Only CIOs are in a position to take a look at the whole picture

The job description of the CIO seems rather mercurial: they have to understand technology, business, legal and accounting and project management, but most of all they have to be practical experts at understanding systems. This ability to look at a whole system encompassing many components from technology to people to policy to markets may be a much-needed skill in this age of complexity.

Ever since I was a boy, I have had a morbid interest in plane crashes, not for the drama, but for the intricate process of elucidating the cause. Perhaps it was this that helped launch me into a career based on the mathematics of complex systems.

There are shelves of books on such doomed flights and reassuringly the final chapter always gives a simply stated cause. However it is rarely that simple. Yes, the turbine blade exploded, but what if the flight control position had been designed to run further from the engine? What if the pilot had tried to use engine power to steer? What if the inspector had spotted the turbine manufacturing fault 17 years earlier? What if he had not been getting a divorce and had been sleeping better, and so on and on.

We are taught that we must always have a clear, stateable and defendable reason for doing something. But studies have shown that how we make decisions is actually very different. We often fold in a large amount of subtle, unstated information, make a gut decision and then, when asked to justify it, retro-fit a simple but illusionary piece of reasoning. The world is too complex for the simple, justifiable explanation, but the subtle one is not acceptable to state out loud.

Such retro-fitting was rife during the financial crisis, when explanations ranged from bankers’ bonuses, collateralised debt obligations and inadequate capital ratios to the very wiring of the male brain. But we crave our daily dose of reason because with it comes a solution.

Since the invention of fractional banking and the innovations that helped fund the Tuscan wars, the financial system has become exponentially more complex. Now each year we trade in exotic financial instruments of a value many times that of the world’s actual output. Our technology also means it executes faster and faster, doing those trades in milliseconds. Within all this lurks a deadly killer: feedback.

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