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Month: January 2021

Management entropy and the Red Queen Trap

I had an interesting conversation about my essay on the Red Queen Trap with someone on LinkedIn, and it made me think about something I did not explain in the essay.

In an ideal environment each element of a system will be acting rationally and striving towards its own preservation and, by extension, the preservation of the system. Rational action here can be understood as the action resulting in optimal energy efficiency from a given number of viable options, where optimal energy efficiency is a function of the energy that must be spent on the action vs the energy that is gained from performing the action. The scenario I describe in the Red Queen Trap essay is set in such an ideal environment.

However, in the real world individual network actors do not often act rationally towards their own or the system’s preservation. This is not necessarily out of stupidity or malice but is often due to limited information – what Clausewitz called ‘the fog of war’ – or a host of other potential motivations which appear irrational from the perspective of the system’s survival. What is more, the closer an actor is to the system’s decision-making centers, the higher the impact of their irrational decisions on the overall state of the system. The irrational decisions of front-line staff [the periphery] are of an entirely different magnitude to the irrational decisions of senior management [the decision-making center].

In practice this means that in complex hierarchical systems decision-making centers will have much higher entropy than the periphery. In other words, they will be dissipating a lot of energy on internal battles over irrational decisions, in effect actively sabotaging the internal cohesion of the system. As a reminder, the lower the internal cohesion of a system, the more energy the system must spend on performing itself into existence. The higher entropy of decision-making centers may be harder to observe in the normal course of operations but becomes immediately visible during special cases such as organizational mergers or other types of system-wide restructuring.

Interestingly, it is in such special cases when senior management is often tempted to make the internal environment of the system even more competitive – through the layering of KPIs or other means – in order to ‘optimize the system’ and protect its own position in the hierarchy. While on the face of it this appears to be a rational decision, it invariably ends up lowering internal cohesion even further, thereby increasing energy costs and routing even more resources away from the periphery and contact with reality [market competition].