BRAZIL-Why do we manage ANYTHING?

To deal with the single most important universal law

This post is a “preamble” to my promised follow-up on my previous post of the 11^th entitled “Looney Tunes”.

We can break a lot of man-made laws and get away with it or pay the consequences if caught but the laws of physics are irrefutable and the consequences of breaking them are fatal.

One such law is the Law of Entropy. Simply stated this law says that all order tends to disorder. Our expanding universe is an example. 

Some 5-or-so billion years from now our sun will exhaust its fuel supply. While that is most certainly beyond your planning horizon you know that it is the ultimate disorder.

An enterprise is an “ordered system” composed of numerous interdependent relationships that tend to disorder and we create rules for dealing with our man-made  system as they tend to disorder. 

We depreciate physical capital to allow for its eventual obsolescence (i.e. disorder), we impose financial controls to avoid going bankrupt, we invest to re-order our enterprise system, etc. etc.

Everything we do is designed to re-order the natural rate of disorder as determined by the Law of Entropy.

When management decisions add to the rate of our trend toward disorder, we face serious problems. Our systems break down and the relationships in them unravel more quickly than we can react to establish a “new” order.

Brazil is a perfect example of how this works.

Centuries of kleptocracy established an “order” in Brazil that eventually made monetary and fiscal disorder inevitable. Brazil’s enormous resource base made the rate of entropy relatively low until the system finally degenerated into hyperinflation that threatened its very existence.

The Real Plan reordered the system to combat the fundamental causes of inflation and in the process ended one of the main sources of disorder in the real income of Brazilians.

The private sector management decisions that immediately followed the Real Plan were to reorder the enterprise systems to adapt to the new circumstances.

However, following the Real Plan, the PT imposed a series of management decisions that instead of contributing to the newly established order of the Real Plan, served to accelerate the rate of entropy. 

As the economy absorbed and adapted to the management “order” of the PT, the rate of entropy accelerated at an accelerating rate.

Since we can’t repeal the Law of Entropy, it is incumbent on Brazil to change the processby which it reorders the system. Since the system has been allowed to unravel almost to the level of collapse or failure the path to reordering it will be a difficult one and take a good deal of time.

It’s a rule of complex systems that they create complex problems and the system alwayskicks back.

The only reason we have managers in business is to recognize when disorder is setting in and take the necessary measures to reorder their respective sub-systems in accordance with the workings of the overall system. 

If order was a permanent characteristic of the enterprise, we would merely need to start the “machine” and then go play golf. 

A manager who cannot perform to recognize disorder and establish an appropriate new order does not belong in your enterprise.

'Nuff said, I guess!