Welcome to Risk Musings
Risk management for regular folks, with a heap of systems thinking
Hello, and welcome to Risk Musings!
What is Risk Musings?
This newsletter aims to demystify risk management for regular folks. It also aims to explore systems thinking in the world of risk management. This endeavor is new and untried. It will involve trial and error, learning and adjustment, and evolution over time. But I believe it is important and worthy of time and effort.
So what will happen here?
Periodically, I’ll publish a general article on risk management in plain English without jargon. Sometimes, for topics where it seems appropriate, I’ll publish an article that uses systems thinking (and more specifically, system dynamics) to explore that topic. This will be as much a journey of learning and exploration for me as I hope it will be for readers. I believe systems thinking is underutilized in fields ranging from risk management to economics to public policy and beyond.
What is systems thinking?
Systems thinking is a mental model from engineering disciplines. Its sub-discipline, system dynamics, visualizes the world in terms of stocks, flows, and feedback loops.
If your eyes glazed over, don’t panic! Stocks are just things, like “the inventory of cars available on dealers’ lots”. Flows are inputs that affect stocks in one direction or another. For example, flooding from the remnants of 2021’s Hurricane Ida destroyed cars and drove people who lost their cars in the floods to buy new ones, reducing the stocks of cars available on dealers’ lots. Going forward, as more cars are produced, stocks of cars available on dealers’ lots should rebound (unless car manufacturers find it more profitable to produce fewer cars).
Wikipedia has some cool examples of system dynamics diagrams. In future articles, I’ll draw my own and walk through how they work.
In system dynamics, stocks and flows are constrained through balancing feedback loops, or they can enter compounding spirals (virtual or vicious) through reinforcing feedback loops. For example, if car manufacturers choose to produce more cars, then inventories of cars available on dealers’ lots will increase, and new cars will stop selling for prices well over MSRP. That’s a balancing feedback loop.
Okay, so this whole newsletter is about systems thinking?
No. More than half the content will be general articles about risk management that don’t require any systems thinking background or awareness at all. But some articles will apply systems thinking. So you can read whichever content interests you.
Where are these systems thinking ideas from?
The canonical book on the topic is Donella Meadows’ Thinking in Systems, which I believe should be required reading. The snippet that blew my mind was this one:
“Trap: Shifting the burden, dependence, and addiction arise when a solution to a systemic problem reduces (or disguises) the symptoms, but does nothing to solve the underlying problem. Whether it is a substance that dulls one’s perception or a policy that hides the underlying trouble, the drug of choice interferes with the actions that could solve the real problem.
“If the intervention designed to correct the problem causes the self-maintaining capacity of the original system to atrophy or erode, then a destructive reinforcing feedback loop is set in motion. The system deteriorates; more and more of the solution is then required. The system will become more and more dependent on the intervention and less and less able to maintain its own desired state.”
Source: Thinking in Systems by Donella Meadows
Intrigued? If I have one suggestion to you in my entire life, it’s to buy and read this book. The link is right there!
These articles cover a broad range of topics.
Yeah. Risk management is a broad discipline. I suspect, like Steve Jobs famously said, I’ll only be able to connect the dots looking backward.
What are the caveats?
I don’t promise to be perfect. I will sometimes be wrong. I will sometimes have unpopular opinions, and I will write some articles that qualify as duds. I may fail in my effort to explain a complex topic. I will sometimes publish late, or have family emergencies, or be otherwise human. But I will try my best, and adjust course when needed, and try again. I will approach articles with an honest heart and an open mind. I hope you’ll do the same as a reader.
What are the disclaimers?
I am not an investment advisor or lawyer. Nothing in this newsletter is or should be construed as investment or legal advice of any kind. You agree that any decisions you make or actions you take after reading these articles are entirely your own decisions and actions, and I take no responsibility for them. I am a generalist who worked as a journalist in the past, and I’m also a specialist in information security and risk management. The topics published here are shared in the sense a journalist would share them, and with similar goals: to educate, to inform, and to spark new questions and new ways of looking at the world.
So that’s it?
For now. Let’s go exploring!