System interaction causes system failure: when you look at individual pieces they work as expected, but when you integrate the pieces into a system the system will fail in certain situation. Example: Our financial system. Which piece causes the broke down? Is it Wall Street financial engineers who created the securities that pool risks, slice and tranche these risks and sell to different investors? Is it rating agencies who rate the CDOs as triple A? Is it the investor who bought these securities without knowing the risk, and relied solely on rating agencies? Is it the borrower over extended their leverage based on the belief that credit will always be available?
Financial engineering creates easy credit. Rating agencies rate and investors buy financial products they don't understand. Risk and credit assessment failed. The ensuing credit boom inflated housing price. The booming housing market created a booming economy and high share price. Everything is linked so when one piece breaks the entire system breaks down.
We can have a segmented, inefficient system that is reliable and low risk within its limits. Or we can have an integrated system that resources can be shared and flow to the most efficient use, but when one piece breaks down the entire system breaks down. There are costs to integration but these costs are not seriously considered. Experts believe the risk is low until the entire system failed.
Specialization is the source of efficiency. But who is going to look at system integration - making sure that every specialized component works smoothly with each other and won't cause a breakdown?