Entropy and Equilibrium in organizations


My pal Dennis Howlett and I were discussing today morning about what makes a large company resist change. A lot of thoughts ran through my mind and I thought I better write it down . Strangely – my thoughts revolved around laws of physics when I looked for answers . No idea why , but this is roughly how I try to answer the question .

Entropy is a measure of disorder in a system . Generally, higher the entropy – the more energy a system needs to just remain a system . There is very little energy available to do something else . Remember the first law of thermodynamics – there is only a certain amount of energy available to a system . Organizations are like that too – given a certain resource level , there is only so much that can be done .

What a company stands for changes with time . Pre-IPO , there is a great focus on increasing the valuation of the company . Size of the company is small and most of the employees have stock options as their primary compensation (or upside ) . When that unity of purpose is there – everyone has the same goal for the most part . If I work in engineering and my buddy works in sales and all we can hire is one extra person – it is relatively straight forward to figure out which team gets the extra headcount .
Both of us know that if the company gets valued higher – we both will be sufficiently compensated to not worry about who has a bigger team and whose team earned more kudos .

Now let’s say the company went public and we still can hire only one person . Now the company has many goals – revenue , profit , employee morale , net promoter score and a hundred other KPIs . Every team is aligned to a subset of the goals – and only a small number of people (occasionally only the CEO and CFO) are measured on all KPIs . Compensation is now not primarily stock for most employees – it is MBO driven . So entropy kicks into high gear – a lot of energy gets spent in just keeping the company running – by optimizing across different goals . This leaves hardly any energy to do anything to move forward .

That is what makes larger companies resist change in my opinion . I think this is one of the biggest causes for innovator’s dilemma . Someone with low entropy and more energy to spare comes along and wins the market while you are fighting your inner devil (which you created yourself and sustained ) .

Physics – statics and dynamics – uses the concept of equilibrium a lot . Inertia is a big deal – unless an unbalanced external force doesn’t act on it, an object just continues to move like it always had , or will sit dead on its tracks . Organizations display this behavior in spades .

This is why incremental changes don’t always give much impact in many companies – those are easy to balance out . Often times – individuals try to push really hard to make a difference . But force is proportional to mass and acceleration . Individuals have less organizational mass and hence need tremendous acceleration to show impact . On the other hand – establishment has plenty of organizational force and just needs a tiny acceleration to provide the balancing force . So things come back to equilibrium pretty soon . Maybe there is an exception like Steve Jobs where the CEO is the individual forcing the change – but even then, we have seem the world doesn’t have too many who could pull off what Jobs was able to .

I should stop now – I am not even sure if this line of thought is useful . But I did promise my daughter that I will help her organize her toys ( does that count as decreasing entropy?) . So off I go 🙂

Making peace with polymorphism


So India is getting a new prime minister – and he is the leader of BJP, an organization based on Hinduism / Hindutva . Now , what exactly that means gets interpreted differently based on who you ask . But given the overwhelming majority that the party got in parliamentary elections – it looks like vast majority of the population of India is leaning towards a definition along the lines of “one god , many manifestations”.

Concept of god is a complex one – there are religions that explicitly reach there is only one god , and that you are a big time sinner if you don’t agree . The treatment of god in Hinduism is interesting to say the least . The fundamental notion is that there is only one god – but that god could have many forms or manifestations . There are some 33 million gods – or 33 million forms of god – in Hinduism . The followers of these 33 million gods haven’t always agreed on whether it all converges to one central concept of god .

If I understood correctly – a triumvirate of gods (Brahma, Vishnu, Siva for creation , sustaining and destruction of life/world) were at the top of the hierarchy of gods . Entire kingdoms were formed and wiped out in India on the basis of “my god is more powerful than your god ” principle -even though there was a universal umbrella of Hinduism that covered them all .

The interesting thing about polymorphism is that once we step outside the world of religion ( I believe the right word specifically is polytheism) – it is a less contentious topic .

Nature has a lot of examples in animal kingdom – like jaguars which look black and which look spotted . I think the biological way of saying it is “multiple phenotypes within one species that live in the same habitat” . It’s a necessary result of evolution. But the moment we extend evolution to the world of religion – all bets are off . Somehow we can’t seem to take a leap from butterflies and jaguars to our own life .

The other example is programming – specifically object oriented programming . I learned procedural programming before OOP and had to be taken kicking and screaming into the new world . One of the smartest things about OOP is that you can arbitrarily define a base class to suit yourself and derive as many sub classes out of it . Or in terms of interfaces – you can have one interface and many methods . If you think of the concept of god as the base class – it becomes easy to understand that many religions can exist with their own nuances .

In programming, when you don’t like someone else’s definition of class – you can over ride it and define your own class and take it from there . I believe that if we exercise independent thought – we can decide to follow any existing beliefs about god , or create own belief systems . And for those who don’t care for the concept of god – think of some sub classes as ones that take all or partial null values . So atheists , “I am spiritual, but not religious” types et al can all be covered in this approach .

Answers are both within us and around us – whether it is about god or anything us . It’s up to each of us to decide what combination works for us .

OK – I needed to get that out of my system . I feel better already 🙂

My wish list for the new Modi Government in India


Modi led BJP swept the elections – clearly indicating the people of India want big changes . Here are my personal “wish list” items on what changes would be great for India in policy terms when this government is in power.

1. Revamp public distribution.

India does well in pockets – but it is practically the most inefficient supply chain I know of in any country. People starve on parts of the country when there is food rotting in other parts – some times food rots in godowns within state when prices increase at super markets for essential stuff like Onions and rice . This needs a big overhaul

2. Amend the constitution – remove “socialist”

Nehru and team decided India needs to be a socialist republic . That is not modern India . If socialist policies were what the people wanted , Congress would have won on its election promises of dole outs to the poor . No strata of society voted for Congress – and it is time to acknowledge its time to move away from socialism as a defining characteristic of India

3. Double down on agriculture and manufacturing

India – and some states like Kerala especially – need to wake up and smell the coffee on agriculture and manufacturing . India is extremely well focused on services and financial markets , which won’t help in a downturn . People can live without services and financial markets are built on speculation – they need to be balanced by agriculture and manufacturing . There are pockets that do great in agriculture and manufacturing – but if we take the country as a whole , it is not a good picture for a nation of a billion people .

Also – these two things give India a better ability to stand up to other countries on foreign policy . Most business schools in India used to teach the post WW2 story of how trade happened between Japan and US and how the hunter became the hunted . Sadly, that is not exactly how reality unfolded for India

4. Introduce mandatory one year apprenticeship for all engineering students

India produces a lot of engineers every year . However , most of them do not have any real skills when they come out of engineering college . It takes a year of working at some company before people figure out the basics of real engineering . And vast majority never work in real engineering – they join IT services companies . Why is it that engineers don’t have an apprenticeship requirement like doctors and accountants ? It should be implemented ASAP

5. Bring consistency in taxation and monetary policy

India has a very complex tax system and it swings widely in short period of time , making it hard to plan investments . On top of that – for the most part, Reserve Bank of India gets pressured to do unnatural things on Monetary policy . It is beyond high time that this stopped . Aadhar – despite implementation troubles – seems like a good step in right direction . But it solves only a part of the problem . I hope Modi gets some serious firepower into financial policy making and then sticks to it long term .

6. Take some consistent stances with neighbors

States ruled by regional parties and centre ruled by national parties who need their help in coalition politics is the reason India could never have a consistent relationship with Bangladesh , Srilanka etc . Now BJP has a clean majority in lower house, but still need some regional help in upset help to push bills . Now is as good a time as any to solve the problems with smaller neighbors .

This gives time , resources and energy to focus on the two big ones – Pakistan and China . Those are probably going to be “frenemies” at best even if trade improves , but that is a lot better than what it is today . Stability in the region can also help redirect extreme defense spending on to other things like infrastructure, health and education