Ninety percent of an iceberg is under water. That means that the visible, above-water section of the iceberg is only 10%. But if we never explore below the water, we would never realize that most of the iceberg is not seen from the surface.

Systems thinking is the mental equal to the 90% of the iceberg that is hidden. It goes deeper than the linear thinking which only accounts for the visible 10%.

Everything is a System

Everything around us is made up of systems. Looking at systems in life we can start to see deeper and clearer. We understand more than if we ignore the underlying systems and focus on the end result.

But most people never explore beyond the top 10%. They miss most of the understanding and instead draw incomplete conclusions. But it doesn’t have to be that way. We can start to expand our understanding by looking at the full picture, systems and all.

Events are the Visible 10%

Peter Senge is a renowned systems thinker. He has written several books that address systems in business and sustainability. He provides a thorough understanding of the importance of systems.

In his book, The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World, Senge uses the iceberg to talk about systems.

Senge calls the top of the iceberg “Events.” “The first level of the iceberg can be summed up in the questions ‘What just happened?’ Think of it as the ‘Six O’Clock News’ version of reality.”

This is where most people remain. They look at events or outcomes and draw conclusions based on this limited view of the world. They may take a step further and look at cause and effect, or before and after, or good and bad. But this is still just a linear view and doesn’t encompass the complete system involved.

The Hidden 90% has Meaning

Below that top of the iceberg (events) is where the understanding comes in. According to Senge this includes Patterns/Trends, Systemic Structures or Forces, and Mental Models.

Patterns and Trends

Seeing a pattern often starts to grow one’s understanding. We can start to see that the “Six O’Clock News” version of reality glosses over those patterns. We get caught up in the fact that the stock market went up or down and by how much. But we don’t view it in the true cyclical fashion that it is.

Then, people get caught up in the current up or down state. This diminishes their ability to see the full pattern and the ebbs and flows over time.

Structures

Looking further at the structures, we see the elements that contribute to these patterns. This gives us even more understanding. We see the ebbs and flows but also understand the general forces that contribute to those ebbs and flows.

Mental Models

The deepest part of the system thinking iceberg are the mental models. These are the various ways of thinking that we use to keep things as they are. It allows the situation to persist and allows the systemic structures to remain.

For the stock market this relates to the greed and fear that people feel around investing. When greed is the driving force, we tend to overvalue stocks creating a bubble. When fear is the driving force, we tend to undervalue stocks. Experienced investors usually see this and make sure that they are buying during times of fear and selling during times of greed.

The Systems Around the Stock Market

Within the stock market system, we have mental models. These are the individual investors beliefs about investing. They include how to regulate it, how to use it to grow money, and our predicted future state.

We also have structures. Government agencies exist to regulate the behavior of companies to conform to the legal code. Investors have limitations on how they invest and pay taxes.

We also see the patterns. The ebbs and flows of the market, the repeated performance of certain stocks, and investors' reactions to stock news all provide more information.

The stock market is an example of a complex system that is like an iceberg. People only focus on the events and the top 10% of the iceberg. But there is much more below the surface. Using systems thinking we can start to unlock a greater understanding of our world. We can finally gain an understanding of the hidden 90%.