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Systems Thinking
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SystemsThinking.md

Systems thinking

Intro

  • how I heard about systems thinking
  • what it is
  • how I applied it at Prezi
  • steal my job!

Part I: How I heard about systems thinking

  • Elon Musk, south african entreprenur
    • what are his 3 most famous startups? (Paypal, reusable rockets)
    • I usually read articles about Elon Musk
    • how does he think to arrive at good problems and good solution?
    • what sets Elon Musk apart:
      • reasoning from first principles vs. reasoning by analogy: "Boil things down to their fundamental truths and reason up from there, as opposed to reasoning by analogy. Through most of our life, we get through life by reasoning by analogy, which essentially means copying what other people do with slight variations. And you have to do that. Otherwise, mentally, you wouldn't be able to get through the day. But when you want to do something new, you have to apply the physics approach. Physics is really figuring out how to discover new things that are counterintuitive."
      • systems thinking: model complexity by breaking it down into parts, connections and function
      • other 'thinkings' [1]:
        • visionary: imagine alternative futures
        • creative: reach outside of the existing vocabulary
        • analytical: numbers, cause and effect
        • influental: influence others to see your view and reconsider their beliefs
  • Donna Meadows, american environmental scientist [2]
    • Harvard, MIT
    • died in 2001
    • Balaton Group: yearly meet of ecologists about sustainability
    • World3: models the limits of Earth's capacity to support human economic expansion [3]
    • two famous books:
      • Limits to Growth [4]
      • Thinking in Systems [5]

Part II: What it is

  • good outline is here [6]
  • system = interconnected set of elements organized to achieve some purpose:
    • elements
    • interconnections
    • a function or purpose
  • more than the sum of its parts
  • examples:
    • water in a tub
    • an SaaS business
    • the solar system
  • stocks and flows:
    • stock = memory of the system, buffers, acts as a shock absorber
    • water in tub
    • active users in an SaaS business: registration, retention, churn
  • feedback loops
    • thermostat mechanism that regulates the heating of a room
    • some guy in Budapest shows Prezi at a meetup, attendees think it's cool and register
  • it's not just "oh, differential equations"!
  • function or purpose: observe behaviour, not rhetoric
  • system purpose != component purpose
    • eg. soccer player wants to make money, team wants to win championship
    • eg. university student wants to get a job, university wants to disseminate knowledge
    • you can change componenets (all of them), but not interconnections and purpose
      • interconnections: change rules of soccer to basketball?
      • purpose: goal of team is to lose?
  • why systems work so well:
    • resiliance: ability of the system to bounce back, arises from complex feedback loops
    • self-organization: capacity of the system to make its own structure more complex
    • hierarchy
  • system behaviour: how systems surprise us
    • non-linearity: "if we increase retention by relative 10%, will our revenue also increase 10%? no!"
    • limits to growth
    • bounded rationality
  • system traps:
    1. policy resistance: subsystems have goals inconsistent with the system goal
    2. tragedy of the commons: abuse of a shared resource by overusing it: delayed negative feedback loop
    3. drift to low performance: past low performance sets current performance expectations/goals
    4. escalation: state of one stock is determined by trying to surpass another stock, and vica versa => collapse, because exponential growth cannot continue
    5. success to the successful: winner is systematically rewarded with means to win again => winners take all
    6. shifting the burden to the intervenor: solution to a problem reduces symptoms, but doesn't solve the underlying problem, destroys the self-maintaining and healing capacity of the system, and as the system erodes, and more and more of the intervention will be required to keep the system functioning
    7. rule beating: bad rules that result in an apperent obeyance to the rules, but actually distorts the system
    8. seeking the wrong goal: system seeks the goal, but it will not result in the desired outcome
  • Essay: 'Leverage Points: Places to Intervene in a System' [7]:
    • leverage: small shift can produce big change
    • identified 12 leverage points:
      1. Constants, parameters, numbers (such as subsidies, taxes, standards)
      2. The size of buffers and other stabilizing stocks, relative to their flows
      3. Structure of material stocks and flows (such as transport network, population age structures)
      4. Length of delays, relative to the rate of system changes
      5. Strength of negative feedback loops, relative to the effect they are trying to correct against
      6. Gain around driving positive feedback loops
      7. Structure of information flow (who does and does not have access to what kinds of information)
      8. Rules of the system (such as incentives, punishment, constraints)
      9. Power to add, change, evolve, or self-organize system structure
      10. Goal of the system
      11. Mindset or paradigm that the system — its goals, structure, rules, delays, parameters — arises from
      12. Power to transcend paradigms
  • Meadows' main result: World3 (global computer model)
    1. the food system, dealing with agriculture and food production
    2. the industrial system
    3. the population system
    4. the non-renewable resources system
    5. the pollution system

Part III: The Prezi business model

  • built a model of the Prezi business model in a 2 day hackathon with other Prezilians
    • demo
    • purpose of model: answer "what if" questions
    • few hundred lines of Javascript
    • understand which are the good leverage points for Prezi
    • what is the effect of improving parameter P by 1%?
    • components:
      • visitors
      • website conversion => users
      • trial enter %
      • trial to pay % => paying users
      • license cost
      • renewal rate => revenue
      • retention
      • prezis created
      • prezis viewed
      • viral loop
    • surprise: improving retention by a "believable amount" would not have a big effect for us
    • optimize website: registration funnel, trial experience, upgrades
  • leverage points for Prezi:
    1. Parameters: price of a PRO license
    2. Length of delays: how long is the trial period
    3. Structure of information flow: did you know that all your Prezis are public if you use a PUBLIC license?
    4. Active users? Prezis? Paying users? Revenue? Profit?
    5. Prezi culture

Conclusion: steal my job

References

[1] http://www.fastcompany.com/3022444/leadership-now/5-ways-to-reframe-your-thinking-to-be-more-like-elon-musk
[2] http://en.wikipedia.org/wiki/Donella_Meadows
[3] http://insightmaker.com/insight/1954
[4] http://www.amazon.com/Limits-Growth-Donella-H-Meadows/dp/0451057678
[5] http://www.amazon.com/Thinking-Systems-Donella-H-Meadows/dp/1603580557
[6] http://kevinkauzlaric.com/thinking-in-systems-book-review/
[7] http://en.wikipedia.org/wiki/Twelve_leverage_points

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