Getting beyond irrational exuberance

Over the last few weeks, we've been witness to some significant events of history. The public, buoyed by the press, has been on a binge of irrational exuberance. That energy now needs to be directed to practical solutions that will rebuild real confidence and move the economy forward. Perhaps some engineering thought process will help.

In my years of working with a crack team of automation engineers, we would frequently see irrational exuberance coming from the halls of marketing. Others might remark that the marketers 'walked with their feet never touching the ground'. We engineers had a more obtuse expression for this behavior. We called it 'running open-loop with the gain turned high'.

While both expressions convey the message that one needs to return to a more grounded sense of reality, the open-loop analogy provides some object lessons beyond the vision of being pulled down out of the clouds.

A control system running open loop is unable to adjust to changing conditions. A system running with high gain is subject to wild fluctuations. Often the controlled element will swing violently from one extreme to the other. The slightest perturbation will cause unpredictable behavior. Sound like anything you may have seen lately? Let's explore how an engineer might solve this problem.

Step one is to close the loop. Closing the loop requires several sub-steps. First, one must define the objective and establish some measurable target or goal. This is followed by making a quantitative measurement of the present conditions of the target variable. The measurement is next compared and evaluated to determine the qualitative condition that exists relative to the established goal. The final step is to take some appropriate action aimed at improving the quality of the result. The cycle then begins again with a new measurement and continues indefinitely.

Step two is to adjust the gain. High gain implies that the evaluation step described above is made too harshly. It's like trying to warm your hand by pouring boiling water on it. Let's hope that our economic stimulus package isn't this type of reaction. A more measured response might be appropriate and cause less secondary damage.

For a given set of circumstances, system dynamics can produce an array of results, with the most likely being oscillations like those we've been seeing in financial markets. Getting the gain to the right setting will result in those oscillations eventually subsiding. The level of zeal in our actions must be appropriately gaged to the circumstances if we are to achieve relatively stable outcomes.

Many times in manufacturing, engineers and technicians stop after adjusting the gain. Processes run, albeit less efficiently than they might. The math gets more complicated, but there are many more steps that can be taken to optimize results. In controls, these steps would include tuning, conditioning, multi-variable and advanced control.

In human affairs and government, the number of variables to be considered is staggering. Optimizing any one of them can be a true challenge, given that they all interact. However, we do need to strive to close all the loops and get the gains set to appropriate levels. In recent years, many of our leaders have had their gains set too high.

Define, measure, evaluate, act with appropriate zeal and measure again is the way to convert irrational exuberance to useful action. It works for machines, processes, human interactions and economies. Next time your machine is misbehaving or next time you need to drag yourself, a colleague or family member back to reality, recall and practice these steps.

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