Factor Analysis and Complexity

Business leadership is discovering the enormous advantages of complexity and complexity science. Many difficult or ‘wicked’ problems may only achieve positive outcomes by embracing the principles of complexity. This is a very positive and important development for business, the enterprise, productivity and innovation.

Unfortunately, there is a futile and disturbing trend to ‘manage’ complexity. Worse, managers are using traditional Fordist techniques like reductionism to ‘solve the complexity problem.’ Thing is, complexity is not a problem; complexity is a major advantage. Complexity can never be solved or managed. Complexity is only served.

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Wait a second! We’ve been taught business complexity is bad. We have been drilled like so many Marines that for business everything is a process. Everything can be reduced to ordered systems. Besides, we have the metrics to prove it! Semper Fi! 

Well, sorry, you have been badly misled. Business is complex. Social business is even more complex. All prosperous business embraces complexity as a joyful advantage. It’s time for business Jarheads to un-learn your MBA.

Fortunately, people are already experts at serving complexity. We all serve many complex environments everyday. Complex systems envelope us, protect us, feed us and assure our survival. It’s safe to say without complexity and complex systems we would not exist!

For example, take factor analysis. Basically it’s correlated variables in terms of a number of unobserved variables called factors. Most of authentic business leadership is based on unobserved variables – stuff you cannot see or control. Meanwhile, so-called management only focuses on observable variables. Hence it is ineffective for complex systems. Recall, complexity is never managed, only led.

Factor analysis is on the rise. It’s because it a highly practical way to serve complexity to achieve prosperous outcomes of highly complex systems.

People use complex systems productively all the time. Everyday life is composed of dynamic networks and complex systems. How do we achieve comprehension and mastery of complex systems?

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For example, financial markets are complex. We depend on DJIA and NASDAQ to inform decisions. The DJIA is factor analysis. Ta-da!

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Creditworthiness and risk markets are complex. Agencies and people use the FICO Score to navigate them. Widespread use of credit scores has revolutionized credit and risk. Factor analysis of complex risk markets has made credit far more widely available and cheaper for millions of consumers.


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Human physiology and the cardiovascular system is complex. Blood pressure must be monitored. Most people don’t know/care much about it until it is too late. Hypertension is complex. It is the silent killer. Most people don’t know what a sphygmomanometer is. Diastolic and systolic really aren’t important to them.

However, most people do know high blood pressure is very bad. It is indicated for many grave problems. Ignore it and face stroke, kidney failure, diabetes, etc. Keep blood pressure in the 120/80 range for health. If you know your blood pressure you are using factor analysis to comprehend and master a complex system. Bravo!

With factor analysis, ‘gaming the system’ must not be used pejoratively. In an increasing complex world, gaming factors must be seen as a net positive.

Gaming is another way to serve complexity. It is how to use complexity science to your advantage. Know when to buy and sell. Know when to spend and save. Know when to hold or fold. Have carrots not fries.

Remember, people ‘game’ their blood pressure with long walks and leafy vegetables. They game their FICO score by paying bills on time and keeping credit utilization low. Day traders game markets to make a living, and so forth and so on.

Thing is, no one can ever know how any complex system works. It’s possible to achieve a certain mastery vis-à-vis factor analysis and gaming. These techniques inform our heuristics. With the proper heuristics we improve the probability of positive outcomes of complexity and complex systems.


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