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Complex Decision-Making in Economy and Finance

1. Aufl.

von: Pierre Massotte, Patrick Corsi
139,99 €
Verlag:	Wiley
Format:	EPUB
Veröffentl.:	09.01.2020
ISBN/EAN:	9781119694984
Sprache:	englisch
Anzahl Seiten:	384

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Titelbeschreibung

Pertinent to modern industry, administration, finance and society, the most pressing issue for firms today is how to reapproach the way we think and work in business. With topics ranging from improving productivity and coaxing economic growth after periods of market inactivity, Complex Decision-Making in Economy and Finance offers pragmatic solutions for dealing with the critical levels of disorder and chaos that have developed throughout the modern age. This book examines how to design complex products and systems, the benefits of collective intelligence and self-organization, and the best methods for handling risks in problematic environments. It also analyzes crises and how to manage them. This book is of benefit to companies and public bodies with regards to saving assets, reviving fortunes and laying the groundwork for robust, sustainable societal dividends. Examples, case studies, practical hints and guidelines illustrate the topics, particularly in finance.

Inhaltsverzeichnis

Introduction xiii Part 1. Dealing with Complexity 1 Chapter 1. Engineering Complexity within Present-Day Industrial Systems 3 1.1. Introduction 3 1.1.1. Reference definitions 3 1.1.2. What are the problems to be solved? 5 1.1.3. What is the “engineering” approach developed here? 7 1.2. Basic properties of complex industrial systems 7 1.2.1. Structure and organization of system functions 8 1.3. The complexity of systems 9 1.3.1. The basic principles of complexification 9 1.3.2. The complexification process 10 1.3.3. The smoothing property of chaotic characteristics 11 1.4. Analysis of some industrial dynamic systems 13 1.4.1. Introduction 13 1.4.2. Interactions in industrial workshops 14 1.4.3. Product flow in a flexible production system 16 1.4.4. Message flows in complex information systems 18 1.5. Applications of new concepts in industrial systems 20 1.5.1. New features and functionalities to consider 20 1.5.2. Design of complex industrial systems management tools 21 1.5.3. The contribution of chaos and self-organization 22 1.5.4. Consequences 24 Chapter 2. Designing Complex Products and Services 27 2.1. Complex systems engineering: the basics 27 2.1.1. Relationship between organization and product: basic principles 27 2.1.2. Reminder of the operating rules of an organization 28 2.1.3. The challenges of such organizations 30 2.1.4. Concepts of sociability and emergence of order 32 2.1.5. The genesis and evolution of complex systems 34 2.1.6. How and where do structures emerge? 36 2.2. The implementation conditions for self-organization 38 2.2.1. Emergence of self-organized patterns 39 2.2.2. Best stability conditions: homeostasis 40 2.3. Advantages and benefits of a complexity approach 41 Chapter 3. Engineering and Complexity Theory: A Field Design Approach 43 3.1. Design approach for a complex system 43 3.1.1. Methodological elements for the design of a complex system 43 3.1.2. Example: how can we propose a “customized product”? 45 3.2. Applications and solutions 46 3.2.1. Case 1: current approaches based on “design on demand” 46 3.2.2. Case 2: “design by assembly according to demand” approach 47 3.2.3. Case 3: product reconfiguration and on-demand adaptation 50 3.2.4. Case 4: product auto-configuration and adaptation for use 53 3.2.5. Case 5: designing self-propagating computers 55 3.3. Application: organization and management in companies 56 3.4. Main conclusions related to the first three chapters 57 Chapter 4. Organizational Constraints and Complexity Theory: Modeling with Agents 61 4.1. A preamble to modeling 61 4.2. Introducing collective intelligence 62 4.3. Studying the agent concept 63 4.3.1. Some definitions of an agent 64 4.3.2. The different categories and models of agents available 65 4.4. Applications using agents 69 4.4.1. Modeling the behavior of a living organism 69 4.4.2. Modeling of an industrial management and control system 71 4.5. Conclusion: information related to the use and usage of modeling 71 4.5.1. Free Trade considerations 71 4.5.2. Harmonization of situations and objectives 72 4.5.3. Emergence of the ecology and “patriotism” 72 4.5.4. Comments and expectations on modeling expectations 73 Chapter 5. Complexity and the Theory of Organizations: Implementation of Collective Intelligence 75 5.1. Introducing the notion of collective intelligence 75 5.2. Definition of a multi-agent system 76 5.2.1. Introduction 76 5.2.2. What’s in a multi-agent system? 77 5.2.3. MAS areas of application 78 5.2.4. Negotiation protocols between agents 79 5.3. Behavioral and interaction strategies between agents 86 5.3.1. Applying the above principles 86 5.3.2. Application example: workshop reconfiguration 89 5.3.3. Influence of the individual characteristics of agents on the decision process 89 5.4. Concluding comments 95 Chapter 6. Complexity and the Theory of Organizations: The Notion of Collective Patterns 97 6.1. The emergence of collective patterns 98 6.1.1. Conditions and method of emergence of patterns 98 6.2. System complexity factors and their measurement 102 6.3. Conclusion: towards the notion of “complex adaptive systems” (CAS) 104 Chapter 7. Complexity and Theory of Organizations: Structure and Architecture of an Enterprise 107 7.1. Notions of structure in organizations 107 7.1.1. The “enabling” environment for Information and Decision Systems 107 7.1.2. The structural environment 108 7.1.3. The company and the global context 109 7.2. Structure of distributed complex systems 111 7.2.1. Introduction 111 7.2.2. The centralized structure 113 7.2.3. The non-centralized structure; the hierarchical structure 114 7.2.4. The heterarchical non-centralized structure 116 7.2.5. The n-cube structure 117 7.3. Conclusion 118 Chapter 8. Complexity and the Theory of Organizations: Applications 119 8.1. Applications: trends and models 119 8.1.1. Application of the principles to steering systems 119 8.2. Application and implementation of concepts in the “Fractal Factory” 125 8.2.1. The case of the Fractal Factory – organization 125 8.2.2. Consequences for production management 126 Chapter 9. Complexity and the Theory of Organizations: Complex Systems Reengineering 129 9.1. The reengineering of complex systems 129 9.1.1. Introduction 129 9.1.2. The approach and the initial conditions 131 9.1.3. The RECOS reengineering methodology 134 9.2. Comments on the technologies used 136 9.2.1. Modeling techniques and tools 136 9.2.2. Role and contribution of IT in BPR 138 9.3. Theory of constraints and complexity management 140 9.4. Measurement of the complexity of a new organization. 141 9.5. Concluding remark 143 Chapter 10. Evaluating and Measuring Complexity: The CINSYS Methodology 145 10.1. A brief overview of the CINSYS system 145 10.2. What can be found in a CINSYS model? 147 10.3. Functional analysis of the method: interpretation by the CINSYS symbolic and structural diagram 148 10.3.1. The vertical axis is the axis of the “structure” 149 10.3.2. The horizontal axis is the axis of “explanations” 152 10.3.3. The ascending bisector axis 153 10.3.4. The “descriptive inversion” axis 155 10.4. Illustration of the method 156 10.4.1. Evaluating project proposals 156 10.4.2. The RAGTIME proposal 157 10.4.3. The BOLERO proposal 158 10.5. What are the advantages of using the method? 158 10.6. “The network metaphor” as the general application context of the method 159 10.7. Perspectives beyond the CINSYS method 160 10.7.1. A generic methodology for dealing with complex problems 161 10.7.2. Analysis of how, or design of new systems 162 10.7.3. Systems development: organization 163 10.8. Conclusion 163 Part 2. Dealing with Risk in Complex Environments 165 Chapter 11. Underlying Mechanisms in Finance 167 11.1. Introduction to finance theory and its evolution 167 11.2. What are the best candidates for the so-called econophysics? 168 11.3. Action plans in financial regulation and bank regulation: are they ok? 169 11.4. Back to physics and matter: their contribution 170 11.5. From matter up to living beings: how can big events be generated? 172 11.6. The evolution of an economic system – the problem of CRISIS 176 11.6.1. Pre-industrial crises 177 11.6.2. Industrial crises 177 11.7. Role of complexity and diversity in Nature 178 11.8. Application: how should we proceed when faced with crises and financial crashes/crises? 180 11.8.1. Definition of a crisis and frequencies of occurrence 180 11.8.2. Future possible crisis 182 11.9. Crisis as the end of an evolution 182 11.10. Collapse theory and modeling – a theory of the “end” 186 11.10.1. Modeling the collapse 187 11.10.2. Application 188 11.10.3. Comments 190 11.11. Design of financial products: the example of world interconnections 190 11.12. Conclusion 192 Chapter 12. Physics and Social Networks: Domain Similarities 195 12.1. Introducing a similarity of domains 195 12.1.1. Problems of complexity and connectivity 196 12.2. On the principle of emergence 198 12.3. Finance, economics and physics: the quantification of emergence 200 12.3.1. Emergence and complexity 200 12.3.2. Complexity as a quality – self-organization and emergence 201 12.3.3. Emergence and thermodynamics: a general view 201 12.3.4. A few applications 202 12.4. About Gödel theorems 204 12.5. Conclusion 205 Chapter 13. Managing Behavioral Risks: Uncertainty and Catastrophes 209 13.1. Introduction 209 13.1.1. Uncertainty is not disorder 210 13.1.2. The different realities 211 13.1.3. World time 213 13.2. Implications for intellectual approaches 216 13.3. The uncertainties 217 13.3.1. Social acceptability 218 13.3.2. From ordinary risk… 220 13.3.3. …To major risk 221 13.3.4. Risk management 223 Chapter 14. On Managing Risk in the Energy Domain: Conventional Problems Encountered 225 14.1. From a new oil crisis (peak oil) and the resulting energy crisis 225 14.1.1. At present, what do we mean by energy crisis? 226 14.1.2. Energy crisis: impacts on prices and the economy 228 14.1.3. Biofuels: how can we prepare for and manage the shortage? 229 14.1.4. What about raw materials and resulting products? 230 14.2. The future: limit of price increases? Implications of the shortage 232 14.3. Modeling the problem correctly 234 14.4. Crisis or heuristic tactics? Large-scale oil shock? 238 14.5. A few conclusive remarks 239 Chapter 15. On Managing Risk in the Financial Domain 241 15.1. Taking about disasters – from risks to catastrophes in finance 241 15.2. An interesting approach: financial analysis of losses 242 15.3. When the drama occurs 243 15.4. How to conduct a risk consequence analysis process? 244 15.5. Conservatory measures: risk and diversification 247 15.6. An additional risk: the decline and inversion rate at the stock exchange 248 15.7. Concluding with additional risks of the shared economy 249 Chapter 16. Why Current Tools are Inadequate 251 16.1. On the shortcomings of current tools: risk and probability 251 16.2. A thematic illustration 252 16.3. What regularities? 254 16.4. Characteristics of rational expectations in economics 255 16.5. Risk characteristics in the industry 256 16.6. A philosophical summary: chance and necessity 258 16.7. The environment’s new challenge 262 Chapter 17. How to Manage Crises? 265 17.1. The fundamental principles of crisis management 265 17.2. Early warning risk signals and the basics of risk management 267 17.2.1. Several families of crises 268 17.2.2. Mechanisms and crisis preparation 269 17.2.3. Detecting early warning signals and containing damage 271 17.3. Five fundamental elements that describe a company 272 17.4. About stakeholders 273 Chapter 18. Managing Crises in Finance and Other Domains 275 18.1. Reorienting company aims 275 18.1.1. The growing importance of the shareholder 276 18.1.2. The specialization of companies in the new economy 276 18.1.3. The advantages and consequences of this evolution 277 18.1.4. Cultivating diversity 279 18.2. Interactions: towards a crisis model? 279 18.2.1. Effects of the crisis of confidence 280 18.2.2. Banks’ subprime exposure 280 18.2.3. Subprime effects within banks and the stock exchange 281 18.2.4. Subprime effects, at the level of individuals 281 18.2.5. Subprime effects, at bank level 281 18.2.6. Effects of changes in securities 282 Chapter 19. Technological, Monetary and Financial Crashes 283 19.1. Yet another view to complexity 283 19.1.1. Global complexity of economy 285 19.2. The reference financial systems are continuously changing 289 19.2.1. The US Dollar and Chinese Yuan 289 19.2.2. Lifetime of a currency. Importance of gold? 291 19.2.3. Distribution of GDP around the world 292 19.2.4. In terms of economical and overtime evolution 292 19.3. Conclusive discussion 294 19.3.1. Problem of gold and rare earth materials 294 19.3.2. Summary and main conclusions 295 19.3.3. T-bonds versus Eurobonds and Chinese bonds, etc. 297 19.3.4. Application and comments 297 Conclusion 299 List of Abbreviations 305 References 313 Index 327

Autorenportrait

Pierre Massotte is the I2D (Institut de l?Innovation et du Developpement) Chairman. He was Deputy Director at Ecole des Mines d?Ales within the Nimes EMA Laboratory, France. He has previously worked for IBM in Quality, Advanced Technologies and Machine Learning. Formerly, he was also the AI Scientific Director at IBM EMEA Manufacturing and Development. Patrick Corsi is a Senior Consultant, an Associate Practitioner with Mines Paris Tech, France, and a member of the Club of Rome EU Chapter. He was for a long time with IBM, THOMSON-CSF, a start-up in AI, and the European Commission in Brussels.