Complexity Economics

The Elegance of Frugality and Risk

A New Theory of Risk and Rating

Preface to “A New Theory of Risk and Rating” by Giulio Sapelli.

The Elegance of Frugality and Risk.

From a theoretical standpoint, risk is confronted in the very same way in which human interests and activities deploy and manifest themselves at given levels of self-organization. In fact, there cannot exist an objectivistic and deterministic theory neither of these interests nor of the corresponding risks. Risk exists solely in the conscience of individuals and may only be referred to an agent, an actor and his conation, to the history of his subjectivity and to the depth of his subconscience. However, there do exists conditions of risk, or aggregates of tangible and intangible factors which derermine conditions of low or high risk gradients. Risk, therefore, is a problem of subjective perception, of a conscious flux, mixed with conditions of structure – in the sense of Levi Strauss – which can alter the perception of risk as well as the possibility that the very existence of risk may appear either diluted or increasingly consistent.

This books speaks in a clear and concise manner of a remedy which is essential in times and conditions characterized by a high perception of risk and uncertainty.

This book launches a message. If we want to avoid aggregations and repetitions of new risks, our future must be a future of frugality. Frugality is essential simplicity, both in organizations as well as in patterns of behaviour, thanks to which it is possible to replicate conditions of low complexity and, consequently, conditions of low systemic fragility. It is like the truth: it is reached only via subtraction, not by addition. Even though today this is a scientifically established fact it is not sufficient to modify our will or behaviour. An eloquent example is that of those who govern global financial circles, and who continue to practice the very same actions which have created conditions of high risk.

Risk doesn’t exist in nature because it is like good or evil: it exists exclusively thanks to human behaviour and to his arbitration in the world of technology. Because of this, all that which leads to higher complexity and entropy increases the intensity and emergence of risk.

In its corageous treatment of risk management, the book addresses one of the taboos of the contemporary consulting rhetoric, demonstrating how the techniques of risk management are responsible of an increase, not reduction, of risk itself. A nice lesson in the direction of today’s illuminism of omnipotent managerial reification, which too often paralyzes our freedom and creativity. The book illustrates how behind this omnipotence hides a source of profound fragility which explains crises and dissolutions of socites which plunge into disorder. In effect, the problem of social sciences is to explain the existence of order. Conflict is not a problem. The problem is to understand how order can come about and replicate itsels. There esists a multitude of books about conflicts but very few on the issue of social order, such as for example those by Emile Durkheime. At this point, complexity enters the scene. An entity which cannot evolve beyond certain limits without provoking the collapse of systems.

What makes this book interesting is its exceptional logical coherence. The complexity management techniques which the book illustrates are meant to counter the destructive forces of risk. The book is therefore an instrument for preserving the replicability, reproducability and performance of systems in conditions of trubulence, multiple converging stresses and aggregation of numerous variables which can escape our control. A simpler remedy means efficient control. In its simplicity, frugality is, however, challenging from a conceptual standpoint. For this very reason, the book can help defend ourselves from risk thanks to sophisticaed but at the same time simple techniques. Simplicity is the essence of elengance and sophistication.

We need to return to decency and ethics in social and managerial behaviour. Hence elegance of the mind is essential more than aver. It can contribute greatly to rendering the personal and social life of the actors of the human comedy more evolved and self-reflexive. Well beyond these years of global economic depression.



“A New Theory of Risk and Rating” is available on Amazon. Get it here.

Established originally in 2005 in the USA, Ontonix is a technology company headquartered in Como, Italy. The unusual technology and solutions developed by Ontonix focus on countering what most threatens safety, advanced products, critical infrastructures, or IT network security - the rapid growth of complexity. In 2007 the company received recognition by being selected as Gartner's Cool Vendor. What makes Ontonix different from all those companies and research centers who claim to manage complexity is that we have a complexity metric. This means that we MEASURE complexity. We detect anomalies in complex defense systems without using Machine Learning for one very good reason: our clients don’t have the luxury of multiple examples of failures necessary to teach software to recognize them. We identify anomalies without having seen them before. Sometimes, you must get it right the first and only time!

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