Our global networks have generated many benefits and new opportunities. However, they have also established highways for failure propagation, which can ultimately result in man-made disasters.
For example, today’s quick spreading of emerging epidemics is largely a result of global air traffic, with serious impacts on global health, social welfare, and economic systems.
Helbing’s publication illustrates how cascade effects and complex dynamics amplify the vulnerability of networked systems. For example, just a few long-distance connections can largely decrease our ability to mitigate the threats posed by global pandemics. Initially beneficial trends, such as globalization, increasing network densities, higher complexity, and an acceleration of institutional decision processes may ultimately push man-made or human-influenced systems towards systemic instability, Helbing finds. Systemic instability refers to a system, which will get out of control sooner or later, even if everybody involved is well skilled, highly motivated and behaving properly. Crowd disasters are shocking examples illustrating that many deaths may occur even when everybody tries hard not to hurt anyone.
Our Intuition of Systemic Risks Is Misleading
Networking system components that are well-behaved in separation may create counter-intuitive emergent system behaviors, which are not well-behaved at all. For example, cooperative behavior might unexpectedly break down as the connectivity of interaction partners grows. “Applying this to the global network of banks, this might actually have caused the financial meltdown in 2008,” believes Helbing.
Globally networked risks are difficult to identify, map and understand, since there are often no evident, unique cause-effect relationships. Failure rates may change depending on the random path taken by the system, with the consequence of increasing risks as cascade failures progress, thereby decreasing the capacity of the system to recover. “In certain cases, cascade effects might reach any size, and the damage might be practically unbounded,” says Helbing. “This is quite disturbing and hard to imagine.” All of these features make strongly coupled, complex systems difficult to predict and control, such that our attempts to manage them go astray.
“Take the financial system,” says Helbing. “The financial crisis hit regulators by surprise.” But back in 2003, the legendary investor Warren Buffet warned of mega-catastrophic risks created by large-scale investments into financial derivatives. It took 5 years until the “investment time bomb” exploded, causing losses of trillions of dollars to our economy. “The financial architecture is not properly designed,” concludes Helbing. “The system lacks breaking points, as we have them in our electrical system.” This allows local problems to spread globally, thereby reaching catastrophic dimensions.
A Global Ticking Time Bomb?
Have we unintentionally created a global time bomb? If so, what kinds of global catastrophic scenarios might humans face in complex societies? A collapse of the world economy or of our information and communication systems? Global pandemics? Unsustainable growth or environmental change? A global food or energy crisis? A cultural clash or global-scale conflict? Or will we face a combination of these contagious phenomena – a scenario that the World Economic Forum calls the “perfect storm”?
“While analyzing such global risks,” says Helbing, “one must bear in mind that the propagation speed of destructive cascade effects might be slow, but nevertheless hard to stop. It is time to recognize that crowd disasters, conflicts, revolutions, wars, and financial crises are the undesired result of operating socio-economic systems in the wrong parameter range, where systems are unstable.” In the past, these social problems seemed to be puzzling, unrelated, and almost “God-given” phenomena one had to live with. Nowadays, thanks to new complexity science models and large-scale data sets (“Big Data”), one can analyze and understand the underlying mechanisms, which let complex systems get out of control.
Disasters should not be considered “bad luck”. They are a result of inappropriate interactions and institutional settings, caused by humans. Even worse, they are often the consequence of a flawed understanding of counter-intuitive system behaviors. “For example, it is surprising that we didn’t have sufficient precautions against a financial crisis and well-elaborated contingency plans,” states Helbing. “Perhaps, this is because there should not be any bubbles and crashes according to the predominant theoretical paradigm of efficient markets.” Conventional thinking can cause fateful decisions and the repetition of previous mistakes. “In other words: While we want to do the right thing, we often do wrong things,” concludes Helbing. This obviously calls for a paradigm shift in our thinking. “For example, we may try to promote innovation, but suffer economic decline, because innovation requires diversity more than homogenization.”
Read more: Global Networks Must Be Re-Designed
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