Innovating and Inventing for Sustainable Cities:
a Tale of Three Incongruities
Paper Presented at the 34" International Conference of the System Dynamics Society,
Delft, Netherlands
20" of July 2016
Craig A. Stephens
craig.stephens@greenwood-ag.com
Matthias O. Miller
matthias.mueller@greenwood-ag.com
Alan K. Graham
alan.graham@greenwood-ag.com
Andreas J. Harbig
andreas.harbig@greenwood-ag.com
Greenwood Strategic Advisors AG
Zugerstrasse 40, 6314 Unterageri, Switzerland
Innovating and Inventing for Sustainable Cities:
a Tale of Three Incongruities
Abstract
Global population growth and urbanization continue apace, making cities ever more important to
humanity. But most cities are not environmentally, economically, socially, or fiscally sustainable and
are unable to secure the investment financing needed for multi-dimensional sustainability. At their
root these problems proceed from the misapplication of Cartesian reductionist approaches to
complex dynamic city-systems. A new framework is needed for integrated, collaborative, systemically
effective investment essential to city sustainability; this paper introduces an initiative to provide that
framework, now under way in partnership with the cities of London and Boston. This is a unique
opportunity for the System Dynamics field, one that requires large-scale socio-economic innovation
as well as a host of new technological inventions that will reshape and automate the practice.
Key words
Sustainability, Cities, Urban Dynamics, Innovation, Invention, System Dynamics
Acknowledgements
The authors would like to thank Christiana Amacker, Adem Delibas, Norbert Englert, Arash Golnam,
Christoph Kirch, Maya Marti, Manuel Niederberger, Philipp Thimm, Alexander Voigt, Thomas
Scheiwiller and Karin Thimmel-Eberle for contributing to the work underlying this paper.
1 Unsustainable Cities and Sidelined Resources
1.1 Introduction: A Tale of Three Incongruities
Cities are crucially important to the welfare of humanity and the world. Globally, mankind is
steadily urbanizing and this trend is expected to continue. Today cities are the engines of
three-fourths of global economic growth, most energy consumption occurs in cities and
they produce the majority of emissions. It is quite literally true that we cannot get the
planet right without making cities sustainable.
Yet most cities are failing to cope with most of the many challenges they currently face, and
are even less capable of dealing with the emergent consequences of present
unsustainability. Put bluntly, we can say that the modus operandi of today’s cities is not
sustainable despite the abundance of resources available — both financial and intellectual —
to establish and maintain cities on trajectories toward sustainability.
This is incongruous, that is, something inconsistent, out of place, inharmonious. Making
cities sustainable is a story of three specific and intertwined incongruities and their
resolution.
e Incongruity #1: Cities are the main engines of global economic growth, but not
sustainable and can’t obtain the investment funding needed to become sustainable.
e Incongruity #2: Capital markets (institutional investors, fiduciaries to the middle
classes) desperately need solid new investments, but there’s no framework for
investing in cities on the scale needed.
e Incongruity #3: System Dynamics is a unique enabling technology for sustainable
cities, but (despite multiple attempts) has had no significant or lasting influence on
them.
Drucker identifies such incongruities as particularly promising sources of innovative
opportunity: “An incongruity is a discrepancy, a dissonance, between what is and what
‘ought’ to be. We may not understand the reason for it; indeed, we often cannot figure it out.
Still, an incongruity is a symptom of an opportunity to innovate.” (Drucker 1985:57).
Here it is important to distinguish between innovation and invention:
e Invention means creating new things or ideas;
e Innovating, as Drucker uses the term, means creating new value, demand,
customers, markets.
Inventing, then, is about creating new things; a simulation language or model is an
invention, as is System Dynamics itself. Drucker (1985:35) argues that innovation is a
“diagnostic discipline”, and comes from a “systematic examination of the areas of change
that typically offer entrepreneurial opportunities”. Innovating is therefore about creating
new value, demand, customers, and markets. Invention without innovation is usually
insufficient to accomplish these things. As will be shown, this distinction between inventing
and innovating will prove critical to resolving the three incongruities at the heart of city
unsustainability.
1.2 Sustainable Cities
It is beyond the scope of this paper to explore alternative definitions of city sustainability. In
line with the widely accepted Brundtland definition of a sustainable development (WCED
1987), a sustainable city must enable current inhabitants to meet their needs without
compromising the ability of future inhabitants to meet their own needs. While city
sustainability has a strong local flavor (particular in regards to social, spatial, and economic
dimensions), serving the needs of current and future inhabitants is not sufficient. A
sustainable city must operate in a manner that is consistent with global sustainability.
Today the word “sustainability” is so frequently and casually applied as to have become
almost meaningless. We have therefore developed a systems-based definition of city
sustainability in the course of dynamic simulation experiments using the city of Chicago as
the subject. A sustainable city has:
1) Rising incomes and municipal revenues (to cope with increasing demands on local
government)
2) Positive fiscal balance and a strong balance sheet (so needed investments can be
financed)
3) Well-maintained infrastructure
4) New investment funding and development projects bringing new infrastructure and
services without big schedule and cost overruns (and resulting under-delivery of
needed functionality)
5) Balanced use of municipal space
6) High (or at least rising) quality of the city’s operational performance and services
7) Energy consumption and emissions flat at much lower levels than today
8) Per-capita city debt and taxation flat at what stakeholders regard as reasonable
levels
9) High (or at least rising) Quality of Life (as measured by a variety of stakeholders) and
strong social balance (upward mobility, cultural diversity, income differentials,
affordability, etc.)
While this is obviously a summary-level definition, it has proved both practical and revealing
in tests of real-city performance under a range of infrastructure investments and policy
changes. A sustainable city is performing well on the dimensions listed above. A city being a
system of systems, the above-listed dimensions of city sustainability are tightly coupled by
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those dynamics. Consequently city sustainability and unsustainability are systemic
phenomena and sustainability is an all-or-nothing proposition: because of their dynamic
interconnectedness a city that performs well on only some of these dimensions is not
sustainable.
Based on these dimensions one is hard-pressed to identify any cities that are sustainable.
Most cities have performance problems on multiple dimensions. London, for example, faces
a housing crisis and deteriorating transportation adequacy. Though highly successful by
comparison with most cities, London also suffers from chronic under-funding of
infrastructure and other investments needed to cope with its own success and resulting
growth. Prior to the recent Brexit vote, that growth was expected to expand greater
London’s population from its present level of 8.6 million to 11 million or more in 2050.
First published by the Mayor’s office in 2014, the London Infrastructure 2050 plan identifies
nine essential infrastructure investment areas: public transport, health care, digital
connectivity, energy supply, housing, education, water supply and distribution,
recycling/reuse/waste management, and green space. In the 35 years to 2050 London needs
£1.3 trillion of infrastructure investment — an annual average of about £37 billion in funding.
Although these numbers do not include additional and much-needed investment in social
services and reduced energy consumption and emissions, they substantially exceed both the
magnitude and pace of public investment in London in recent decades and the volume of
investment funding available from public-sector sources as they are currently structured.
The global need for city infrastructure investment funding is quite large. Today the world’s
top 600 cities total 1.5 billion in population and generate half of global GDP. By 2050 the
population of these cities is expected to grow by 73% to 2.6 billion; the infrastructure
investment to cope with growth in these 600 cities amounts to approximately £280 trillion.
Incongruity #1. Cities are the economic engines for % of global growth; they also consume
about 70% of all energy and generate 75% of all emissions. As one of the world’s most
successful cities London exemplifies a global conundrum, a massive systemic incongruity
with pervasive consequences for all of humanity: Investment is essential for social,
enviror and fiscal inability in cities, but cities cannot currently
obtain the substantial funding required.
This is the first of the three intertwined incongruities that must be resolved to make cities
sustainable.
1.3 Institutional Investors on the Sidelines
The chronic shortage of investment funding in cities is not due to a lack of financial
resources. To the contrary, capital markets are characterized by an abundance of funds and
a shortage of quality investment opportunities. As fiduciaries for middle-class wealth,
institutional investors (such as insurers and pension funds) are responsible for huge
amounts of capital; but they struggle (in an era of central-bank repression) to find safe
investments that will produce long-term risk-adjusted returns consistent with promises to
and the needs of their clients.
Incongruity #2. Here we face the second incongruity: Cities need huge amounts of
investment funding and i Li 's need large-scale long-term investments,
but traditional frameworks allow financing only on a limited scale that does not satisfy
cities’ current needs and falls far short of the investment required for sustainability.
This incongruous condition exists for several compelling reasons.
e Cities generally produce much more government revenue (in various forms) than
higher levels of government allow them to keep.
e Few city governments are reliably cash-flow positive; most are cash-neutral or in
deficit; many have also reached traditional limits on financing.
e The multiplicity of vertical “silos” in a city’s “system of systems” makes it hard to
anticipate and track by traditional means (i) the performance of diverse city
investments, (ii) resulting environmental/social/economic benefits, and (iii) the
influence of such benefits on the city’s fiscal performance and balance sheet.
e Public-sector investment projects have a well-known tendency to overrun schedules
and budgets, which threatens expected functionality and performance benefits for
the city (examples abound).
e Shifts in politics and political leaders may alter commitment to particular
investments.
e Asaresult institutional investors cannot currently be confident that cities will earn a
positive return on city investments after financing costs.
This last point is the most important; as fiduciaries, institutional investors cannot risk client
assets without strong assurance that there will be a return on and (ultimately) return of the
invested capital. Such assurance comes with knowledge that the city itself will consistently
earn a positive return on investments made in it, after financing costs.
It appears, then, that the main barrier to large-scale new investment in making cities
sustainable is — that cities aren’t currently sustainable! What may sound like a paradox is in
fact a logical consequence of the operational rules of institutional investors. In other words,
the insufficiency of investment in cities is a systemic phenomenon.
Assurance of positive returns on investments for the city (after financing costs), and of a
strong balance sheet and positive fiscal balance, are requisite for investment financing on a
much-enlarged scale. New financial instruments are also requisite, accompanied by
regulatory approvals and new modes of investor assurance.
But how to bring about such changes in cities and city financing?
1.4 System Dynamics on the Sideline
“Urban Dynamics” (Forrester 1969) is a founding work in System Dynamics and was a core
vehicle for the invention of the field. It should be noted, however, that the original Urban
Dynamics model focused on a general understanding of generic forces that shape the
growth and decline of cities. It was not a model of a specific city, nor did it include the full
set of feedback mechanisms (particularly economic and financial) that drive city
performance. It and other early city simulators were outstanding technical inventions that
produced considerable understanding among a small group of practitioners.
Subsequent research (Mass 1974; Schroeder, Sweeney & Alfeld 1975, Graham & Alfeld
1977) expanded the scope of the Urban Dynamics analysis, dealt with criticisms and
misunderstandings emerging from other fields, and attempted a small number of real-world
applications. In a review of the “first fifty years” of Urban Dynamics, Alfeld (1995) recounts
the histories of five early applications of Urban Dynamics.
In spite of the analytical superiority of Urban Dynamics-style models relative to conventional
methodologies, real-world applications have led to mixed results at best. Unsuccessful
applications suffered from failure to understand and balance short- and longer-term city
interests, or from a misguided focus on modeling and models rather than solutions that
improved city performance and sustainability. Useful insights resulted when core principles
of Urban Dynamics (relative attractiveness, ageing of buildings and limitations in land
availability) were understood and internalized by city stakeholders. Implementation failures
seem to have resulted from inadequate approaches rather than flaws in the methodology or
technology. But nowhere did this work take root and have a pronounced or lasting influence
on cities. One might conclude that the technical inventions (city simulators) worked
noticeably better than did practitioners’ attempts at socio-economic innovation; no lasting
demand, no customers and market, emerged for dynamically assisted management of cities.
For the future, Alfeld (1995: 221) suggests two guiding principles: First, he suggests to
“emphasize answers, not models” — for example, (i) demonstrating how to maximize the
leverage of existing programs, (ii) quantifying tradeoffs between competing programs, and
(iii) using the logic of the model to foster consensus within and across interest groups by
developing and proving systemically synergistic solutions. Second, he emphasizes the
importance of focusing on the user interfaces with these simulators rather than on the
model and data. Interfaces need to enable administrators, planners, and other city
stakeholders to run, evaluate, and understand their own scenarios largely without
intervening experts. Used that way, city simulators can become platforms for stakeholders
to organize and access systemically relevant information and knowledge and to
understanding and intelligently influence the causality of forces at work in the city (Alfeld
1995: 222).
More recently IBM employed System Dynamics in modeling the city of Portland (Hennessy
et al. 2011, IBM 2011). In that project, representatives from IBM, the city of Portland and
other stakeholders created a model to inform the development of the Portland Plan. From
early in the process publicly available sources were enthusiastic about the application of
System Dynamics to city planning, but the project ended with little or no influence on
strategic city planning and no apparent follow-on applications.
What went wrong? The IBM/Portland project combined a classic Urban Dynamics approach
with participative group model-building. Despite public availability of a high-quality user
interface for running city simulations, the simulator itself remained a black box to those not
closely involved with its creation. The project did not create solutions or products accessible
to non-experts. Discussions with insiders indicate that the project failed to obtain buy-in
from important stakeholders both inside and outside city government. To whatever extent
the simulator was a technical success, one might conclude that this project failed on the
innovation side.
Incongruity #3. Despite the unique and proven analytical power of System Dynamics
plied to city-sy multiple ion attempts have produced no lasting influence,
benefits, or usage.
2 Needed: Socio-Economic Innovation Enabled by Investment and Invention
2.1 The Chicago experiment: What must one do to make a city sustainable?
As far as we know this important question went unaddressed until 2014, when Greenwood
began investing in an effort to answer it.
The city of Chicago was our first experimental subject, a city which faces problems of under-
investment, urban decline, and looming financial inviability. Using publicly available data we
set up and calibrated a dynamic simulator of the city to support a series of experiments
involving various forms of infrastructure investment along with land-use and taxation
policies. The simulator structure is shown in the summary-level diagram below (see figure
1). This simulator is substantially more complete and capable than that of Urban Dynamics.
It includes, for example, a full set of financial statements linked to other elements of the
city-system.
aaa,
Metropolitan
Attractiveness
Operating
aa Z ~~ Expenditures
\ Fiscal e——— & Performance
Balancewe__Tax & Other,
Revenues
Tax _—
Rates
Figure 1: A summary-level diagram of the city simulator structure.
Having developed the simulator through several rounds, we also invested in a simple user
interface and embarked on the experiment.
Chicago data and “business as usual” simulations show the city to be unsustainable on
multiple dimensions (declining jobs and employment, deficit spending, insufficient
investment in infrastructure, rising per-capita levels of debt and/or taxation, etc.). Our
experiment aimed at answering this question: How far could Chicago progress towards
multi-dimensional sustainability during a 12-year test period, based on combinations of five
types of infrastructure investment and two policy changes? As experimental conditions we
assumed that funding for infrastructure investment could be much more available than in
the past and that political opposition would not prevent investments and policy changes.
Although the full range of tests and results is beyond the scope of this paper, our
experiment produced the following results and insights.
e Even a large investment in any single infrastructure type does little to improve city
performance and nothing to make it sustainable. Most such investments fail to
produce city fiscal gains that exceed financing costs, which causes per-capita debt
and taxation to increase.
e Substantial simultaneous funding for all five investment types sharply improves
Chicago’s performance on several dimensions of sustainability (economic,
environmental, and Quality of Life) but sharply worsens performance on other
sustainability dimensions (unemployment increases and per-capita debt and taxation
are much higher).
e Combining all five investment types with complementary policy changes in land use
and taxation produces performance consistent with sustainability on all nine
dimensions listed above. The most notable improvements:
- The city becomes consistently cash-flow-positive and per-capita debt is capped at
a modest level;
- Investment increases ten-fold and much of that is self-financed;
- Energy consumption and emissions decline sharply and stabilize at much lower
levels despite healthy economic growth;
- The quality of city services and overall quality of life improve sharply;
- The city’s performance trajectory diverges dramatically from the “business as
usual” scenario, with significant and measurable performance improvements
accumulating quickly (within the normal span of political office).
The most important outcome (from a financial standpoint): investments in the city earn
positive long-term returns (for the city) after financing costs; that is an essential condition
for sustaining increased private-sector financing.
Some important insights from this Chicago experiment:
e City returns on investment depend as much on overall conditions in and
performance of the city-system as they do on the nature of the investments
themselves;
e The same is true of policy changes — changes that would make the city less
sustainable in the absence of investment funding have the opposite effect when
such funding is increased and performance improves;
10
e This means that improving the city’s systemic performance tends to increase returns
from city investments and policy changes, which tends to increase and sustain
private-sector willingness and ability to provide investment funding;
e Acity that attracts increased investment and begins to move towards sustainability
on multiple dimensions will experience self-reinforcing performance and funding
gains that should accelerate movement towards sustainability.
Sustainability therefore seems to be self-financing, both through the city’s surplus cash
flows and by attracting and justifying increased private-sector funding. In other words,
increasing city sustainability tends to make itself sustainable. A corollary also seems to be
true: deteriorating city sustainability tends to make itself sustainable. To put it another way,
a city in a state of unsustainability will tend to remain in that state unless acted on by forces
(investments and policy changes) that put it on a different trajectory towards sustainability.
Pondering why a city’s movement towards sustainability should tend to be self-
perpetuating, and why an unsustainable city tends to remain unsustainable, the answer to
both questions seems to be the same. Unsustainable cities tend to be trapped in that state
by the power of self-reinforcing feedback; when effectively energized by new investment
and policy changes, the same feedback begins lifting the city out of unsustainability.
The context for these feedback effects is decades (at least) of a- or even anti-systemic
approaches to running cities like Chicago. Cartesian reductionist thinking attempts to
decompose complex dynamic systems (such as cities) to their constituent elements so those
elements may be understood and managed. The consequences of reductionism can be seen
in the many vertical “silos” to be found in a city, each being defined and managed as if it
were largely independent of the others; they can also be seen in layers of government
above the city level and in the gradual arrogation of authority and control over the city to
higher government levels.
Cartesian reductionism has taught humanity a great deal about system components. It is in
systems that limitations inherent in the Cartesian approach come to the fore and do great
damage. By definition the behavior of a system is other than the behavior of its component
elements. The system is that which cannot be understood from its decomposed elements;
decomposition prevents systemic understanding. To the extent that it survives, a city-
system “managed” along reductionist lines is at least pronouncedly sub-optimal and
sometimes dysfunctional. The unpleasant consequences of sub-optimal and dysfunctional
city performance accumulate, gradually diminishing options, resources, freedom of
movement, and sustainability. The city’s own mismanaged dynamics hold it pinned in a
problem-ridden and unpleasant corner of its performance envelope.
The Chicago experiment leads us to this conclusion: clawing back even a modest portion of
the substantial and unpleasant consequences of sub-optimal city performance produces
large gains which tend to self-perpetuation. Clawing them back is possible because the same
powerful feedbacks now holding the city pinned in its unsustainable state will, if re-
11
energized in another direction, lift it out of that state. This is systemic transformation
powered to a large degree by the system itself, consequently such transformation requires
neither genius nor total political control.
2.2 What is required of System Dynamics to make cities sustainable?
Having demonstrated through System Dynamics experimentation the possibility of
establishing cities on trajectories towards multi-dimensional sustainability, we cannot
imagine accomplishing such transformative change without the practice and discipline of
System Dynamics. But early applications are already altering this practice and discipline to
such an extent that they will soon cease to bear much resemblance to their current forms.
The substance of the field will remain but its forms are radically changing and new
inventions are transforming existing processes and empowering new actors.
Making cities sustainable requires several big, new things of System Dynamics and system
dynamicists.
1) First, recognize that making cities sustainable constitutes socio-economic innovation.
Second, recognize that System Dynamics practice is and will continue to be about
inventing things rather than innovating. The innovation is utterly dependent on
these inventions but they are not and cannot be the innovation — they just make it
possible.
2
Next, be aware that socio-economic innovation succeeds or fails according to the
values of stakeholders in the systems that are the locus of that innovation. Also be
aware that few of those stakeholders are inventors of any kind and that their values
consequently have little in common with those of System Dynamics practitioners/
inventors. Socioeconomic innovation will continue to fail in cities if it is pursued
based on the values of system dynamicists — a primary reason why there has been no
lasting influence from city-simulation initiatives to date.
3
In our small field deep experts build small numbers of models based mostly on their
own values and interests. That works to an extent in academia and consulting but it’s
inconsistent with socio-economic innovation. To innovate in cities we have to
reverse the whole process and develop simulators and software and tools working
from the outside in, that is, working in from the great diversity of city stakeholders
based on what represents value to them. We have to design the technology, the
inventions, to conform to the city-system innovation on which we’re focusing and to
the values of those who will determine whether that innovation succeeds or fails.
The inventions must serve and enable and conform to that innovation and those for
whom we are innovating — it rarely works the other way around.
4
System Dynamics will cease to be a craft-based practice, developing skills through
long apprenticeship at the feet of master practitioners and dependent on slow,
12
5
6
laborious, mostly-manual work by those experts. The fact that the work is done on
computers doesn’t save it from being manual. The processes of System Dynamics
must be industrialized (i) so that very small numbers of deep experts are no longer a
bottle-neck on quality applications and (ii) to accelerate the acquisition of expertise
and the creation of new experts. Establishing a single city on its trajectory towards
sustainability involves such a large effort as to be impossible unless the practice of
System Dynamics is extensively automated. Automation is a form of invention, which
we're pretty good at. Other fields have automated, so can we; and as an added
benefit automation should greatly improve quality.
We must transform high-quality System Dynamics applications practice so that it can
be safely carried out by professionals who know little or nothing of System Dynamics
itself. It is impossible to scale up the practice as it currently exists, and it is
impossible to make more than a tiny handful of cities sustainable through practices
that are inherently unscaleable. Making System Dynamic practice scaleable requires
redeveloping our technology, tools, processes, and practices for transfer to and safe
operation by other professionals; it also requires expanding our practice to include
the training of the trainers of these other professionals. Remember that these
professionals will have values that differ from ours; their values and ours must be
congruent and compatible, but they will not be the same. The new forms of our
technology, tools, processes, and practices must conform to their values as well as
ours.
We must invent new software that liberates System Dynamics experts from their
traditional role as indispensable intermediaries between “users” and simulation
models. This involves much more than just wrapping a good user interface around a
city simulator. It means inventing city-stakeholder software that integrates and
automates all of the access and exploratory and diagnostic capabilities currently
provided by expert system dynamicists.
2.3 The initiative in London and Boston: a space for collaborative innovating
To establish a city on a trajectory towards multi-dimensional sustainability requires a great
diversity of knowledges, skills, resources, and capabilities. A subject city and a team of
system dynamicists are necessary but very far from sufficient.
Such transformational change can emerge only through collaborative work by cities,
institutional investors and their fiduciaries (asset managers), enabling middle-men (banks,
audit/advisory firms, regulators, and rating agencies), charitable foundations, and System
Dynamics practitioners and their affiliates (software developers, etc.).
Cities are half of the new city-finance market that must emerge for cities to move
towards sustainability. Cities provide the need, occasion, and justification for large
new volumes of urban investment financing.
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e Institutional investors (insurers and pension funds) are the other half of that market,
providing investment funding which they, as fiduciaries, need to place on behalf of
their clients (the middle classes).
e Asset managers are fiduciaries to the institutional-investor fiduciaries. They advise
such investors, packaging new investment products for them and distribute such
products to them.
e Investment banks create financing and sell it on to institutional investors, often via
asset managers.
e Rating agencies evaluate and rate the risk of newly created and existing financing
based on the credit-worthiness of the institutions being financed.
e Audit/advisory firms provide assurance and consultancy-type services to cities,
institutional investors, and asset managers.
e Insurers and pension funds (institutional investors) are closely supervised by
regulators, who determine the acceptable range and terms of products in which
institutional investors may invest.
e Charitable foundations offer experience in and focused funding for city sustainability
initiatives.
e System dynamicists provide and apply analytical technology that is a critical enabler
of the new city-finance market that must emerge for cities to move towards
sustainability. More importantly, System Dynamics practitioners provide the
knowledge of city-systems and process of determining how they may safely be
transformed and financed in trajectories towards sustainability.
There is little precedent for such a co-creation partnership. The incentive for such disparate
organizations to collaborate lies in the transformative potential inherent in the prospect of
making cities sustainable. That potential exists in different forms for each type of
organization: cities see their transformation in new investment funding for sustainability;
institutional investors see transformation in new long-term fixed-income investments in
large volumes and with attractive returns. Asset managers see transformation in large
volumes of new investment products that synergistically integrate infrastructure, social-
impact, and green investments — for which there is rapidly growing and unsatisfied demand
from their institutional-investor clients. Investment banks see transformation in providing
their services in a large and fast-growing new finance market, one that could become the
largest such market in the history of finance. Audit/advisory firms see transformative
potential in new advisory-service services and markets (the largest such markets since ERP).
Charitable foundations see transformation in larger vehicles for more concentrated and
leveraged contributions to city sustainability. System Dynamics practitioners see
transformative potent for their entire practice and field.
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The requisite work can only be accomplished collaboratively and in integrated fashion. From
the city end of this multi-party partnership, that work is to devise, test, and demonstrate
tailored combinations of investments and policy changes that will establish each city on a
trajectory towards multi-dimensional sustainability including positive returns on city
investments after financing costs. From the capital-market end of the partnership (the
institutional investors) the requisite work is to design and develop financing instruments,
processes, measurements, and standards suitable to the new city-finance market,
acceptable to and approved by institutional investors, regulators, and rating agencies. In the
middle of the partnership the work of investment banks and audit/advisory firms enables
and facilitates this co-creation process. At the center of the partnership the work of System
Dynamics practitioners and their affiliates provides the platform for collaboration between
cities and capital markets and the tools and processes for monitoring and ensuring the
feasibility of the entire process and its planned outcomes.
Greenwood launched this initiative in late 2014. The Greater London Authority joined in
early 2015, followed by the city of Boston early in 2016; a third city is expected to join in the
second quarter of this year. Discussions with other organizations began in mid-2015 and are
ongoing.
For more than a year Greenwood and London have been collaborating on the Greater
London Simulator Prototype. The Prototype simulates the 32 boroughs comprising Greater
London and the over-arching Greater London Authority. It is almost certainly the most
potent and capable dynamic simulator of a metropolitan area developed to date. We have
developed new software that automates and greatly speeds the process of simulator set-up
and validation; this is proving vital as the size and tight dynamic coupling of city simulators is
testing the boundaries of what can be done via unautomated processes. Beginning around
mid-year we will begin applying these tools and adapting the Prototype simulator structure
to the city of Boston and the rest of the towns comprising greater Boston. The Greater
London Simulator Prototype will reach maturity in the second half of this year; analytical use
has begun and will accelerate as the Prototype nears maturity.
Prototype work will be succeeded by a three-year Pilot during which partners in the
Initiative will carry out their collaborative work. The Prototype simulators will be succeeded
by even more powerful and detailed versions that individually simulate each borough, city,
and town in the greater metropolitan areas. By the end of the Pilot the partners will have
developed, tested, reviewed, and received approvals for a first major round of new
investment funding in each partner city. An Implementation and Expansion stage will follow
the Pilot, during which the partners implement first-wave financing, investments, and
projects in the original partner cities and extend the partnership to include a new group of
cities.
The response of current and prospective partners to this initiative has been most
interesting. They see the uniqueness of its large scope and objective in a world where most
new efforts aim at incremental improvements. They also see the unique partnership and co-
15
creation effort as consistent with and requisite for the accomplishment of that large
objective. They are motivated by the transformative potential of this initiative for their
organizations, and by the prospect of playing a formative role at its inception.
4 Conclusions
We launched this initiative as a radically different approach to systemic societal challenges.
We outlined ways in which the field of System Dynamics will be changed in the course of
this Initiative. We are confident that the enabling technologies (the inventions) are available
or can be developed, that confidence being based on real achievements in these areas. If
successful, this approach to the application of System Dynamics will open up a new and very
large space for effective management of complex dynamic systems, and will make System
Dynamics itself scaleable to meet that need. We are confident that our field will benefit
from the practice of innovation as a methodical, purposeful search for ways to create new
value, and that the experience gained during this Initiative will inform innovative efforts in
other areas where System Dynamics ought to have had an impact.
The real challenges, in our opinion, lie in the inter-organizational, political, cultural,
communicative and co-creation aspects of this Initiative. In these respects the initiative is
already breaking new ground. How do we ensure that the initiative remains strongly
focused on the collaborative creation of societal wealth rather than falling victim to profit-
maximization behavior of individual organization? For the Initiative to succeed, partners and
a wide array of city stakeholders must benefit from it. We believe that the Initiative’s unique
content and approach provide an unusual opportunity to benefit all such interests in
integrated fashion, bringing clarity, rationality and moderation as better alternatives to
political extremes and gridlock.
16
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