Whilst random fluctuations add complexity to how exactly events unfold, many of the phenomena discussed in this article feature simple underlying mechanisms that are well understood and do not need abstract or complex math.

The sub-prime lending collapse was inevitable, and its timing increasingly clear as conditions worsened. The 2001/02 dotcom crash was indicated as new-firm startups were gradually overtaken by failures – both of which were observable – with IT/telecom suppliers, consultancies and others relentlessly adding capacity while ignoring this data. The same has happened this time round in many sectors – e.g. ship construction, commercial property, credit-card lending.

Many such events feature thresholds being crossed in the organization’s own market environment – making it a basic discipline of competent strategic management to track these mechanisms, rather than looking for abstract and non-actionable answers in complexity. 

Please go to this article and challenge its value for helping senior managers steer organizations’ strategy and performance! – there’s a comment facility. … unless of course you know of a  real business that made real decisions with real impact on its sustained performance byusing complexity science that could not have been done easier, quicker cheaper another way?

As commonly understood, and indeed as explained in Michael Gladwell’s popular book, it’s all about the take-off of self-reinforcing effects. But there’s a much more powerful source of tipping points – threshold effects. To take a simple example – a service team can cope just fine if calls are 80, 90 or 99% of its capacity to respond, but at 101%, performance collapses. There are many other examples, including economic cases – e.g. when the Indonesian economy fell back by a few percent in the late-90s downturn amongst the Asian tigers, demand for new cars fell – not by a few percent, but by more than half!

So .. just how much damage could a 3% increase in sub-prime mortgage defaults do to the US financial system? [see Randall Dodd, Subprime: Tentacles of a Crisis] .. depends just how close key parts of the system had been taken to critical thresholds, and hence to powerful tipping points. Greenspan made a further point – that he [and we] had assumed banks sought to protect their investors from risk, but that seems not to have been the case over the last 5 years - instead, they took us all just that bit too close to those thresholds.