Using System Dynamics to Build Consensus

Martin CaprilesFor Martin Capriles, SF ’05, there is something almost magical about the Beer Game, a management simulator developed in the late 1950s by Jay Forrester and his students at the MIT System Dynamics Group. The game famously puts teams of students in charge of four components of a distribution chain. Players within each component—retailer, wholesaler, distributor, and factory—receive shipments of beer, fill as much of their customers’ orders as possible, and place new orders for beer with suppliers. As students make operational decisions and review the impact of past decisions, they inevitably are dismayed by the unintended side effects of their actions.

After leaving MIT, Martin Capriles headed back to Venezuela, his home country, where he was responsible for all commercial operations for the Venezuelan subsidiary of CEMEX. Almost immediately on arriving back at the office, he realized he needed to put the Beer Game into play—this time, with real world consequences.

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Should we be bullish or bearish on BRICS?

When the alliance first formed in 2001, many investors were bullish about BRIC, the association of what were then considered four burgeoning economies—Brazil, Russia, India, and China (South Africa joined in 2010). BRICS nations represent 40% of the world’s population and account for almost $16 trillion in GDP. The idea was that BRICS would create an international financial network that would rival the prevailing western-dominated system. But 15 years out, how much of a threat to the status quo does BRICS actually constitute?

Andrew LoAndrew Lo, Charles E. and Susan T. Harris Professor of Finance, believes that when it comes to BRICS, much depends on political factors. “The stability and credibility of BRICS governments is vital. If they can manage the volatility, including the threat of hyperinflation, and implement more disciplined monetary policies, it could be just a matter of time before they play a more important role.”

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  Economics