Electricity Regulation/Deregulation

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Electricity Regulation/Deregulation

Post by =?iso-8859-1?Q?Andr=E9_Reichel?= »

Hello all,

Jaideep raised some interesting questions which are not easy to answer. I
personally think, system dynamicists saw this thing coming. Why did nobody
listen? I can merely guess but this is truly a high political issue. Instead
of browsing what went wrong or whos fault it might be, lets think about
solving this mess.
A little mental model of the situation might be of assistance. When we think
of energy supply (and there seems to be a shortage) two flows come to mind:
an outflow caused by energy demand and an inflow from energy generation. If
considered a stock, energy generation also has an inflow, lets say use of
energy resources. Between energy generation and supply there are inevitable
losses in energy transportation. That seems to be a crucial point. These
losses are not only caused because of thermodynamics or Ohms law, but also
by the power line infrastructure. After deregulation investments in this
infrastructure dropped. This is common not only to energy but as well as
telecommunication and railway markets. If investments are triggered by
earnings and earnings are triggered by energy price, then deregulation,
which leeds to falling prices, can be thought of as a major source of this
crisis. What can be done?
Nothing in the short turn, thats for sure. Investing in infrastructure is
highly important but will take quite some time. Building more power stations
(again, time delays) wont do anything until the infrastructure has been
improved and the environmental impacts of such a policy are likely to raise
even more problems. The most promising solution appears to be reducing the
outflow, that means the energy demand. Of course, this also is not a short
term solution and maybe we are about to experience a fine example of worse
before better. So, is that a solution, let the markets have their say and
energy prices increase? I think so. At the same time political actions have
to be taken to
a) invest in power line infrastructure (maybe accompanied by careful
reregulation of the infrastrucuture)
b) encourage energy savings through the use of the tax system (e.g. green
taxes, tax reliefs for low energy use, regenerative energy use etc.)
Im seeing forward to hearing other statements and alternatives. This is an
important issue and as Jaideep put not only for the US. This is truly a
global issue and therefore can only be solved globally.

Regards,

André Reichel
A.Reichel@epost.de


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From: "John W. Rodat" <jwrodat@earthlink.net>
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Subject: REPLY Electricity Regulation/Deregulation (SD3280)
Date: Fri, 8 Jun 2001 08:46:18 -0400
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Mark Wallace makes some interesting observations on "pseudo-deregulation."
Many similar things happened when New York State de-regulated hospital
prices but forced substantial expenditures as surcharges on prices and costs
and left a particularly constraining (and political) licensing system in
place. The one major difference is that the demand for hospital services is
falling. So when hospitals manifest financial problems, its the regulatory
changes that get blamed (like electricity in CA). In the public debate quite
difficult to disentangle what the real cause is.

John W. Rodat
President, Signalhealth, LLC
Information Based Health Care Strategies
jwr@signalhealth.com
(518) 439-5743

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Reply-To: "Bob Walker" <walker@delsysresearch.com>
From: "Bob Walker" <walker@delsysresearch.com>
To: "SD Listserve" <system-dynamics@world.std.com>
Subject: QUERY Top 20 Models
Date: Fri, 8 Jun 2001 10:40:06 -0400
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In a recent posting on SD Certification (SD 3283), Jim Thompson =
introduced a suggestion by Jay Forrester: ( That ) "practitioners should =
have about "20 models" as the basis for all their work. He started his =
list with industrial dynamics, market growth, and world dynamics / =
limits to growth. We should try to complete that list as part of this =
exercise."

"20 Models" was the subject of a small group discussion among SD =
Consultants, Academics and Business practitioners held at the Harvard =
Faculty Club in 1998, moderated by Sharon Els. The Group began by =
establishing criteria for admission to such a list... These were:

1. Model has proven robust over time, capable of being reused as a =
template.
2. Model has passed validity tests commonly used by top level =
practitioners.
3. Model is relevant to real world issues, especially those involving =
High Stakes.
4. Model contains or is useful in demonstrating important "dynamic =
lessons".=20
5. Model collection represents those models that all managers should =
study.

>From my notes, here is that list... the order does not imply a ranking.
As I recall, Jay began the discusssion with his own "short list"...

1. Workforce - Inventory (commodity cycles)
2. Production - Distribution
3. Technology Diffusion (including Bass Diffusion, infection, epidemics =
etc.)
4. Market Growth as influenced by Capital Investment
5. The Economic Long Wave (Kondratieff Cycle)
6. Aging Chains (many forms, including skill migration, leadership =
development.
7. Boom and Bust (as seen in the Beer Game and Mark Paichs B&B work)
8. Project Dynamics (particularly the Rework Cycle)
9. Resource Allocation (e.g. Nelson Rs TQM model at Analog Devices)
10. Urban Dynamics
11. World Dynamics (both the original and subsequent models such as =
World 3)
12. Escalation Dynamics (Pricing, Affinity)
13. Competitive Dynamics and Cooperation
14. Consumer Dynamics (dynamics of Customer behavior)
15. Productivity and Morale (may include other phenomena such as =
Burnout)
16. Dynamics of Quality (especially erosion of quality)
17. Public Policy (broad issues including impacts of Regulation, =
Community, Environment, Geography).
18. Financial / Accounting. (including interfaces with Financial =
Markets)
19. Dynamics of Research and Development (R&D)=20
20. Inter-organizational relationships (Partnerships, Alliances, =
Coalitions etc.)
Generally... Industry level dynamics.=20

Its a start, and not bad for 45 minutes of work.=20

It seems to me that there are elements of a useful Taxonomy of models =
here, and that the field might benefit from further thinking about how =
the pieces might be reorganized or recombined to provide a more general =
statement of scope, depth and applicability. Is there interest in a =
voluntary "virtual discussion" on how this might be done?

Perhaps those of like mind could agree to "find each other" at the =
Atlanta Conference as a way of getting the ball rolling.=20

Bob

Robert J. Walker
System Dynamics Practice Leader
Delsys Research Group, Inc.
Suite 400 - 45 Rideau St.
Ottawa, ON K1N 5W8 CANADA
TEl: +1 (613) 562-4077
FAX: +1 (613) 562-4102
Mail: walker@delsysresearch.com
"J Mukherjee"
Junior Member
Posts: 6
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "J Mukherjee" »

Watched the Frontline TV show tonite on PBS. It was a discussion on

"BLACKOUT - What caused the power crisis in California? What went wrong?"

See for details -
http://www.pbs.org/wgbh/pages/frontline/shows/blackout/

My question then was - how could all the system dynamicists, big systems
thinkers fail to see this coming? Is this a failure of the field? There are
many studies on this subject, esp. in electricity deregulation, both in
Europe and US, so how could this really happen? Were there any studies done
that were ignored, because of lack of understanding of those who evaluated
those studies? What is wrong? Because this kind of subject is so close to
system dynamicists hearts, I think there may be huge lessons here. I have
my own ideas here, but Id like to throw it out as a challenge to the many
experts on this list, especially as the idea of deregulation is being
currently touted as a panacea to worlds ills - this will likely happen in
the rest of the USA (Texas, New York), and because rest of the world tends
to follow the US economy, it is likely going to happen in the rest of the
world, especially in the emerging markets (China, India, etc.), and also in
other markets such as in the biotech/pharamceutical industries. Are there
similar problems in the future that we are not anticipating?

Best,

Jaideep

PS - if the discussion from above becomes too non-SD/non-ST/political,
please feel free to post it on the following website ("Coffee Corner" link)
and not on this list. Id like to hear from you - I am also struggling to
understand what happened, and why I didnt see it coming. Much thanks.

http://www.optimlator.com/
jaideep@optimlator.com
"Mark B. Wallace"
Junior Member
Posts: 10
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "Mark B. Wallace" »

The key point to understand is that what happened here in California was
not, repeat, not, a "deregulation" of the market for electricity. Persons who
use that term to describe it are at best ignorant and at worst disingenuous.

What happened was a restructuring (as in the Russian term, "perestroika")
of the industry. Two vital areas where regulation was (mistakenly) left in
place:

1. No decontrol of (retail) prices.

2. Only partial decontrol of costs. Specifically, distributors (the big
utilities) were forbidden to engage in long-term contracts with generators.
Distributors were and are required to purchase their electricity on the
"spot" market, where costs are much more volatile in the face of fluctuating
demand.

(Note: the City of Los Angeles, where I reside, operates its own
distribution agency. It was exempted from the second regulation, and it
does have long-term contracts with suppliers in place. We have no
blackouts here, but they have them two kilometers away in Santa Monica.)

Under those circumstances, to refer to the California change as
"deregulation" is preposterous (which hasnt stopped most of the press and
pundits from calling it that).

Combine those two "non-deregulated" (i.e., regulated) areas with two facts:

1. Use of electricity in California has been growing by leaps and bounds.

2. No new power plants have been brought on-line in this State in the last
ten years.

and you dont need SD to see the risks. Conclusion (and there is nothing
new here): pseudo-deregulation may be worse than none at all. I make
specific comments below.

Mark


Is this a failure of the field? There are
> many studies on this subject, esp. in electricity deregulation,

Which this was not (see above).

both in Europe
> and US, so how could this really happen? Were there any studies done that were
> ignored, because of lack of understanding of those who evaluated those
> studies?

This is an interesting question. Politicians (among others) have a long
history of ignoring inconvenient facts, and I wouldnt be surprised to
discover that it happened here also.

What is wrong? Because this kind of subject is so close to system
> dynamicists hearts, I think there may be huge lessons here.

None that werent understood and documented by Adam Smith over 200
years ago. But then, as Santayana said, "Those who are ignorant of
history are doomed to repeat it."

From: "Mark B. Wallace" <
mark.wallace@verizon.net>
"George Backus"
Member
Posts: 23
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "George Backus" »

I finally have some time to respond to this thread. System Dynamics was in
the forefront of the California deregulation analysis. We used
ENERGY 2020 (a SD model) with essentially all the significant players in
the market: SCE, San Diego Gas & Electric, Pacific Gas & Electric, Enron,
Northern California Power Agency, PacifiCorp, Reliant, Calpine, Duke Energy,
Southern Companies, the Bonneville Power Administration, and, most recently,
Governor Davis office. In some instances, the work was limited to
presentations on results and system thinking about the issues. In other
cases, it included training and analyses on how to prosper in the new
environment and what pitfalls to avoid. I contend SD or systems thinking
was needed and should have been used to test the rules before they became
law. The unanticipated consequences of policy are best experienced in a
simulation. The simulation can then be used to design rules that provide
the desired consequences (dynamics) despite countervailing dynamics within
the system.

There is fairly general agreement as to what caused the CA problems and they
were recognized early on. The primary issue is the actual lack of
meaningful deregulation in California. Customers do not see price signals,
so do not respond to supply/demand imbalances (no feedback). The rules also
do not allow real-time use of load control or distributed generation. The
inability to enter into long term contracts and the excessive stranded
investment payments kept initial wholesale (generation) costs too low and
prevented the development of new capacity (no feedback). However, even with
adequate prices, Californias siting process would have prevented adequate
capacity. In summary, neither supply nor demand was actually deregulated
(allowed to control the market through feedback mechanisms). The rules of
the market were so distorted by political compromise and incumbent utility
protectionism that market gaming became the norm. The robust economic
growth soon made demand outstrip supply and the recent sustained high prices
were dominated by simple supply and demand considerations. Our
international work indicates the same basics process will play out
worldwide. Deregulation, if properly implemented, appears to offer much
benefit, but human nature to maintain advantage and status quo implies that
the road will be rocky.

While many analysts recognized the problems and upcoming situation,
essentially all believed that the system would finally "break before
extreme conditions occurred and, thereby, open the way for a rational (and
workable) approach to the market. Much of our early work was to actually
facilitate market gaming to cause the existing rules to be rejected earlier.
Even as the crisis loomed larger and many months of sustained problems
attempted to shake the utilities, public, and politicians into recognizing
reality, discussions with the incumbent CA utilities and the governors
office even last week indicate no change in thinking or any recognition of
the feedback dynamics that have to be resolved. The consequences were and
are much more severe than anyone seriously imagined (including those with SD
models). The benefit of good weather so far this summer does not negate the
problem.

The real problem, however, is our problem and one we, as system dynamists,
still have no standard recipe to alleviate. It is the problem of a
paradigm. How do you actualize a change in religious conviction? Facts
and pain only seem to reinforce the wrong convictions. The view of reality
as a simple problem (often in the form of a scapegoat like "the out-of-state
energy suppliers") and a simple linear-thinking (singular) solutions (e.g.,
single minded focus on anti-trust) becomes more entrenched as the problem
becomes worse. Attempting discussions of dynamics, feedback, delays, and
causality become more and more an exercise in futility.

A couple of years ago, on this server, George Richardson stated that to
raise a client out of their linear thinking morass, the system dynamist must
focus on the simplest concepts of first order feedback and causal flow. As
a producer of hopelessly complex, gigabyte models, I have never forgiven him
for that statement. :-) The value of SD to society hinges on our
understanding and acceptance of that insight. Often, on this server, we
discuss esoteric mathematical or philosophical issues. We often let the
relevant causality take a secondary position. Causality is too slippery to
hold. Any arguments beyond the problem at hand soon deteriorate to show
that real causality can never by known or proven. But proving causality can
be known with certainty is irrelevant. Rationality is the ability to
understand enough to confidently make useful decisions. Despite the
ever-present criticism of SD -- that it is the product of speculation and
baseless judgment -- it did develop from the principles of engineering --
its arrogant rationalism, unabashed utilitarianism, and resolute faith in
causality. SD is a paradigm. The concepts that specify it, feedback and
causality, define its peculiar and powerful worldview.

Most SD project contracts that I know about come from project managers who
already are enamored with SD - wrongly or rightly. These clients invariably
come to "embrace" SD or system thinking during an earlier time when there
were no pressing issues requiring survivability decisions and the later
entrenchment of a (non-SD) perspective that justified those decisions. Even
where SD is particularly potent in solving a critical problem, the effort to
convert a desperate client over to the SD-way is overwhelming. (I avoid
even bringing up SD in my work despite that I only offer 100% SD solutions.)

We have to first make the incision before we can remove the old cancerous
paradigm and implant the SD world-view. George Richardsons observation
seems to point to how the initial incision must be executed. I know of no
historical record where missionaries produced proselytes during a time of
social upheaval or crisis. In hard times, the existing religion simply came
more in demand. The religion was a self-reinforcing product of the society
in which it functioned. I routinely encounter situations where the "SD
solution" is obvious. Long after the wrong decisions have played out, the
post mortem continues to substantiate the SD understanding of the dynamics.
In truth or delusion, SD appears to me to be more useful than other
paradigms for decision-making -- when dynamics are involved. I argue our
(the SD communitys) failure to change the world or to "ignite the fire"
comes from our inability to deal with our own paradigm in the context of the
exiting paradigms. Saying that we are right and "they" are wrong does not
lead to making the world a better place. I sense that I could successfully
promote many more rational decisions among my clients if I could break the
paradigm barrier. This barrier" is the limitation for SD to affect the
really significant problems of our time. Any non-speculative and
non-baseless approaches to over come the barrier might move SD in to the
position where it actually produces implemented solutions to momentous
problems.

Any takers to the challenge?


George Backus
Policy Assessment Corporation
14604 West 62nd Place
Arvada, CO 80004-3621
Bus: 303-467-3566
Email:
George_Backus@ENERGY2020.com
"Jack Ring"
Junior Member
Posts: 12
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "Jack Ring" »

This may sound too simplistic but I think the solution to the "paradigm
problem" is to do what Jay Forrestor often admonishes us. That is, use
SD to demonstrate the inevitable outcome of continuing a behavior and
then use it to discover better policies that have a chance of being
implemented.
(My aplogies to Prof. Forrestor if I am not getting it right.)

In this light the thing that SD lacks is the ability to model human
behaviors, expecially in herd-instinct or malicious-intent situations.
Although Machiavelli explained the first order system over 450 years ago
and Prof. Rudolph Starkerman has been evolving and publishing an nth
order model during the last forty years not much has seeped into the SD
"catechism" It seems to me that the "social scientists" simply cannot
understand the technical models and the "engineers" who can understand
the modeling notation are not interested in the human phenomena.

One message is that we must learn to model the threats to a system and
even to the fidelity of the model of the system as well as learning to
model the nominal stocks and flows.

The California situation is not greatly different from the Denver
International Airport situation wherein the modeler discovered that the
baggage handling system would not work and even how to make it work but
no one would listen to him.

If you intend to model a problem suppression system then you must first
model the problem system, including the political part.

p.s. when Gov. Davis went to Washington to tell everyone the suppliers
were at fault I found it ironic he did not remark that the airfare from
Sacramento to Washington D.C. could be as much as five times higher if a
traveler restricted themselves to spot markets. Perhaps he was not
aware of this phenomenon because he traveled in a state-provided
aircraft --- at 20 times the spot rate.

Jack Ring
Never (mis)take Know for an answer.
From: "Jack Ring" <jring@amug.org>
"Andy Ford"
Junior Member
Posts: 10
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "Andy Ford" »

Misunderstandings on
System Dynamics & Electricity Deregulation:

I have been watching the discussion thread on electricity deregulation
with great curiosity, wondering where an electronic discussion might take
us. My own research focuses on the west coast electric system and the use
of system dynamics (SD) to help us understand the impact of rewriting the
rules in this complicated industry. After several years of study, Im still
overwhealmed by the complexity of the crisis. My limited suggestions to
date appear in articles on the potential for boom & bust in the electric
industry. The first article appears in Energy Policy (Vol 27, 1999); the
second will appear in Energy Policy (Vol 29, Nu 11). Ill give a plenary
summary of this work at the Atlanta Conference, and Ive posted summaries of
the California situation on my WSU website, URL below. The theme of these
articles is that our best hope lies in "Waiting for the Boom" in
construction to solve many of the problems that have emerged in California.

Im contributing to the discussion thread to clear up three possible
misunderstandings on the limitations of SD.

#1. Why hasnt SD been used?
This question seems to suggest that SD has not been used, but there have
actually been many applications of SD, in the United States and around the
world. George Backus has recently described his extensive use of simulation
models with SD features with many of the participants in the Calif. crisis.
SD is also being used around the world (in the UK, Colombia, Brazil, and
Korea for example). As practioneers contribute to this discussion thread,
they are usually answering somewhat different questions ----, ie "Why
hasnt SD been used more extensvely?" or "Why dont our recommendations
receive serious attention?"

#2 SD lacks the ability to model human behaviors, especially in
herd-instinct situations
I believe this recent statement is misleading. Many SD practioneers work
diligently to include human behavior within the simulated system, and
teachers emphasize the need to continue this practice. Stermans description
of boom/bust cycles in the real estate industry (Business Dynamics, page
698) is illustrative. My simulation of boom/bust in the California
electric industry rests on an explicit theory of human behaviors, including
a particular group of investors which are guided by herd-instinct.

#3. SD lacks the ability to model human, especially in malicious-intent
situations.
This recent statement might refer to the "strategic behavior" of generating
companies as reserve margins have tightened in the California system.
Numerous studies have documented the withholding of generating capacity that
has caused the California markets to clear at prices far above the prices
that would occur in competitive markets. (The "withholding" usually takes
the form of "economic withholding" where generators bid their units far
above variable costs.The extent of withholding and the ensuing impacts on
market prices have been studied extensively by academics and by the
California ISO. It is also the subject of testimony and counter-testimony
by MIT and Harvard economists.) These stuides focus on the detection of
market power, not the simulation of market power. SD has contributed here
as well; it has been used to simulate economic withholding in the
California electric system, and the simulated impacts are comparable to the
market power detected by the California ISO.

Andy Ford
Program in Environmental Science & Regional Planning
Washington State University
Pullman, WA 99164 - 4430
USA

phone (509) 335-7846
email FordA@mail.wsu.edu
web http://www.wsu.edu/~forda
"Jack Ring"
Junior Member
Posts: 12
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by "Jack Ring" »

Andy,

I think your view of human behavior models differs greatly.from mine

Although the Sterman model to which you refer is quite interesting it is
largely an economics model and includes no obvious variables for human
behavior. In fact, starting on page 702 he clearly indicates that the
humans involved did not understand the situation (however, the model
does not represent the sentience of these players).

I have not seen your model so cannot comment but if you would care to
share the aspect that you think represents human behaviors I will be
happy to comment. Perhaps it will allow us to discern the relative
culpability of Rep. vs. Dem. policies and practices in the CA situation.

More than the outcomes of human behavior must be modeled. The types and
relative intensities of awareness, acuity, values, intent, decision
error, decision criteria error, hidden agendas, etc. are the "stocks" to
be included. An example of flow might be the political game of two
weaker interests coalescing to defeat a stronger one, then deciding the
winner in a second round thus yielding the *least worst* outcome.

My malicious intent statement did not refer to the power generating
companies.
FWIW, I see no malicious intent in their behavior of maximizing
shareholder value any more than I see malicious intent in the "yield
management" behavior of hotel managers who vary rates depending on the
season or other factors or the "yield management" practiced by the
airlines. In fact, if any behavior is malicious it is more likely the
Governors who, instead of protecting the citizens interests is
politicizing and leading a Zeroth Order System (a state government)
into the role of controller of a Second Order System (power
consumption). The Law of Requisite Variety clearly predicts the outcome
of such foolishness and continued efforts in this vein can only be due
to malicious intent to further other agendas.

.In fact, by modeling human behavior one gets clear about the winners
and losers of any action and whether these were happenstance or
malicious.

Also, please note that "many SD practitioners work diligently to include
human behavior" is laudable but is not a confident predictor of whether
human behavior is actually included.

Jack Ring
From: "Jack Ring" <jring@amug.org>
Bill Harris
Senior Member
Posts: 75
Joined: Fri Mar 29, 2002 3:39 am

Electricity Regulation/Deregulation

Post by Bill Harris »

Some time ago, "George Backus" <George_Backus@ENERGY2020.com> wrote
the following. I think its related to some of the current dialog.

> >The real problem, however, is our problem and one we, as system dynamists,
> >still have no standard recipe to alleviate. It is the problem of a
> >paradigm. How do you actualize a change in religious conviction? Facts
> >and pain only seem to reinforce the wrong convictions. The view of reality

Well, this may be a tangent, but it may not be. Bob <b>****</b> of Southern
Cross University has written an interesting essay called "Beliefs
Without Reason," and he offers some suggestions therein for productive
conversations of the sort you may be describing. See
http://www.scu.edu.au/schools/gcm/ar/arp/bwr.html. His answer is
neither logical nor technical in nature.

> >as a simple problem (often in the form of a scapegoat like "the out-of-state
> >energy suppliers") and a simple linear-thinking (singular) solutions (e.g.,
> >single minded focus on anti-trust) becomes more entrenched as the problem
> >becomes worse. Attempting discussions of dynamics, feedback, delays, and
> >causality become more and more an exercise in futility.

> >A couple of years ago, on this server, George Richardson stated that to
> >raise a client out of their linear thinking morass, the system dynamist must
> >focus on the simplest concepts of first order feedback and causal flow. As
> >a producer of hopelessly complex, gigabyte models, I have never forgiven him
> >for that statement. :-) The value of SD to society hinges on our
> >understanding and acceptance of that insight. Often, on this server, we

> >Most SD project contracts that I know about come from project managers who
> >already are enamored with SD - wrongly or rightly. These clients invariably
> >come to "embrace" SD or system thinking during an earlier time when there
> >were no pressing issues requiring survivability decisions and the later
> >entrenchment of a (non-SD) perspective that justified those decisions. Even
> >where SD is particularly potent in solving a critical problem, the effort to
> >convert a desperate client over to the SD-way is overwhelming. (I avoid
> >even bringing up SD in my work despite that I only offer 100% SD solutions.)

Heres a personal anecdote from a number of years ago that struck me
when you said that. At the time, I was an employee in a company, and
I was doing internal consulting work. I looked at an issue that my
manager had repeatedly mentioned to everyone in the organization with
a bit of resignation; he seemed convinced it was simply a fact of life
hed have to live with. I was able to create a very simple model to
replicate the problem, and the solution was almost equally easy to
design.

Fearing the worst, I put together about 20 overheads making what I
thought was a careful case for why this solution would work. I was
sure Id spend the hour appointment I had made persuading him, and I
wasnt confident of the outcome. I dont think I mentioned SD, but I
did show a stock and flow so he could see what I was talking about.

When I got to the second or third slide, the one showing the basic
stock and flow, and I described the solution as changing the feedback
of information, he jumped on my words and said, "Do it!". He needed
no selling; it was done.

What was unique about him?

He wasnt an innovator in the process sense, open to each new
approach to managing organizations. Hed innovate on product
design, but he wanted his management processes to be tried and
true.

He was a former electrical engineer, well schooled in feedback
theory from having worked with analog circuits and control theory.
He immediately saw that the organizational system he was living in
as an unstable feedback system, once he was prompted to think in
those terms. At that point, the rest was obvious to him.

Even when I was a practicing engineer, feedback loops were hard to
deal with. When a circuit was supposed to put out 5 volts but really
put out 0.5 volts (or 12 volts), that was pretty easy. When it was
supposed to put out 5 volts but put out a very distorted sinusoid,
then life got interesting. That oscillation was present throughout
the entire feedback loop, so it wasnt a simple matter of measuring
the voltage on all the circuit nodes, for that told you nothing.

It was very tough to break the feedback loop and measure each
subcircuit. Youd have to terminate the circuit where you cut it with
the proper impedances. Often there was a very high gain (>100,000) op
amp involved, so it was close to impossible to set DC voltage levels
at the input to keep the output within normal boundaries.

Howd we earn our keep? With a combination of some analytic tools,
some simulations, and some really neat measurement equipment. Oh, and
experience counted for a lot, too.

Sounds sorta familiar, except for the neat measurement equipment.

Whats the key for SD? I think weve all reminded ourselves that
structure creates behavior. Thats tough, for structure is a concept,
not a thing. You cant touch it or replace it; its simply what you
get when you put all the pieces together a certain way. And
structures often dont work the way most people think they should.
Thats why electrical engineers (at least used to) get multiple
courses dealing with feedback, from simple circuit design to control
theory to various math and complex variable courses. And much of what
they deal with is largely linear and stationary.

Does it help to find prospects who understand feedback from another
context? And would it help to educate the broader audience on
basic feedback so they understand it when they see it, even if they
cant spell SD?

Regards,

Bill
From: Bill Harris <bill_harris@facilitatedsystems.com>

PS: A couple of us are going to try the education route through a new
column in Leverage Points, the Pegasus Communications free email
newsletter.
--
Bill Harris 3217 102nd Place SE
Facilitated Systems Everett, WA 98208 USA
http://facilitatedsystems.com/ phone: +1 425 337-5541
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