entropy Archives - TheWayoftheWeb

I’ve been interested in how businesses organise themselves for a while, but working outside of a corporate structure has been allowing me to think more about what works.

As I previously posted, I’ve been reading PW Singer’s Wired for War recently, and nature is a huge influence on the world of robotics and AI – after all much of the work is finding automated equivalents to the brains and mechanisms of humans and other animals. But is was catching some of Professor Brian Cox last night in a programme about Destiny and time that sparked this particular idea (The show is currently on BBC iPlayer here)

Big Piles of Sand, Sunset — Big Piles of Sand by cobalt on Flickr.

Basically in a section on entropy, the example used was a pile of sand, which could be re-arranged in a huge number of ways without really altering the structure of the pile, and therefore it demonstrated ‘high entropy’. By comparison, a sandcastle containing the same amount of grains would be changed significantly by even just a small re-arrangement, and therefore demonstrated ‘low entropy’.

So with an extremely limited knowledge of the Second Law of Thermodynamics, what on earth does this have to do with business?

Entropy, time, nature and businesses:

Well, entropy affects all things, and is really a measure of energy changes as things disperse – think of a block of ice melting. And these changes which can increase entropy can happen spontaneously.

So busineses which arrange themselves like a pile of sand should retain their broad shape through a far bigger number of changes. The prime example could be the branded venture capitalism of Virgin. By using a branded VC model, they’re able to get in and out of various industries and fields relatively quickly and painlessly, whilst the overall company values remain. And they can experiment with space flight, for example, without fear.

Technology companies seem to be more adept at this – the 20% Google time for engineers to work on pet projects in one example of expanding and changing whilst apparently staying somewhere within the Google values (e.g. ‘Do No Evil) – hence the search and advertising business also includes a range of other projects which tie-in to a greater or lesser extent.

And smaller businesses which follow these ideas seem to be growing – for instance, the virtual agency model which tends to be occurring more often in the creative and marketing disciplines (as opposed to the crowdsourcing model which can often be more akin to ‘spec work’ – i.e. you just post your demand and someone meets it for the lowest cost). The virtual agency should be a collaborative co-creation environment, and certainly the better ones seem to fit that build (Disclosure – I’m a member of both Blur Group and Guided Collective)

The natural end of the formal structure:

The entropy idea seems to suggest that initially you had small, local groups, which turned into large formal ones due to advances such as the Industrial Revolution etc. In terms of the impact, the change was massive, but in terms of the duration of the change, 200 years isn’t such a long time.

Which makes me think that the move towards collaborative groups coallescing, splitting and reforming may well be the most natural state, and the time for the large formal institutions really is at an end.

Ronald Coase is attributed with the idea that economic tasks are performed by firms when the transactional costs suggest it. (Cheers to @jobucks for succeeding where Google and my memory failed).The earliest reference to it via Wikipedia comes from John R. Commons:

It is this shift from commodities and individuals to transactions and working rules of collective action that marks the transition from the classical and hedonic schools to the institutional schools of economic thinking. The shift is a change in the ultimate unit of economic investigation. The classic and hedonic economists, with their communistic and anarchistic offshoots, founded their theories on the relation of man to nature, but institutionalism is a relation of man to man.

But the digital age seems to enable a shift back to commodities and individuals with a basis in natural and social relationships. If each grain of sand is an individual loosely linked to the others in the group on the basis of selling a commodity, then it can exist with high entropy and continue to retain its shape in the face of the majority of external forces. Whereas tight formal rules of an institution bind ‘man to man’, but mean spontaneous external forces are far more likely to blow it apart.

Steve Rubel posted a risky bet on his personal blog, Micro Persuasion, yesterday, that ‘By January 2014 I will wager that in the US almost all forms of tangible media will either be in sharp decline or completely extinct. I am not just talking about print, but all tangible forms of media – newspapers, magazines, books, DVDs, boxed software and video games.’

While I don’t doubt he’s right that all forms of tangible media will have experienced a sharp decline, I’d differ slightly in my belief that most will continue as niche products – in the same way that vinyl exists for some DJs and collectors. And I’m not sure about the timescale.

Although he makes a compelling point with many great examples of how digital content is becoming increasingly mainstream, I think there’s a tendency to almost imagine one day when suddenly all the printing presses stop, and we all ‘go digital’.

This is the way the world ends

Not with a bang but a whimper. The Hollow Men, T.S Eliot.

Physical products won’t go out like that, despite the predictions I’ve heard since I started in online publishing almost a decade ago. Think of the concept of Entropy, the natural decay of all things – or the erosion of land by the force of the sea. Both are gradual, and yet completely unstoppable physical forces like the changing habits of consumers and the constant innovations in technology.

Yes, many companies, products and industries are in sharp decline, which is likely to be accentuated by the current global economy collapse, and there’s a desperate need for most to innovate new revenue streams. But there are still isolated cases of success in traditional media, and there are still sizeable profits being made, even by declining titles. Will these have been eradicated to the point on non-existence in 6 years? I think that depends on the age of the consumers of those titles, and the likelihood of them continuing to buy physical products from habit or affection.

The era of physical content distribution domination for print, audio, film and videogames is coming to an end, but there are still barriers to overcome. Rather than the UK increasing broadband speeds and bandwith caps, for example, the U.S. is instead seeing them introduced. That’s a major barrier to film and videogame downloads, which can be a hefty size to acquire.

But the item for me which is most likely to drive this transformation is missing from Steve’s otherwise comprehensive list. And that’s the smart phone (the iPhone for the sake of argument). For the first time there’s a consumer device which combines digital music, photography, telephony, communication, blogging, applications and almost everything else, and which is easily able to feed Flickr, download from iTunes etc, etc, etc. It provides an attractive and increasingly familiar conduit for digital content which isn’t as imposing as a PC for the non-geeky, and reaches those who don’t spend their working days on a keyboard. On my recent holiday, I cursed my lack of a smart phone when I had to constantly remove the memory card from an old digital camera to upload to Flickr. And when we lacked a GPS, or mobile internet access to look for a location. And the fact I couldn’t access Twitter or my blogs without using a PC old enough to have a floppy disc drive!

Personally I think the physical content carthorse will continue to plod along for a fair while longer – if I had to pick a date out of the air, I’d probably pick 2020 as the cut off point for physical products reaching the very margin of content delivery – but don’t make the mistake of thinking I wouldn’t advise any company to be investigating every alternative opportunity as if they’re life depended on it, because it certainly does.

The natural decay of business structures

Entropy 2.0