IN the biblical book of Matthew, Jesus of Nazareth tells the story of the king who gives three “servants” some money to take care of while he is gone. Two of them doubled his investment while the third gained nothing.
In every organization from government to a sari-sari store, there are only two methods of operation. One is to rely on people and the other is to rely on a system. Stories abound of companies that were crippled when the only guy with total access to the e-mail system was fired and “forgot” to tell anyone the password.
Therefore, the alternative is to have a system in place that ensures the functioning organization will always be opened on time. In 1947 a company called The International Organization for Standardization was founded to help organizations write their operations instruction manual. By the way, being “ISO Certified” is not like winning the Oscar. You write the manual to their specifications and pay to be certified.
So, the King relied on people instead of a system. What he should have done is to follow a “take care of the money” guide. “Invest sixty-percent in a business (equity), twenty five-percent in high yielding corporate bonds (lending), and fifteen percent in property (farm land).”
We are told that there is something wrong with government and we need a new “system.” And then we hear all kinds of ideas from federalism giving more autonomy to local government to changing from “president” to “parliament.”
It’s all nonsense. Which country should the Philippines be when it grows up? Germany, with the highest electricity rates in the world? Japan, with a 300 percent Debt-to-GDP ratio? US, with 8.5 percent inflation?
Thailand would be great except for the military controlling the government. Singapore is wonderful except for “everything censorship” and one-party rule since 1965. Or maybe Egypt, Vietnam, Nigeria, Turkey, Mexico—pick one. Don’t like oligarchs? Then stay away from South Korea where the Chaebols built the economy but in 2014, the largest chaebol, Samsung, composed about 17 percent of the economy.
Perhaps we need a homogenous common ancestry, blue-eyed (89 percent in Finland) people like Scandinavia and a 5 million population.
There is no single “system” of government that works. Then we get the “people” solution. One candidate for Senate said: “Charter change is not the real answer to the real problems that our people are facing. What we need is better government. And vote for me.” I added the last part.
A ratchet is a mechanical device that allows continuous linear or rotary motion in only one direction while preventing motion in the opposite direction. An analog watch runs on a ratchet that guarantees the hands only move forward. Government is designed to operate the same way. The Ratchet Effect is where costs and complexity only increase and never decrease because organizations are optimized to expand, not shrink.
Have a problem? Add a new cabinet position or “czar.” It is true also for the private sector.
With 1970 as the baseline, US Bureau of Labor Statistics data shows that the number of physicians and other health care providers increase by 300 percent by 2019. The number of hospital administration staff increased by 3,200 percent.
The more an organization expands, the more costly and complex it becomes. Complexity serves us well when it radically increases productivity and is then worth the expenditure. However, as it grows, the ability to reduce the cost and complexity for the objective of effectiveness and efficiency becomes increasingly impossible.
“There’s something wrong with the system. I can fix it if elected.” No, you cannot fix it any more than you can “fix” a rotting tree branch. Government needs to be pruned and thinned and no politician seems to ever have the political will to do that. That is why the Ratchet Effect wins and the people lose.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.