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Murray Grimwood, aka Power Down Kiwi, delivers a short treatise on unflawed thinking arguing we need a measure of stocks rather than a measure of flows like GDP

Murray Grimwood, aka Power Down Kiwi, delivers a short treatise on unflawed thinking arguing we need a measure of stocks rather than a measure of flows like GDP

By Murray Grimwood

In my last article, I likened the planet to a paddock which we are over-grazing. If you asked me what was the major shortcoming that has got us to our current impasse, I’d reply: flawed thinking. So here’s a short treatise on unflawed thinking; we’re going to need a lot of it…..

Our world is a collection of intermeshing systems. Some are self-regulating but some are one-way flows, some of which are from a fixed-amount stock or to a limited-capacity sink. Here, I’ll argue that GDP is a measure of flows, but what we need is a measure of stocks. It’s about that simple, with the proviso that we have to be careful defining what constitutes a stock.

To understand why and what to do about it, and to keep our thinking going in the right direction, we need something called ‘systems thinking’ (academically referred-to as ‘systems analysis’). I have long advocated its priority for government and as a part of education at all levels. A great little treatise on this way of thinking, is Donella Meadows (She worked at MIT – still the top university on the planet and I regard her group as the top of the top). I won’t repeat her work here, but you could spend an evening in worse ways than reading it.

One analogy I use is the Titanic. There are myriad on-board systems. The service staff come on and off duty, passing on information about linen inventories, sick passengers, broken crockery. They cover for sick colleagues, wipe up messes, field enquiries. They are a self-regulating circular system, requiring non-physical inputs (instruction, rostering) and physical inputs (food, water, heat). Non-physical outputs might be advice, physical outputs will include dirty laundry and sewage.

But their system can’t survive alone – they need the food/kitchen system to be doing its thing, and the engineering-maintenance crew to be doing theirs. All are attempting to self-regulate; the kitchen trying to anticipate demand to avoid waste, the boiler man trying to anticipate how many people will turn their thermostats up for the night and down during the day. (Attempting to regulate flows is tricky – set a thermostat at 20 degrees, say, and immediately the cut-off happens, your temperature is dropping away. To average 20 degrees, you have to set the cut-off higher.) There are capacitances in these systems – linen may be washed at a slower rate than it gets dirtied, but the stack in the cupboard may take a week to deplete, masking the discrepancy until there is no capacitance left – which is too late.

Then there are the linear systems – the coal from the bunkers, into the boiler, providing heat and work, emitting ash, CO2 and low-grade heat (too low to retrieve – the usual end-game with energy-use). These linear systems reduce efficiency if, say, the fireman has to walk his coal barrow further into the bunker, or if he is down to scooping the dust from the floor. He has to work harder, which makes him hungrier, with knock-on effects in the kitchen. They have to work harder to feed him, taking more coal, which….. You get the picture.

Besides feed-back loops like our hungry stoker, there can be oscillations (where the chef over-then-under-then-over-orders, say) and knock-ons (pantries emptying faster than anticipated, re-ordering too much then too little then too much..). Feed-back loops tend to grow exponentially until checked by some limit, and physical systems always have limits. Understandably, many folk give up trying to track it all and turn to believing in something like an ‘invisible hand’.

But if the coal bunkers are near empty, so many things depend on that linear flow that we can make some pretty accurate assumptions; that when it’s all gone the food will be cold, and that the ship will be at the mercy of wind and current. Whether the first-class system out manoeuvres the steerage system in obtaining the last meals from the kitchen system does not affect those assumptions. Nor does the amount of money held onboard, nor whose pockets it is in, nor how fast it churned. The food it will be cold and the ship it will stop. Those can only be accurately measured in tonnage remaining, and in distance-per-hour.

Solar energy and wind energy will be all they eventually have to work with, but their systems (boilers and pumps shoving water around radiators, say) will mostly be inappropriate and some will not be adaptable at all. Passengers – used to heat on demand, hot food on demand and the idea of arriving somewhere – are going to be somewhat vocal in their annoyance, perhaps threatening to change the management system on the bridge. Which won’t change the systemic predicament one jot; they’re addressing the management system and it’s the coal system that is the problem. Time to adapt infrastructure – built under no such urgency over a longer period – will inevitably be ‘too short’. As we’re about to see – yet people are still buying already-stranded assets like there’s no tomorrow….

 Surveyed, passengers might even indicate pessimism, but their pessimism is not the problem. They might offer more money, but it won’t change the big-system problem either. The linear coal system kills the big ship system, the same way starvation kills a body even though the rest of the bodily systems are fully functional. An important differentiation in systems analysis is between stocks (like the coal) and flows (heat to water, water to stateroom radiator, warm passengers, latent heat away into the night. From a physics point of view, money is not a stock – it may well have represented the ability to bid for a stock while the stock existed, but a stock it is not.

Besides systems thinking, there is thinking-outside-the-square and logic-progression. When I was very young, Dad taught me to think ‘upside down, inside out and back-to front’ before reaching a conclusion. De Bono called it lateral thinking. Nowadays, I’d advise the addition of the word ‘dispassionate’, too.

Like this: You’re on the Titanic half an hour after the iceberg. You note the lack of lifeboat seats, and figure that you (middle-class, male) have little chance of obtaining one. Logic says the goal is to be alive tomorrow and follows by pointing out that to do so, you must be out of the icy water. ‘Above it’ is the only way to be out of it, and atop something that floats is the only way to be ‘above it’. Deckchairs? Bundled-up and tied with stripped-up canvas? Excellent – and ‘Property of the White Star Line’ is shortly going to be irrelevant, even if a few of the staff haven’t cottoned-on yet. When to launch your uncertified upcycled craft? Early, before you get swamped by others or sucked down with the ship. Logic also tells you that you can’t take 1500 others along, but from there logic fails. Who you take – partner, spouse, lover, child, nobody – that’s up to you. One of the best examples of logic-stepping to a result, is Wilbur Wright’s progression to heavier-than-air flight; not a man of genius, just a logical/lateral mind and an adherence to first principles. We can all do it.

In the Titanic example, onboard GDP figures and surveys of optimism may vaguely reflect some unease, but back-cast data projected forwards (3% growth in restaurant patronage tomorrow, based on past trends, say) can tell us precisely nothing. Measuring the coal, preparing to reduce energy-demand and altering systems to catch sunlight at deck-level, are the only games in town. To see how economists get this wrong (even with the best of intentions and with a totally-correct grasp that we need to change things drastically) we need look no further than Kate Raworth’s otherwise-excellent ‘Donut Economics’. It’s a brave effort at defining the big goal, but applies incorrect weight to the driver (energy).

What to do? We need to measure stocks, not flows. We need to ask what we’re trying to achieve societally, too. The Treasury initiatives into wellness and Natural Capital, while a tad hamstrung by econo-speak, are moves in the right direction. When we look back, the idea that we could measure well-being by monitoring a flow of debt-issued tokens will be seen as one of the main causes of our near self-extinction. GDP as a goal, simply has to be abandoned. Collaterally, we’ll also shake our heads at how we measured ‘capital’.

 It’s time our PM formed a systems committee – a meshing device, because until we get our goal-definitions right, we’ll continue to operate systems which produce wrong results. (I suspect she’d only need the one – the current crop are sub-system reporters and reporting on unwashed linen or cold food isn’t solving the ship-system dilemma). Our Universities need to mesh their disciplines too – examples of silo-speak which a generalist like me can rubbish, are all too common. It’s not good enough, coming from institutions purportedly about knowledge above all things. And we all need to think big-picture, systemically and logically. Then be very careful defining our own goals, many of which may be counter-intuitive. If you read nothing else between now and Christmas, read that Meadows PDF linked at the beginning. Then Google what she co-authored in 1972. And weep at the time we’ve wasted in between.

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29 Comments

I know I already put this link up but it properly belongs here as it very much supports what PDK has written.
https://motherboard.vice.com/amp/en_us/article/43pek3/scientists-warn-th...

Murray most people have difficulty assessing big picture thinking. Which is not to say you should not try to explain it. But perhaps some examples of what could make good lifeboats would help?

For instance would electric battery trains help? There is an interesting history of these in NZ which you may not be aware of.
https://medium.com/land-buildings-identity-and-values/electric-battery-p...

I plan to do a series, sub-systems as they relate to the big picture. Agriculture for instance....

Great. Looking forward to it.

We have not got Clue One about the actual extent of many stocks. Poster child: Lithium. It's in batteries: like the one in my garage, currently (sorry) at 39% with the solar pumping. Around half of the world's lithium oxide is produced by two holes in the ground: Greenbushes and Mt Cattlin, both in WA. The latter was opened up just recently, being an older gold/silver/copper shaft-and-drives operation dating back a century. WA is (as is most of Oz) highly prospective for many metals, being several-billion-years-old granite with faults, seams, intrusions etc. It's scarcely explored under the surface. And that surface is 10 times the size of New Zealand. And WA is a fraction of Australia. And Australia is a fraction of the world.

The Great Orme copper mine in Llandudno (Clan-deed - n short o) Wales has been continously worked for 3,500 years. There's a lot of ore still there.

The Levant mine in Cornwall extended 400 fathoms down, and a mile-and-a-quarter under the sea, They were still following the rich leads until the sea broke through the roof, and the man-engine main shaft parted company with the loss of 113 lives.

My point is simple. If we need a resource badly enough, we will go get it. At Great Orme, it was with deer antlers, fire, children for the smaller seams and adult hands and backs. At Levant, it was with coal, children, picks and a lot of ladder-climbing. In neither case was the resource exhausted. In neither case was the resource extent even quantified.

We just don't know much of anything about the stock under our feet, the bulk of the seabed (85% of the planet), because we haven't had the incentive to look yet. So a limit-to-growth weltanschauung is.... Limited.

And mineral resources are not part of any 'intermeshed system'. Except perhaps subduction and spreading zones. Which are in Gaia's tender care. Minerals and rocks are just There. We find 'em, we dig 'em up, and we make stuff out of the smelted results. Except for a few space-shots, none of this production has left the planet. It;s all there, and even when discarded, we know where it is. There's the decent fraction of a cubic kilometer of 'waste' a kilometre from where I live. It may be mined one day.....when the incentives dictate. Possibly by children, using deer antlers.

Waymad - Unfortunately, in all instances the fireman has to walk further for your 'coal', and it's of lesser concentration. Here's copper:
http://www.nautilusminerals.com/irm/content/pdf/eartheconomics-reports/2...

" In operation from 1937 to 1957, Holden Mine removed copper ore with an average concentration of 6%. For every 16.6 metric tons of ore hauled out of the Holden Mine, 1 metric ton of copper was recovered. Unfortunately, terrestrial copper ores of this concentration have largely been mined out and concentrations now yield much lower percentages globally.Today’s largest copper mines, such as the Chuquicamata mine in Chile, have ore grades in the range of 0.7%"

That goes for everything, cherry-pick the best first, more and more energy required thereafter. - the ocean is so dilute you can forget it, and you'd have to be pretty desperate to mine your local landfill. You'd need a lot of high-quality energy do do so. Our 'economy' has already taken us to a point where Lord Martin Rees recon's we've got a 50/50 chance of seeing in 2100 as a species - I think hes being optimistic if we attempt to continue our trajectory. But your way will die a death of diminishing returns for effort applied, of it's own accord.

There are folk who purport to be scientists who you can read to reinforce your view - Lomborg comes to mind, he who Kevin McCloud (Grand Designs frontman) once described as 'ludicrous'. I'll do a piece on belief, wishful thinking and all-out fairy-tales before I'm done.. :)

That Thinking in Systems book is well worth downloading and reading. This morning I have been reading it from the end until the beginning. I quite like reading the conclusions first and then working my way back. Does anyone else do that? That way you don't totally succumb to TL;DR and at least get the gist of it and if your interest is piqued you keep on reading.

I was taking notes as i was reading and for those too lazy to read it I have some interesting quotes:

All those endeavors [sports etc.] require one to stay wide awake, pay close attention, participate flat out, and respond to feedback. It had never occurred to me that those same requirements might apply to intellectual work, to management, to government, to getting along with people.

I like this advice. Emphasis mine.

Getting models out into the light of day, making them as rigorous as possible, testing them against the evidence, and being willing to scuttle them if they are no longer supported is nothing more than practicing the
scientific method—something that is done too seldom even in science, and is done hardly at all in social science or management or government oreveryday life.

Again emphasis mine. This is a particular bugbear of mine. Too few people understand the core system which is evolution IMHO.

If I could, I would add an eleventh commandment to the first ten: Thou
shalt not distort, delay, or withhold information.

News media and academia we are looking at you!

The first step in respecting language is keeping it as concrete, meaningful, and truthful as possible.

Again pointing an accusing finger at the MSM and academia.

Human beings have been endowed not only with the ability to count, but also with the ability to assess quality. Be a quality detector. Be a walking, noisy Geiger counter that registers the presence or absence of quality.

Everything and everyone is not equal. There are variations of quality and quality is important.

If something is ugly, say so.

Is this PC? I don't think so!

Remember that hierarchies exist to serve the bottom layers, not the top.

Wow, yes this. Although I can't help feeling it is European concept, maybe I'm biased. People should know their place in the world but being at the top comes with great responsibility.

Before you charge in to make things better, pay attention to the value of what’s already there.

Mantra of the conservatives. All those that scorn White Male privilege should ponder this.

“A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise.

If you don't want to do too much thinking just follow this one principle.

Many Native American cultures actively spoke of and considered in their decisions the effects on the seventh generation to come.

What the Boomers so epically failed to do.

Examples of bad human behavior are held up, magnified by the media, affirmed by the culture, as typical. This is just what you would expect. After all, we’re only human. The far more numerous examples of human goodness are barely noticed. They are “not news.”

Looking at the media again here. I think they have a lot to answer for.

Idealism is ridiculed. Statements of moral belief are suspect. It is much easier to talk about hate in public than to talk about love.

This is our modern system and it is crap. The cause of the high suicide rate I suspect.

Thus though man has never before been so complacent about what he has, or so confident of his ability to do whatever he sets his mind upon, it is at the same time true that he never before accepted so low an estimate of what he is. That same scientific method which enabled him to create his wealth and to unleash
the power he wields has, he believes, enabled biology and psychology to explain him away—or at least to explain away whatever used to seem unique or even in any way mysterious. . . . Truly he is, for all his wealth and power, poor in spirit.

I'm enjoying these pieces by Grimwood and am frankly quite surprised that Interest.co.nz is publishing them. Why is that? I can't go into too many details except to say it will require an awakening, an invigoration of the human spirit, a realisation that it can not be defined and is more spiritual than we know, a discarding of the failed systems and everyone getting on board to do their part and be a part of it:

https://youtu.be/F3ywBX1OGeE

Nice contribution zachary

“A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise."

- Aldo Leopold, in "A Sand County Almanac". Considered by many to be the 'father' of modern environmental ethics.

https://en.wikipedia.org/wiki/Aldo_Leopold

Sounds good until considering the death ray that kills all humans - once I've invented it I suppose I will either have to use it or disobey your ethics. Certainly the fastest solution to preserving the integrity and stability of the biotic community.

So you've seen the latest Avengers movie then!

Culling the herd might be unpopular, but it is a valid solution.

If nuclear weapons are used it could mitigate the global warming problem as well:

https://news.nationalgeographic.com/news/2011/02/110223-nuclear-war-wint...

I thought of this solution quite a while ago although my target was the Amazon jungle.

Stimulating piece. Thank you.
As I see it your man on the Titanic uses both asset and flow measurement/projection. He plans his escape noting the assets - lifeboat seats, but also likely flows - people to seats, concludes and formulates his plan.
For me there is a rough parallel in balance sheet , profit and loss, analysis, plan and budget which in themselves are pretty useless unless preceded and informed by a mission statement and objectives e.g “Logic says the goal is to be alive tomorrow “ and “Who you take – partner, spouse, lover, child, nobody – that’s up to you.”
I guess we are missing agreement on humanity’s mission statement and objectives.

Thats what credit systems do, they borrow off the future. It's the credit system that has allowed us to consume more than we can afford, to eat tomorrows lunch.
Every time there is a crisis the expectation is that more credit will come to the rescue, crises are an opportunity, thats until you get to the end of the string, the 500 trillion of debt.

How would life look without access to credit?

A quote from the book that pdk linked to in the article;

One of the worst ideas humanity ever had was the interest rate, which led to the further ideas of payback periods and discount rates, all of which provide a rational, quantitative excuse for ignoring the long term.

There is a resource underground, and a country chooses not too exploit it because it is environmentally bad.
Is it a failure of systems thinking if a different country comes along and exploits the first country to get at that resource?

NZ has many resources like this, say fresh water, putative oil deposits, coal, fisheries, whales and the Ross Dependency. What's to stop others from coming in and taking them despite NZ's best efforts to protect them?

Anyone played Dwarf Fortress lately? Murray's Titanic reminded me of it :D

Nicely summarised. The whole point at this point, is that - while we are not the first organisms to alter the planet - we are the first species to have the sapience see the problem and to do something about it.

Fighting over what still exists in Darwinian style, ends in collapse. It looks like that may be what happens, but that doesn't make it the smart thing to do. Nor does it make joining in the collapsing scrum, the right move.

It would be nice to think we could get it together in an intelligent manner - no harm in leading the way.....

and the easiest way to get at those resources is by lending them more than they can pay back, deficits pile up until something has to be sold. Look at Tonga and it's Chinese debt, something has to be sold.

Great series of articles I am looking forward to reading the rest.

One problem is in how we measure things when we are talking about resources in economic terms is that economics lacks constants to measure things with, in science things are measured against other things we regard as constant, in economics we tend to measure things in currency which is in a constant state of change, this I think leads to a lot of bad thinking.

We have to stop writing out IOU's, sometime in the future someone will call them in and we get forced to sell real things, lots of the IOU's were just bank created credit instruments but being paid back with real work and real resources.

Going to Architecture School as a mature student there were two things I learnt that stand above all else. One was to understand the design process, something I had already been unconsciously doing until then. The other was that Archtecture is about designing a bunch of systems that work together well. Done well in incorporates efficiency, you don't want to walk too far to the firewood shed, the fridge, or dunny. A door is just a system to accommodate flow, as is a window. To design systems you have to identify all the systems at play and understand them. I am good at it, I won awards.

Here is the thing, the bigger the system is the more subsystems it contains. A bigger and more complex system needs a bigger mind to hold all the subsystems and work with them. What is happening is that no one is listening to the people that can see these bigger systems Murray is talking about. They are busy bickering about subsystems that are failing, but can't see the relationship to that sub system, other sub systems, and the overall system. I this forum is a great example of what I talk about, a group of above intelligent people that still can't collectively grasp it.

There is a tendency for above average people with some financial, academic, or professional success to believe that they have the answers. You may even say they are outstanding in their field. This can lend a certain arrogance or confidence, an attitude that their opinion is more important because of their success. We get into this trouble because these people have an influence that far outstrips their real capacity. They are only a subsystem, thus ineffective and of no consequence. No one is listening to guys that can see and comprehend the stocks behind the systems.

We need to change the narrative, to do that we have to change who has control of it. To be honest I don't see it happening. I base this predicition on past performance, the warning have been around since material was published about finite limits by the Club of Rome. I also base it on some of the dumb arse comments made in these forums from people that should know better.

Go back to some of my posts from around 2013/14, you will see I was talking about known reserves of key minerals at current (not exponential) rates of consumption. Stocks in years at a set flow. Most then were within one to two generations from being uneconomic. Interestingly I have just gone to check USGS for the annual mineral summaries but can't find them.

Well put description of subsystems. As an ex-database programmer we have something similar with databases being so complex nobody can comprehend all the relationships and the critical issues being applied as rules before the subsystems are built - eg a banking database enforcing all transfers of money have a 'from' and a 'to' account.

However the basic idea was well expressed long before databases and schools of architecture and ecological science were invented. Aesop's Fables no 87: "To kill the Goose That Laid the Golden Eggs".

Is this what you are referring to (from 2012)?
http://static.bbcverticals.com/future/img/BBC-stockcheck-02.jpg

Nice one, keep posting that. I have seen it before but it isn't what I refer to. USGS.com had (and may still have hidden somewhere) annual mineral summaries that had current production and known reserves. Simple division gave numbers (back when I was looking) such as 16 years of chromium, 20 for gold and silver, 40 for copper, around 26 for lead and cadmium. Nickle was in the 2-3 decade period, plus a few others. We are now 5 years into those times. These were simple numbers, not assuming growth in consumption/production. If there was a sudden shift to new technologies, such as electric cars, then the growth in copper and associated minerals for batteries would see the reserves rapidly consumed.

There is also the energy equation to get this stuff out of the ground an processed. We use an entire damn for Aluminium production in this country. Add that to the energy used to extract it, pre-process it, ship it here, then ship out the finished product.

We've heard a classic example of small-system, doomed to fail thinking today: Phil Twyford claiming we are on our way to solving the Auckland housing crisis.

No we're not, and no, it's not a housing crisis. Unless he addresses population, he isn't on the way to solving anything. Step back one and it's a population crisis. Even if he has the right answer, it was to the wrong question.

Global debt to GDP is %325 , and no one is getting better.It's a race to the bottom.

There is an answer to the analogy - don't hit the iceberg.

You miss the point. Purposely? The first story didn't hit an iceberg, it ran out of good quality energy.

The second analogy the person in question wasn't steering.

:)

Great explanation of problems already here and to come for Miami-Dade county;

https://www.bloomberg.com/news/features/2018-08-29/miami-s-other-water-p...