The realisation that dynamic systems in economic and social domains behave in a similar manner to those found in nature is gaining momentum...but, unless the comparisons are drawn again and again the lessons will be overlooked by those whose belief systems cannot see beyond the models...no matter how flawed...that brought us to this point. I hope this presentation helps your understanding in some way. If so spread the word we NEED to get to work!

1. Financial lessons from nature
“Systems thinking”, the growth of
complexity and requirements for
resilience

2. Fractal [self similar]
systems
Adaptive cycles are the
foundation of both natural
ecological and human socio-
economic systems, and have
been investigated independently
from very different perspectives
by ecologists and financial
analysts who, until some
“thought leadership” from the
highest levels within Bank of
England, had almost certainly
never collaborated.
It is interesting then to look at the
strong correspondence of the
self-similar hierarchical patterns,
best described as fractals, which
emerge from both fields. This
form of organisation seems to be
a fundamental dynamic in many
areas.

3. Growth phase
During the growth phase the
system finds an abundance of
resources available. Expansion
and exploration of new
opportunities are key concepts
within this stage. “When new
ecological spaces open up – due,
for instance, to forest fires, or
retreating glaciers, or many other
things- resources needed for
other species to grow are made
available. There’s more light
reaching the soil surface when
large trees are toppled, or burned
to the ground, for example.”

4. Conservation
[consolidation) phase
“The "r" phase is transitory, and
as the system matures, it is
replaced by the K phase.
Eventually slower growing, long
lived species or entities enter the
system. Resources become less
widely available as they become
“locked up”… The K phase is
sometimes called the
conservation phase, because
energy acquired goes into
maintaining or conserving
existing structure, rather than
building new structure. In this
phase, a few dominant species or
companies or countries … have
acquired many of the resources
and are controlling the way they
can be used.”

5. Release phase
“Often systems rapidly pass into
a phase called omega. This is also
referred to as the release (or
creative destruction) phase
because structure, relationships,
capital or complexity
accumulated during the r and K
phases is released (often in a
dramatic or abrupt fashion). …
Plants may die … or a company
may go bankrupt, releasing
workers and decommissioning
factories or offices.”

6. Reorganisation phase
“The fourth, or alpha phase, is a
period of reorganisation, in which
some of the entities previously
released begin to re-structure
but not necessarily as they were
before. This phase can mark the
beginning of another trip through
an adaptive cycle … Many new
entities may enter the system,
and innovation becomes more
probable.”

7. Nested adaptive cycles:
in nature and economy
Adaptive cycles do not exist in
isolation. Local ecosystem cycles are
embedded in larger and slower-moving
regional cycles operating over years
and decades, which are in turn part of
global climate and elemental cycles
(carbon, nitrogen, phosphorus etc.) that
may unfold over centuries or millennia.
These larger cycles can act as stabilising
factors by adding a 'memory effect', or
wealth reservoir, enabling rapid
regeneration following a localized
setback, but only if the larger cycle is
not in its own contraction and
reorganisation phase.
In addition to being part of larger cycles,
dynamic ecosystems are also composed
of smaller and faster-moving cycles of
growth and decay, operating on much
shorter time horizons. This nested set of
self-similar structures allows for both
persistence and innovation.
"We had the complete collapse of a model based on consumer
spending, a housing bubble, an overweight banking system - three
banks, each of them with a balance sheet larger than the British
economy.
"It was a disaster waiting to happen and it did happen. It has done
profound damage and it is damage that is going to last a long time."
Vince Cable, Business Secretary

8. The “butterfly effect” and
the nature of systemic risk
Collapse, if and when it comes again, will this time be global. No longer can any individual nation
collapse. World civilization will disintegrate as a whole. Competitors who evolve as peers collapse
in like manner. J Tainter
We have become very accomplished at
assessing and managing many risks i.e. the
potential for losses arising from events that
we have past experience of.
But our lack of experience in dealing with the
“emerging risks” and uncertainties of non-
linear systems has already been
demonstrated by the collapse of global
banking and a succession of natural
disasters.
The ability to apply lessons learnt, from the
behaviour of complex natural systems to the,
Globally inter-connected, dynamic [non-
linear] business systems now exists .
Our awareness of the nature and cost of “low
probability, high impact “[Black Swan] events
illustrate the need to build resilient systems
and networks that rely upon inter-
connectedness for their survival. Otherwise
the characteristics of fragile, self-similar,
systems are communicated [butterfly effect]
to those connected to it …failure can lead to
sudden collapse across domains…

9. "It is not the strongest of the species that survive,
nor the most intelligent, but the one most responsive
to change."
Charles Darwin

10. The complexity of inter-
connectedness can be plainly seen in
every area of modern life – this map
shows UK internet density.
But interdependence is a feature of
the most successful and resilient
systems: ecological; biological;
societal; economic.
Inter-connectedness is the conduit for
risk and uncertainty that are
generated and communicated among
systems and across networks.
We define resilience, formally, as the
capacity of a system to absorb
disturbance and reorganise while
undergoing change so as to still retain
essentially the same function,
structure and feedbacks - and
therefore the same “functionality”.
Resilience:
amid growing complexity

11. Assessing the health of a
business system [SME]
“Imagine assessing the robustness
of the electricity grid with data on
power stations but not on the
power lines connecting them”
But that is, essentially, what we do by
sampling the type of information used
for Accounting purposes - shown (right).
It serves as a means to benchmark
against past or peer performance –
although data can be 12 (or more)
months old and is subject to
manipulation to achieve a specific
outcome – but fails to inform as to the
“health” of the system…
…vital information for:
a company owner
a firm involved in “risk transfer”
suppliers or customers
establishing a resilient economy!

12. Characteristics of a Highly Complex Business or System
Difficult to manage
Highly exposed
Vulnerable
Unhealthy
Unsustainable
Fragile

13. What’s in a name – a logo – a brand?
…what goes around comes around
You don’t have to be BIG, bent, bad
at business or just plain greedy to get
things wrong or to suffer from
unforeseen circumstances
…ALTHOUGH it doesn’t help!
It hurts. Many people have suffered
and will continue to do so for some
time but…
what have WE learnt?
what have THEY learnt?
what chance real CHANGE?
what price TRANSPARENCY?

14. …the dynamic systems of the new modernity are non-linear and, therefore,
IMPOSSIBLE to measure and manage utilising conventional tools.
Creator User
SYSTEM owners are accountable to STAKEHOLDERS across the ECOSYSTEM,
including supply chain PARTNERS and inter-connected NETWORKS . SHARING
the responsibility to deliver SUSTAINABLE CUSTOMER VALUE. TRANSPARENCY is
the foundation for the TRUST required for a truly INTERDEPENDENT system.

15. Ontonix UK
• Contact:
– David G Wilson, CEO
– m. + 44 (0) 7919 917150
– e. david@ontonix.com
– w. www.ontonix.com
• Want to connect with me on Linkedin?
http://www.linkedin.com/in/davidlongshanks
• Webpage and blog:
Ontonix UK Ltd. Registered number: SC380992. Registered office: The C'a'doro, 45 Gordon Street, Glasgow, G1 3PE
Credit: Much of the inspiration and content for this
presentation came from the analysis of Buzz Hollings’ work by:
http://theautomaticearth.blogspot.com