorist attacks fall to an historic low last year, as trumpeted by the State Dwepartment this spring, officials conceded that the number of attacks had, in fact, risen sharply." (The Times, 12th June 2004.)

Our personal specialism is with flow models of the cognitive system, where at one level of analysis it is information which is flowing. Cognitive science has made some progress towards analysing mental information flow qualitatively [we recommend Ellis (1982) as one of the most thorough analyses, although it deals only with language processing], but quantitative analysis is fraught with technical difficulties, because the system has no end-to-end standard coding system. In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #2 can manifest itself.

Characteristic #3 - Systems Thinking as Sensitivity to Root Cause

"For want of a nail, the shoe was lost; For want of the shoe, the horse was lost; For want of the horse, the rider was lost; For want of the rider, the message was lost; For want of the message, the victory was lost; For want of the victory, the kingdom was lost; And all for the want of a nail." (Trad.)

The third characteristic of the true systems thinker is that s/he understands at a deep philosophical level how difficult it is to establish a truly valid link between a systems behaviour and its ultimate cause. The problem is that the obvious explanation is all too frequently not the best explanation. Our personal experience in commercial systems maintenance taught us to rely on nothing less than a full "root cause analysis" of every new problem. Fortunately, this can usually be carried out quite quickly using the "Method of the Five Whys", as outlined in our e-tutorial on "Systems Defects". The value of this method lies in the depth of analysis it promotes, and you need that depth because most problems only start to yield meaningful and substantial truths on the fourth or fifth pass [our header text explains why the kingdom was lost in five whys of this sort]. Here is how one of the gurus of the method, Robert B. Pojasek of Pojasek Associates, explains both why we need the tool, and how to use it .....

"Why do we want to understand what we need to know when we can just act on our intuition and solve the problem right away? [Because] once the root cause is identified, the solutions (alternatives) will easily follow. [.....] You use the tool by asking 'Why?' at least five times as you work through various levels of detail. Once it becomes difficult to respond to 'Why?' the probable cause of the problem may have been identified." (Pojasek, 2000/2004 online.)

Pojasek himself gives a detailed example [check it out], but you do not have to look very far for others. Dew (1996/2004 online) suggests that root cause analysis needs to be carried out differently depending on whether the analyst concerned is left- or right-brained. Left-brained individuals are likely to prefer "elaborately categorising possible causes and using strict rules for questioning". Right-brained individuals are more likely to prefer the five-whys or diagrammatic methods. Hard data on this interesting suggestion is, however, in short supply. In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #3 can manifest itself.

Characteristic #4 - Systems Thinking as Sensitivity to Quality of Evidence

Readers unfamiliar with the concepts of "statistical significance" and "p-value" should pre-read one of the several Internet introductions to hypothesis testing in scientific method [click for example]. Alternatively, use the [glossary] links as and when you come to them.

The fourth characteristic of the true systems thinker is that s/he relies upon evidence proportionately to its merit, trusting it only when it is totally safe to trust it, doubting it when it is wise to doubt it [Prime Ministers take note], and, when there is genuinely no alternative, doing without it altogether. Systems thinking therefore often involves decision making under conditions of uncertainty. Fortunately, all research scientists know how to cope with a little uncertainty - they give it a "p-value", and they interpret their findings as statistical inferences of greater or lesser likelihood rather than as out-and-out facts. We see the same diagnostic caution in modern medicine, where the emphasis is on "evidence-based practice" [glossary], and where the term "diagnosis" is now out of fashion in favour of "impression" [glossary]. By analogy, evidence-based systems thinking requires probabilistic thinking supported by hard empirical data.

So how do we get the necessary level of quality into our evidence? Well the general skill lies in knowing when and how a particular proposition does not reflect reality, and that requires a large number of specific "critical thinking" skills [glossary]. Two areas of particular need can be identified, namely (a) spotting fallacious argument [glossary], and (b) criticising research design [glossary]. Many classes of fallacy have been identified over the years, and are well covered in the "Think more Effectively" genre of paperbacks [example] and consultancies [example]. Here is a selection to whet the appetite .....

In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #4 can manifest itself.

Characteristic #5 - Systems Thinking as Hypothesis Testing

Readers unfamiliar with the concepts of "hypothesis testing" and "Type 1 error" should pre-read one of the several Internet introductions to hypothesis testing in scientific method [click for example]. Alternatively, use the [glossary] links as and when you come to them.

This is actually a good point at which to summarise our argument so far. The first four characteristics of our true systems thinker fit together as follows .....

Step 1 - Locate your system and its boundary

Step 2 - Monitor what moves within it, and grasp how the parts interact

Step 3 - Identify the root causes of failures .....

Step 4 - ..... given the available evidence

But in practice the "available evidence" is rarely enough. The fifth characteristic of the true systems thinker is therefore the ability to generate additional evidence of his/her own, thus extending the existing evidence base. This requires the skills of academic argument [glossary] in general, and of scientific inference [glossary] in particular. It also calls for perhaps the single most important scientific skill of all, namely that of "hypothesis testing" [glossary] .....

ASIDE: The skills of "hypothetico-deductive reasoning" not only represent the most advanced form of human cognition, namely "formal operational thought" as described by the Swiss epistemologist Jean Piaget [detail], but constitute the beating heart of the scientific method itself. Sadly, not all normal adults actually progress to this advanced stage, remaining "concrete" thinkers all their lives. This latter line of argument became popular in the late 1970s, thanks to papers by Long, McCrary, and Ackerman (1979) and Shute (1979). Estimates of the proportion of adults lacking this ability come out at 40% to 50% or so, increasing to 80% shortfall, or worse, in old age.

In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #5 can manifest itself.

Characteristic #6 - Systems Thinking as an Eye for Practicality

"The fact that a mill is automatic is one reason why it cannot have automatons to run it" (The Northwestern Miller, 1883; cited in Storck and Teague, 1952, p285).

The sixth characteristic of the true systems thinker is to be able to tell apart that which is likely to work from that which is not likely to work. The problem here is that of complexity, because the whole point about systems is that they have many parts, all somehow intermeshed. There therefore remains much to do between establishing what is going wrong with a system [Characteristics #1 and #2], and actually putting it right. Even when your fault analysis [Characteristics #3 and #4] and hypothesis testing [Characteristic #5] have fully identified the problem, you are still a long way from knowing what to do about it. The sixth characteristic of the true systems thinker is therefore to be able to reconcile requirement - that which your system sets out to do on behalf of its sponsor - with mechanism - how you are actually going to get it to do it.

ASIDE: Remember that most systems thinkers are employed. The requirements of their system are not theirs to specify; they are there to be delivered. Systems thinking, in other words, is a bought and sold commodity.

Unfortunately, when trying to get systems to behave, there is a major constraining law of nature at work, namely ..... 

Ashby's Law of Requisite Variety: This is a systems law which states in essence that a control system always has to be more complicated than the system it is controlling. In everyday language, you have to know a system's "wrinkles" before you can safely operate it, let alone attempt to take it to pieces, or try to repair or improve it. Ashby's Law is important because it is the explanation of choice in many of the scenarios listed in Section 3, because all too often the controllers of those failing systems did not understand them well enough to control them. Ashby's Law is also the law which - although he may not have known it at the time - must have been in the mind of our thoughtful miller when he spotted the Achilles heel of automation as long ago as 1883 [see header quotation].

As to the level of complexity at which Ashby's Law kicks in, this is determined by the controller's cognitive capacity. Bright controllers do better than dull ones, but both are eventually fallible. This is because systems thinkers have to develop comprehensive "mental models" of their respective systems, complete with all their ins and outs, and accurate in all respects. Only then can they hope to remain "one step ahead" of malfunctions when they occur. Or to put it another way, systems thinkers have to do with non-biological systems what neurologists, cardiologists, urologists, etc., do with the various subsystems of the body, constantly relating any eccentricity of behaviour to as short a list of possible underlying pathologies as they can. And the bigger the system, the more you have to know, until in the end you become unable to learn new facts fast enough, or recall old ones accurately enough. This cognitive limitation represents a systems equivalent of the Peter Principle [glossary] which we have claimed as Smith's Fifth Law [glossary], and which states that systems controllers rapidly advance to the level of systems complexity at which their systems competence starts to break down.

And as if all that were not bad enough, knowing what might and might not work with most systems also requires knowing what might and might not work with the people who staff them. Systems thinking therefore also demands the ability to predict human behaviour, and human behaviour can be infuriatingly unpredictable at times. Some idea of how humans help turn minor glitches into major disasters can be gained from the various sectors of our Disasters Database. In Sections 3 and 4, we shall be noting more of the ways in which a shortage of Characteristic #6 can manifest itself.

Characteristic #7 - Systems Thinking as an Eye for Excellence and Virtue

"The least initial deviation from the truth is multiplied later a thousand-fold" (Aristotle).

The seventh and final characteristic of the true systems thinker is to be able to deliver Characteristics #1 to #6 without making too many waves. It is about fitting systems smoothly into the world, and not immediately bringing about a whole new set of problems every time you solve an old one. It is about helping rather than hindering. It is about design elegance, and even, on occasions, about justice and truth. As a skill set, therefore, the essence of Characteristic #7 is a strange blend of forethought and ethical consistency, for which no rule book exists to tell you what to do. Suffice it for the moment to say that the most successful systems initiatives are those which get both the requirement and the mechanism right, for these are the systems which are graced with what today's marketing people call "the wow factor". Unfortunately, it is all too easy to have requirement without mechanism, and vice versa, with dramatic and often fatal results. Here are two illustrative scenarios, both from the ongoing Iraq War .....

CASE - GOOD MECHANISM, BAD REQUIREMENT: Our first scenario presents the deployment of a technically proficient killing machine in pursuit of party political advantage as an example of good mechanism chasing bad requirement. This scenario supposes that when Tony Blair was first approached for British participation in the anti-Saddam Coalition, he saw benefit first and foremost to his party. He saw the same sort of jingoistic khaki dividend that had so benefited Margaret Thatcher at the time of the Falklands War, and wanted some for himself; he sensed a "Baghdad Bounce" (Socialism Today, June 2003 online). He was therefore a quick and eager ally to the US and nowhere near suspicious enough of Washington's own (still) largely hidden agenda. He saw what he wanted to see, and he heard what he wanted to hear. Neuropsychologically speaking, his diencephalon had said yes to the US call for partners before his cerebral cortex - the seat of intellect - had even heard the question. So the requirement, in other words, was to send troops to die and kill on behalf of the Labour Party, rather than for Queen and Country. The mechanism, on the other hand - the generally well-oiled killing systems of "shock and awe" - worked all too effectively, and tens of thousands have died - and are still dying - as a result.

CASE - GOOD REQUIREMENT, BAD MECHANISM: Our second scenario takes us forward a year, and takes a broader perspective. It presents the deployment of the same killing machine in pursuit of a world of peace and harmony as an example now of bad mechanism chasing good requirement. The point, of course, is that the mechanism itself has not changed in the slightest, merely that its technical proficiency must always be judged according to some abstract ethical code. Our own view is that you cannot kill for peace and destroy for harmony, for that is - to borrow a phrase from the Vietnam years - "f*ck*ng for virginity". It is both heavy-handed and counter-productive. It is primitive visceral thinking, and, like Frankenstein's monster, this sort of visceral thinking invariably ends up crushing the very petals it is trying to appreciate. 

When all is said and done, therefore, systems thinkers have to share with judges (but not, by definition, with lawyers or other forms of spin doctor) the quality of absolute objectivity. They have to be dispassionate. They have to be sensitive to the dynamics of confrontation without being on anyone's "side". They have to have no axe to grind. They have to want their system to be the best, not for what it can bring them by way of personal reward, but because it is the right thing to do. And, not surprisingly, this renders politically motivated systems decisions the most fallible of all [remember Smith's Second Law].

On the bright side, it is often possible to detect that Characteristic #7 is lacking in a person/system merely by staying on the look out for such give-away signs as hypocrisy and bare-faced inequity, the two surest indices of moral imbecility. Thus ..... 

"A union chief who has attacked the fat cat salaries of bosses is to get £80,000 a year for doing nothing, it emerged yesterday." (The Daily Mail, 17th May 2004.)

"A hit-and-run driver who killed a pedestrian was fined just £83 yesterday. Minutes later, the same magistrates fined another motorist more than £400 for crashing into a tree." (The Daily Mail, 3rd June 2004.)

In Sections 3 and 4, we shall be noting some of the ways in which a shortage of Characteristic #7 can manifest itself.

3 - Indicative Case Studies

In this section, we present a series of pertinent cases. These have been selected for overall effect and readers should note that the level of evidence [glossary] is usually pretty low-grade, often being little more than anecdote [glossary] or political sniping, and rarely carrying more weight than a single case study [glossary]. In an ideal world, much painstaking academic research would therefore need to be done before ever acting [which time, needless to say, never permits]. Here are the studies .....

3.1 System Study - E-Banking

Despite a decade of experience, e-banking has so far [April 2004] been slow to take off commercially, not least because it seems to attract as many e-fraudsters as genuine e-customers. The ratio of e-fraudsters to e-customers is unknown, and such data as are available are both operationally and stock market sensitive and tend therefore to be carefully kept out of the headlines.  To see the cyberattack e-mail used against National Westminster Bank PLC on 8th December 2003, click here (the NatWest banner logo and the contact details have been removed). This particular technique is known in the trade as "phishing" [tell me more], and in its original form this speculatively networked communication looked superficially convincing. Needless to say, anybody naive enough to have replied would have been handing their priceless security details to professional criminals [horror stories]. Would you have replied? The perpetrators are thought to be operating from Eastern Europe, and banking chiefs are so alarmed that they have set up the Anti-Phishing Working Group to combat them. Nevertheless, cyberattacks against the world's banking industry are now almost hourly occurrences. For example, "[Working Group] spokesman David Brunswick says: 'We recorded about 100 attacks a week in March compared with about 40 a week in January'" (The Mail on Sunday, 25th April 2004).

Keen to do its best, NatWest now instructs its customers as follows: "Please be on your guard against emails that request any of your security details. If you receive an email like this you should not respond and should contact our Online Banking Helpdesk immediately." This is a nice thought, but we tried that when we were cyberattacked, and - not being the only recipient - could not get through to said helpline for 48 hours! We have a clear enough requirement, in other words, but no mechanism to deliver it [so not many marks for Characteristic #6 on this occasion].

In systems terms, online banking systems are good examples of the dangers of setting one's systems boundaries too tightly [see Characteristic #1]. If we focus only on the computerised service offered by the banking house in question, complete with all its user identities and passwords and security facts and phrases, then to the uncritical eye we have a system which is ready for market and in which every system component will have been precisely engineered to an agreed Requirements Specification. But if the systems boundary has not been set wide enough, then that precision will not extend into the domain of the e-customer. The risk is then that the computerised service typically makes so many complex security demands on us as customers that we throw together mini-systems of our own to help us keep track of it all, and these mini-systems, of course, are likely to be far from professionally designed; in most cases, indeed, they rely on such devastatingly unsafe practices as writing down our passwords and PINs, the very parts of the system the fraudsters are trying to compromise. The banks promise that you will not personally suffer from such frauds [although the small print on this point actually requires you NOT to have written down your passwords and your PINs, so beware], but it needs pointing out that it is getting increasingly common for systems failings to push corporations over the edge [viz. Barings Bank (1995, £850 million) and BCCI (1991, £7 billion)], so in practice you can never be totally sure that your bank will still be there in the morning to compensate you.

UPDATE: "Fraudsters seeking to con online bank customers can buy internet addresses matching the names of high street banks for as little as £10, raising fears of a surge in phishing attacks. [.....] Yesterday, The Times bought the internet address for just £37." (The Times, 20th November 2004.)

To stay with banking for a moment, it emerged recently that e-banking systems carry out fewer common-sense checks than conventional banking used to. Here is the story. On 22nd August 2003 a Mrs X used an e-banking service to make a payment of several hundred pounds to a salesman. Four days later the salesman complained at not having received the transfer, and when Mrs X investigated she discovered that she had miskeyed the payee's account number, and that a fourth party, Mr Y, had got the funds. The nightmare developed when Mrs X's bank attempted to recover the funds from Mr Y's bank, only to be informed that this was not possible because the money had already been spent. So she enquired why they had processed the transaction in the first place, when the payee's name and account number had not cross-matched, only be told that the clearing system does not actually carry out that cross-check. The payee's name is quite literally ignored, because "banking systems use sort code and account numbers only to process payments" (The Times, 21st February 2004). Fearing now that her original clerical error had been compounded by the broader system into an irretrievable loss, Mrs X then went to the banking industry's ombudsman, only to be further horrified to learn that the remedial system does not work either because it covers only the relationship between an individual and their own bank, not banks in general!

3.2 System Study - The Fox River Grove Rail Disaster, 1995

In this incident on 25th October 1995 [full story], a train sliced the back off a school bus which had failed to clear a railway level crossing due to a slow-to-change red traffic signal on the roadway ahead of it. Seven children died as the result of what turned out (in part, at least) to be a subtle illogicality in the traffic signal timings. Given that historical design factors had already placed the traffic signal such that the detained traffic queue would, when long enough, back up across the railway track, the engineers responsible had put a lot of effort over the years into getting the timings and signage right. Unfortunately, there were still combinations of circumstances when the traffic signals did not provide sufficient time for detained vehicles to clear the track [some reports assert that the pedestrian crossing phase of the roadway signalling had not been properly factored into the railway signal timing]. This is an academically interesting incident because it shows what can go wrong with split responsibility. Highway engineers had confirmed that there was nothing detectably wrong with the road signals, and railway engineers had confirmed that there was nothing wrong with the track signalling, but both had a "my box mentality" [see Characteristic #1 as regards the perils of myopic boundary setting] which on this occasion - when the two systems interacted and became a superordinate system - proved fatal. One of the NTSB's conclusions was accordingly that "had a coordinated program to ensure effective communication between transportation modes about all aspects of grade crossing safety been in operation, the ineffective communication between [the highways department] and the railroad might never have occurred" [Full NTSB briefing]. This case is a textbook example of the Law of Requisite Variety at work [see Characteristic #6] - the control system was not on this occasion more complicated than the systems being controlled, allowing them to develop some fatal dynamics of their own.

3.3 System Study - Multiple Registration to Vote

In order to demonstrate just how easy it was, a British newspaper reporter recently assumed the fictitious name of Gus Troobev (an anagram of Bogus Voter) and registered himself on 31 different local authority electoral registers "within just a few hours" (The Daily Mail, 7th February 2004). He also registered nine different bogus names with a 32nd council. Despite a growing national campaign to fight "identity theft" and the government's own proposals for "identity cards", only two councils made any significant attempt to confirm his identity. It was all easier, the reporter claimed, than registering with a video rental shop! The obvious step of cross-validating the individual lists against one of the major national databases - National Insurance Number, for example - is simply not in place, again thanks to a my box mentality and lack of management focus. As a result, the British democratic system - once a source of great national pride - remains a "system" in name alone; a loose superordination, whose lesser elements are poorly integrated and dysfunctional.

3.4 System Study - The Soham Murders, 2002

"He [Huntley] charmed, bullied, and lied his way through life" (The Guardian, 17th December 2003).

"..... ruthless and clever beyond belief" (The Sunday Times, 6th June 2004).

On 17th December 2003, school caretaker Ian Huntley was convicted of the murder on 4th August 2002 of the Soham schoolgirls Jessica Chapman and Holly Wells. This high-profile case usefully illustrates a number of tragic systems-level failures, perhaps the most telling of which is the difficulty delivering in fact something which begins life as a noble systems requirement [Characteristic #6 again]. The critical tensions were between the right under British law to be deemed innocent until proven guilty, and the accepted need for maximally responsive child protection legislation. Caught in the middle (and torn in both directions) were the data protection arrangements introduced by the Data Protection Act, 1998, and themselves still "bedding in". The child protection provisions were those authorised by the Police Act 1997. Included in this package of innovations was the formation of the Criminal Records Bureau (CRB), an official agency to hold relevant criminal records on potential sex offenders and issue "disclosure" reports to potential employers of persons "regularly caring for, training, supervising, or being in sole charge of persons aged under 18". The CRB disclosure service went live on 1st March 2002, and was soon notorious for the delays in processing disclosure requests.

ASIDE: This is a valuable systems lesson in itself, and the CRB system is already in the black museum of IT project management. A subsequent "drains-up" enquiry by the National Audit Office identified a number of contributory factors, including an over-ambitious implementation timetable, a failure to foresee the volume of postal applications, and too strict a limit on the number of users who could access the CRB system at the same time. Nor could the system access all potentially relevant sources of data: "The Bureau's procedures might not identify an applicant who has been, for example, under investigation by HM Customs and Excise for smuggling drugs or pornography" (National Audit Office, p4) [see the National Audit Office report]. Nor [see Section 3.9 below] does it reliably pick up records from abroad in tourists, immigrants, or asylum seekers. And this in an era of "joined-up government"!

However, delays were not the only problem, because the definition of "relevant" had been left to individual interpretation, and in Huntley's case the CRB protections had totally failed to identify him as a potential risk. He had received a clean CRB report from the police authority in Humberside, his previous area of residence, despite the fact that Humberside police force had investigated Huntley on no less than 11 previous occasions for allegations of indecent assault and rape, including eight offences against underage females. They had, however, deemed it unlawful on data protection grounds to store details of allegations, suspicions, and dropped charges, on the grounds that such subjects are innocent until proven guilty. What society at large has to decide, therefore, is its requirement in this matter: does it want innocent until proven guilty and a pretty flimsy child protection system, or does it put protection first and sacrifice some civil rights. And it was, and is, a matter of supreme legislative dishonesty to have left it to the systems men to decide.

Nor did one hand really know what the other hand was doing. For example, Humberside PC Michael Harding recorded after one of the failed investigations that it was "quite clear that Huntley is a serial sex attacker and is at liberty to continue his activities" (The Daily Mail, 27th February 2004). He duly lodged a "serial sex attacker" warning on Huntley in 1999, totally unaware that a data weeding policy would come along a year later wiping such warnings from the system. Similarly, one of Huntley's previous employers - deputy headmaster Roger Davies - had informed Humberside social services that Huntley was having unlawful sex with two of his 15-year-old pupils. However, that information was not passed to the police (The Daily Mail, 2nd March 2004). And to top it all, Soham school failed to process the reference request for its new caretaker. Huntley provided five references at his interview in November 2001, but none was followed up, and, upon later investigation, they turned out to conceal what would have been give-away gaps in Huntley's employment history (The Times, 13th March 2004). Maxine Carr, meanwhile, Huntley's girlfriend and accessory, was freed on 12th May 2004, at an anticipated annual cost of "easily" £1 million a year for police protection.

ASIDE #1: We have some sympathy here with the right-wing press, who are aghast at this drain on the public purse, and not in the least mollified by the fact that we shall at least be saving the cost of the benefit frauds the social security system allowed Carr to perpetrate in the years prior to the murders (The Daily Mail, 11th May 2004). Nevertheless, we find more in common with the human rights journalist, Joan Smith, when she points out (The Times, 11th May 2004) that Carr should be better regarded as another of Huntley's victims, rather than as his accomplice. Smith is doing some good systems thinking here, for if you carry out a root cause analysis of Carr's offence you start to conclude that the poor woman has been a victim of defective systems all her life. For example, if the education system had done its job properly in the first place (she left school without any GCSEs, etc.), and not blithely churned out yet another characterless (and thus vulnerable and gullible) loser, the whole desperate affair might have been avoided.

ASIDE #2: Smith's most resonant point takes us to the very heart of the mechanisms of human communication, to the point at which ideas and emotions interact in the milliseconds before we start looking for the words needed to express them. She portrays Carr as having entered the adult world ill-equipped to cope with "the techniques used by controlling men" such as Huntley. There is a growing literature on this [see for example, the research publications of Patricia Petretic of the University of Arkansas, and Margaret H. Launius of Mansfield University, Pennsylvania], and the situation seems to be that assertiveness is easier to define than implement. Our animal halves are tuned to dominance or submissiveness, usually the latter, and possibly from before birth. So it is no good merely advising battered women to "get out while you can because these men will not change". Instead, the advice needs to be complemented by some very hard skills, and not everyone succeeds in acquiring them. We mention this because it is precisely Huntley's techniques of near-sociopathic manipulation and coercion which another arch-manipulator used to take us into, and keep us in, the Iraq debacle. For more on the conversion of ideas into speech, see our e-paper on "Speech Errors, Speech Production Models, and Speech Pathology", and for more on the "human ethology" of dominance and submissiveness, see our e-handout on "Communication and the Naked Ape".

STOP PRESS: In the event, it only took hours for state functionaries to manage to squander the first of those millions. Things started to go downhill on 11th May, the day before Carr's release, when a briefcase full of the Home Office's plans for her new identity was stolen from the boot of a civil servant's car, "while she was celebrating a friend's birthday over lunch" (The Times, 14th May 2004). As if that were not enough, it then took "just six hours" for attentive residents in the chosen location to spot their new neighbour moving in (The Mail on Sunday, 16th May 2004). The Information Commissioner, meanwhile, "has ambitious plans to beef up the data protection legislation to give it more teeth" (The Computer Bulletin, May 2004): we point out, ever so humbly, that this is merely another good requirement, and that systems designers are still trying to work out how to implement the 1998 tranche of rules and regulations. The full text of the official Bichard Inquiry into the failure of child protection systems in this case is available online at click here.

3.5 System Study - Incompetence at its Most Lethal

Following several possibly avoidable deaths amongst the British military personnel involved in the current Iraq War, it transpired that ammunition and equipment shortages were commonplace, and that our own systems were often as lethal as the enemy's. Here is a selection of Iraq War stories with a systems angle .....

"Sergeant Steven Roberts, 33, was shot dead while trying to quell a riot in Iraq just days after being told to hand back his flak jacket because there were not enough to go around. [.....] Theoretically, the MoD supplied more than enough to go round, but the distribution system broke down in Kuwait and Iraq, which meant that many of the soldiers had to share out what was available." (The Times, 19th January 2004.) "The doctor who treated Sergeant Albert Thomson after he was shot in Iraq insisted last night that he did everything he could to save his leg - and blamed a shortage of military helicopters for a delay in evacuating the injured soldier to a field hospital where doctors could have carried out emergency surgery." (The Scotsman, 21st January 2004.)  "A British soldier revealed last night that he and his comrades were issued with just five bullets each while serving on the front line in Iraq. [.....] They were also short of maps and body armour, he said. Instead of radios, they were issued with a mobile phone and instructed to call up if they were attacked. 'I was supposed to ring up my boss and ask for help,' the soldier said. 'The only problem was that mobiles didn't work in Iraq'." (The Daily Mail, 25th February 2004.)

In fact, the entire military commissioning set-up can be faulted .....

"An army inquiry into the deaths of six British military policemen in Iraq last year has found that the men were unable to send a single radio message requesting assistance. [.....] Soldiers in the Gulf last year were using 25-year-old 'Clansman' radios because of delays in the introduction of new communication technology. Clansman radios are known as bulky, insecure, and prone to failing because of their poor batteries. The six Redcaps were killed when a mob of Iraqis armed with Kalashnikovs and rocket-propelled grenades stormed a police station where they were training local officers in the central Iraqi town of Majar Kabir in June. Hundreds of men from the elite Parachute Regiment's 1st Battalion were stationed nearby but were unaware of the Redcaps' plight. [ .....] Military communications experts told The Observer this weekend that the new Bowman radio equipment, due to be introduced by the end of this year, would have enabled the detachment [to] contact the Paras. Production and contracting problems have meant that the system will be in service eight years late." (The Observer, 25th January 2004.)

"The Ministry of Defence has paid nearly £280 million for helicopters that are incapable of being flown in cloudy weather. The eight advanced Chinook battlefield helicopters will not be ready for combat until 2007, the National Audit Office reported yesterday. The purchase of Chinook mark 3s was supposed to provide the services with a sophisticated night-and-day, all-weather troop-carrying helicopter. The original in-service date was 1998, but they were eventually delivered in 2001. However, mistakes made early in the programme effectively grounded the new aircraft for another six years. [.....] Responding to the NAO report, Edward Leigh, Chairman of the Commons Public Accounts Committee, described the purchase of the advanced Chinooks as 'one of the most incompetent procurements of all time'. He said: 'Thanks to a massively botched job, they cannot be flown when there is a cloud in the sky. Instead of desperately needed helicopters, the MoD might as well have bought eight turkeys. [The] eight Chinook mark 3s were bought for their extended range, night-vision sensors and navigation capability. However, as work progressed, 'it became evident that displays for the weather radar and other systems ..... would not fit [the] cockpit'. One solution, the NAO said, was to have a totally digitised cockpit, the option chosen by the Royal Netherlands Air Force. But the MoD could not afford it, so a 'hybrid solution' was chosen: putting some digital equipment into the cockpit, while keeping other older analogue systems. However [this] proved unworkable [and pilots now] have to fly the aircraft by looking out of the cockpit window for 'external reference points' and cannot rely on any of the flight displays." (The Times, 7th April 2004.)

"Britain's new £20billion fleet of Eurofighter [Typhoon] jets could be unsafe to fly in cloud because of faulty computers, a leaked report reveals. Last minute checks before the aircraft enters RAF service have led to a ban on 'dynamic manoeuvres' or flying in cloud unless two qualified pilots are on board. Glitches in the software which keeps the warplane stable created an 'unacceptable' risk of the pilot suddenly losing control [because] digital instrument displays in the cockpit are prone to failure in flight which 'could deny the pilot information at a critical stage', especially if in cloud. [.....] Since development began 20 years ago, the plane has become a byword for delays and cost overruns ande is now Britain's costliest defence project ever. Eurofighters will not enter frontline service until 2007 at the earliest - almost a decade later than planned." (The Daily Mail, 25th May 2004.)

"A £5 billion project to build a new fighter jet for the Armed Forces has been thrown into chaos because the aircraft is too heavy to land safely. The Joint Strike Fighter is supposed to replace the Sea Harrier jump jet but major design flaws are expected to put back the project and push up costs. If the problems cannot be solved, the Royal Navy may have to redesign its two new aircraft carriers to cope with the plane. [.....] The US-designed warplane is 3,300lb overweight, meaning it can only land safely if it has used its full complement of bombs and missiles and the fuel tanks are virtually empty. Otherwise, there is a danger that the undercarriage will collapse as it touches down." (The Daily Mail, 17th May 2004.) [The truth here can only be that there was no British input into the requirements capture phase of this US project, or that it was given but studiously overlooked.]

"Efforts to save money on the RAF's £20billion Eurofighter Typhoon warplane by scrapping its powerful cannon have turned into a farce, it emerged yesterday. Four years ago ministers announced that to cut costs the aircraft would be built without its wing-mounted gun. The weapon, they insisted, was irrelevant to modern air combat. However the jet's computerised flight-controls meant the cannon had to be replaced by ballast of the same size and weight, to stop it becoming dangerously unbalanced. [Unfortunately,] the cheapest way to fit an object the same shape and weight as the cannon was to use ..... the cannon. So now it will be built into the hi-tech jets after all, but with no ammunition or firing mechanism." (The Daily Mail, 13th August 2004.)

..... and perhaps even beyond remedy .....

"The Armed Forces are being let down by 'woeful' delays in the delivery of vital equipment, the Commons Defence Committee said yesterday. A promise from the Government six years ago to buy essential kit 'cheaper, better, faster', under a policy called 'smart acquisition', had failed to deliver the goods. [.....] The [Ministry of Defence] had introduced the policy in 1998 to rid the department of embarrassing cost overruns and delays. But procurement continued to run overtime and over cost and the MPs feared that the failures would not stop despite attempts to abolish the bad old ways of procuring equipment. 'We are forced to conclude that our Armed Forces have been let down by the organisation tasked with equipping them,' the committee said. [.....] The key underlying cause of poor performance, the MPs said, was the MoD's failure to invest enough money and time to examine the risks of each project before starting to build." (The Times, 28th July 2004.)

The battlefield is also home to a succession of tragic "blue-on-blue" (or "friendly fire") incidents, all of which turn out after one or two "Whys?" to be down to systems errors of one sort or another. For a selection of stories, chosen more or less at random, click here, or here, or here.

The systems lessons in all the above will be obvious, and in the cases of the fair-weather Chinooks and Typhoons, and the overweight F35s, the average six-year-old could have done better [not a joke - six-year-olds do jigsaw puzzles, you see, and their cognitive systems are used to the notion of having bits that fit together; civil servants evidently do not]. Interested six-year-olds may apply to the MoD careers officer at click here, but quickly, please. It may or may not be causally related that British soldiers are in fact outnumbered by the army of civil servants who manage them (The Mail on Sunday, 2nd May 2004).

3.6 System Study - Incompetence in the House

On 19th May 2004, a disgruntled citizen wangled a place in the House of Commons public gallery, and, when the Prime Minister rose to speak, bombarded him with flour bombs, scoring a direct hit with one of them. This, considered in isolation, is a serious enough incident, because as commentators were quick to point out the flour bombs could just as easily have been anthrax or a nerve gas [a firearm would probably not have made it through the scanners outside]. What took analysts' attention, however, was the fact that the attack took place shortly after the installation of a new £600,000 security screen designed expressly to prevent direct action of this sort. However, it soon emerged that the protester in question had not been sitting behind the screen at all. And why? Because there have always been two grades of "public" in politicians' eyes, namely (a) the great unwashed, who get put behind the screen, and (b) VIP guests, who - on the grounds that they have been specially invited - get put in front of it. The flour bomber was - horror of horrors - in one of the VIP seats!

Investigations then revealed a masterly interaction between two systems. It turned out that the guest was not a VIP after all, had not actually been invited, and was not actually known to anyone. Instead, there appears to have grown up a black market in VIP invitations as prizes at charity auctions and the like. So on the one hand, taxpayers are paying (at least one of them against his better judgement) for a system to protect their elected representatives from the realities of the world, and on the other hand those self-same representatives are flogging off privilege seats literally to the highest bidder, with their respective parties pocketing the proceeds! It would, of course, be treasonous to suggest that Al Qaeda get along sharpish to one of these auctions and help put British taxpayers out of their misery.

3.7 System Study - Modern Corporate Fraud, I - Mis-Selling

There has been a veritable parade of atrocities against good corporate governance across the western economies over the last few years, but because the lesson is invariably the same we shall consider only the case of the British life assurance company, Equitable Life. The story here concerns the mis-selling of endowment policies, a type of life assurance product which takes a monthly premium and pays back a "sum assured", with or without "profits", after a predetermined period of tax-exempt investment (that, or prior demise) .....

ASIDE: We first heard of this particular financial product in the mid-1970s, when we were ourselves in the insurance industry. Endowments had always been big business amongst the well-endowed [sic], because they were tax efficient, and so life assurance companies had habitually paid themselves handsome commissions on each sale (typically £20 per £1,000 sum assured). It then occurred to the marketing boys that the product could also be used to service the mortgage market. Thus a without-profits endowment could be dated to mature at the end of the mortgage period, whereupon its maturity value could be used to settle the capital debt on the mortgage. This allowed the mortgagee, in the meantime, to make interest-only payments on the mortgage. However, if you were better off, and able to afford a bigger monthly investment, then you could opt for a with-profits version of the same arrangement. This not only paid off the mortgage at the end of the period but also gave you a lump sum - the profits element of the endowment - into the bargain. So far so good. Then somebody came up with the bright idea of deliberately under-assuring in the first instance, and using the aforementioned profits element to make up the difference. Granted, you would get no maturity lump sum in this case, but the premiums would have been that much smaller throughout the period of the contract. This scheme was heavily sold under the name "minimum-cost" endowment mortgage. The catch with the minimum-cost endowment, of course, is that if the profits eventually came in lower than had originally been estimated, there would be a shortfall at maturity, and that is exactly what happened when the world's stock markets plunged in late 2001.

The crash of 2001 was unfortunate enough for the individual policyholders, but it was equally unfortunate for Equitable once those irate policyholders started to compare notes on how they had been sold the product in the first instance. It turned out that in the majority of cases they had wanted a "repayment" mortgage, but had been persuaded to change their minds by the original salesforce.  Moreover, since the cost of the minimum-cost endowment was about the same as the conventional mortgage, the only person who could possibly benefit was the salesman. The stories then cumulatively tell themselves .....

"Scottish High Court judge Lord Penrose's 818-page report into the crisis, ordered by the Government, found that 'the primary failing lay with Equitable Life's management, who operated a culture of 'manipulation and concealment'. [.....] Lord Penrose criticises the regulatory bodies responsible for monitoring Equitable, saying they 'failed policyholders'. He describes the Department of Trade and Industry and the Treasury - which regulated Equitable between 1998 and 1999 - as 'ill equipped', and the Government Actuaries Department - responsible before 1998 - as 'complacent'. [.....] Lord Penrose's most stinging criticisms were reserved for the Equitable board, which failed to get 'fully to grips' with the financial situation. He said the collective skills of its members were 'inadequate for the task'." (The Daily Mail, 9th March 2004.) "[A policyholder complained] 'I am totally disillusioned with the whole savings system - nobody trusts them, and justifiably so. The regulators did not regulate. What were all those civil servants being paid for? They did nothing.' [Another policyholder's] experience has left him a bitter man who holds the finance industry in disdain. 'The industry exists to serve itself and doesn't stop to think of the damage it inflicts on its customers,' he said. 'Added to this is the ineffectiveness of the regulator." (The Sunday Times, 14th March 2004.) "The judge identified [name], chief executive and actuary between 1992 and 1997, as one of the main architects of the firm's decline. He was 'autocratic', 'manipulative', and hid the true state of Equitable's finances from the rest of the board for years, said Penrose. The board also comes in for criticism. 'It had insufficient knowledge and skills [remember Characteristic #6] to prove an effective challenge to the executive in critical areas,' the report said." (The Sunday Times, 14th March 2004.) "Equitable Life investors were outraged yesterday as it emerged that the man at the heart of the crisis is enjoying a £150,000-a-year pension." (The Daily Mail, 10th March 2004.)

Needless to say, Equitable had not been dining alone at the trough of other people's life savings .....

"Money Mail asked 32 [insurance and unit trust companies] how much £50 a month saved for ten years into a 25-year unit-linked endowment is now worth. The figures provided assume the money - a total of £6,000 - has been invested in the companies' mainstream balanced managed funds. Twenty-five companies gave figures. Of those, only Provident Mutual has managed to keep that £6,000 in one piece. But, even then, it has grown by only a meagre £72 over ten years to £6,072. In the worst case, Guardian has managed to shrink £6,000 to £4,122. [.....] The reasons for the dreadful returns produced by the life insurance companies is two-fold: sky-high charges and lousy fund management. Endowments were designed to meet the needs of commission-hungry salesmen rather than the homebuyers relying on them to pay off their mortgages. The amount of commission handed over to salesmen is quite staggering. Often it amounted to the best part of the first two years' premiums ....." (The Daily Mail, 31st March 2004.) "A scathing report by MPs reveals that payouts on endowments will fall short by £40 billion, leaving many home owners struggling with huge debts. But the men who ran the insurance companies which sold the policies did not suffer. Typical of them was [name], the now retired managing director of Standard Life, who was one of four bosses singled out for criticism by the chairman of the Treasury Select Committee John McFall earlier this year. The Select Committee report says around 80 per cent of the 8.5 million endowment policies still in force are unlikely to pay off the mortgages for which they were taken out, with average shortfalls of £5,500. Mr McFall [identified] [names] as typical in an industry which 'consistently put itself ahead of the consumer'. They had enjoyed pay rises of up to 72 per cent during the three-year spell to 2002 in which the crisis emerged." (The Daily Express, 11th March 2004.)

Nor, indeed, are endowments the only savings product where the lack of effective regulation permits all sorts of dubious goings on .....

"The split-capital trusts scandal has disintegrated into squabbling where only the lawyers win. Behind closed doors in the City and in the gleaming towers of London's Docklands, executives are battling each other, their advisors, and the regulator. Hundreds of millions of pounds are at stake. The Financial Services Authority is desperately trying to salvage its tattered reputation as the investor's guardian. Stockbrokers who devised and marketed the trusts are battling to limit payouts. Financial advisers, who sold the investments to private savers, are struggling just to stay in business. Savers, who lost heavily in 'low-risk' investments, are left in limbo. Compensation, if it ever arrives, is years away. [.....] The [Financial Ombudsman Service], already swamped by a record number of complaints about endowments and other financial scandals, has received 4,200 complaints about splits. It has resolved only a quarter. [.....] Desperate to appear tough and influential, the City regulator [the Financial Services Authority] has boasted about its probe into the crisis [however] critics say the FSA's actions are aimed more at saving face than reuniting savers with their lost cash." (The Mail on Sunday, 25th April 2004.) "The FSA is [also] concerned that a growing number of companies are pushing so-called pension-unlocking services [which] let some savers take up to 25 pc of their pension pots as a tax-free lump sum when they reach age 50. Pension unlocking is a money-spinner for salesmen who can instantly make up to 6 pc of the pension pot." (The Daily Mail, 26th May 2004.)

And even the upright are not always perfectly vertical .....

"Profiteering banks stand accused of bamboozling customers with illegible small print and jargon. The confusion is such that three-quarters of credit card holders have no idea what APR - annual percentage rate - they are being charged." (The Daily Mail, 17th March 2004.)

3.8 System Study - Modern Corporate Fraud, II - Mis-Accounting

"Is there an honest man on Wall Street?" So ran the headline to a recent exposé of corruption in the US currency market. A sustained FBI investigation code-named "Operation Wooden Nickel" was followed on 18th November 2003 by a full-scale daylight raid by FBI SWAT teams at six separate New York offices, at the end of which 48 brokers and traders had been taken into custody. [Full story from CNN.] The scams under investigation included "boiler room" companies [explanation] and rigged foreign exchange trades.

The systems angle on this and every other successful scam is that sustained thievery requires expert concealment. You must cover your tracks [so we are reliably informed], deceiving both colleagues and auditors alike. Thieves, in other words, are expert systems thinkers, and techno-thieves doubly so. They are not immune from Ashby's Law as such, but the sophistication of their mis-control systems has by definition to exceed that of the system's legitimate controllers [see Smith's Sixth Law].

Most scams are relatively low-echelon affairs, going on without the direct collusion of higher management (the indirect collusion being merely their failure to have in place control systems capable of preventing it). Some, however, are engineered from the very top. Here are some of the juicier recent instances .....

"Britain's second largest oil company admitted yesterday that it had repeatedly lied to shareholders about the true state of its oil and gas stocks, as the company published a damning report into the behaviour of its former managers. [.....] Excerpts released from a 463-page report by Davis Polk & Wardwell, the US law firm, revealed that [names] deceived investors by ordering the destruction of documents detailing shortfalls in the company's reserves." (The Times, 20th April 2004.) "Top Shell executives exaggerated the company's oil and gas reserves, then tried to cover up, an independent inquiry said yesterday. Its devastating report reveals how the company deceived the City and shareholders with figures that were wrong by many hundreds of millions of pounds. Executives may have broken the law in the process." (The Daily Mail, 20th April 2004.) "The alleged fraud has cost shareholders roughly £8 billion [and] American legal experts said Shell's disclosures last week made it more likely that the company would eventually be forced into a record settlement of the shareholder class action lawsuits. The highest pay-out so far is $3.5 billion (£2 billion) to shareholders in hotel and car rental group Cendant'." (The Mail on Sunday, 25th April 2004.)

"As three former executives of Computer Associates pleaded guilty to securities fraud yesterday, the [US] federal prosecutors investigating the company's accounting practices left little doubt that they were zeroing in on Sanjay Kumar, the company's chairman and chief executive. [.....] Mr. Kumar was the second-ranking executive at Computer Associates throughout the late 1990s, a period when current and former employees say the company used accounting tricks to overstate its sales and profits." (New York Times, 9th April 2004.)

"As congress prepares for an intense round of questioning of Enron directors and officials, there is a growing suspicion that at the heart of the once-mighty energy trader was a financial hole. Evidence is accumulating that the Houston-based group, which boasted of being asset light, may also have been light on profitability at core operations." (The Financial Times, 19th March 2002.)

"As Parmalat executives last December took a hammer to a computer at headquarters, one of the most damning files under attack was 'Account 999'. The file survived. A print-out of Account 999 and its Euros 8,056,131,103.09 debit is now one of many bizarre centrepieces for charges being prepared against former Parmalat managers and Deloitte Italy, the bankrupt dairy group's primary auditor. [.....] Gianfranco Bocchi, a former Parmalat accountant, told investigators the account [was] a 'trash bin' for all the faked revenues, assets, and profits that Parmalat had accumulated over the years." (The Financial Times, 12th April 2004.) [Full article]

As to how we might ever hope to stop such things happening, we need to develop our Characteristic #2 systems thinking skills. We need to spot what is moving, where, and why. And [and here we speak for all honest citizens] we need to do this urgently, because in the final analysis the what will turn out to be our savings - the sweat off our brows, no less - whilst the where will turn out to be someone else's pocket.

3.9 System Study - The UK Immigration and Asylum Systems

Just as depressing is the state of the nation's immigration and asylum systems, that loose agglomeration of formal acts and treaties, broad understandings, and informal agreements, which governs such things as extradition arrangements, support for international students, the nation's agreed immigration policy, and the "place of safety" provisions offered to bona fide asylum seekers as a demonstration of one's maturity as a society. For a long time, this "system" worked smoothly enough, until one day word got out that Britain's streets were strewn with gold. Now the thing about systems is that relatively short-lived overloads commonly expose long-standing weaknesses, and that is exactly what happened in this case. As the number of economic migrants went up, Britain's ill-fitting and poorly integrated farrago of migration rules and regulations delivered nothing but chaos, even to the point of threatening to bring down neighbouring systems in the social security, healthcare, and education domains. Here is the sort of thing which can happen .....

To begin with, accurate estimates of the numbers of asylum seekers entering Britain are notoriously difficult to come by at the best of times (the Home Secretary, for a start, cheerfully confesses to not having a clue). It therefore does not help that there is pressure from the social security system to have yourself counted twice, thus: "The asylum seeker, who claims to be 36, called himself both Zahir Chouf and Younis Madjoudi to claim housing benefit and job seeker's allowance from two social security offices in West Sussex. [.....] The farce deepened when [Chouf/Madjoudi], who obtained two National Insurance numbers, was sentenced on the basis that he was Chouf, with a clean criminal record, rather than Madjoudi, who has previous convictions. [.....] The Department for Work and Pensions said handouts totalling £100 million were stolen each year by cheats who forge documents and steal identities of the dead, including babies." (The Daily Express, 18th November 2003.)

It also does not help when the crime is organised, because, as we saw in Sections 3.7 and 3.8, crooks are invariably better systems thinkers than good honest civil servants. Thus .....

"When ten new nations join the EU on Saturday, it will not just be their workers taking the opportunity to flock to Britain unhindered. A thriving black market has already sprung up in documents which prove citizenship of one of the New Ten countries. These are being bought for as little as £50 by would-be immigrants from states still outside the EU, who will use them to get to Britain." (The Daily Mail, 29th April 2004.) "Our passports and identity cards are near perfect," claimed one black marketeer. "If you are interested in claiming multiple benefits in England then you can turn up with as many identities as you want." (The Daily Mail, 8th May 2004.)

“A thousand successful asylum applicants face a review of their cases after the doctor who gave evidence at their hearings admitted yesterday he was really a former taxi driver with no medical qualifications. [Name], a career fraudster who used a string of fake qualifications to set himself up as a leading clinician, was behind bars last night after conning more than £1.5 million from the government, leading charities, and patients.” (The Times, 18th January 2005.)

Another good scam is to arrange to come over faint at the opportune moment .....

"Immigrants are pretending to be ill at airports to dodge checks, it has emerged. After being taken to hospital, they are often abandoned by immigration officials. They are then allowed to leave without any record being kept - after hours of expensive and pointless treatment. The racket, in which people-trafficking gangs exploit Britain's generous rules giving automatic emergency care on the NHS, has been revealed by hospital staff. [A] specialist nurse at the accident and emergency department of Newham General Hospital in East London, said: 'Increasing numbers of immigrants are being brought to us with problems that are not emergencies. It would appear that they are getting wise to the system. We are using a lot of resources on these people, who often do not even need treatment.'" (The Daily Mail, 10th April 2004.)

..... or to develop a convenient limp .....

"Disabled asylum seekers must be given priority over British citizens in the queue for council housing, the House of Lords ruled yesterday. The landmark decision by the Law Lords means would-be refugees with disabilities can demand support from a local authority - even if Britons would not qualify for the same help. [.....] The latest controversy centres on the case of Abdelaziz Muni, a 25-year-old Algerian who claimed housing from Lambeth borough council in London because he has one leg half the length of the other and requires prosthetics. Asylum seekers are normally housed and supported by the National Asylum Support Service (NASS), with the costs paid from central Treasury funds rather than local council taxpayers. But a legal loophole means disabled asylum seekers can still apply to their local authority under an old law, the 1948 National Assistance Act. [.....] Funding is at the centre of the row, and yesterday's judgement means local council taxpayers must pay to support disabled asylum seekers." (The Daily Mail, 27th January 2004.)

Needless to say, the monitoring and enforcement systems do not inspire a great deal of confidence .....

"In a whole year, one boss is convicted over illegal workers [.....] despite an admission by ministers that there are 'hundreds of thousands' of immigrants living and working illegally in Britain. [.....] Out of 65 prosecutions brought in 2001, only one led to a conviction." (The Daily Mail, 20th October 2003.)

..... and the knock-on effect into the related systems domains is nothing short of devastating .....

"Room 12 in Field House, Fetter Lane, is the home of the Immigration Appeal Tribunal (IAT) and the heart of the asylum appeal industry which costs the British taxpayer some £100 million each year" (The Daily Mail, 29th May 2004). "Britain's most senior judges are furious at wasting thousands of hours on 'hopeless' legal challenges by asylum seekers. One in four of all judicial reviews in the High Court in the past year were lodged by refugees and funded almost entirely by taxpayers [but] less than three per cent were successful. [.....] The irony is that hardly any of the asylum seekers turn up in court, and once the decision has gone against them they disappear without trace." (The Daily Mail, 24th January 2004.)

"Immigrants and ethnic minorities are to be given luxury detached homes valued at up to £400,000 each at nominal rents. [.....] Almost £4 million of taxpayers' money has been spent on building the 14 homes at The Glade, in Shirley, Croydon, South London. The first tenants are due to move in next month. Ian Connelly, a member of the Monks Orchard Residents' Association, which is fighting the scheme, said: 'Local residents are justifiably angry that so much of their hard-earned taxes is being spent housing people in the kind of luxury they can't afford themselves. It's adding insult to injury when you think that few, if any, of these new tenants will be in a position to pay the market rent, which means they will be claiming housing benefit, which means taxpayers will be paying that bill as well.'" (The Sunday Express, 15th February 2004.)  

"An attempt to evict thousands of asylum seekers who are about to lose their state benefits has descended into a costly farce, it emerged yesterday. Up to 10,000 asylum seekers become EU citizens on May 1 when eight Eastern European countries are admitted to the Union. As a result, they will no longer qualify for benefits and have been ordered by the Home Office to leave their state-subsidised homes and find work within the next two weeks. But many asylum seekers are appealing against the eviction orders on human rights grounds, after what opponents describe as 'another cock-up' by the Home Office. And, predictably, the taxpayer is set to foot the bill. [.....] The asylum seekers received letters this month warning them they will lose their state benefits and must find friends and relatives to live with while they look for work. But to secure employment they have to obtain a work permit, which requires them to provide their passport. However, asylum seekers are compelled to surrender their passports to the Home Office when they arrive in the UK. Also, the application form for a work permit is not yet available from the Home Office and no unit has been established to process the applications." (The Daily Mail, 17th April 2004.)

"The government is paying to keep 25,000 homes empty for non-existent asylum-seekers, enough to house the population of Taunton or Ashford, a confidential Downing Street memo reveals. [.....] Demand [has] been less than expected because the number of asylum seekers has halved in the past 18 months. But the Home Office is still obliged to pay for the properties as it failed to insert a get-out clause in the three-year and five-year contracts it made with councils and private landlords." (The Sunday Times, 27th June 2004.)

"The trial of three accused people-smugglers collapsed yesterday when prosecutors admitted that key witnesses could no longer be traced. [.....] The cost of the police investigation and trial is estimated to be £6.5m. [.....] The [defendants], themselves asylum-seekers, were accused of transferring huge sums of money to China [but] Judge Michael Burr ordered them to be acquitted after he was told several illegal immigrants police found at the Dragon Palace had since disappeared [rendering] their evidence inadmissible." (The Independent, 22nd June 2004.)

"Taxpayers could be saddled with a multi-million-pound bill to support European Union students at British universities, academics warn today. [.....] Experts say nearly all students from the ten countries due to become full EU members in May - where average earnings are between a tenth and a third of the UK's - would qualify for financial aid, landing Britain with a huge unforeseen bill. Currently EU students can apply for help paying tuition fees but are not eligible for student loans or maintenance grants. But a test case before the European Court of Justice could change that because] the Government has not budgeted for the millions it would have to pay out if the parental income test was applied to EU students." (The Daily Mail, 22nd March 2004.)

"UK universities stand to lose millions of pounds because they will no longer be able to charge full-cost tuition fees to students from the ten countries joining the European Union this Saturday. Institutions earn about £27 million from 3,400 undergraduates from the ten EU accession states at UK universities [.....]. These students are charged as non-EU students and pay fees of between £7,000 and £8,000 a year. But after their countries join the EU they will have to be charged the same as UK students, who pay a maximum of £1,125 a year. [The estimated total] net loss to universities could be more than £23 million a year." (The Times Higher, 30th April 2004.)

Immigration chaos has also pushed sex offenders' legislation beyond its workable limit. Here is an example of what is at stake when systems are not effectively interfaced .....

"Polish illegal immigrant [name], 48, had came to Britain in 1996 after absconding from prison in Poland where he had been convicted of numerous sex cases, including 17 rapes. The following year he strangled 12-year-old [name] at her family flat in Hammersmith, West London. His trail of sex crimes might have ended only a month later, when he was arrested for theft. But he was neither finger-printed nor DNA-tested and was allowed to disappear after claiming asylum. He was finally halted after being arrested for raping a student in 2002. In the meantime [name], who was using a forged Portuguese passport, was able to obtain a £8,000 heart bypass from the NHS. [.....] Police are planning to question him about the disappearances of three women from the West London area where he lived. He will also be interrogated about the murder of Surrey schoolgirl Milly Dowler two years ago. [.....] A Home Office spokesman said: 'It is a matter of great concern that this individual with such a serious criminal history managed to get into this country and that his background was not uncovered when he came to our attention.' [.....] Even now, behind bars, he enjoys life in Britain. In regular telephone calls to his mother in Poland [name] praises the standards of Her Majesty's prisons."  (The Daily Mail, 1st April 2004.) 

Even national security is clearly a thing of the past, especially where subcontracted labour is concerned .....

"Ulster Loyalist fanatic [name], who was jailed for taking part in a plot to smuggle guns to paramilitary killers, works for Laing O'Rourke, the Irish firm building the airport's new £2 billion passenger terminal. Astonishingly, airport operators BAA admitted last night that it has not carried out criminal record checks on [name] or any of the thousands of other construction staff at the terminal." (The Daily Express, 22nd March 2004.)

"An Iraqi asylum seeker caused a major security scare after he was found in a Tube tunnel. The man was found by a London Underground track patrol at 3am near a key set of points on the Victoria Line between Seven Sisters and Finsbury Park stations. He was described as a 'sad individual' merely taking shelter in the tunnel [and was] questioned and referred to immigration services. [.....] However, Bobby Law, London district secretary of the RMT Tube union, said: 'We are concerned that any unauthorised person should have access to the tracks, particularly at that hour. There would have been plenty of time to have hidden anything. We have demanded security checks for all those who work on the system but this has not been done. There are sub-contractors without identification. Nothing has been done to improve security since the Madrid bomb, nor has anything really been done since 9/11.'" (The Daily Express, 5th May 2004.) <<AUTHOR'S NOTE: This is a textbook example of Smith's Fifth Law [check it out]. There is no system to protect the capital's vulnerable commuters because the transport system itself is already beyond the true grasp of its controllers. Even in such a worthy case as this, there is no room for further complexity, either at the level of requirement or mechanism.>>

And on E-Day [1st May 2004] itself .....

"Front-line immigration officers were ordered not to check EU passports [.....] as Britain opened its borders to a wave of migrants from Eastern Europe. A confidential memo seen by The Mail on Sunday reveals that border staff at Calais and Dover have been told by their boss to ignore people carrying European passports for fear of upsetting those from the ten new EU states. [The leaked memo] says that barcodes in EU passports need not be checked by computer - the only way officers can spot a fake. Swiping also tells immigration staff whether a person has been deported from Britain or refused entry, or whether they are wanted by police. [.....] Perhaps even more alarmingly, the memo goes on to reveal that the immigration service is plagued by staff shortages. Plans to check passengers on all Britain-bound coaches arriving at Calais had to be abandoned, it said, because of 'staffing pressures', adding that 'we will be limited to two immigration officers to clear traffic'. Yet this process is critical because once passengers arrive at Dover they are simply waved through as it is assumed they will have been thoroughly vetted at Calais." (The Mail on Sunday, 2nd May 2004.) <<AUTHOR'S NOTE: Any systems thinker sensitive to flow [see Characteristic #2] would immediately suggest increasing the supply of the necessary skills by encouraging further economic migration!>>

The taxpayer, needless to say, is paying not just the benefits and the compensation, but the salaries and pensions of the civil servants in the benefits offices and at the ports, not to mention of the host of judges and lawyers who wrestle each other over obscure points of law, nor, above all, of the lawmakers the length and breadth of Westminster whose smug idiocy it was which allowed the situation to come about in the first place.

STOP PRESS: Starting in July 2004, those same smug idiots now propose "to use advertising, public relations, and the placement of 'positive' news stories about migrants on the BBC and other broadcasters" (The Sunday Times, 23rd May 2004). There has been no accompanying statement, however, as to enhancing the substantive systems.

3.10 System Study - The UK National Health Service

By now the stories are beginning to repeat themselves, with only the names and the place-settings needing to be changed [in modern Britain, it seems, the chaos has more pattern to it than the systems ever do]. Here, with only minimal commentary, is the sort of thing going on in the NHS .....

"There are now more bosses than hospital consultants, and medical staff make up fewer than half the workforce. The startling figures fuelled fears that the billions being poured into the health service are going on bureaucracy and backroom staff." (The Daily Mail, 6th April 2004.) "Middle managers made the same complaint as chief executives. 'I am so busy reporting that I do not have time to get on with any work,' explained the head of treatment management systems in a hospital in the West Country. She went on: 'We are being performance managed to death.' Another wondered: 'What do they do with all this information? The feedback is zilch.'" (The Sunday Times, 8th February 2004.)

ASIDE: Technically speaking, the root cause problem here is the repeated failure to cost into proposed management initiatives the true cost of any "derived data"[glossary] such initiatives might require. To ask a junior manager for "some figures" may seem, at first glance, an innocent and legitimate request on your part, but in most cases the systems YOU have given your junior manager to work with ought already to have given you that information. If they have not, and especially if that junior manager's team is already fully committed, then your request is a serious operational distraction, and should either be withdrawn or properly scheduled. Education and Health are constantly beset by requests such as this. 

"There is a huge gap between what the government says is happening [in the NHS] and the experience of the ordinary patient. This gap is caused by the inability of hospital management to manage. Nobody from the chief executive down enjoys the sort of authority taken for granted by any small business. Even your local corner store can sack someone incompetent. Not the NHS hospital. Political correctness, the power of the unions, and centrally set targets take precedence over patients' wellbeing. Their care is almost incidental. [.....] The forthright manager of a busy London accident and emergency department was clear what took up her time and energy. It was not the violence, the sheer number of patients, or even staff shortages - bad as these are - but the bureaucracy and 'endless meetings'. [.....] She spent only one-fifth of her time with her patients." (The Sunday Times, 8th February 2004.)

"Ministers have spent more than £50 million on the organisation set up to save the NHS money on agency staff - with no evidence it has had any success, it emerged yesterday. Nearly four years after NHS Professionals was established to help short-staffed hospitals, the bill for temporary nurses and doctors has soared, reaching £1.6 billion last year. [.....] The aim of NHS Professionals was to fill temporary vacancies with NHS staff. But there are no records available to show the agency has made any savings [because] the cost savings of using NHS Professionals were accrued locally and there was currently no central collection of such information." (The Daily Mail, 17th April 2004.)

"Hospitals are removing patients' names and medical records from their beds because of fears they might be breaking the Data Protection Act. NHS managers - frantic to ensure they stick to confusing confidentiality laws - have replaced the names with letters identifying different beds and removed medical notes. But last night critics claimed the new working practices are confusing doctors, placing an extra burden on nursing staff, and could put patients at risk of receiving the wrong treatment." (The Mail on Sunday, 29th February 2004.)

 "The full astonishing story of the failed asylum seeker who will cost the Health Service millions of pounds can be revealed today. [Name] was smuggled into the country and should have left when his application for asylum was turned down. But the 29-year-old Iraqi stayed on illegally and was paralysed in a horrific car crash that left him needing medical care for the rest of his life. The NHS trust where he was registered with a GP has had a £440,000 bill from the Department of Health for his treatment until this March. [.....] It is costing £4,000 a week, or £208,000 a year, to pay for specialist treatment that [name], a former policeman, requires." (The Daily Mail, 21st January 2004.) <<AUTHOR'S NOTE: During World War Two, a top-secret organisation known as the Special Operations Executive (SOE) organised the parachuting of spies and saboteurs into Nazi-occupied Europe. Once there, they slit throats, blew up railway lines, cut telephone wires, and generally diverted the enemy's resources in whatever way they could. So if [name] had been an SOE agent, he would already have earned a medal. We can only hope that when Britain trained the Iraqi counterpart to SOE [details] they left this particular topic off the syllabus. >>

"In the long run, the NHS is doomed if people continue to pour into the UK and gain free treatment courtesy of the British taxpayer. Already, HIV and TB sufferers from the Third World, especially sub-Saharan Africa, are putting a massive strain on many inner-city hospitals. Money is being spent on them rather than being made available for more intensive care beds or better run casualty departments for families who have paid into the system. [.....] Estimates of the cost of health tourism already run as high as £2 billion a year but there are no reliable figures." " (The Daily Express, 25th February 2004.)

"An NHS hospital is being forced to spend £6,000 a week on an illegal immigrant with infectious TB who refuses to be treated. [.....] Tens of thousands of pounds in taxpayers' money is being spent keeping him in a special isolation unit [to] reduce the risk of infecting other people. And the hospital, the Hammersmith in West London, has had to provide a 24-hour guard because the man [has] assaulted at least one of the medical staff caring for him." (The Mail on Sunday, 20th June 2004.)

3.11 System Study - The Case of the Missing Weapons of Mass Destruction

The failure to locate the Iraqi WMD conceals a number of important systems lessons, thus .....

Characteristic #1: Not many marks for systems thinking here. The data fit only a handful of explanatory scenarios, and in every one of them the system being managed has been clearly boundaried at the US national interest, nothing broader.

Characteristic #2: Not many marks for systems thinking here, either, with flow or flow management problems occurring at every level from the intelligence to the hardware. The WMD sensors and dials proved to be particularly unreliable, of course, and the cause-and-effect relationship between a nation's goodwill and its long-term influence has been ignored altogether!

Characteristics #3 to #5: No marks on any of these. The world does not know the true root cause of the Iraq War, nor - thanks to the ruthless efficiency of behind-closed-doors decision making - is it ever likely to find it out.

Characteristic #6: Nought out of ten for practicality, too, because this piece of malicious (US) and crass (UK) adventurism has made things inestimably worse. 

Characteristic #7: And nought out of ten here, too, it being difficult to find a single system of values in the history of humankind whose definitions of excellence and virtue embrace the goings on at the Abu Ghraib prison. [For an interesting introduction to the issues of the "law of war", we recommend Krauss and Lacey 2002/2004 online.]

3.12 System Study - The Economic State of the Nation

All in all, therefore, the systems which ought to be making Britain stable and efficient as a 21st century state are showing all the classical signs of overload. They creak under input, they are error-prone, their help-desks are always busy (and never ring back), they abandon long-established protections for the sake of temporary expedience, and - and this is possibly the most damning criticism of all - they are reactive rather than proactive; they simply bounce along from one crisis to another because they are controlled by non-systems-thinkers. Here are some glimpses of life in Britain today. Note how often the problem can be traced to party political dogma [remember Characteristic #7] and/or lack of awareness of flow [remember Characteristic #2] ..... 

"Public sector efficiency has collapsed since Labour came to power, according to a leaked Government document. It suggests that productivity in health, education, and other key areas is down by between 10 and 20 per cent. The figures cast fresh doubts on the effectiveness of the record rise in public sector spending being overseen by the Government. The Tories say much of the cash is being swallowed up by burgeoning bureaucracy. Some experts estimate that as much as £20 billion a year may be being wasted." (The Daily Mail, 26th April 2004.) Following a decade of rising taxes and deteriorating services, the National Audit Office reported in December 2003 on the extent of inefficiency and waste in the system of directing British taxpayers' money into services. It concluded that money (and we are talking £421 billion a year here) typically did not get where it was needed thanks to a combination of poor systems and poor management of those systems. Thus: "Billions of pounds of taxpayers' money is being wasted by Government departments because of poor budget control [.....]. Just a one per cent efficiency improvement in the utilisation of the £1447 billion of resources allocated to departments over the next three years would release just under £14.5 billion to redeploy to frontline services'." (The Daily Express, 12th December 2003) "One in five decisions on who should get state benefits and how much they should receive is wrong, a damning report from the public spending watchdog will say today. The errors are causing hardship and uncertainty for millions of vulnerable claimants as well as pouring money into the pockets of those not entitled to it. Edward Leigh, MP, the Conservative chairman of the Public Accounts Select Committee, said it was 'unacceptable' that six years after the introduction of reforms designed to improve the accuracy of decision-making, the error rate was still running at 20 per cent. The credibility of the entire social security system, which pays out £100 billion of benefits a year, was being undermined as a result, he added, with estimates of the cost of fraud and error ranging from £3 billion to £7 billion. Mr. Leigh blamed the complexity of the benefits system and poor management for the failures, as well as the proliferation of inadequate computer systems, many of which are run by the private sector companies that are not held to account for their mistakes. 'The whole system is far too complex. The public certainly does not understand it and the staff sometimes don't understand it. There are 33 different computer systems at the moment in the system for benefit payment,' he said." (The Times, 25th March 2004.) Moreover, thanks to the Private Finance Initiative (PFI), the government's way to live now and pay three times as much later, everything costs nothing. Thus: "Hey Presto ..... the cost of another hugely expensive PFI hospital has just found its way off the balance sheet of the government - and off the balance sheet of the private consortium that built it. The Queen Elizabeth Hospital in Woolwich is the second most expensive PFI hospital in the recent batch. But its cost (£118 million) is not accounted for in the accounts of the firm that built it [whose auditor] says the cost should be on the government's balance sheet. Naturally it isn't there either, because for chancellor Gordon Brown the whole point of PFI is to pretend that the government is not spending money on PFI hospital projects (for which taxpayers will be forking out huge sums for the next 30 years or so)." (Private Eye, 30th April 2004.)

Another burden on the taxpayer is the benefits system. This system, by its nature, has both friends and enemies, so again we must restrict our cases to those with a systems angle. Note the flow implications in the following .....

"He's at an age when most young men are happy to enjoy the single life with their friends. But 19-year-old [name] is already a father of four - and has another child on the way. Fortunately for the unemployed [name], money is not a problem when it comes to supporting his growing brood. Like his 23-year-old wife [name] he has not worked a day in his life but he is able to pick up well over £1,000 a month in benefits." (The Daily Mail, 6th August 2004.)

Historians of the future will also, we suspect, have a lot to say about the debt culture into which modern Britain has been deliberately allowed/encouraged to descend, and which has yet [May 2004] to unleash upon the economic fabric of the nation the earthquake havoc it has gradually been storing up .....

"The British public are borrowing, spending, and consuming as if there is no tomorrow: house price increases are accelerating, mortgage advances are soaring, and borrowing on plastic and via overdrafts continues to rise at spectacular rates. All this is happening despite the Bank of England's best efforts to slow the process by raising interest rates twice since November. We have become a nation - from the Government down - which is living on the never-never. [.....] The latest figures show that the total household debt still outstanding has reached 125 per cent of post-tax household income. This compares with just 90 per cent in 1998 ....." (The Daily Mail, 30th March 2004.) "Britain may be heading for a housing market crash which will send shockwaves across the whole economy, the International Monetary Fund warned yesterday. Its Word Economic Outlook report identified a property bubble and talked of the 'likelihood of a sharp price correction'. [.....] Families carrying large debts could be in serious trouble as a result of interest rate rises or higher unemployment, it warned." (The Daily Mail, 22nd April 2004.) "Gill Hankey, principal of the Bankruptcy Advisory Service, says that five years ago 90 per cent of her clients were people who ran small businesses. Now, half of them are personal bankrupts with an average debt of £30,000 to £50,000 (not including mortgages). As a nation, we are in debt to the tune of well over £900 billion, which is more than any other country in Europe. When interest rates go up, a bolt of pain shoots through the nation ....." (The Daily Express, 6th March 2004.) "Gordon Brown faces an embarrassing high-profile clash with the International Monetary Fund over £100 billion of borrowing that he has managed to keep off the Government's books. The IMF is putting the finishing touches to a report expected to insist that such public-private funding deals should be counted as government borrowing. Dr. Anne Krueger, the IMF's acting managing director, said last week that governments had 'no business' hiding private finance projects away from their balance sheets." (The Mail on Sunday, 25th April 2004.)

"Personal insolvencies hit 10,271 in the fourth quarter, up 29 pc in a year says the DTI. This is the highest since Britain emerged from recession in 1993". (The Daily Mail, 7th February 2004.) "The latest Bank of England figures for [credit card] debt - the amount still to be paid off - suggests that some people are already struggling with their card bills and are being hit by crippling interest and penalty charges. Many house buyers also appear to be covering higher mortgage bills by the short-term tactic of letting their credit card balances rise." (The Daily Mail, 5th May 2004.)

These are not just some dusty old economic statistics, either, for they conceal real human tragedies .....

"Stephen Lewis, 37, earned £22,000 a year and lived a modest family lifestyle. But he was swamped by easy credit. By the time he died he had 19 cards [.....]. Last night his MP, Labour's John Mann, promised to raise the tragedy with Chancellor Gordon brown and demanded action to enforce more responsible lending. He believes Mr. Lewis's story, while extreme, is reflected in thousands of homes across Britain. 'The attitude of the banks has been extraordinary and callous in the extreme', he said. 'It is absolutely clear that he was offered credit way beyond what a man earning £22,000 could afford to carry. [.....] Around £50,000 of the debt is thought to have been generated by interest, bank charges, and the cost of card protection insurance plans." (The Daily Mail, 11th March 2004.) "Eight months ago, [his wife] found her husband hanging from a rope tied to a rafter in the attic of their home in Worksop, Nottinghamshire. Without her knowing, he had signed up for a succession of credit cards during the previous four years, amassing debts of £70,000. Each time he was allowed a new one he used it to reduce the debt on another card. [.....] In the end, [suicide] was the only way he could repay his debt." (The Daily Mail, 12th March 2004.)

And Mr. Lewis is unlikely to be the only one .....

"Consumer groups and MPs have warned of a personal debt crisis. Yesterday even the Council of Mortgage Lenders warned against borrowing too much. Director Michael Coogan said: 'In these circumstances, we would urge borrowers to think carefully about how they would cope with higher interest rates.' Deirdre Hutton, chairman of the National Consumer Council, accused banks of recklessly chucking cash at people. 'Britain is in the grip of a credit binge,' she said. 'It has been reported that six million families have been caught in the debt trap and are having difficulties meeting repayments.' Citizens Advice said it has seen a 44 per cent increase in pleas for help from those in debt over the past six years. It is dealing with more than one million debts inquiries a year. Policy director Teresa Perchard said: 'Our research shows we are at a critical stage where personal debt problems threaten to overwhelm large numbers of people.'" (The Daily Mail, 23rd April 2004.) "The most obvious measure of the collapse in confidence in financial services is the saving ratio, writes David Smith. The ratio, saving as a proportion of household-disposable income, stood at 10% when the Labour government took office in 1997. By the year 2000 [it] had slumped to a record low of 4%." (The Sunday Times, 14th March 2004.) "Students are likely to graduate with debts averaging £33,700 by the end of the decade, a report warned yesterday. It predicted graduate debt will triple after higher tuition fees are imposed on students starting degree courses in 2006. The study for Barclays showed debt is expected to grow dramatically from its current level of £12,000 when the £1,125 a year limit on fees is raised." (The Daily Mail, 5th May 2004.) "In a damaging blow to Chancellor Gordon Brown, the UK dropped four places to 15th in the highly respected Global Competitiveness Report by the World Economic Forum. The Swiss-based organisation blamed the huge levels of debt built up by the Chancellor as well as fears over inflation and the poor state of the road and rail network." (The Daily Mail, 31st October 2003.)

Even the organisations who promise debt management advice are only in it - surprise, surprise - for the money (although in the following case the regulatory mechanisms seem to have worked for once) .....

"Two debt management companies that aggravated the financial problems suffered by 800 debt-laden people were yesterday wound up by the Department of Trade and Industry. The closure of [names] is the latest scandal to rock the controversial debt management company (DMC) sector, where firms act as intermediaries between heavily indebted individuals and their creditors. DMCs [.....] have been the subject of an Office of Fair Trading review, amid fears that vulnerable borrowers were being steered into lengthy repayment plans that levy high interest charges. [.....] DTI officials said the companies had exacerbated the financial problems of their clients [.....]. 'Although clients paid the companies between 12 and 44 per cent of their debts as a monthly management fee, there was no evidence of any debt management,' a DTI spokesman said." (The Times, 1st May 2004.)

4 - Joined Up Thinking

The case studies presented in Section 3 illustrate failings across the range of systems thinking skills, but the general picture is clear: we think we understand and control more than we actually do. And the world, eager to remind us of that fact, regularly bites back. With too tight a system boundary, for example, e-banking becomes more prone to cyber-attack rather than less, traffic signals become capable of causing rather than preventing fatalities, the lofty principles of a just and democratic society deteriorate into dribbling lunacy, nationally and internationally, and our politicians treat us like five-year-olds and get away with it.

So what does it take to build, implement, and operate systems which actually do what they are intended to do, and with wisdom and justice besides? Well, perhaps more than any other characteristic, systems thinkers do what is known in the vernacular as "joined up thinking", and in the summary table below we shall be suggesting where that joined up thinking is most urgently needed ..... 

System Study

Primary Deficit (s)

Improvement(s) Needed


Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Better customer interface design; better controls in general.

Fox River Grove

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.

Multiple Registration to Vote

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.; integration of government systems in general.

Soham 1 - Date protection vs child protection

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.; integration of government systems in general.

Soham 2 - The witness protection aspects

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.; integration of government systems in general.

Military Logistics

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.; integration of government systems in general.

Weapons of Mass Destruction

All Characteristics generally lacking, some totally so.

We wish we knew.

Insurance Mis-Selling and Corporate Mis-Accounting

The low-level scams indicate a primary deficit in Characteristic #2, and the high-level ones a deficit in Characteristic #7.

Better Characteristic #2 monitoring systems in both cases, although the first needs to operated internally to the organisation in question, and the second externally.

Immigration and Asylum

Characteristic #1 (My Box Mentality); Characteristic #6 (Ashby's Law).

Systems integration and superordinate thinking.

National Health Service - Derived Data

Characteristic #2.

Systems integration and superordinate thinking. Less very expensive micro-management.

Note how frequently Characteristic #1 and the Law of Requisite Variety are implicated. This is actually only to be expected, because the one is largely a reaction to the other. Systems are down-boundaried to help keep their complexity within comprehension, and only later does the downside factor - ie. the consequent absence of the big picture - make itself felt.

So are the necessary improvements ever likely to happen, or are we doomed to suffer, and perhaps one day even die from, uncontrolled complexity? Well the early signs are certainly not promising, because both Ashby's Law and the Peter Principle are effectively fundamental laws of nature. This means that the laws which give us politicians sans virtue and public servants sans insight are as inescapable as the laws of gravity. Yet there is an occasional glimmer of hope, for all that. To start with, we could take a lesson from those who design control environments for a living, because they reassure us that systems thinking is an educable skill, given a certain minimum level of wit. Typical of this cutting edge research is MacLeod and Smeall (2001), who have studied best design practice in Royal Navy warships. They see effective command and control as requiring interaction between a "ship's bridge philosophy" and an "integrated platform management system" (IPMS), and it is worth looking at what is being proposed in case there are more general lessons to be learned. Here, briefly, is their proposed system architecture .....

"Unlike present naval control systems which tend to operate separate combat management, ship data management, machinery control, etc., the [IPMS] will use a central backbone architecture connected to all management systems via a common real time capable Local Area Network (LAN)." (MacLeod and Smeall, 2001, pp297-298.)

Changes to "ship's bridge technology" will help implement this new philosophy, ensuring that the electronics and the physical environment interact smoothly with the cognitive ergonomics of the personnel involved. Specifically, there will be a "lower level enclosed bridge" (the "command bridge" or "conning bridge"), supplemented by an "upper level cockpit" with 360º vision. Metaphorically, therefore, the proposed system is going out of its way to deliver adequate perspective - thus validating our Characteristic #1. The system will also provide reliable management information, thus helping to deliver Characteristics #2 to #6. Indeed, the only characteristic left up in the air is #7, the requirement for good mechanism to be deployed towards the common good, and we recognise that we are probably a long way from solving that particular problem.

So what we have in our ideal warship is what we need in the world at large. We need systems thinkers to help those who are not systems thinkers become systems thinkers. We also need computer systems which "know" what their human colleagues are thinking, thus ensuring the flow of accurate information to those ready and able to appreciate what it really means. And all in the interest of acceptable longer term visions. That is the requirement. May the mechanisms of implementation arrive soon, for we should all be deeply concerned by what will happen if they do not.

5 - References

See the Master References List