The main reason complex societies collapse is that complexity – like other human endeavors – eventually suffers from diminishing returns. Complex societies are problem-solving machines. They tackle one problem after another by marshaling a society’s resources toward solutions.
In the beginning, the problems a society tackles are those that are easiest to solve and bring the greatest rewards. So they are worth the effort and expense of maintaining a complex social structure. Over time, however, societies tend to move on to problems that are increasingly difficult and expensive to solve, so the rewards for solving them decline. Consequently, the cost of maintaining a huge bureaucracy, specialized professions, or upper classes grows increasingly burdensome.
The essential currency with which a society finances its complexity is energy. Energy includes food supplies, human and animal labor, fuels (such as wood, fossil fuels, or uranium), and others. As long as energy is plentiful, a society can invest in more complexity. But once energy supplies reach their limit or start to decline, complexity becomes less and less affordable.
Eventually, a society may reach the point where trying to solve a new problem is not worth the cost. From then on, it becomes vulnerable. The next crisis or serious problem that comes along may be the straw that breaks the camel’s back, and the civilization collapses.
What will happen when oil supplies fall behind demand? We have built our modern civilization on the premise of unending growth – growth that needs energy. We have built a complex civilization that requires increasingly large amounts of energy to maintain itself. What happens if growth is no longer possible?
The most important question raised by a financial crash is why so many intelligent people – professionals and non-professionals alike – did not see the bubble for what it was. What fooled them into pursuing such a mad course of action that inflicted so much damage to their own future?
People think of the oil industry as this backward, nineteenth-century industry with people randomly drilling holes. But in fact, next to the military, it’s emerged as probably the biggest consumer of computer technology in the world.
Demand for oil is increasing at the same time that many oil fields have passed their peak, and few new ones of any size are being discovered. Outside of OPEC nations, production is already declining.
The world today consumes energy at a steady 13 terawatts, 85% of which comes from fossil fuels. By 2050, experts expect demand to increase by another 30 TW.
People en masse forsakes reason and objective thinking and succumbs to a primordial instinct to run with the herd. Hundreds of years ago, when a herd of buffalo was stampeded toward a cliff by Native American hunters, no buffalo poked his head above the crowd to look where they were going. Each creature simply accepted his neighbors’ belief that there was an urgent need to run. From then on, they were driven by adrenaline, each buffalo’s panic and excitement reinforcing his neighbors’. So it was with investors in the tech bubble. Greed, and a fear of being left behind, triggered the same instinctive state of excitement and panic that kept everyone’s eyes glued to the financial media, their fingers hovering over the trigger buttons of their stock trading programs.
Japanese banks no longer tolerate losses. This means they are risk averse when deciding which business lines to run, which clients to serve and which markets to target. Admittedly, Japan is a unique haven: it has a strong home currency, very cheap cost of funding and captive clients looking to globalize, so it has a natural buffer. Their view on risk may be worth emulating.
To make your organization curious, cool and crazy, employ the EMBER model. As you weigh a course of action or decision, ask yourself:
- (E) Does it make us extraordinary?
- (M) Does it matter to customers?
- (B) Does it breaks new ground?
- (E) Does it encourage evolvement?
- (R) Is it real?
If the answer is a firm “yes” to each of these questions, then your decision could ignite your business like oxygen to an ember in the fire.