Monday, January 25, 2010

Books: Adaptive systems - Dynamic Networks - Evolutionary Dynamics

I just finished reading "Complex Adaptive Systems: An Introduction to Computational Models of Social Life", by John H Miller and Scott E Page. Interesting book, dealing with problems that are dear to me, although from a fairly different perspective from the one I am used to.

I come to this from the angle of decision management. As Carole-Ann Matignon writes in her blog, a lot of developments are expected to make 2010 an interesting year for the discipline. Dealing with uncertainty is one of them, and one of the key sources of uncertainty is related to complexity.

One aspect that deserves attention is how we can manage decisions in light of the effects of the very high level of interconnectedness between multiple entities, with relations that are complex, non linear, etc. In the business world I have up to very recently been active in, this translates into the effects of customer psychology, mass effects, etc. All problems that frequently vex traditional approaches, and tend to create challenges to standard modeling approaches.

The book properly highlights the key difference between a complex system and a complicated system: the complex system's behavior cannot be explained by reducing it to sub-components and explaining the components and their interactions. Which, in a certain sense, creates a significant challenge to some of the traditional scientific or engineering approaches. That is what makes these complex systems so fascinating: they are composed of a multitude of agents inter-related and inter-acting in massive terms, yet they exhibit emerging behavior similar, a posteriori , to that of a single agent but that cannot be explained by decomposing it.

John H Holland, from the Santa Institute, has written a lot about this subject. His analysis of the characteristics of ComplexAdaptive Systems is often reduced to this: order is emergent (or behavior is emergent), history is irreversible, future behavior is often unpredictable. I am not sure about the last point - it's not as much a question of whether the future behavior is predictable, it's much more a question of whether traditional approaches allow the prediction of future behavior.
The key challenge is how to model that behavior. The typical techniques used in most decision management approaches today do not deal with complex systems - they focus only on simple agent behavior, modeling away through extreme simplification the network effects. When those intervene in real life, the models become totally irrelevant - and I would venture to say that a lot of the events we've seen in the past decade and in particular the last couple of years have shown the limits of the simplification. After all, it could be claimed that network effects are largely responsible for the propagation of the bad loan practice, as well as the reactions when the bubble collapsed.

It reminds me of the classical work "The Structure and Dynamics of Networks", another nice - though less accessible, collection of papers (Jean-Marie Chauvet refers to it in another post - in French but I am sure he will gladly translate should you ask for it). Read it, challenging by parts (some I ended up skipping) but good. And let me know what you got from it.

Not in the same space, but connected, I got "Evolutionary Dynamics: Exploring the Equations of Life" by Martin Nowak for my 14 yo old. Probably a little bit too ambitious for him (I read it first and am still waiting for him to pick it up), but the book is beautiful, and the theme is connected to Complex Adaptive Systems. Nowak is an expert, and his book covers a wide range of analytic approaches that should become part of the arsenal of those studying complex systems.

This whole thing may seem like a scientist's dream (remember, I am not a scientist), but the reality is that the large consumer-oriented companies are already dealing with this kind of problem. Just think for a minute about what happens in an EBay auction, or an Amazon recommendation.

I am looking forward to significant synthesis of the approaches, and, as a result, techniques that will enrich in the future the way we approach decision management.

What's your take?

3 comments:

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Jason said...

Carlos,
I'm curious to know what your thoughts are on where you think this might be going too. I'm new to CAS, but the work behind it absolutely fascinates me. I currently work in a highly complex regulated arena that deals with the aftermath of the loan crisis, and most of it is beyond what the business leaders truly understand. As I try to model this into software I often struggle with how I can improve upon this as my current metaphors don't seem to address it fully.

emre said...

You should get him a layman's book written by scientists instead. Try Albert-Lazslo Barabasi or James Fowler.