OUR INSTITUTIONS are cracking at the edges. Each day, we hear about another failure that causes us to question the role and efficacy of government, industry, and social structures. But all too often the debate focuses on the specific problems of a particular sector: Have newspapers lost their way? Is the auto industry obsolete? Can finance be managed without bankrupting us? The overwhelming details of each problem mask systemic problems of all the failing organizations. On closer examination, we can identify a consistent set of causes that apply across the board.
The first systemic problem is simply a matter of scale. Too many organizations have grown without limit - beyond any rational design point - and no correction has been made to accommodate their size. This is a common problem in engineering: We design things with some implicit size in mind, and then are expected to extend that design bit by bit until the parameters are so out of whack that the whole enterprise collapses. Simply put, an airplane meant to carry 100 passengers will probably fly with 120, but not with 200. Any good engineer will recognize that at some point you have to rethink the problem.
What we previously viewed as “economies of scale’’ have become liabilities. We can mask that with statements such as “too big to fail,’’ but the real problem is that they are too big not to fail.
Second, our organizations have become monocultures. Collections of organizations that are too large have also become too similar; any distinction is bred out of them. I first learned this as the “supermarket theory,’’ but economists call it Hotelling’s Law. The idea is that if you have one city block and one supermarket, the logical placement is in the middle of the block, to draw equally well from each end. But what if you have two stores? It would make sense for each to locate on either end of the block, to be closer to half of the shoppers. But instead, both markets vie for the center to attract all the customers. Since their offerings and location are the same, they become undifferentiated clones. Now any problem that impacts one will harm the other equally.
Monocultures also lead to a “herd mentality.’’ You can see this with banks. It’s a Gresham’s Law applied to business practice: The worst practice will displace the better as long as enough actors are doing it. So when one bank takes an excessive risk to reap a greater reward, that risk package propagates. But then when one organization “gets sick,’’ like a homogeneous population, they all risk catching the same infection.
Third, our large institutions have become opaque. When no one inside or outside an organization understands what that institution does or how it does it, effective management and regulation become impossible.
Our financial system is an obvious example. When a company claims it has to retain the employees that sank it because no one else can understand how to unwind the mess they created, the company has clearly gone beyond transparent business practice.
Fourth, we have lost sight of the necessary balance between industry and community. Think of community needs and industry as sitting on opposite sides of a seesaw. When one weakens, the other needs to increase its weight to bring it back to equilibrium. An industry simply cannot lose touch with the needs of the communities it serves.
Finally, large organizations have deviated from their original social mission. Too many organizations are no longer performing the societal function that allowed them to be created in the first place.
Regardless of the industry - healthcare, entertainment, finance, or any other - these themes resonate. This is why Hollywood is blindsided by YouTube, why the healthcare industry can’t promote well-being, and why the finance industry’s problems are called “systemic.’’
Does this mean some kind of societal apocalypse? Far from it. What we learn from failure is as important - if not more important - than what we take away from our successes. But by recognizing these common problems, we are at a starting point for meaningful redesign. Addressing yesterday’s cracks may well be the key to strengthening our institutions for tomorrow.
Andrew Lippman is a founding member and associate director of the MIT Media Lab, where he co-directs the Digital Life Consortium and Communications Futures Program. 
