Housing amplifiers
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The US economy's housing amplifiers and their implications

Summary
A key
Plans are interpreted and implemented by agents.  This page discusses the properties of agents in a complex adaptive system (CAS). 
It then presents examples of agents in different CAS.  The examples include a computer program where modeling and actions are performed by software agents.  These software agents are aggregates. 
The participation of agents in flows is introduced and some implications of this are outlined. 
agent
in the 1990 - 2008 housing expansion Countrywide is linked into the residential mortgage value delivery system (
The complex adaptive system (CAS) nature of a value delivery system is first introduced.  It's a network of agents acting as relays. 

The critical nature of hub agents and the difficulty of altering an aligned network is reviewed. 

The nature of and exceptional opportunities created by platforms are discussed. 

Finally an example of aligning a VDS is presented. 
VDS
) by Paul Muolo and Mathew Padilla.  But they show the VDS was full of amplifiers and control points.  With no one incented to apply the brakes the bubble grew and burst.  Following the summary of Muolo and Padilla's key points the complex adaptive system (
This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
CAS
) aspects are highlighted. 
Chain of Blame
In Paul Muolo and Mathew Padilla's book 'Chain of Blame' they detail the results of investigating the US is the United States of America.   Economy's residential housing
The complex adaptive system (CAS) nature of a value delivery system is first introduced.  It's a network of agents acting as relays. 

The critical nature of hub agents and the difficulty of altering an aligned network is reviewed. 

The nature of and exceptional opportunities created by platforms are discussed. 

Finally an example of aligning a VDS is presented. 
value delivery system
(VDS) outlined below

Muolo and Padilla are journalists who have long focused on the impact of
This page discusses the physical foundations of complex adaptive systems (CAS).  A small set of rules is obeyed.  New [epi]phenomena then emerge.  Examples are discussed. 
changes in law
on the detailed strategies and operations of businesses in the housing VDS.  They had concluded that the Savings and Loan system of the late 1980 - early 1990s (transformed by the 1982 Garn-St. Germain act of 1982 was signed by President Reagan in response to the 1979 oil shock inflation driven collapse of the US S&L industry.  The S&Ls had previously only been allowed to offer depositors fixed rate loans on fixed length mortgages which could not adapt to the rapid inflation.  The S&L depositors responded by switching to higher interest bearing money market funds.  The 1982 act deregulated the savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. 
) inherently induced criminality.  However, key players in the housing system like Angelo Mozilo, CEO is chief executive officer. 
of Countrywide Home Loans, had argued that residential mortgage banking was effectively regulated by the capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty.  Capital includes: real property, financial capital and professional capital.  It is not immutable instead depending on the state of the society within which it exists.  It can be owned by governments (public capital) and private individuals (private capital). 
markets.  The assumption was that Wall Street
Flows of different kinds are essential to the operation of complex adaptive systems (CAS). 
Example flows are outlined.  Constraints on flows support the emergence of the systems.  Examples of constraints are discussed. 
controlled the mortgage bond business
and the regulation was in their best interest.  Even in 2003 Muolo doubted that assertion.   In retrospect they could not regulate.  (Mozilo was cleared of criminal and civil acts by the department of justice but NYT Gretchen Morgenson is unimpressed Jun 2016). 

Mozilo had made Countrywide the largest public company originating home mortgages. Mozilo was interested in the detail of the business and identified the
This page discusses the effect of the network on the agents participating in a complex adaptive system (CAS).  Small world and scale free networks are considered. 
key network connections
required for success.  He focused his staff on these connections.  He had designed the company to become number one in every market it entered.   He had followed his competitors into the sub-prime market and by 2007 dominated that too.  When he admitted to analysts in 2007 that a falling mortgage market would not turn around until 2009 he added "We are experiencing a huge price depression, one we have not seen before--not since the Great Depression".  The stock market plunged 226 points.  A few days later two Bear Stearns mortgage focused hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s collapsed.  The stock market collapse expanded and went global.  Countrywide stock was part of the collapse. 
The subprime and prime residential mortgage value delivery system
The early recipient of a subprime mortgage was usually a home owner with credit issues that constrained access to prime lenders.  The home had typically gone up in value during the borrower's time of ownership.  Subprime borrowers compared the rates favorably to those of their credit cards.  During the 1970s Southern California had been the hot market for primary & secondary mortgages, representing a quarter of the total US is the United States of America.   market and with a growing population driving up the demand and price of housing. 

Realtors are the most significant link between borrowers and mortage initiators.  TV advertising also directed potential borrowers to loan originators.  Loan brokers subsequently also linked borrowers to mortgage originators. 

Non-bank loan originators, like Countrywide, and S&Ls is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
initially focused on prime rate mortgages.  S&Ls were initially legally constrained to pay a maximum 5.5 percent on deposits.  When US inflation was above this level the S&L business model collapsed.  S&Ls typically kept their loans on their books.  When Congress & President Reagan acted to free the S&Ls to offer higher deposit rates savers returned, but the mortgage portfolio payment streams were 30 year fixed rate and generally didn't match the new higher deposit rates the S&Ls offered.  The business model again collapsed.  Non S&Ls had a choice of business structure.  Some became REITs reducing their tax commitments, but constraining them to pay large dividends each quarter.  In the commercial property market cash flows from rents can finance a REIT is a real estate investment trust. 
.  Residential is a cyclical business making this a dangerous commitment, but some investment banks, such as Friedman Billings Ramsey (FBR), suggested they could toggle between REIT and non REIT.  Becoming a REIT provided access to investment capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty.  Capital includes: real property, financial capital and professional capital.  It is not immutable instead depending on the state of the society within which it exists.  It can be owned by governments (public capital) and private individuals (private capital). 
, and allowed loan originators to hold bonds on their balance sheets.  By early 2000 that was important since it had become cheaper to use deposits to fund mortgages than to use warehouse loans, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. 
.  Indeed at this time Countrywide purchased a bank. 

Loan officers initially constrained the origination of subprime loans
Originally specialists lent to the subprime market, obtaining a higher interest payment, but having to manage a higher potential of default by ensuring the borrower had equity in the house and by their expertise in repossession.  That meant foreclosing the house and then working with the local marshal to throw the defaulter out of the house and then boarding it up and chaining it off. 

The decision to proceed with offering a loan was made by a loan officer.  Some companies paid these agents a reward for each loan they closed. 

The equity estimate depended on accurate valuation of the house's value, from an independent appraiser. 

Non-bank loan originators borrowed the money they loaned since they did not have deposits.  Most competitors were S&L is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
s who had deposits.  While loan origination created revenue flows, compliance was necessary to ensure the company could obtain finance.  But market share strategies and compliance requirements counteract. 

The S&L is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
s could keep the loan on their books or sell them on to the Government chartered investing companies Fannie Mae is the coloquial name for the FNMA which is:
  • The federal national mortgage association, a GSE.  It was made a publically traded company by the HUD act of 1968 to remove its debt from the federal budget.  
  • In 1970 FNMA was authorized to purchase conventional mortgages.  FHLMC was setup to ensure competition for FNMA in this task. 
  • In 1981 FNMA issued its first designated MBS. 
  • In 1992 the Democratic Congress and President Bush established HCDA which gave FNMA affordable housing goals set annually by HUD with Congressional approval.  
  • In 1999 the Clinton administration put pressure on FNMA to expand loans to low and moderate income borrowers.  FNMA took on additional subprime risk. 
  • In 2000 HUD placed anti-predatory lending rules on the affordable housing goals, but these constraints were dropped in 2004.  In effect they just pushed mortgage originators to Wall Street finance. 
  • Once mortgage originators started to use warehouse loans, the GSEs lost visibility and control of origination.  
  • The GSEs purchased AAA mortgages from commercial banks.  Many of these classifications were fraudulent leaving the GSEs with bad debt.  In 2008 to maintain the stability of the global economy the George W. Bush administration seized the GSEs and placed them in conservatorship under the FHFA, ensuring they could not collapse.  
  • In 2010 FNMA's stock was delisted from the NYSE.  They still trade over-the-counter. 
and Freddie Mac is the Federal home loan mortgage corporation (FHLMC), a GSE. 
.  Non-bank loan originators could also sell A rated loans to Fannie and Freddie.  Fannie and Freddie would not purchase non-conforming mortgages (subprime) in the 1970s.  Fannie Mae and Freddie Mac obtained special low rates on finance from the government, but since they legally couldn't accept subprime or jumbo mortgages Wall Street traded them into the market for a commission. During the Clinton administration Andrew Cuomo relaxed the charters to allow more types of mortgages to be purchased.  The George W. Bush administration encouraged Fannie Mae and Freddie Mac to go further and buy subprime based mortgages.  Being the owners of huge amounts of residential mortgage debt Fannie and Freddie had cyclic businesses dependent on low interest rates.  To make their business results appear less cyclic both companies falsely reported earnings that they had hedged, which became public by 2007. 

For large non-S&L is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
s the loans were supplied as lines of credit by larger money centered banks.  Small non-S&Ls initially obtained finance from Doctors and Dentists.  At that time California medical professionals were cash rich and seeking good rates of interest.  They were paid 13%, while the non-S&L kept 1%, of the 14% interest charged on the loan.  Once the subprime market became established Wall Street lenders such as Prudential Securities offered even the small non-S&Ls warehouse loans, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. 
which it would pool and securitize as mortgage backed securities (MBS is mortgage backed security, a bond backed by the monthly payments homeowners make on their residences.  It was initially developed by Lew Ranieri at Salomon Brothers. 
).  The attraction for Prudential was that subprime mortgages were a sustained stream of interest.  The mortgage owners did not historically refinance since they had limited access to other credit.  The lack of refinancing was important since while the A-rated parts (90%) of each MBS were purchased by hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s, the other 'B' piece was required to be held by the lender.  This 'B' part was risky, is an assessment of the likelihood of an independent problem occurring.  It can be assigned an accurate probability since it is independent of other variables in the system.  As such it is different from uncertainty. 
, since it was structured as the piece with all the interest payments.  If the borrower refinanced the holder of the 'B' piece would still have to repay the rest of the interest payments.  How much risk, uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers.  This is different from Risk.   and reward the lenders had on their books was open to the lenders, and their stock investors, interpretation of how long the borrowers would maintain the loan. 
The 1977 original MBS had securitized prime mortgages which had a forty year history of default rates to define the risk associated with the bond.  Bond investment banks, like Salomon and Bear Stearns, used statistics on the history to understand the rate the mortgages would prepay.  That information was a key edge their traders had when selling the bonds in the market.  The subprime loans were only ten years old and were changing in attributes rapidly.  The subprime securities should not have been viewed as similar to the original MBS. 

Prudential and the Wall Street firms use sales reps to obtain parcels of originated loans.  These are then reviewed by a quantitative analyst.  The decision to accept and underwrite the loans is made by a mortgage banker, who then trades the packaged bonds on the secondary markets. 

Wall Street bundled an offer of no cost warehouse loans, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. 
with an agreement to securitize the loans at the investment bank, under cutting the money center banks that also offered warehouse loans, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. 
for interest. 

Wall Street packaged the loan pools into ABS is an asset-backed security defined as backed by nonconforming loans rather than Fannie Mae or Freddie Mac quality loans used in original MBS or CMO. 
s (to differentiate them from original MBS) and further packaging of the subordinated tranches of subprime securities into Collateralized Debt Obligations (CDO)s which allowed them to transfer the uncertainty associated with the loans to institutional investors hungry for high yield bonds to offset low short term rates.  The CDO is a:
  • Care delivery organization in health care. 
  • Collateralized debt obligation in finance.  The idea is to transfer the credit risk rather than the loan itself.  The bank enters into a CDS on the loans with a SPV.  The CDO allows the bank to shift its loans outside the reach of regulators.  The CDO also can distribute the risk unevenly by tranching.  Equity is most at risk.  Then any subordinated debt. 
s were not transparent.  The CDOs were sold through private placements and the underlying
Satyajit Das uses an Indonesian company's derivative trades to introduce us to the workings of the international derivatives system.  Das describes the components of the value delivery system and the key transactions.  He demonstrates how the system interacted with emerging economies expanding them, extracting profits and then moving on as the induced bubbles burst.  Following Das's key points the complex adaptive system (CAS) aspects are highlighted. 
derivative contract
details were not disclosed to the buyers.  The loan originators, the securitization process and the hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s that purchased the bonds were all outside the control of banking regulators.  Since CDOs had originally been packages of different corporate bonds, credit card receivables and aircraft loans designed to diversify risk the new opaque CDOs were likely to be poorly understood in the market.  The value of the new CDOs really depended on the continued increase in residential house prices in the US.  Once Deutsche Bank analysts concluded that prices must start to drop in the years ahead they began shorting is a multi part transaction where:
  • A borrowed tradable asset (this part of the transaction is not performed in the naked version) is sold under the assumption that the asset is going to fall in price during the period when it has been borrowed. 
  • Once the asset falls in price it is then purchased. 
  • The asset is returned to the lender, with any additional risk premium. 
  • The short seller keeps any profit.  If the asset gained value during the period of the short then the seller makes a loss.  
the ABS index. 

The Wall Street firms typically outsourced the assessment of loan compliance to a specialist, such as Clayton Holdings.  The investment banks typically requested audits of only 5 - 20% of loans.  The lower the figure the more likely the bank was to win the loan pool from the originator.   Further as long as the loan ended up in a CDO it would contribute to revenue but not present a risk to the investment bank!  Since the banks paid for the underwriting and their profits were correlated with the volumes of loans securitized there was pressure on the mortgage underwriters to pass as many loans as possible.  With discressionary factors loading the underwriting the demand for revenue was going to raise the loan pools ratings. 

Countrywide traded jumbo loans and Community Reinvestment Act (CRA) loans, needed by banks and S&Ls to conform with federal law directly competing with Wall Street.  Its traders made multi-million dollar commissions.  Soon Wall Street traders were employed at the trading desk. 

Companies could obtain help with becoming publicly owned from Investment banks.  One decision was whether the company should become a REIT is a real estate investment trust. 
.  FBR was particularly focused on the techniques for doing this.  FBR, promoted the option to toggle between REIT and non REIT.  In 2003, with interest rates low, investors, including hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s, were keen to gain access to shares of subprime loan originators and REIT investment grew.  By 2005 the Fed raised short term rates but the prior bubble had driven up the numbers of loan originators.  This competition kept the mortgage rates low and profits dried up.   By the end of 2007 most FBR sponsored lenders had failed or been sold.  The problem was that as subprime loans went delinquent Wall Street would ask the originators for extra funds, or to buy back the mortgages.   REITs had paid out 90% dividends, so they had little retained earnings to respond with. 

Washington consulting firms, particularly those headed by the politically connected and aware, provided network connections between business groups, investment banks, civil servants and politicians.  The agents employed by these firms move in and out of roles in the presidential administration and departments. 

Bond rating agencies associated a value and risk, is an assessment of the likelihood of an independent problem occurring.  It can be assigned an accurate probability since it is independent of other variables in the system.  As such it is different from uncertainty. 
profile with the collateralized mortgage bonds for a fee from the bank creating the derivative contracts.  The AAA ratings they gave to CDO is a:
  • Care delivery organization in health care. 
  • Collateralized debt obligation in finance.  The idea is to transfer the credit risk rather than the loan itself.  The bank enters into a CDS on the loans with a SPV.  The CDO allows the bank to shift its loans outside the reach of regulators.  The CDO also can distribute the risk unevenly by tranching.  Equity is most at risk.  Then any subordinated debt. 
s were in part based on the insurance that the bonds carried from the three big bond insurance companies.  It totally ignored the uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers.  This is different from Risk.   implicit in the interconnections of the US is the United States of America.   housing and financial markets. 

Press, TV shows and analysts provided investors with a conduit to the originator's public relations framed judgments of their executives. 

While hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s purchased the subprime mortgage bonds 'A' parts and borrowers paid the interest streams lenders made huge profits.  However, when that wasn't true subprime lenders would generate huge losses. 

Hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
s are opaque operations which provide investment vehicles.  Initially value investment strategies were followed by managers like Warren Buffett, but quantitative strategies leveraging computing power to apply options models became popular over time. 

The 1998 Russian debt crisis and related Long-Term Capital Management was Long-Term Capital Management, a hedge fund that used Black-Scholes quantitative models to trade in derivatives.  The hedge fund's bets failed during the Asian and Russian debt crisis of 1998 and it had to be rescued by the Federal Reserve. 
collapse reduced hedge fund interest in debt.  Investors in public subprime lenders lost hundreds of millions of Dollars. 

As bad for holders of 'B' pieces of loans was the appearance of loan brokers.  These free-lancers, often laid off experienced S&L is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
loan officers, identified candidates for loans and then got paid a fee if the loan package looked good to the lender.  With no linkage to the 'B' piece of the loan the brokers convinced borrowers to refinance to capture more fees. 
Still the margin on subprime loans was so high that once the initial crisis finished the remaining loan originators were able to capitalize on the amplifying value delivery system.  To gain access to these profits Wall Street firms began buying the loan originators.  That introduced a conflict of interest since the same firms also financed and securitized loans from other loan originators.  As the retail housing market soured investment banks issued margin calls and required loan buy backs against the originators - but was that good finance or a business strategy?  The Clinton Administration struggled with the Russian debt crisis and refused to regulate the derivatives process.  With the
The IPO of Netscape is defined as the key emergent event of the New Economy by Michael Mandel.  Following the summary of Mandel's key points the complex adaptive system (CAS) aspects are highlighted. 
bursting of the dot com bubble
the George W. Bush Administration looked to the housing market to pull the economy out of recession.  Chinese finance officials aiming to keep their currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
weak helped by purchasing US is the United States of America.   treasuries.  The capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty.  Capital includes: real property, financial capital and professional capital.  It is not immutable instead depending on the state of the society within which it exists.  It can be owned by governments (public capital) and private individuals (private capital). 
flowed into the finance system.  The Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
  • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
  • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
  • Federal Advisory Committee with twelve members
  • Single US currency - the Federal Reserve Note. 
cut short term interest rates, making subprime margins especially attractive. 

Non subprime primary mortgages were typically insured by government agencies.  For bonds to sustain a high rating they needed to be insured.  Berkshire Hathaway and AIG both offered insurance on mortgage bonds. 
Vertical Integration of the mortgage industry
Many sub-prime mortgage originators had been vertically integrated into major Wall Street firms.  That hugely increased Wall Street's profit and uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers.  This is different from Risk.   and undermined the regulatory process Mozilo promoted.  Initially Bear Stearns had launched EMC Mortgage  to buy delinquent loans from the 1989-1990's S&L is savings and loan association.  These S&Ls were deregulated by the 1982 Garn-St. Germain act. 
collapse held by the Resolution Trust Corporation.  By 1996 EMC was starting to issue sub-prime loans, and even benefited from the mortgage originator consolidation of 1998-1999.  Bear Stearns further integrated into hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
management including subprime debt based funds in which the bank itself invested increasing profits and uncertainty for the bank from 'B' loan refinancing and loan defaults.  The Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
  • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
  • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
  • Federal Advisory Committee with twelve members
  • Single US currency - the Federal Reserve Note. 
Chairman Alan Greenspan, resisted calls for government regulation of the system and early bursting of the subprime bubble. 

This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
Complex adaptive systems (CAS)s
have a number of aspects which can be used to classify the key aspects of the US is the United States of America.   residential housing VDS:
Congress had also set the comptroller of the currency is the Office of the Comptroller of the Currency, a bureau within the Treasury. 
in conflict with state regulators.  While the states were tightening rules to limit predatory lending, the federal bank regulator offered federal control with limited constraints on lending.  The US comptroller collected fees for any banks that switched to Federal regulation. 
  • By Jun 2017 financial regulators were seeing indications that they needed to increase protections, but were responding to political pressure to relax the regulations setup after 2008. 
These powerful forces ensured for a time that subprime loan originated debt would provide huge returns for value chain participants and investors, leaving non-participants as relative losers.  The lower the Fed set the short term interest rate the more profitable and extensive the flows became.  Given the obvious implications the other agents were drawn into the cycle, helping to guarantee success.  A bubble was developing.  Still this highly amplified system was unstable, being very sensitive to the interest rate.  If it rose flows would diminish driving job losses and company failures. 

As with the
The IPO of Netscape is defined as the key emergent event of the New Economy by Michael Mandel.  Following the summary of Mandel's key points the complex adaptive system (CAS) aspects are highlighted. 
tech bubble
the seeds of failure are present in the forces of success.  More loans mean more profits, but the pool of legitimate borrowers is finite.  As it depletes less robust borrowers were selected to keep the pipe line full.  The result was a growing mountain of debt with a book value far greater than its revenue and profit streams.  Eventually poor performance became obvious and market values dropped precipitously. 

The US's expansion around the globe and its reengineering of its financial constraints had broad impacts on the economy's performance.  It also supported misjudgments by many agents based on their local models of the economy that did not account for the changes.  


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This page looks at schematic structures and their uses.  It discusses a number of examples:
  • Schematic ideas are recombined in creativity. 
  • Similarly designers take ideas and rules about materials and components and combine them. 
  • Schematic Recipes help to standardize operations. 
  • Modular components are combined into strategies for use in business plans and business models. 

As a working example it presents part of the contents and schematic details from the Adaptive Web Framework (AWF)'s operational plan. 

Finally it includes a section presenting our formal representation of schematic goals. 
Each goal has a series of associated complex adaptive system (CAS) strategy strings. 
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