Complexity: Bureaucratic (Death Spiral) and Self-Organizing (Sustainable) (February 17, 2011)
Bureaucratic complexity leads to a death-spiral collapse; self-orhanizing complexity retains the assets of complexity and the adaptability of organic networks.
Three classic books address how increasing complexity leads to systemic collapse:
The basic idea is that increasing complexity is advantageous up to a point, and then the costs of maintaining that complexity exceed the carrying capacity of the now bloated and resource-hungry system. Ad hoc solutions attempted by the Elites include war (conquer more resources to fill the gap), replacement of Elites by other Elites (Meet the new boss, same as the old boss) or exaggerated religious rituals (magical thinking).
The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy.
I recently addressed the systemic tendency of bureaucracies and fiefdoms to expand via the ratchet effect and then implode in a stick-slip event as the underlying instability is masked until the system gives way. Dislocations Ahead: The Ratchet Effect, Stick-Slip and QE3 (February 14, 2011)
In Survival+, I describe the systemic drive within complex bureaucracies to maintain the status quo at all costs: full spectrum defense of the status quo and asymmetric stakes in the game.
In the first, the bureaucracy organizes all its resources to defend itself against encroachment by other fiefdoms (internecine conflict between protected fiefdoms) and outsiders; it does so with desperate vigor because the employees and managers have a keenly asymmetric stake in the game of allocating resources: if their fiefdom loses resources, their livelihoods and perks vanish.
Thus, outsiders rarely muster the political power needed to over-ride these highly motivated forces of bureaucratic over-reach. For examples, we need look no further than the sickcare system, in which an outrageously costly week stay in a hospital has jumped from $10,000 to $120,000, or the Pentagon, where every new weapons system costs twice as much as the weapons it replaces (the F-35 fighter aircraft cost $110 million each, and perhaps as much as $150 million, replacing the Super Hornet F-18 E/F that cost $57 million each), and cities, which responded to the boom of the 80s and 90s by embarking on hiring sprees and limitless "sweeteners" to public labor unions and employees.
San Francisco offers one example. Though the city's population expanded by a modest 7% and inflation added 17% to costs, the city's budget jumped 70% and its payroll rose 30%. Having extended its complex bureaucracy into the stratosphere, the city is responding by raising fees on all sorts of trivial citizen activities.
The San Francisco budget grew by 70 percent between 1996 and 2003—three times faster than inflation, from $2.9 billion in 1996 to $4.9 billion in 2003. The 2010 budget is $6.5 billion, a 33% increase in seven years that is almost double the 17% percent rise in total inflation of that time span.
Just as large, complex bureaucratic corporations have vanished without a trace once their overhead costs exceed their carrying capacity, so too will cities inevitably go bust as the immensity of their insolvency becomes inescapable.
The same can be said of the entire Federal government, which has added $1 trillion to its overhead in recent years even as revenues fell. Now the budget exceeds $3.8 trillion while revenues are at best $2.3 trillion, creating a structural deficit of $1.6 trillion-- the expected deficit in 2012.
Cuts of a modest $100 billion are met with howls of pain, and the Federal fiefdoms are increasingly devoting their resources to self-protection rather than pursuing their mission.
Even if cuts of $100 billion are made, expenses in the Central State complex will rise by $200 billion annually without any special effort being made: that's the nature of bureaucratic complexity.
There is another type of complexity, one based on the organic model of self-organization and self-regulation. An interesting example of a large-scale self-organizing enterprise is Bombay's (India) unique system of lunchbox deliveries: Dabbawalas, 5,000 delivery people working seamlessly to delivery tens of thousands of lunches to office workers for a very low cost per lunch.
The system has no bureaucracy; it operates a network that is moving from word-of-mouth communication to SMS (texting). Regardless, the underlying network is self-organizing and self-regulating: no bureaucracy is needed to instruct the delivery people, organize their routes or enforce countless regulations on their conduct.
As a result, the cost remains very low.
Furthermore, if the system encounters problems, it draws upon the network for solutions, rather than a high-cost, complex central authority bureaucracy.
Bombay Dabbawalas go high-tech (from 2006)
Indeed the Dabbawala's method of lunch delivery is unique. Their origin dates back to the 1890s, a period when Bombay saw an influx of people from various communities and regions of India migrating to the city to seek livelihood. According to the Association, there were no canteens or fast-food centers then, and those who could not take a packed lunch from home since they had to leave early invariably had to go hungry.
Unfortunately, I have been unable to locate a copy of this documentary.
Thus complexity can remain an asset, as long as it is self-organizing, self-correcting and self-regulating. A bureaucracy's systemic response to any challenge or threat is always the same: devote precious resources to self-preservation above all else. Thus the responses needed to save the system never receive the resources they need to be successful, and the bureaucracy's complexity and drive for self-preservation dooms it to collapse.
Complex self-organizing networks like the Dabbawalas, on the other hand, operate more like an ecosystem, evolving rapidly to systemic change without a Central State or management imposing "solutions."
As former Sun Microsystems honcho Scott McNealy said circa 2000: the network is the computer. For the Dabbawalas, their network is the innovator, the management and the adaptive ecology in which they operate and live.
The Dabbawalas are adapting social media and modern communication technologies to serve and extend their network. Those technologies are highly leveragable in such a self-organizing network.
Thank you, CNF, for the information on the Dabbawalas.
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