How to Make a Systems Graphic to Understand Shared Enterprises

Wherever we are, we need to deal with complex systems, from small family units to whole environmental ecosystems. With zillions of entities interacting, it's almost impossible to keep track of how our actions may affect the world. When we are faced with such situations and need to understand complex systems or find solutions to complicated problems, it can be helpful to visualize our understanding of these interactions.

One way to do this consists of making systems graphics, which are at the core of my forthcoming book on rethinking the economy — proposing ways to build an economy that promotes abundance of life, in which all humans and a great diversity of other life forms can thrive. These graphics can be useful in understanding the behavior of all kinds of systems, including corporations, cooperatives and shared health insurances.

In the following instructions, I refer to one example of a systems graphic I created in the book. It’s about understanding how Solidago — a collective, member-owned health insurance organization in Germany — works. As a member, I have an inside view of how it operates, allowing me to construct  this  systems graphic.

1. In the middle or top of a page, write your main object(s) of concern — what you wish to protect or increase. You can use a graphics software program or even a pinboard. I used the free, open-source software Inkscape.


Note: The terms you write down should refer to measurable quantities, even if you can't measure them accurately. In this example, I wrote down "members' state of health" as the main concern of the members and "financial stability of members" as a main reason why they founded the organization. Don't write down the main process that you are concerned about (such as "preserving members' financial stability") because this is what the entire graphic will be about.

2. Think of key factors that affect your object of concern — that make it increase or decrease. In this case, I did not write down the myriad factors that can affect people's health, because Solidago does not try to impact those directly, but is concerned more specifically with the costs of treatment. Instead, I chose the terms "medical treatment," "costs of services" (the costs of specific medical services), and "treatment costs" (the total costs incurred for medical treatments by a patient). Distribute these terms across the page or pinboard.


3.  You may also want to write down things that are affected by your object(s) of concern. Some of the things you’ve written down in step two may be affected by your object(s) of concern — in that case, do not write them down again. Every term you come up with should only appear once on the page. Or you can write down key interventions.

For example, I wrote down the core parts of Solidago's activities that are designed to make it easier for members to finance their health care. Solidago collects monthly "membership dues" which go into the "association's accounts," from which "reimbursements of treatment costs" are paid out.



4. Draw arrows linking the terms that you've written on the page to show how they affect each other. The trick is to use a color code to distinguish between two main types of causal relationships. The color code I've used is this: A black arrow if more of the first item leads to more of the second item (which also means that less of the first item leads to less of the second item). For example, medical treatments are supposed to improve the members' state of health.


Use a red arrow for an inverse relationship: more of the first item leads to less of the second item (which also means that less of the first item leads to more of the second item). For example, if members' state of health is high, they need fewer medical treatments, and if it is low, they need more treatments. 


Use a gray arrow if you can't quite figure out the relationship, but you think it's important — or it's a complex relationship that may depend on some other factors that you haven't figured out yet (and that should eventually be included in the graph).

5. As you draw your arrows, think of feedback loops and make sure to show them. Feedback loops occur when causal relationships loop back to the first item in a chain. The simplest occur between two items, like the example above. Longer feedback loops may include three or more items.

The color code makes it possible to quickly recognize two types of feedback loops: reinforcing and balancing feedback loops. A reinforcing feedback loop (with no red arrows or an even number of red arrows) drives either exponential growth or collapse. A balancing feedback loop (with one or an odd number of red arrows) results in a more or less steady state or a series of oscillations. For a system to be sustainable, it requires some reinforcing feedback loops in order to grow or to recover from shocks, but it also requires balancing feedback loops that work in a timely fashion to achieve stability. 

The health status and treatment relationship is an example of a balancing feedback loop that includes one (or: an odd number) of red arrows. A balancing feedback loop either results in a more or less steady state (neither growth nor decline) or in a series of oscillations. What it does not do is exponential growth or total collapse. Reinforcing feedback loops can be recognized in a graphic if all the arrows are black (or: there is an even number of red arrows, that cancel each other out). Here is an example of a reinforcing feedback loop in the emerging graphic:

Solidago is seeking to obtain better legal standing as an alternative to existing public and private health insurances in Germany. This is important because a few years ago a law was passed requiring everyone in the country to have either public or private health insurance. Having more members would increase Solidago's political clout and thus help to obtain legal recognition. Conversely, obtaining legal recognition would help the organization attract more members.


6. Once you've completed the steps above, you probably have come up with a messy, spaghetti-like image. Move around the items on your graphic so as to minimize the number of arrows that cross each other. Make sure that with every move, you are still making the same connections, even while you have changed the locations of the terms.

Solidago early graphic (see what the latest version looks like further down):


7. Once you have created a satisfactory graphic, find the reinforcing feedback loops that make the problems you are facing intractable — or the balancing feedback loops that prevent your project from growing to a size where it can really make a difference. Now start thinking of how to intervene to get the system to behave differently.

In this case, the feedback loop between more members and legal recognition is not yet really working as desired. Although the number of members is growing, it is not yet at a scale that would really make a difference in terms of political clout. Thus, one key issue would be to make sure that the organization is doing all it can to attract new members, and perhaps to find new approaches to ensuring that it does obtain better legal recognition.

In another respect, however, Solidago really solves an important problem. One of the key feedback loops in our economy is that profits are invested in creating new needs (for example, through advertising) as well as creating more products. This increases sales, leading to increased profits that are invested in creating new needs and more products. This leads to ever-increased resource consumption, without making people happier.

Solidago (like a consumer cooperative) does not involve the above feedback loop. If you study the Solidago graphic, you find several arrows leading from "associations' accounts" (the nearest thing to "profits" in the graphic) to "financial stability of members" (the core concern). Either treatment costs are reimbursed directly, or a reserve fund is built up to prepare for contingencies, or legal recognition is sought. But, there are also two red arrows: If Solidago were to be really flush with funds, members would likely vote to reduce membership dues and maintain their financial stability in this way – and this would reduce the amount of money available for investment. Consequently, Solidago can be better summarized by the graphic below: the need (of maintaining financial stability in the face of high medical costs) leads to various uses of funds  to finance medical treatment, which reduces the need. Once the need is reduced, membership dues and therefore investments are reduced. This helps to reach a steady state, stabilizing resource consumption while actually making people happy.

Solidago latest version:



Writer's note: In order to support the German-language — and indirectly the English-language — publication of this book, I am running a crowdfunding campaign. I would appreciate any support you may provide. More details here

Header photo by Tamarcus Brown via unsplash. 


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