Thursday, April 03, 2014

Systems archetype: Success to the Successful


The Success to the Successful systems archetype explains how very small differences, and random factors, can lead to one actor in a system to be hugely more successful than other actors:

  • how monopolies are created
  • why income is so unevenly distributed in many countries
  • why success in the school system leads to success later in life
  • how Microsoft became dominant in the software market

...and many other phenomena. Success to the Successful provides an explanation model for the Pareto Principle, the observation that in many systems, roughly 80% of the effects come from 20% of the causes.

To understand the causal loop diagram above: Assume that you have two actors A and B. A and B compete for resources. A and B may start out being equal. That is, there may be no observable difference that would give either a competitive advantage.

As long as the system is perfectly balanced, nothing interesting happens, but, if there is a random event that either favors A, or hampers B, then A will gain an advantage over B. A can use that advantage to gain more resources. Because resources are limited, B will be starved for resources. This will mean a greater advantage for A. When the cycle repeats, A will be able to gain even more resources, and B will have less.

If the cycle is not checked, it will continue until A kills off B. In cases where A and B are interdependent for survival, A will then die too.

Examples

Two recent Youtube videos provide excellent examples of the effects of the Success to the Successful systems archetype.

The first video describes how income distribution in the United States have changed in the past few decades:

The second video shows the same income distribution phenomenon occurring in Sweden. The video is in Swedish, and I have included it mainly for my Swedish readers.

Remedies


The video above shows Warren Buffet and Bill Gates discussing a remedy to the problem of uneven income distribution. It is well worth watching.

There are two tactics that can be used to restore balance in a Success to the Successful situation:

  • Identify the resource being unequally distributed, and redistribute it more equally. For example, this is why tax scales in many countries are progressive. It has nothing to do with justice. It is a way to prevent distribution imbalances that would eventually lead to economic collapse.
  • Separate the reinforcing structures, so that they no longer are allocated resources based on their relative results. For example, when Apple was being outcompeted by Microsoft and the PC manufacturers, Apple broke into the music market with the iPod. This reduced Apple's dependency on the computer market, a system dominated by Microsoft and the PC, and allowed it to build strength in an area where there was less competition.

Review

I have asked the very nice people in the Systems Thinking in Action group at Linkedin to review this post. The comment thread is here (for group members only). I will update this article whenever someone catches me making a mistake.

References

Higher Learning Research Communications, March 2013, Volume 3, No. 1
Systemic Perspective, Vol. 4, Gene Bellinger (Out of print. Visit the Systemswiki instead.)
Business Dynamics, John Sterman

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