New Year’s resolutions going well?
Most failures in life aren't random—they're predictable patterns we keep repeating. The world in which we live is an accumulation of the systems we have built, purposefully or not. The outcome and behaviour of those systems meet at the intersection of our imagined, neat, linear worldview and a nonlinear, messy reality.
I previously explained how to become a systems thinker, but unless you understand how to spot system traps, you’ll be doomed to repeat them repeatedly.
While we yearn for predictable, linear relationships where cause leads directly to effect, real-world systems stubbornly refuse to follow our neat mental models. They engulf and entangle themselves messily in our nonlinear world. Some systems have behavioural patterns that are so undesirable that change or intervention is needed. We call these system archetypes.
Below are 8 system archetypes every system thinker needs to know.
Policy-Resistance
When multiple actors in a system have conflicting objectives, they often end up in a draining battle to maintain the status quo.
If one party were to increase their efforts, it would be met with equal or greater force, intensifying the cycle of escalation. This dynamic plays like a perpetual tug of war as each strains to pull the system toward their preferred state. This pattern manifests itself in everything from foreign policy, to bitter political standoffs and arms races.
You have to ask yourself who benefits from such a broken system that seems to satisfy nobody.
The Tragedy of the Commons
Ecologist Garrett Hardin described the commons system in a classic article in 1968. Hardin used as his opening example a common grazing land:
Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons... Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?"...Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1…Since, however, the effects of overgrazing are shared by all,…the negative utility for any particular decision-making herdsman is only a fraction of-1. The rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another…But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each, is locked into a system that compels him to increase his herd without limit-in a world that is limited.
“Ruin is the destination toward which all rush, each pursuing his own best interest.”
Individual rationality in shared resources inevitably leads to collective disaster.
When faced with common resources like forests, fisheries, or clean air, humans consistently demonstrate a remarkable blindness to collective consequences. Each person’s seemingly innocent decision to take "just a little more" compounds with thousands of identical choices, creating a devastating cascade of overuse. This pattern of individual rationality leading to collective irrationality plays out across scales, from local fishing spots to global climate change.
The tragedy of the commons demonstrates our limited perspective on long-term consequences.
Drift to Low Performance
Past poor performance creates a dangerous self-reinforcing cycle in systems.
A reinforcing feedback loop of eroding standards continuously drags the system standards lower and lower. Each decline in performance makes the next decline more acceptable-this is how companies, relationships and values die. Putting the breaks on this drift can only be done from a commitment to continuous performance.
If mediocrity is what you accept. Mediocrity is what you will get.
Escalation
Escalation is one of the oldest tricks in the ‘Dick Swinging Competition Playbook.’
Unfortunately, when parties enter into competitive escalation, they trigger a dangerous feedback loop that grows not linearly, but exponentially. Escalation is how the Americans ended the Second World War at the expense of hundreds of thousands of Japanese people. It’s also likely that escalation is how something even more catastrophic will happen in future. What starts as a small slight can quickly become a major escalation of political and military might.
This pattern isn’t exclusive to foreign policy or war with the pattern repeating in countless human interactions ranging from playground disputes, gang warfare, smear campaigns, and arguments with loved ones.
The obvious answer to combat escalation is to never get involved in the first place. Even more obvious is just how difficult that is to put into practice.
The Competitive Exclusion Principle
"Market competition systematically eliminates market competition."
In any shared ecosystem, competition for resources inevitably leads to domination by a single species. Cough!
One of the species will be more resourceful, will multiply more and will dominate the other species, often to local extinction. The competitive exclusion principle demonstrates how shared resource dependency leads to eventual dominance by a single species. This natural law shapes the distribution and survival of species across ecosystems.
Nature eliminates redundancy through competition. If the winners are allowed to continue winning unbounded, a reinforcing feedback loop will be introduced where it’s easier for the winners to keep winning and the losers to keep losing. A zero-sum game. Moving away from nature, you can see this play out with companies that are hit with antitrust lawsuits against them for monopolising sectors, industries or commodities.
Nature, and more so businesses, are brutal at eliminating redundant players.
Addiction
Surface-level solutions often mask deeper systemic problems while making them worse.
Quick fixes like drugs, money, or social media likes can provide immediate relief from discomfort, but only temporarily. Be on the lookout for symptom-relieving, or signal-denying policies or practices that do not truly intervene to disrupt the negative reinforcing feedback loop. The existing reinforcing feedback loop needs to atrophy and be replaced with a new reinforcing feedback loop that will contribute to the desired behaviour. As the system becomes more reliant on the new behaviour, the more the existing negative reinforcing feedback loop erodes.
True intervention comes from replacing broken cycles and not just treating their symptoms.
Rule Beating
When systems are perceived as unfair and they are disliked, humans become remarkably creative at circumventing them.
From corporate tax havens and the use of anonymous social media accounts to bullying and harassment, people will always think of ingenious ways to ‘beat the rules.’ The sophistication not only shows the creative plays people will use to go around the game, but the insidious ways that poor rules contribute to nefarious systems’ behaviour. I once watched in amazement at the speed and technicality of a bunch of lads stealing a car in the dark of night. Potential F1 pit team there I thought, if only they’d apply themselves.
If you have poor or unfair rules then people will play the game and find ways to manipulate them in their favour.
Seeking the wrong goal
You’ve probably heard the saying “Build systems, not goals?” I’ve said it myself, but it’s not 100% accurate.
Goals are the direction setters for systems. Systems need goals.
Without clear and definable parameters, the balancing and reinforcing feedback loops can not work to produce the desired outcome or behaviour. If the desired system state is a certain water level in a reservoir, and there is no monitoring or intervention system in place to stop it from dropping below that level, then water shortages will ensue. If your goal is to bring in more customers for your business, but your focus and resources are directed at profitability, then don’t be surprised if you have a different outcome from what you expected.
Clear goals enable systems to self-correct and maintain desired states.
When creating systems you need to be especially careful not to confuse effort with results, or else you will produce a system that produces effort and not results. Systems obediently follow the parameters you ask them to produce:
Once upon a time, people raced sailboats not for millions of dollars or for national glory, but just for the fun of it. They raced the boats they already had for normal purposes, boats that were designed for fishing, or transporting goods, or sailing around on weekends.
It quickly was observed that races are more interesting if the competitors are roughly equal in speed and maneuverability. So rules evolved, that defined various classes of boat by length and sail area and other parameters, and that restricted races to competitors of the same class.
Soon boats were being designed not for normal sailing, but for winning races within the categories defined by the rules. They squeezed the last possible burst of speed out of a square inch of sail, or the lightest possible load out of a standard-sized rudder. These boats were strangelooking and strange-handling, not at all the sort of boat you would want to take out fishing or for a Sunday sail. As the races became more serious, the rules became stricter and the boat designs more bizarre.
Now racing sailboats are extremely fast, highly responsive, and nearly unseaworthy. They need athletic and expert crews to manage them. No one would think of using an America's Cup yacht for any purpose other than racing within the rules. The boats are so optimized around the present rules that they have lost all resilience. Any change in the rules would render them useless.
The boats used for the America’s Cup demonstrate perfectly the example of correct goal setting, but demonstrate a horrifying fragility to the slightest of change. This advice should not be ignored when we create our systems.
Final Thoughts
Systems are incredibly complex even at a basic level. Getting them to ‘behave’ the way you want or expect them to is difficult even when measuring single stocks (parameters). On a global scale, this must be neigh on impossible. When I read about these traps I was reminded of the late Charlie Mungers insistence on inverting problems.
Therefore, if you want to build systems or look at ways to adapt them, ask yourself how picking undefined or misaligned goals from the get-go is going to help you. Ask yourself if the rules you have in place are fair and just and if not, would people likely try to get around them? Ask yourself if you take “just a little more” and other people are thinking the same, what might the consequences be? Ask yourself what continued poor performance might look like in achieving your desired outcomes. Both on a personal and professional level. And finally, ask yourself how putting a proverbial bandaid on your problems for a temporary reprieve is going to help you in the long run.
Until next time, Karl (The School of Knowledge).
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This is excellent application of inversion thinking to systems design. You’re absolutely right that starting with “how could this fail catastrophically” reveals design flaws that positive framing obscures. Misaligned goals, unjust rules that invite gaming, tragedy of the commons dynamics, performance decay, temporary fixes that compound problems, these are all predictable failure modes worth designing against upfront. Munger’s inversion works because systems thinking requires anticipating second-order effects, and asking “how does this break” surfaces those faster than “how does this succeed.”
It’s fascinating how systems can become so ingrained that they turn dysfunctional, or how they shift so gradually that we end up locked into behaviors that no longer serve us.