WHY THINGS GO WRONG
Trouble, Trouble Everywhere
As a practicing CPA I frequently have to counsel business clients facing trouble in all its forms. Just like individuals, business owners are subject to adversity in millions of different ways: A new vehicle breaks down inexplicably, a trusted key employee leaves suddenly and with no prior notice, a major competitor opens up right down the street, the IRS decides to audit the business, a crucial major supplier goes bankrupt, etc.
The list of harm, hardship and adversity facing business owners (and people) is virtually infinite.
Individuals are subject to their own set of risks and problems, including medical issues. According to a 2015 survey by the American Heart Association about 800,000 strokes occur each year and approximately 200,000 of them are “cryptogenic” which means the cause is unknown. Patients afflicted with strokes of unknown cause suffer the most because they don’t know why. They live in fear, which makes recovery far more difficult.
There may be no cure or solution for some of the worst problems of life. But it can be extremely helpful to at least know why something important has gone wrong.
Disorder and Failure Are Built Into the Deepest Layers of Reality
Why do things go wrong? Physics has the answer which takes the form of an equation that is the supreme enemy of mankind:
S = k.LogW
The 19th century German scientist Ludwig Boltzmann discovered this equation, known as entropy (disorder) or the Second Law of Thermodynamics. Simply put, the equation says the more elements contained in any system the more ways exist for things to go wrong.
An approximation of Boltzmann’s equation is Murphy’s Law:
‘If something can go wrong, it will, given sufficient time.’
Abraham Lincoln knew all about how things can go wrong in terrible ways. As a brilliant and experienced politician he had this to say about dealing with people:
You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.
Anyone who works in customer service or otherwise deals with the public should memorize this quote (which Lincoln may have derived from the poet John Lydgate.)
(For those of you who want the full mathematical explanation of Boltzmann’s equation here it is: S, the measure of disorder in any closed system equals k, Boltzmann’s constant, multiplied by the logarithm of W, the number of elements in the system.)
Trouble is a Statistic
Whether you look at trouble using Boltzmann’s equation, or the insights of Murphy’s Law or Abraham Lincoln it’s a fact that trouble is a statistic. For any sufficiently complex task, such as carpentry, accounting, medicine or auto repair, you can be certain that the chance of failure, errors or major problems is non-zero.
There is an exception to this rule: Tic-Tac-Toe. Everyone knows that if you play a game of Tic-Tac-Toe there is a very simple strategy for winning every time. Unfortunately, winning at this trivial children’s game offers no help at all for people struggling with the far more complex problems of life.
Business owners and individuals must budget for problems, and have contingency plans for likely scenarios where trouble may arise. The more steps that must be followed in any activity, the greater the chance something will go wrong. The more transactions that must be engaged in, the greater the chance something will go wrong. The more people involved in a project, the greater the chance that something will go wrong.
If a business doubles in size then the problems faced by the owner will increase significantly. Boltzmann would probably congratulate a business owner who succeeds in doubling his business, and then point out that the “W” term in his equation has become “2 x W” (subject to qualitative factors) meaning there are many more ways for things to go wrong.
The Next Blow is Already On Its Way
Complacency can set in after a business or individual is hit with and survives a major problem. People may persuade themselves that the storm is now over and the easy times they deserve have returned at last.
Boltzmann’s equation is ruthless and offers no mercy whatsoever to anyone. No one earns credit or protection merely because they survived one instance of adversity. The statistical tendency for disorder to reassert itself in new forms and ways remains constant: for all of us the next blow is already on its way. Count on it, and plan accordingly.
Watch, wait and see
Wonder, worry what shall be
It should be unsurprising that disorder occurs and is distributed in a disorderly way. There are clusters and voids. A person could have a great year with no illness, no car crashes, no accidents, and no hardships. On January 1 of the following year his house burns down, he has a major car crash, the stress of these events leads to him being fired from his job and then he develops a severe illness. Clusters and voids.
Realism is the best philosophy for dealing with life. Pessimism is self-defeating while optimism in the long run is a fallacy.
“Optimism is for cowards.”
Oswald Spengler
Realism requires that we fight back. Here is a fistful of five ways to combat trouble:
(1) Simplify
The “W” term in Boltzmann’s equation measures the number of elements in any system, which could be the number of people working on a task, the number of steps or transactions to be engaged in, the number of doctors performing a surgery, etc.
In general if W is minimized in any particular situation then the chance of something going wrong is also minimized. This is the physical reason why simplicity is usually (though not always) a good thing.
There is an important exception to the wisdom of pursuing simplicity. A few rare individuals don’t seek safety and comfort and prefer, instead, to climb Mount Everest, travel to the Moon, or risk their life trying to stop an Ebola outbreak in Africa. These heroes freely accept danger and complexity as the price of achievement.
(2) Redundancy
Redundancy is another way to cope with trouble. Nature has given us two eyes, two kidneys, two lungs. Our brains are ‘plastic’ and soft-wired – this neurological fact allows many stroke victims to reprogram their brains to bypass damaged areas and re-acquire lost skills and abilities.
All critical systems in your life, business, home, etc. should have built in redundancies. NASA knows this; so too do all elite military Special Forces units.
(3) Resilience
Resilience is the ability to take a punch, survive, recover and get back on track. Fragile systems can be wiped out by the slightest disturbance while a resilient system can withstand disruptions.
Professor Nassim Taleb, in his important 2012 book Anti-Fragile, discusses systems that not only survive but actually prosper during adversity and hardship. Taleb defines anti-fragility as follows:
Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.
See:
(4) Good Design
All objects, software, habits and techniques can be evaluated by the effectiveness of their design. Good design not only achieves an intended purpose but is also resistant to disorder. Engineers have a famous saying:
Good luck is a byproduct of good design.
Study the pathways that lead to failure, error, collapse. The first design for a new bridge must be evaluated for errors, faults, and oversights and then improved in a series of continuous refinements. In this way the bridge will get stronger and stronger before it is ever built.
(5) Planning
Planning is a type of systematic thinking where you consider the future, what you want it to be like, what steps you must take to achieve it, and what risks and costs you will have to deal with to create the desired future. The future isn't free and costs not only money but also effort and vision. You must learn to see in the dark, to pierce all shadows, and to plan for all likely events.
At its finest, planning is a branch of applied statistics used to evaluate likely and unlikely scenarios, and identify the steps that must be taken to either reach or avoid a particular scenario. In the context of this article, the primary purpose of planning is risk avoidance. Think like an insurance company and identify and avoid risk systematically.
The other four responses to trouble discussed above are mostly based on the idea of fighting to win. Good planning helps you win without fighting at all by avoiding trouble in the first place.
“To subdue the enemy without fighting is the ultimate skill.”
Sun Tzu
The Art of War
Trouble is Pervasive and Inevitable
Harm, risk and adversity are distributed everywhere and cannot be avoided. Here is another non-mathematical explanation of why this is true:
One day as the angels came to present themselves before the Lord, Satan, the Accuser, came with them.
“Where have you come from?” the Lord asked Satan.
And Satan replied, “From patrolling the earth.”
Book of Job 1:6 and 1:7
The grave of Ludwig Boltzmann in Vienna, Austria.
George Adams
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339
©2015 Copyright George Adams CPA MBA. All Rights Reserved.
