My friend asked me to simplify complexity for him by example. I found that Covid-19 offers a great example. Let us study its effect on several dimensions.
The first dimension is economy. The lockdown in many countries reduced traveling. Tourists stopped pouring in.
Hotels suffered little occupancy and losses.
Airlines suffered for lack of passengers.
Tourist companies suffered for losing their main customers- the tourists
Restaurants suffered because they lost almost all their foreign customers.
Taxi drivers lost because they too lost a good source of income.
Hotels, restaurants, tourist companies, restaurants, and airlines lay off many of their employees to reduce their losses.
Out-of-job numbers escalated increased and so the inflation rates decreased.
Money flow reduced to a minimum because of the uncertainty that prevailed with the predominant belief that cash is king.
Governments revenues decreased because they lost huge amounts of taxable profits, sales taxes, and revenue taxis at the same time governments needed more revenues to cover up for the rising costs of covid treatments.
Financial institutes suffered too because less people were eligible for loans and lost their revenues for interests on loans.
The construction and real estate sectors suffered too because people could not get loans to buy flats. Many businesses had to lay off many of their employees to save their available cash.
Wages and salaries were cut down to reduce losses further decreasing the money liquidity in markets.
The hospital suffered losses too because the flow of foreign patients stopped and local patients hesitated to go for hospitalization to save money.
Export-imports activities shrank because of lockdown and restrictions on land and air cargo. Many essential supplies disappeared or were available at their minimum levels in markets.
A crisis can offer opportunities for lucky businesses. Pharmaceutical companies and mask manufacturers are two examples of benefitting sectors.
These are just a few examples of the rippling effect of the disruption the world is experiencing now.
On the social front, people suffered from social distancing. Many people felt anxious and troubled. In communities, people find relief for their anxieties and this was no more possible. Weddings, social gatherings in parties, and weddings reduced to their minimum and the disruption of social norms proved extensive. Sectors are interconnected so that a change in one sector shall extend its effects to many other sectors.
On the education, front learning from distance spurred and new learning technologies found their way to the teaching sectors. Travels by school buses and private vehicles to educational institutes suffered. Social learning whereby students gather in one class and get to know each other almost disappeared.
We can see from the above discussions that it is difficult to grasp the cause-effect relationship. A disruption in one sector extends its arms and cross-links too many other sectors. Causes reinforce each other and compound their effect. The linear relationship between cause and effect does not exist anymore.
Effects of cross-linking of causes lead to the formation of a network and not a linear relationship. These effects compound and grow exponentially and reach their tipping point rapidly. If the system is heavily connected, it forms a rigidity gap leading to its collapse. Hence, we need agility to cope with rapid changes.
The image shows some of the interactions we experience and the emerging complexity from such interactions. Linear thinking of such systems is void of any value.
We need a higher level of thinking than complexity itself to find our directions in its complex terrain.
Thank you for illustrating 2nd and 3rd order consequences in action.
In too many instances, decisions are made only by looking at 1st order consequences.
Like not addressing small instances of bad ethics in the workplace because “Jim is normally a nice guy and we don’t want him to lose face” soon becomes a company culture of harassment or pilfering, and lack of accountability.
Many of the governments that rolled out big expensive support packages at the start of the pandemic did it exactly to mitigate some of the many negative 2nd and 3rd order effects you mention. Even if they didn’t succeed, the population probably had a little more trust in the good will of the government than if they had done nothing.