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The Cost of Complexity

Everyone pays a price for complexity, whether in the form of reduced profits in a business, diminished efficiency in the public sector, or excessive cost imposed on consumers, who must pay more for products that are produced through unnecessarily complex means. The cost of complexity can be difficult to identify, however, because it defies measurement both in terms of direct costs and outcomes. More often than not it simply becomes a source of friction that slows everything down and takes a silent toll. Missed opportunities, reduced consumer satisfaction, slower growth and foregone investment are among the most common results of unnecessary complexity.

Examples of such complexity abound, whether in the form of multiple layers of required approvals in government, excessive and overlapping layers of production in businesses, and even on an individual level, such as numerous stops at security checkpoints at airports. We have all asked ourselves why things need to be so complicated, and how much money and resources must be wasted in the process of maintaining “normal” operating conditions. Justifying such inefficiencies through the status quo argument of “that’s the way it’s always been done” demonstrates capitulation while negating just how much the world has changed.

Status quo and decision avoidance have become the principal outcome of most committees; research has shown that an average of five people are involved in the decision-making process—particularly those that require agreement about change or procurement. The friction created by such unnecessary complexity is akin to that generated by corruption—both exact a tremendous price for individuals, businesses and societies, yet with so many people guilty of being accessories to complexity and friction, we are collectively deincentivized to devote the energy and resources required to move toward more efficient systems.

Some forms of lending and insurance that are intended to catalyze trade and investment flows end up contributing to what often become the most complex and time-consuming transactions in financial markets.

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