Template:Modernism versus pragmatism

Modernism vs. pragmatism

• Vertex vs. edge
• Text vs. meaning
• Algorithm vs. heuristic
• Formal vs. informal
• Tool vs. application
• Innate vs. emergent
• Obvious vs. subtle
• God vs. Darwin
• Simple vs. complex
• Quantitative vs. qualitative
• Calculated vs. interpreted
• Static vs. dynamic
• Stocks vs. flows
• Structure vs. interaction
• Nouns vs. verbs
• Trees vs. wood
• Permanent vs. ephemeral

“I should explain that in the Soviet scientific community in those days, mechanistic determinism held sway over all other approaches. Researchers believed that the natural world was governed by the iron law of cause and effect. This mentality was a product of the political environment.”

— Cixin Liu, Ball Lightning

A running theme in the JC is the distinction between top-down and bottom-up of organisation models.

We are in the swoon of a passionate love affair with data, technology and the algorithm. Thought leaders perceive an inevitable, short, path to a singularity where everything can be planned, everything calculated, everything provisioned, we will no longer have to rely on irrational, costly, inconstant, error-prone meatsacks. This time is different; this time we behold a future of technological unemployment but unlimited leisure.

Now I am a crusty old refusenik, and while that is largely borne of self-interest — I am an irrational, costly, inconstant, error-prone meatsack, after all — before mortgaging our futures to the machine, I think it is worth nutting through the digital prophecies to see if they hold water.

Every story needs a narrative and this one starts with a fundamental, philosophical divide: on on hand, determinism: the view that the causal principle holds, in theory, we can calculate all outcomes from first principles, our main challenge is outright data processing capacity; on the other, pragmatism: the view that, whether or not the causal principle holds, it’s too hard, too constraining and too inflexible. It’s better to live with uncertainty and figure things out as we go.

Determinism begets modernism and aspires to centralisation: we should aggregate and optimise processing power; management’s main function is orderly administration and maintenance of the machine which, by operation of logic, will dispense optimal outcomes by itself.

Pragmatism begets systems thinking and aspires to decentralisation: the world is fundamentally unpredictable; it is best dealt with by experienced experts; management’s main function is to empower and equip experts and optimise their ability to communicate.

So; centralised algorithms versus distributed heuristics.

Perfection versus good enough.

Modernism

“In 1988 a first international regulation was crafted to regulate the capital a bank needs so that it is unlikely to default, known as the Basel Accord (Basel I). This agreement was 30 pages long and the calculations could be done with paper and pen. It was revised in 2004 to something more magnificent, Basel II. With a great deal of added detail and new complex risk models, Basel II was 347 pages long. A few years after the creation of this masterpiece tailored to make the world safe, the financial crisis of 2008 broke out. The reaction was to weave an even more complex regulation, Basel III, which came to 616 pages. Whereas Basel I was translated into 18 pages of primary legislation in the United States, Basel III required more than 1,000 pages. I have asked central bank regulators: who understands the consequences of Basel III? The unanimous answer was “probably not a soul”.”

—Gerd Gigerenzer, Risk Savvy: How To Make Good Decisions

The top-down models are “modernist”. They view organisations as complicated machines. Formal design is important, and follows (centrally-determined) function; the more efficient your contraption is, the better it will navigate the crises and opportunities presented by its environment — the market. Modernism regards the market as an extremely complicated mathematical problem: hard, but— theoretically — calculable. Modellable. Should a model not work, one must refine it.

Shortcomings in current technology mean we cannot — yet — fully solve that problem. We still need humans to make sure the machine operates as best it can, but the further humans are from that central executive function, and the better the algorithm gets, the more humans resemble a maintenance crew: their task is simply to ensure the orderly functioning of the plant. As technology advances, human agency can be progressively decommissioned.

The modernist narrative focusses on what it can see, which is necessarily limited to the formal inputs and outputs of its own model. There are at least two consequences of this. Firstly, the modernist narrative cannot see informal, but often vital, interactions between components of the system that its model does not consider material. These are the random acts of kindness, the jobs the staff do that are not in the service catalogue, that explain the difference between excellent performance and work-to-rule.

Secondly, modernism is a negative sum game: its baseline is immediate, costless performance of the program. Positive variance from this baseline is not possible: the goal is to lose as little energy as possible. As with a Newtonian equation, real-world performance never meets theoretical conditions: friction and imperfection means an inevitable loss of energy and increase in entropy.

In Newton’s theory, acceleration equals mass times force. In the practical world, acceleration is inevitably less than mass x force. We know that friction, gravity, heat, entropic energy loss means in the real world, observed A will never be quite amount to M*F. Engineering and environmental control move real A closer to theoretical A, but it is practically impossible for real A to equal theoretical A, and theoretically impossible to exceed it. Engineering is there for a negative sum game: no amount of engineering, efficiency or insight can on yield an acceleration equal to or greater than M*A.

The modernist disposition holds that the same is true in an organisation.

Human operators create a great deal more entropy than machines. If the only measurement is flawless performance of an algorithm, humans must be worse at it then machines. There is no credit given to insight, diagnosis, creation of alternative models or narratives comma because in the the modernist framework, there is no such thing as a valid alternative model. Economics is a kind of applied physics. There is no room for alternative facts.

Business, and government, suffers from a kind of physics envy. It wants the world to be the kind of place where the input and the change are proportionate: everything is numerically expressible and the amount you spend on something is proportionate to the scale of your success.

—Rory Sutherland

If it is true that bettering an algorithm is impossible then it stands to reason: meatware is expensive and inconstant: the largest risk to the organisation is human error, thus the strategic direction of an organisation’s development is to eliminate where possible the need for human intervention. Where that is not possible, human activity should be constrained by rigid guidelines and policies to reduce the probability of mishap, and monitored and audited to record and correct those errors that do happen top prevent them happening again. To the modernist, malfunction and human error are overarching business risks.

This worldview is one that appeals to many people in business management. Others might find it it rather desolate. But desolation is no argument against it if it is correct.

Pragmatism

When a man throws a ball high in the air and catches it again, he behaves as if he had solved a set of differential equations in predicting the trajectory of the ball. He may neither know nor care what a differential equation is, but this does not affect his skill with the ball. At some subconscious level, something functionally equivalent to the mathematical calculations is going on.

—Richard Dawkins, The Selfish Gene (1976).

When you get too close to your material, sometimes you can’t see an absurdity even if it pinches you on the nose. Not only does a person catching a cricket ball not solve differential equations, or anything like it (let alone functionally equivalent), but she can’t. She would need the inputs for every differential equation in play. Just to determine a trajectory is: Y = H + X * tan(α) - G * X² / 2 * V₀² * cos²(α).

Bear in mind you don’t know the velocity, angle, vector, or starting coordinates of the projectile, all of which you would need just to perform that differential equation

Bottom-up models are, for want of a better world, “pragmatic”. They see the organisation as a constantly changing organism operating with incomplete, ambiguous information in an environment that is also constantly in flux. To survive, firms must respond dynamically and imaginatively to unpredictable, non-linear interactions in the environment which is constantly shape-shifting into new configurations in unexpected, and unexpectable, ways. For a pragmatist, practical control must be exercised at the points where the organisation interacts with its environment. A firm should have talented, empowered, well-equipped people — subject matter experts — to handle those interactions. Those in the central management function have a holistic view of the environment and can provide aspiration and tools to the subject matter experts, but real decision making is done by those experts at the edges, not the the management function in the middle.

Intellectually, the battle ought to have been won by the pragmatists long since (systems theory, complexity theory, even, for all its obsession with algorithms, evolutionary theory line up with pragmatism), but modernism keeps devising new ways of getting itself back in the game, and over the last twenty years has been winning. What with the giant strides of the information revolution, the forthcoming singularity, technological unemployment, the abolition of boom and bust in 2005, and the effective management and distribution of financial risks through sophisticated financial derivatives (amirite?), it is easy to be lulled into a sense of security.

Getting down amongst the elephants and turtles is not to everyone’s taste, but if you do it helps to see the planet on top of it more clearly. Here’s a distinction to draw: between things and interactions between things. Nouns versus verbs.

The illusion of permanence and the Ship of Theseus

We see that even many of the markers we treat as formal, fixed and permanent are really temporary: the Dread Pirate Roberts effect: the personnel comprising a corporation change over time. Likewise institutions: corporations merge, change business models, change locations, move into different markets. IBM of 2021 is very different from the IBM of 1971.

But the individuals may be fleeting and transitory; the residue they leave behind is not: The corporation’s devotion to the formal means that successive individuals become progressively constrained by their predecessors actions and decisions — even if, in the mean time the dynamic considerations that led to the decision no longer prevail. A rule that has been there for a long time, but that no-one knows the provenance of, acquires a kind of mystical quality. I think this is the inverse of the “Lindy effect”.

The illusion of significance

Because we can see the formal structures easily we tend to imbue them with significance, and assume the static connections between the formal structures are what matters. For example the org chart: this places every person in a firm in a logical, hierarchical relationship to everyone else, and can be neatly and easily controlled, that’s not to say many organisation charts become positively Byzantine.

There is much management theory around the relationship of “spans” and “layers” optimal organisation charts no more than 5 layers of management; no more than 5 direct reports and so on. This, from People Puzzles, is pretty funny:

How many is too many?
Around five direct reports seems to be the optimum number, according to Mark and Alison, although there are some scenarios where up to nine can work.
When it comes to the senior team in a company, however, too many people reporting directly to the owner manager can really hold the business back. Alison recalls working with someone who had 13 people reporting directly to her. “She had to do 13 appraisals at the end of every year!” she says. “It simply wasn’t an effective use of her time.”

Witness the formalist disposition, when the most significant thing you can do is carry out a formal process. The ethos is this: look after the form and the substance will look after itself full stop take care of the pennies and the pounds look after themselves. But this is the reverse colon this is to look after the pounds and assume the pennies will take care of themselves.

In any case you can’t encode mandatory small teams and a flat structure. There is a mathematical relationship between them: the smaller the average team, the more management layers there must be.

And besides, this is to miss the map for the territory. An organisation chart is a static map of the firm configured in the abstract, in theory, before it does anything. This is how the machine functions when it is idling. Org charts are the plan you have before you get punched in the mouth. Formal reporting lines are often the most sclerotic, rusty and resented interaction channels in the organisation. Communications up and down them — usually reluctant, strained, for the sake of it — are at best responsive to commercial imperatives, and derivative of them: the firm’s business is done only when the gears are engaged, and that means its personnel communicate with those who are not in their immediate hierarchy. The business unit is a cog: what matters is the effect a cog has when it is engaged.

But as the complicatedness of our organisations has grown we have developed more and more internal engines which engage not with the outside world but with each other in in heat generating, vibrating, noise emitting, wasteful energy consumption. Of course one needs compliance but when NZ compliance needs its own chief operating officers and and its own internal audit it drift away from optimal efficiency. I know of one internal audit department that has its own internal auditor. Who audits that function? We approach an infinite regression. But the buck must stop somewhere.

You can understand the wish to focus on reporting lines — formal organistional structure — because it can be easily seen. It is is legible. It is measurable. Auditable. But it misses the organisation’s real arterial network: lateral communications that cross the organisation’s internal and external boundaries: these are the communications that employees must make — between internal specialists in different departments and with the firm’s clients and external suppliers — to get their job done and move the organisation along. Note: it is in these interactions, themselves that things happen: it is here that tensions manifest themselves, problems emerge and opportunities arise, and that these things are resolved. It is not the drill, but the hole in the wall.

These are informal interactions. They are not well documented, and from above, not well understood. They are hard to see. They are not legible. Yep everyone who has worked in a large organisation knows that there are a small number of key people, usually not in significant formal roles, who who get things done. They know histories, they have networks, they understand procedures and and, more importantly, workarounds. These are the ad hoc mechanics that keep the the superstructure on the road.

They are hard to see precisely because they do not derive their significance from their formality, but from their function. From the frequency of interaction and the comprehensiveness of connection. These people are the super spreaders. They are the informal hubs of a multiple hub-and-spoke network. They earn their authority not from their formal position, nor their formal grading, but their informal reputation, earned daily, interaction by interaction.

A map of interactions is not a top-down, God’s-eye view. It disregards the artificial cascade of formal authority, in favour of informal credibility. It reveals the organisation as a point-to-point multi-nodal network, is a far richer organisation than that revealed by the org chart. This is how the firm actually works, and and inevitably the formal organisation will frustrate it.

Yet no firm I know of even considers it. Yet, with data analytics, it would not even be hard to do: Log the firm’s communication records for data to see where those communications go: what is the informal structure of the firm? Who are the nodes?

Typically, vertical, staff-to-manager communications don’t have those qualities. Reporting lines are more an interaction constraint rather than an indicator of productivity. They impede the firm from interacting freely.

The modernist theory is that the firm is a unitary machine that must be centrally managed and controlled from the top; therefore the more organisational structure the better.

The “agilist” advocates removing layers, disestablishing silos, and decluttering the organisational structure.

The agile theory is that risks and opportunities both arise unexpectedly, come from places unanticipated by the formal management structure, and therefore the optimal organising principle is to allow talented people at the the coalface the maximum flexibility to react to those risks and opportunities. Thus, the imperative is to have the best people, with the best equipment, in the best place to react skilfully. Those people aren’t middle managers, the optimal equipment isn’t the one that leaves the best audit trail, and that place is not the board room, much less the steering committee or the operating committee. It is out there in the jungle. the fewest number of formal impediments to their creative use by those people.

For a modernist, this is inevitably a scary prospect. The modernist view is that as long as the structure is correct the quality of the people in any of the positions on the organisational structure is immaterial as they have predefined roles to perform.

So to understand a business one needs not understand its formal structure, but its informal structure: not the roles but the people who fill them: who are the key people whom others go to to help get things done; to break through logjams, to ensure the management is on side? These lines will not show up in any organisational structure. They are not what James C. Scott would describe as legible. They are hard to see: they are the beaten tracks through the jungle: the neural pathways that light up when the machine is thinking. They show up in email traffic, phone records, swipecode data.