This presentation from the EURO 2016 conference in Poznan, Poland, and from the GDN conference in Bellingham, WA, USA, joint work with Leroy White of Warwick Business School, shows how combining formal and informal organizational networks enables decisions to flow more freely around organizations, but at a cost, leading to an optimal size of informal organizational networks. If organizations can control these, this leads to implications for optimal information flows in companies.
Month: July 2016
The Brexit Paradox: This is not Representative Democracy
In the UK, voters elect a Member of Parliament who is there to represent the views of their constituents. This is representative democracy, and the UK has survived pretty well with this form of government. It is one of the many things that the Romans Have Done For Us.
Members of Parliament are supposed to do what their constituents tell them to do. They may have loyalty to the political party to which they belong, but they should, at least in theory, represent the views of their constituents.
The recent referendum on whether the UK remains a part of, or leaves, the European Union, has caused a great deal of uncertainty, and it is clear, when you think of it, why this is so.
Consider the stylized map of the UK below, where the country is split into three constituencies. Each constituency has 1 million electors, who all vote.
Constituency A votes 800,000 Leave : 200,000 Remain;
Constituency B votes 400,000 Leave : 600,000 Remain; and
Constituency C votes 400,000 Leave : 600,000 Remain.
This means that there is a total of 800,000 + 400,000 + 400,000 = 1,600,000 voting for Leave; and 200,000 + 600,000 + 600,000 = 1,400,000 voting for Remain.
This is democratic. The will of the people is that, by a sizeable majority, Leave wins.
However, when this is ratified in Parliament*, by the representatives of the people, the consituents’ MPs, the following happens:
The MP for Consituency A votes Leave;
The MP for Consitutency B votes Remain;
The MP for Consituency C votes Remain.
We are then left in the paradoxical position that a referendum result‡ cannot – under a representative democracy system – be implemented by the MPs.
This is a key constitutional question, and one that cannot be solved by Parliament or the Judiciary†. This is a fundamental issue for British (and European) democracy. And its importance cannot be overstated.
* there is a fierce debate on which body needs to invoke Article 50(2) of the Treaty of European Union, but let us assume that Parliament would make this decision ‘in accordance with its own constitutional requirements’ under Article 50(1).
† it is clear that the decision will be the subject of Judicial review, right up to the Supreme court, but this will merely be a judicial rather than a democratic decision.
‡ this is not quite the situation in the actual Brexit referendum result (although there is no way of telling, as MPs’ constituencies are different from referendum counting districts), but the fact remains that the result of a referendum can be inconsistent with implementation under representative democracy.
Update 3 November 2016: The High Court (subject to appeal to the Supreme Court) has confirmed that Parliament should decide how to implement withdrawal, as the powers of Royal Prerogative would have an impact on Statute, which is not normally the case when treaties are made or revoked. Brexit is a special case, as it would overturn Statute in a way that was not envisaged in the European Communities Act 1972. The full judgment is here).
What proportion of an airline ticket is made up of the cost of the aeroplane?
Aircraft aren’t cheap. Neither are airline tickets. But how much of that airline ticket is made up of the cost of the aeroplane?
If we assume a relatively efficient modern airliner, say a 777, a 30-year lifetime, 3500 hours per year, and an average speed of 500mph, that produces a total distance of 52,500,000 miles. Which is quite a lot.
If you were to knock on Boeing’s door, they could sell you one for $320 million. Volume discounts are, I am told, available.
So, assuming straight line depreciation, along with many, many other assumptions, that’s $6.10 per mile. At 350 or so passengers, that is around
2 cents per mile
Or, for a 3000 mile (transcontinental or transoceanic) flight, a total of sixty dollars. Which is perhaps more than I expected.
Stacking Shelves the Amazon way
Amazon FC are playing in the Euros (the UEFA football championship). Or at least that’s what could be inferred from my name badge.
In fact, Amazon FC is one of the Amazon fulfilment centres, located in the Polish town of Poznań, location of the 28th European conference on Operational Research.
The fulfilment centre is huge – with a million separate items stocked, and up to a million items being processed every day – and is just one of a network of existing sites around Europe and around the world, the locations of which are themselves optimized to minimize cost.
One of the many interesting facts about the tour was the way that Amazon store stock on their shelves. Like any other business, they want to minimize fixed costs. One way they can do this is to maximize the density of items stored on their shelves. Unlike in my Mini factory visit (which will be the subject of a later post), Amazon does not run a just-in-time stock system. They are happy(ish) to hold stock on the basis that their customer will have it quickly and will not have to wait for it to be backordered. Amazon was founded on the basis of being able to supply items that only a few people will want – the so-called long tail – itself the subject of a book available on, where else, Amazon… the upshot of which is that if you rank the most popular to the least popular items sold on one axis, and take a logarithm of the number of these items sold on the other, it will make a nice straight line (a Zipf distribution for those interested). So, Amazon will hold on to some items for years on the basis that someone, somewhere, sometime, will want to buy it.
So, Amazon needs to store these millions of items. While most things are controlled and optimized by computer, they leave it down to human intuition as to where to store items – albeit guided by optimization algorithms.
Instead of giving a specific destination for each stock item (basically a very large grid reference), they give their employees a general area into where to store items. The idea behind this is that when you first fill a location with stock, the space-packing density will be high as items fit next to each other. But as items are removed and sold, spaces will be created meaning that you are effectively paying to store air. So Amazon allows its employees to use these spaces to store more items – even if they are unrelated to each other. Of course, the system keeps track of stock locations, but by doing things this way, the efficiency of the operations is improved, and less space is required for storage.
There is a similar example of adaptive organization used by Southwest airlines in my article The Complexity of the Corporation.
The Complexity of the Corporation
In my paper, The Complexity of the Corporation, I introduce complexity science applied to management, discussing complex adaptive systems, emergence, co-evolution, and power laws.
“We discuss the notion of complexity as applied to firms and corporations. We introduce the background to complex adaptive systems, and discuss whether this presents an appropriate model or metaphor to be used within management science. We consider whether a corporation should be thought of as a complex system, and conclude that a firm within an industry can be defined as a complex system within a complex system.Whether we can say that the use of complexity research will fundamentally improve firm performance will depend on the effect on success derived from its application.”