Critical Nodes and Financial Bailouts

by | May 8, 2020 | complex adaptive systems, sustainable investing

The first principle in permaculture which is a complex adaptive system methodology involves “observation.” It sounds simple enough, right? If you are creating a new product or service, you often start out with a value proposition that addresses a genuine need in society. As part of that discovery process you observe. We have many more advanced tools such as computing power, artificial reality, advanced mathematics, and new visualization tools that can enhance this part of the process. Observing in a complex, non-linear, living system requires looking at things in holistic views, looking at all the intersecting and interdependent parts and key nodes in the system. This is the level of transparency that is possible today as we bring together these advanced technical tools and interdisciplinary teams and it is really incredible. To solve big problems, now you have an actual chance to do it right.

Oops…we might be getting ahead of ourselves. Now we get to see what is hidden. We get to see what we have done wrong. We get to see all the problems that are overlapping and how things relate to one another. It is like one day we put these new cool glasses on and can see what we could not see before. The process of using a living, non-linear, complex systems based methodology to examine problems in society is already leading to big breakthroughs in science and technology such as new digital currency tools, studying the microbiome in biology or the promise of regenerative medicine. As we apply these tools in finance and the global economy, it starts to paint a less glamorous view and a troubling picture. If you are going to ask the questions, you have to be prepared to hear the answers. This is the part of this process that requires real courage, especially if you really want to offer products and services that solve serious problems in society at the root cause. Even when the evidence is undeniable, people still bury their heads, deny the obvious. Given the transparency that is possible today, however, the truth will come out sooner or later. This is just the first stop on our journey with this process, but one of the most enlightening, and, at times, one of the most difficult.

The following quote is from an online journal called “The Daily Reckoning” and is from Charles Hugh Smith. Even if you do not agree with his conclusions, the data that points to these highly centralized systems is hard to ignore.

“Systems that are highly centralized, i.e., dependent on a handful of nodes that are each points of failure — are intrinsically fragile and prone to collapse. Put another way, systems in which all the critical nodes are tightly bound are prone to domino-like cascades of failure as any one point of failure quickly disrupts every other critical node that is bound to it.” (

A follow on article by the same author is related to our habit of looking at the past to guide the future. This is done automatically in finance and provides relief to people over the short term that everything will be okay. Since this is an incongruent and unbalanced system, eventually the past will not predict the future. The prevalent view looking at the way the market has rallied after recent stock declines seems to be that if we just keep bailing out this unstable financial system, the market will keep going up as it usually does after large financial intervention. When is this time different? When does the past no longer predict the future? (

Using natural ecosystem principles to rethink how our economic system functions is very timely. As scary as the truth can be, there are natural, regenerative principles that are waiting for us when we are ready to use them. We can begin to apply them step by step, project by project, fund by fund. They are very bottoms up, resilient sustainability principles that are the antidote to fragile, centralized systems. They are naturally diverse, efficient, effective, inclusive, and beautifully creative principles. They help guide balance between serving our individual interests and the collective good of society without getting into bipartisan fights based on outdated ideologies.