Systems Thinking: A Lesson From History On Strategic Decision Making
Two recent economic and political situations illustrate deficiencies in linear thinking.[i] We thought the economy was going to continue to improve in 2008, mostly oblivious to the sub-prime mortgage lending crisis and the ensuing “Great Recession.”
Likewise, many in the U.S. went to bed on November 8th, 2016, thinking the citizenry would vote in another Democratic candidate for President. In both instances, many thought that the economy or country respectively would continue to behave as forecasted and reported.
The Upshot Forecasting Model in The New York Times.
Linear thinking vs. systems thinking.
Although statistical modeling methods are good for evaluating past behavior, these methods can lead to difficulties when forecasting future behavior. As in my examples above, reporting driven by statistical modeling caused many of us to assume that past behavior could predict future behavior. It is especially difficult to use statistics, i.e. linear thinking, to predict future trends when the underlying dynamics of a political or economic system are changing.
Systems thinking allows you to identify key principles in a system and react adaptively to changes, providing substantial advantages when you want to forecast human behavior. To use the political case again, in 2015 Concentric teamed up with a media company in the Midwest to forecast six states’ presidential and senate races in the 2016 elections using Concentric Market®. By considering the entire market system including, but not limited to, competition, touchpoints, and social media influences, Concentric Market® enabled the media company to advise their political advertisers on the best media plans and timeslots that would have the greatest impact on the polls. The model accounted for minute-to-minute viewership changes and anticipated how the content of their ads would influence the perceptions of specific segments of their viewership. As a result, the media company increased ad revenue and grew their market share. In addition, Concentric Market® enabled the media company to forecast the correct winner in all six swing-state senate races it was monitoring. It also forecasted the winner of the presidential election in five out of six swing states.
Although systems thinking is still gaining traction for Western business strategy, Western academics and policymakers have been using this approach to understand the actual drivers of human behavior that cause societal problems, such as poverty and segregation. In early China, exceptional systems thinkers adapted principles to anticipate real-time circumstances and become extremely wealthy. These examples from other disciplines illustrate how systems thinking can help you better anticipate and react adaptively to changes in your own business and market.
Examples of systems thinking in the West: Jay Forrester and Thomas Schelling.
I’d recommend Complexity: A Guided Tour by Professor Melanie Mitchell for an overview of systems thinking in Western history. Her definition of complexity is worth restating here because it provides a helpful framework for understanding systems thinking:
A complex (adaptive) system happens when “control and simple rules of operation give rise
to complex collective behavior, sophisticated information processing, and adaptation via learning or evolution.” [ii]
When you can identify the rules that give rise to complex behavior, you won’t be blind-sided when the rules change.
People initially used systems thinking in the West to tackle difficult societal issues. In Urban Dynamics, Professor Jay Forrester and researchers at MIT produced the first models that uncovered how officials had been blind-sided by the underlying dynamics of inner-city poverty.[iii] Urban Dynamics revealed that increasing availability of low-cost housing in inner cities increased the poverty levels in inner cities. Forrester’s conclusions were based on economic analyses that showed that “too much housing meant that there was too much for the economy of the area to support.”[iv]Because officials were not sensitive to the economic burden of low-cost housing on their communities, their good intentions increased the economic burden on these communities.
In the social sciences, Professor Thomas Schelling’s Micromotives and Macrobehavior showed how the decisions of many individual agents could cause tipping points and clustering – because people were responding to the actions of the people next to them.[v] Schelling famously showed how individuals – following their racial preferences – created predominantly white and black neighborhoods.[vi] Following certain unspoken principles, these people came to an equilibrium or a resting point where all of the drivers balanced each other so that the population of a given area remained more or less racially uniform.
Both Forrester’s and Schelling’s analyses showed that policymakers couldn’t adaptively react to the decisions that individuals were making within their respective systems. These policymakers misunderstood the underlying economic and social rules of the systems, and misinformed decisions led to increased poverty and segregation. If you are curious about these subjects, you’ll find reference information in the notes at the end of this article.
Examples of systems thinking in the East: Sima Qian and Fan Li.
I think some of the best systems thinkers are from early China.[viii] Sima Qian was born over 2000 years ago, and, in my opinion, was the world’s greatest historian and a foremost expert in thinking in terms of systems.
I’ll only discuss one chapter written by Sima Qian (司馬遷, ?145–?86 BCE) in his landmark text, the Archivists’ Records (Shiji 史記),[ix] titled “Biographies of Assets Accumulating” (“Huozhi liezhuan” 貨殖列傳).[x] Although the concept of a centralized economy didn’t exist during his lifetime,[xi] Sima Qian explained the ebbs and flows of commodities throughout his empire (Western Han 西漢, 206 BCE–9 CE), which had about 60,000,000 people, 50,000,000 mi2 of land (130,000,000 km2), 1500 administrative regions, and 145,419 civil servants.[xii]
Sima Qian precisely defines the figures who he is interested in examining (people who made at least the equivalent of $200,000 cash or owned specific assets),[xiv] and explains the behavioral principles by which he understands his economic system. One important rule for Sima Qian was that people have an inherent tendency to be motivated by a desire for profit,[xv] and that wealth (fu 富) has an inherent ability to make people slaves to it.[xvi]He further states that “The best governments take into account these natural inclinations [when devising policies],” while “very worst enters into competition with them for profit.”[xvii]
Sima Qian observed that his government’s policies of selling tax-collection contracts, government offices, and noble titles helped create the conditions to bring about a new class of people, who Sima Qian called “uncrowned nobility” (sufeng 素封).[xviii] The “uncrowned nobility” made money sitting back and collecting from investments, and they didn’t have the usual obligations of paying tribute, land taxes or other levies.[xix]Although he couldn’t fault them for getting wealthy off of the system, Sima Qian thought the “uncrowned nobility” living lavishly from their investments were as deplorable as people who lived from the charity of others,[xx] or people who lived a life of poverty while spouting lofty morals.[xxi] All these people were enslaved by their different economic conditions and could neither anticipate nor adapt to changing dynamics. The “uncrowned nobility” clung to their wealth, and, similar to the oblivious investor in 2008, assumed that the empire’s economic conditions would remain favorable to them.
Sima Qian contrasted these undesirables with exemplary figures who he thought used their wealth well, including the legendary statesman and merchant Fan Li (范蠡, 6th–5th cen. BCE).[xxii] In particular, Fan Li demonstrated an excellent use of systems thinking. To help his king defeat a rival state and economically develop his own, his mentor Ji Ran (計然) gave Fan Li seven principles arising from a variety of conditions, from observing natural disasters to the price manipulations of staple foods (his translated speech is in the notes).[xxiii] His principles allowed him to anticipate and adapt to changes based on the current circumstances. For example, Ji Ran said, “If there is draught, then invest in boats. If there is a flood, then invest in sedans.” These principles allowed Ji Ran’s and Fan Li’s king to anticipate economic changes based on real-time circumstances and become one of the most powerful rulers in history. Fan Li continued to apply these principles and became one of the most successful merchants in history by strategically stockpiling and selling goods. When he identified changing circumstances, he applied his principles to anticipate outcomes and take advantage of wealth building opportunities. Moreover, he taught his children and grandchildren these principles, so that the family grew to become unimaginably wealthy.[xxiv]
To bring us back to the present day, I recommend the Economist special report, “It’s all go”. Interestingly, the frugal founder of the drink conglomerate Wahaha (娃哈哈), billionaire Zong Qinghou (宗庆后), is from the same geographical region as Fan Li (modern-day Zhejiang province).
Thinking in terms of systems allows you examine trends, and to anticipate and adapt to changes because you understand the core rules of human behavior that govern your system. It is as applicable to stockpiling and trading staple foods in early China as it is to selling consumer packaged goods, building media plans, investing in new product innovation or modeling modern policy issues. If your business in any way relies on individual human behavior, then systems thinking should be integral to your strategic plans.
You can read more about Concentric’s work with customers in other fields in our case studies.
[i] (Back) For a recent discussion on linear thinking in the Harvard Business Review (HBR), see Bart de Langhe, Stefano Puntoni, and Richard Larrick. “Linear Thinking in a Nonlinear World.” Harvard Business Review, Harvard Business Review, 18 July 2017, www.hbr.org/2017/05/linear-thinking-in-a-nonlinear-world. Accessed Jan 19th, 2018.
[ii] (Back) Melanie Mitchell, Complexity: A Guided Tour (New York, NY: Oxford University Press, 2009), 13. If you are curious about where to begin to understand the MIT researchers approach, the best book that I’ve found is Professor Donella Meadows’s Thinking in Systems: A Primer, edited by Diana Wright (Sterling, VA: Earthscan, 2009). It will give you the foundation to understand and appreciate complexity in systems model.
[iii] (Back) Jay W. Forrester, Industrial Dynamics (Portland, OR: Productivity Press, 1961); Jay W. Forrester, Urban Dynamics (Portland, OR: Productivity Press, 1969); Jay W. Forrester, Collected Papers of Jay W. Forrester (Portland, OR: Productivity Press, 1975). Forrester’s lab continued to make global-scale models in World Dynamics and then Limits to Growth, in addition to making models for the U.S. economy. See Jay W. Forrester, World Dynamics, 2nd ed. (Portland, OR: Productivity Press, 1973); Donella H. Meadows, Dennis L. Meadows, Jørgen Landers, William W. Behrens III, The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind (New York, NY: Universe Books, 1972); and Jay W. Forrester, “Information Sources for Modeling the National Economy,” Journal of the American Statistical Association 75 (371), 1980, 555-574.
[iv] (Back) Jay W. Forrester, “The Beginning of System Dynamics.” McKinsey Quarterly, McKinsey & Company, 1 Nov. 1995, www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-beginning-of-system-dynamics. Accessed Jan 19th, 2018.
[v] (Back) Thomas C. Schelling, Micromotives and Macrobehavior (New York, NY: Norton, 2006). The first chapter (pp. 9-45), where Schelling discusses his lecture attendants seemingly odd seating behavior, is one of the most memorable examples of showing how individual choices can sum up to the behavior of the aggregate.
[vi] (Back) Schelling. Micromotives and Macrobehavior, 135-167.
[vii] (Back) This picture is taken from Thomas Schelling “Dynamic Models of Segregation,” The Journal of Mathematical Sociology 1 (2), 1971, 143–86.
[viii] (Back) By ‘early China’, I mean the period from Western Zhou (西周, ca. 1050 BCE) in China up to the end of the Western Jin (西晉, 316 CE). For readers who are curious about Chinese history, I recommend Wilkinson, Endymion P. Wilkinson, Chinese History: A New Manual (Cambridge, MA: Endymion Wilkinson, c/o Harvard University Asia Center, 2018). For more information about the early Chinese texts I mention, I’d recommend the classic Michael Loewe, Early Chinese Texts: A Bibliographical Guide (Berkeley, CA: Society for the Study of Early China Institute of East Asian Studies, University of California, Berkeley, 1993). By using Loewe’s reference text with Wilkinson’s, you can gain a foothold on any early Chinese source I mention.
[ix] (Back) For a good translation, I would recommend Records of the Grand Historian of China, compiled by SIma Qian, translated by Burton Watson (New York, NY: Columbia University Press, 1961). Hereafter referred to as BW. The Records of the Grand Historian of China and The Archivists’ Records are different translations of the same Chinese title (Shiji 史記). For the Chinese text of The Archivists’ Records, see Shiji 史記, compiled by Sima Qian 司馬遷 (Beijing: Zhonghua shuju, 1959 (1975)). Hereafter referred to as SJ.
[x] (Back) The most well-known translation of this Chinese title is Burton Watson’s translation: “The Biographies of the Money-makers”. I differ with Watsons translation of the Chinese title, and have instead used Professor Michael Nylan’s translation of “Biographies of Assets Accumulating”. I chose Professor Nylan’s translation of the title because I agree with her reasoning that “this chapter is a history of moneymaking as much as of moneymakers”. See Michael Nylan, “Assets Accumulating: Sima Qian’s Perspective on Moneymaking, Virtue, and History,” In Views from Within, Views from Beyond: Approaches to the Shiji as an Early Work of Historiography, edited by Olga Lomová, Hans van Ess, and Dorothee Schaab-Hanke (Wiesbaden: Harrassowitz Verlag, 2015), 131–169.
[xi] (Back) Moses Finely pointed out that there was no centralized economy in Ancient Greece. See Moses I. Finley, The Ancient Economy (Berkeley: University of California Press, 1973). Regarding this finding, Professor Michael Nylan has wrote “M. I. Finley suggested in his classic work, The Ancient Economy, that one cannot speak of an “economy” in classical Greece or Rome, because (a) the economy was not sufficiently integrated; and (b) the pursuit of profit not only severely constrained by custom, but also understood to be of far lesser importance than the pursuit of higher status and honor. The same could be said of early China as well.” Nylan, “Assets Accumulating…”, 169.
[xii] (Back) According a census in 2 CE, the Western Han dynasty had 12,233,062 households, with a population of around 60 million persons. The total arable farmland was around 136,300,000 square kilometers spread among roughly 1500 administrative divisions. To monitor this, there were 145,419 officials for 1500 territories. See Ma Daying 马大英, Handai caizhengshi汉代财政史 [A History of the Han Dynasties’ Fiscal Policies] (Beijing: Zhongguo caizheng jingji chubanshe 1983), 2–3.
[xiii] (Back) Hans Bielenstein, “Wang Mang, the Restoration of the Han Dynasty, and Later Han,” In The Cambridge History of China, edited by Denis Twitchett and Michael Loewe, 1:223–90 (Cambridge: Cambridge University Press, 1986), 241.
[xiv] (Back) SJ 129: 3271-3272. BW 449. Sima Qian gives the reader a precise and detailed list of the different types of luxury commodities that you could own to have the equivalent of 200,000 cash in the Western Han. About these detailed lists of assets, Professor Michael Nylan writes, “Certainly, these lists reveal the complexity and richness of market forces throughout the empire. Since these items — some of them necessities and some luxuries, as we know from excavated and received sources — come from all over the Han empire, they demonstrate a high degree of inter-regional trade and monetization in the empire, no doubt facilitated by the circulation of a single currency, wushu 五銖 coins, whose value the throne backed — at times, enforced.” Nylan, “Assets Accumulating…”, 163.
[xv] (Back) Professor Michael Nylan writes, “all serious thinkers after Xunzi (d. ca. 230 BC) agreed that it was up to government to devise the sort of models and institutions needed to encourage people to convert their desires for profit into desires to emulate the Good. Sima Qian evidently accepts without a demur the ritualists’ conclusions that the best sort of human beings make money when they wish to, yet relinquish it with no regrets, when it seems better to do so. Good rulers, as well as good institutions, encourage this propensity to redistribute profits, or even forego them, in Sima Qian’s view.” Nylan, “Assets Accumulating…”, 140.
[xvi] (Back) SJ 129: 3274. I translate this section as follows, “As for ordinary people, if someone’s wealth is ten-times theirs, then they humble themselves to it. If someone’s wealth is one-hundred times theirs, then they are in awe of it. If someone’s wealth is one-thousand times theirs, they are a servant to it. If someone’s wealth is ten-thousand times theirs, then they are a slave to it. This is an inherent principle of things. [凡編戶之民，富相什則卑下之，伯則畏憚之，千則役，萬則仆，物之理也。]” See BW 449 for a translation of the entire passage.
[xvii] (Back) SJ 129:3253. BW: 433-434. I follow Professor Michael Nylan’s translation for this part of the passage, “The best governments take into account these natural inclinations [when devising policies], the next best guide the people by benefits and boons [handed out in accordance with the system of sumptuary regulations], the next uses moral instruction to teach them, the next best merely organizes them [without explanation or instruction], and the very worst enters into competition with them for profit. [善者因之，其次利道之，其次教誨之，其次整齊之，最下者與之爭]” Nylan, “Assets Accumulating…”, 155 (I modified this quote so that the Chinese is next to the translation).
[xviii] (Back)See Nylan, “Assets Accumulating…”, 167, especially note 125.
[xix] (Back) SJ 129: 3271-3272. See BW 447-449 for the entire passage. I translate the following part of the section, “Currently, there are those who do not receive an official salary, who do not receive income from noble ranks or estates, but their pleasures are comparable these officials and nobles. They are named the “uncrowned nobility”. As for actual nobles, they collect taxes for food and land, and every year they collect from about 200 houses. A lord who collects taxes from 1000 houses receives 200,000 cash. However, these lords must have an audience with the emperor and give tribute from these taxes. As for the common people who engage in farming, crafting, trading, and selling goods, the ratio is every year there is 10,000-cash profit from 2000 houses. So, a household with a 1,000,000-cash investment would make 200,000 cash. However, these people take their turns defending the borders and pay their land tax from these taxes. As for the clothes and food that they desire, after paying taxes they are free to pursue what they prefer and find beautiful. [今有無秩祿之奉，爵邑之入，而樂與之比者，命曰「素封」。封者食租稅，歲率戶二百。千戶之君則二十萬，朝覲聘享出其中。庶民農工商賈，率亦歲萬息二千（戶），百萬之家則二十萬，而更傜租賦出其中。衣食之欲，恣所好美矣。]” For a discussion on the term sufeng, see Nylan, “Assets Accumulating…”, 167.
[xx] (Back) SJ 129: 3271-3272. See BW 447-449 for the entire passage. I translate the following part of the section as, “Even though fortune has given them the resources, they (the ‘uncrowned nobility’) do not drill holes for the city’s wells, they do not travel to different towns. They sit and wait to receive their invested money. Their physical bodies have the dignity of a retired gentleman, but they take from the wealth distributed to them. On the other extreme, there are families that are poor with parents that are aging, wives and children who are young and weak, and at times of the year do not have the food or drink to offer for sacrifices. Their food, drink, bedding and clothing are not enough to make them self-sufficient. If they are like this, but do not feel ashamed, then they are not human. [然是富給之資也，不窺市井，不行異邑，坐而待收，身有處士之義而取給焉。若至家貧親老，妻子軟弱，歲時無以祭祀進醵，飲食被服不足以自通，如此不慚恥，則無所比矣。]”
[xxi] (Back) See SJ 129: 3271-3272, I follow Professor Michael Nylan’s translation, “”if a man has no way to act like those rare persons who deliberately seek mountain retreats, and he grows old in poverty and low rank, however fond he is of talking about humaneness and duty, he, for his part, should be ashamed of himself! [無巖處奇士之行，而長貧賤，好語仁義，亦足羞也!]” Nylan, “Assets Accumulating…”, 161 (I modified this quote so that the Chinese is next to the translation). For an illustrative example Sima Qian disdain of a so-called ‘righteous’ individual who leads a life of poverty, see his praise of Confucius disciple Zigong (子貢, 5th cent. BCE), who went on to live a life of wealth and popularize Confucius’s name, and critique of Confucius poorer yet more righteous disciple Yan Hui (顏回, 5th cent. BCE). See SJ 129: 3258. BW 438. Although Professor Beatrice L’Haridon writes this perspective was not the same within other areas of the Archivists’ Records or between other histories, such as Ban Gu’s 班固 (32–92 CE) Records of the Former Han (Hanshu 漢書, hereafter referred to as HS). Béatrice L’Haridon, “The Merchants in Shiji: An Interpretation in the Light of Later Debates.” Views from Within, Views from Beyond: Approaches to the Shiji as an Early Work of Historiography, edited by Olga Lomová, Hans van Ess, and Dorothee Schaab-Hanke (Wiesbaden: Harrassowitz Verlag, 2015), 12, <hal-01494146>, https://hal.archives-ouvertes.fr/hal-01494146/document.
[xxii] (Back) In addition to these figures, Sima Qian also praises the financial abilities of Fan Li’s mentor Ji Ran (計然 (6th–5th cen. BCE), Zigong (mentioned in the above note), Bai Gui (白圭, 4th cen. BCE), Fan Li’s mentee Yi Dun (猗頓, 5th cen. BCE), Guo Zong (郭縱, 5th cen. BCE). See SJ 129.3256-3261, BW 436-440 for the entire section. For SJ 129.3260, I added in this section to give more context about people who knew how to use their wealth, and translate it as follows, “Wuzhi Luo raised livestock until they became numerous. He then sold them and sought extraordinary fabrics and other things. He offered these to the barbarian King Rong. King Rong then rewarded him ten-fold. The king gave Wuzhi Luo so much livestock that he could fill a valley with horses and cattle. The First Emperor of the Qin bestowed upon Luo the noble rank of lord, and every season he was invited to court to join the array of subjects. As for the Widow Qing of Bashu, she received a cinnabar mine from her deceased husband, and she was able to increase her profits for several generations. Her family, for its part, didn’t reproach her. Now, Qing was a widow, but she was able to guard her enterprise, use her financial resources to protect herself and not be infringed upon. The First Emperor of the Qin regarded her as someone who was faithful to her late husband, invited her to have an audience, and built the Honoring Lady Qing Pavilion. Now, Mr. Luo was a countryman who excelled at raising livestock, and Mrs. Qing was a widow who lived in the hinterlands. Yet, their sense of propriety could contend with forces of 10,000 chariots, and their renown spread everywhere under heaven. Was it not because they used their wealth? [烏氏倮畜牧，及眾，斥賣，求奇繪物，閒獻遺戎王。戎王什倍其償，與之畜，畜至用谷量馬牛。秦始皇帝令倮比封君，以時與列臣朝請。而巴（蜀）寡婦清，其先得丹穴，而擅其利數世，家亦不訾。清，寡婦也，能守其業，用財自衛，不見侵犯。秦皇帝以為貞婦而客之，為築女懷清臺。夫倮鄙人牧長，清窮鄉寡婦，禮抗萬乘，名顯天下，豈非以富邪？]”. See also HS 91.3679- 95.
[xxiii] (Back) SJ 129: 3256-3257.BW 436-438. I translate the following as, “Long ago, King Goujian of Yue (越王句踐,496–465 BCE) was routed in Kuai Ji (會稽, modern-day Zhejiang province)by the rival forces of the Kingdom of Wu. At that point, he employed Fan Li and Ji Ran. Ji Ran said, ‘If you know there will be a fight, then you prepare well. If during the right season you use something, then you understand it. If these two have actualized, then you understand the idea of an asset and carefully observe it. And so, Jupiter being in the metal position to the west means an abundant harvest; water to the north means ruin; wood to the east means famine; fire to the south means draught. If there is draught, then invest in boats. If there is a flood, then invest in sedans. These are the inherent principles of things. Every six years there will be abundant harvests, every six years there will be draught, and every 12 years there will be a great famine.Now, as for the price per unit of grain, selling for 20 cash will hurt the farmers and selling for 90 cash will hurt the secondary occupations. If the secondary occupations are hurt, then the valuables will not appear. If the farmers are hurt, then their fields cannot be cleared. If you don’t go past 80 cash when raising the price and don’t go past 30 cash when lowering it, then both the farmers and the secondary occupations will benefit. There will be a fair price per unit of grain and evenly distributed goods, and the borders and city markets will not be short supply. This is the way to govern a country. The principle of stockpiling goods for trade is to keep it in perfect condition and not let it depreciate in monetary value. When using goods to trade, a perishable will fail, which means don’t hoard valuable staple foods. I don’t dare sit on their value.
Through evaluating whether there is a surplus or deficiency of something, you can understand whether it is expensive or inexpensive. When the price of something hits its peak, it will then depreciate. When something hits its utmost trough, it will then appreciate. Expensive goods should be thrown out as if they are dung and dirt. Inexpensive goods should be grabbed up as if they are pearls and jade.Valuables and money should move as if they are flowing water.’ The king followed this advice for the next 10 years. He made his state wealthy, gave lavish incentives to his soldiers. His soldiers raced to the arrows and stones as if they were yearning for food. Subsequently, King Goujian got his revenge on the state of Wu, demonstrated his military might throughout all the states, and came to be called ‘One of the Five Hegemons’.昔者越王句踐困於會稽之上，乃用范蠡、計然。計然曰：「知鬭則修備，時用則知物，二者形則萬貨之情可得而觀已。故歲在金，穰；水，毀；木，饑；火，旱。旱則資舟，水則資車，物之理也。六歲穰，六歲旱，十二歲一大饑。夫糶，二十病農，九十病末。末病則財不出，農病則草不辟矣。上不過八十，下不減三十，則農末俱利，平糶齊物，關市不乏，治國之道也。積著之理，務完物，無息幣。以物相貿易，腐敗而食之貨勿留，無敢居貴。論其有餘不足，則知貴賤。貴上極則反賤，賤下極則反貴。貴出如糞土，賤取如珠玉。財幣欲其行如流水。」修之十年，國富，厚賂戰士，士赴矢石，如渴得飲，遂報彊吳，觀兵中國，稱號「五霸」。”
[xxiv] (Back) SJ 129: 3256-3257, BW 436-438. To continue the passage, “Once Fan Li had wiped clear the shame of Kuai Ji, at that point he sighed deeply and exclaimed, ‘Of Ji Ran’s seven principles, King Goujian has used five and attained his aspirations. Since he has already implemented them throughout his kingdom, I wish to employ them in my household.’ At that point, he boarded his skiff and floated throughout the rivers and lakes. He changed his given name and family name. He then went to the state of Qi and became known as the ‘Adaptable Old Wine-skin’ (Chiyi Zipi). After that, he went to Tao, where he became known as the ‘Vermillion Duke’ (Zhugong). The Vermillion Duke (Fan Li) thought Tao to be at the center of all lands under heaven, and where all the local lords from the four directions would exchange their goods. At that point, he managed his estate, stockpiled wealth at his residence, actively followed the seasons, and did not make demands upon others. And so, as it is for those who are good at managing their lives, he was able to select the right people and assign them to the right position at the right time. In nineteen years, he made 1000 cash three times, and twice he distributed it to less wealthy acquaintances and siblings. This is called someone who is wealthy that enjoys practicing virtue. In his later years, he became frail and old and turned over affairs to his sons and grandsons. They managed his enterprise and grew it. Subsequently, it’s worth reached that of 100,000,000 cash. And so, those who speak of wealth all mention the ‘Vermillion Duke of Tao’. 范蠡既雪會稽之恥，乃喟然而歎曰：「計然之策七，越用其五而得意。既已施於國，吾欲用之家。」乃乘扁舟浮於江湖，變名易姓，適齊為鴟夷子皮，之陶為朱公。朱公以為陶天下之中，諸侯四通，貨物所交易也。乃治產積居，與時逐而不責於人。故善治生者，能擇人而任時。十九年之中三致千金，再分散與貧交疏昆弟。此所謂富好行其德者也。後年衰老而聽子孫，子孫脩業而息之，遂至巨萬。故言富者皆稱陶朱公。”
If you are curious about my evidence for Western examples:
de Langhe, Bart; Puntoni, Stefano; & Larrick, Richard. “Linear Thinking in a Nonlinear World.” Harvard Business Review, Harvard Business Review, 18 July 2017, www.hbr.org/2017/05/linear-thinking-in-a-nonlinear-world. Accessed Jan 19th, 2018.
Forrester, Jay W. Industrial Dynamics. OR: Productivity Press, 1961.
———. Urban Dynamics. Portland, OR: Productivity Press, 1969.
———. Collected Papers of Jay W. Forrester. Portland, OR: Productivity Press, 1975.
———. World Dynamics. 2nd ed. Portland, OR: Productivity Press, 1973.
———. “Information Sources for Modeling the National Economy.” Journal of the American Statistical Association 75 (371), 1980. 555-574.”
———. “The Beginning of System Dynamics.” McKinsey Quarterly, McKinsey & Company, 1 Nov. 1995. www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-beginning-of-system-dynamics. Accessed Jan 19th, 2018.
Meadows, Donella H. Thinking in Systems: A Primer. Eds. Diana Wright. Sterling, VA: Earthscan, 2009.
Meadows, Donella H., Meadows, Dennis L., Landers, Jørgen, Behrens, William W., III. The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind. New York, NY: Universe Books, 1972.
Mitchell, Melanie. Complexity: A Guided Tour. New York, NY. Oxford University Press, 2009.
Schelling, Thomas. “Dynamic Models of Segregation.” The Journal of Mathematical Sociology 1 (2), 1971.143–86.
———. Micromotives and Macrobehavior. New York, NY: Norton, 2006.
If you are curious about my evidence for early Chinese examples:
Bielenstein, Hans. “Wang Mang, the Restoration of the Han Dynasty, and Later Han.” In The Cambridge History of China. Edited by Denis Twitchett and Michael Loewe, 1:223–90. Cambridge: Cambridge University Press, 1986.
“Every Penny Counts for Zong.” Week in China, 18 Mar. 2012, www.weekinchina.com/2012/03/every-penny-counts-for-zong/.
Finley, M. I. The Ancient Economy. Berkeley: University of California Press, 1973.
Hanshu 漢書. Compiled by Ban Gu 班固. Beijing: Zhonghua shuju, 1962 (1975).
“It’s All Go.” The Economist, The Economist Newspaper, 10 Sept. 2015, www.economist.com/news/special-report/21663324-technology-offering-chinese-business-cornucopia-new-opportunities-its-all-go.
L’Haridon, Béatrice. “The Merchants in Shiji: An Interpretation in the Light of Later Debates.” Views from Within, Views from Beyond: Approaches to the Shiji as an Early Work of Historiography, Edited by Olga Lomová, Hans van Ess, and Dorothee Schaab-Hanke, 1–21. Wiesbaden: Harrassowitz Verlag, 2015. <hal-01494146>, https://hal.archives-ouvertes.fr/hal-01494146/document.
Loewe, Michael. Early Chinese Texts: A Bibliographical Guide. Berkeley, CA: Society for the Study of Early China Institute of East Asian Studies, University of California, Berkeley, 1993.
Ma Daying 马大英, Handai caizhengshi汉代财政史 [A History of the Han Dynasties’ Fiscal Policies]. Beijing: Zhongguo caizheng jingji chubanshe, 1983.
Nylan, Michael. “Assets Accumulating: Sima Qian’s perspective on moneymaking, virtue, and history.” In Views from Within, Views from Beyond: Approaches to the Shiji as an Early Work of Historiography. Edited by Olga Lomová, Hans van Ess, and Dorothee Schaab-Hanke, 131-169. Wiesbaden: Harrassowitz Verlag, 2015.
Records of the Grand Historian of China. Compiled by Sima Qian. Translated by Burton Watson. New York, NY: Columbia University Press, 1961.
Shiji 史記. Compiled by Sima Qian 司馬遷. Beijing: Zhonghua shuju, 1959 (1975).
Wilkinson, Endymion P. Chinese History: A New Manual. Cambridge, MA: Endymion Wilkinson, c/o Harvard University Asia Center, 2018.