Pierre Massotte - Complex Decision-Making in Economy and Finance

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Pierre Massotte

Patrick Corsi

First published 2020 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address:

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© ISTE Ltd 2020

The rights of Pierre Massotte and Patrick Corsi to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

Library of Congress Control Number: 2019953240

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A CIP record for this book is available from the British Library

ISBN 978-1-78630-502-2

The world is constantly changing. Disruptions have come of age. Their rhythms and frequencies are accelerating, and the perception of the world in which we live continues to evolve towards ever greater sophistication and complexity. Surprisingly, while complexity is found everywhere and remains intrinsic to Nature, various works have led to a curious discovery: that a reduction in the level of complexity is not an advantage in terms of diversity – which leads to the creation of solutions and of co-evolution[BOU 03], for instance for the development of new business processes and information systems.

Complexity is part of the times. Due to nonlinearities and feedback loops, it provides robustness and at the same time adaptability to systems. On the contrary, when too low, it leads to problems in terms of conduct or stability of results. Those can even be “deadly” and hinder the very evolution of Nature’s systems.

The science of complexity is only in its infancy, and we understand scientifically only a tiny part of it. It would therefore be pretentious to want to explain its theory and foundations. Yet, this science has allowed new concepts to emerge. We were confronted with this reality at IBM Europe every time its Advanced Technologies Group – the ATG Competency Centerhad to deal with issues related to the management and control of complex systems. In the absence of theoretical foundations, it was from experimentation and pragmatism that we built our own “philosophy” on complexity. Furthermore, the Ecole de Mines d’Alès in Southern France enabled us to better develop and control certain aspects of complexity and to consolidate these industrial experiences.

This book discusses some principles and methodologies designed to better understand and control, or even manipulate, these new concepts. The transition from “simple” to “complex” applies to most natural phenomena because they are governed by the same fundamental laws, from the infinitely small to the infinitely large – the cosmos – and whatever the domains of activity we consider; here lies a principle of universality. The results are already far-reaching, and the approaches we have developed, by also using multidisciplinary concepts, can be implemented in most of the complex processes or systems we encounter in the socio-economic world. Today, the contribution of information technologies makes it possible to finally provide efficient solutions to problems that were sometimes known for a long time.

At the system behavior level, a major consequence existing in our industrial systems is their unpredictability. Considering the general applicability of the fact, repercussions abound in both social and political areas. As an example, the pattern of the European Union’s construction is currently going through a testing period filled with disruptions, chaotic moments, periods of crisis and, in the end, a situation that we hardly see where it will lead to.

Let us situate our conversation on this well-known example, the construction of Europe. The following analysis is based on comments made by Hubert Védrine, a former French Minister of Foreign Affairs, at a conference held on March 3, 2004 at the Rotary Club of Paris entitled “ L’évolution de l’Europe ” (the Evolution of Europe). For the record, the construction of Europe also involves integrating countries through closer technical and industrial links, increased economic interdependence and an attempt to generate a political superstructure encompassing the member states. This therefore constitutes a new complexity levelof the system called the European Union or the EU, desired by economic elites, yet which may lead to extreme scenarios. Here lie three general points:

1 1) Any system must be analyzed in its wholeness. Example: we cannot make an economic system more complex by cutting ourselves off from political realities and lacking the pragmatic common sense linked to the cultural and social constraints of our environment.

2 2) In any complexification process, the lack of meta-rules (rules on rules), of unifying projects (objectives) and of synchronization can result in a loss of coherence and homogeneity. As a result, new organizations cannot emerge.

3 3) In any complexification process, an excessive aggregation of entities associated with weak interactions leads to a “soft” or quite stable system, i.e. lacking flexibility, in which convergence towards a source is difficult. In the above example, the EU cannot then be constituted or unified based on priority and common issues.