Nilza I. Cruz Ruiz
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"Philosophy is written in that great book which ever lies before your eyes – I mean the universe… This book is written in mathematical language and its characters are triangles, circles and other geometrical figures, without whose help… one wanders in vain through a dark labyrinth."
"With regard to matters requiring thought: the less people know and understand about them, the more positively they attempt to argue concerning them."
– Galileo Galilei
The "Macro" Picture
Life: quite probably the most complex phenomenon in the Universe. It takes on an impressive variety of forms, properties, functions and behaviors over a huge range of scales. Each of the organisms that constitute the biosphere have evolved by the process of natural selection following a unique historical path. Then, add to the biological life, the underlying complexity related with social life, which we, as humans have introduced into the planet, especially in the form of cities, and all the astounding phenomena they encompass: culture, commerce, organizations and architecture. A common property shared by humans, cities, and organizations is that they are complex systems. The cities created by humans have a bright side representing economic and academic development, innovation, and also opportunities for development as engines of wealth and politics which will open the door to POWER (which may approach the not so bright side). On the darker side, cities represent an opportunity for crime, poverty, pollution and consumption generators of energy and other resources.
The related challenges and threats we are facing nowadays are not new. All have been with us since the beginning of the Industrial Revolution, but because of the exponential or highly accelerated rate of urbanization, they feel like catastrophe is highly predictable within the interrelated (one has led to the other) perspectives of social, economic and long term climate changes we have been confronting. This does represent and opportunity to think about, create, develop and study a "science of cities" and by extension a "science of companies". In other words, a formal framework for understanding their landscapes, dynamics, growth and evolution. Similar to the framework used to study the environments, growth, dynamics and evolutions of us as humans. The point of convergence of cities, companies and humans: Complex Systems.
Dynamics and Non-linearity in Complex Dynamical Systems
A universal characteristic of a Complex System is that the whole is grater than, and significantly different from, the simply linear sum of its parts. In many instances the whole seems to take a life of its own, almost dissociated from specific characteristics of its initial building blocks. Furthermore, even if we understood how the individual agents interact with one another, predicting the systemic behavior as a whole is not usually possible. "Conspiracies" within the agent dynamics also occur at moments in time in space which are naked for the human eye. Agents may auto-organize to produce outcome. This collective outcome, in which the system manifests a significantly different behavior than that of the individual parts, is called emergent behavior. Non-linear systems are dynamical systems. It is a recognizable characteristic of economies, financial markets, companies and organisms.
Energy, Metabolism, and Entropy
From the human or social life perspectives, there is an amount of energy needed for survival. For humans, this is quantitatively expressed in terms of a metabolic rate, which is the amount of energy needed per second to keep an organism alive. As social mammals now living in cities, we require homes, lighting, heat, automobiles, roads, computers, and so on. These represent the social metabolic rate. The social metabolism and human energy invested in the development of cities, countries, etc. should positively correlate with the society and city infrastructure which we use to promote growth.
Thus, energy is processed as part of the metabolic or social metabolic rates.
When energy is processed, there is always a price to pay. Because energy underlies the transformation and operation of almost everything, no system operates without consequences. There is a law of nature: The Second Law of Thermodynamics, which states that whenever energy is transformed into a useful form, it also produces "useless" energy as a degraded by-product: "unintended consequences". For example, as humans we need to eat in order to stay alive, but after eating, sooner or later you would have to go to the bathroom for a physical manifestation of your personal entropy production!
The word Entropy is the literal Greek translation of "transformation" or "evolution". So, in making order, or in a closed system, disorder is inevitable. To maintain order and structure in an evolving system requires the continual supply and use of energy whose by-product is disorder. In organizations, implementing order produces disorder as a consequence. As we know the saying: "No pain, no game" This is why as humans, in order to stay alive, we need to continually eat to combat the inevitable, destructive forces of entropy production. This is no different for organizations or cities, which require more energy for innovation, maintenance and growth.
The battle to combat entropy by continually having to supply more energy for growth, innovation, maintenance, and repair, which becomes increasingly more challenging as the system ages, underlies mortality, resilience and sustainability, whether for organisms, companies or societies.
Energy, Metabolism, and Organizations
As humans, after growing rapidly in their youth, almost all companies with sales of over about $10 million end up floating on the ripples of the stock market. This is a precarious situation because if a big wave comes they can drown. If companies are left alone while suffering losses (even if profits are growing exponentially), companies become vulnerable if they are unable to keep up with the growth of the market. A sizeable fluctuation in the market or some unexpected external perturbation or shock at the wrong time can be devastating to a company whose sales and expenses are balanced. This sequence of events is not very different to the process that may lead us, humans to our own death. We too, are finely balanced between metabolism and maintenance costs. Ultimately, we reach a stage where even a small perturbation just as a minor cold or heart flutter can lead to death.
The death of a company may refer to their disappearance because of a merger or acquisition, rather than by liquidating or going bankrupt. A useful definition is to use sales as the indicator of a company's viability, the idea being that if it's metabolizing, it's alive! Birth would be defined as a time when organization first reports sales and death when it ceases to do so.
In synthesis, organizations, as humans, are born, require energy, maintenance, metabolize, stay alive, suffer diseases, survive, or not; (i.e; die). They are, as us, complex dynamic systems which adapt to changes. They also consist of agents interacting non-linearly with properties and behaviors which interact, and even conspire within each other in a self organized manner. The emerging behavior is often not possible to predict, even though tools as agent based modeling and systemic dynamics can help simulate the behavior of these systems. We need to continually strive to think this way, to understand emerging behavior is not the linear result of the system's agents or constituents. Non-linear systems are dynamical systems, and dynamical systems, as for example differential equations, are used to study the instantaneous rates of change within systems. For example, in organizations, we focus on financial results and economic behavior, but not on the rate of change of these results, and the associated underlying factors [regulation, operational infrastructure, technology, human capital, etc.] associated with these rates of change are seldom addressed. We may refer to these underlying factors as the organization's genetic code. In this case, the organization's economic behavior would be a function of the rates of change associated with the dynamics resulting from the interactions of its genetic code. This, within existing landscapes.
Next week we'll talk more about Dynamical Systems, Non-Linearity and Applications
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