Systems

Why can’t we make the trains run on time?

Paul Clarke – honestlyreal

On a morning where transport is disrupted across the UK by snow and cold winds, it’s worth returning to this post from a few years ago, which explains why small amounts of snow here are so much more disruptive than the much larger amounts which are easily managed elsewhere. In short, the marginal cost of being ready for severe weather, when there isn’t very much of it, isn’t justified by the benefits from another day or two a year of smooth operations. That is a very sensible trade off – the existence of which is immediately forgotten when the bad weather arrives.

It’s a trade off with much wider application than snow-covered railway tracks. Once you start looking, it can be seen in almost every area of public policy, culminating in the macro view that everybody (it is asserted) wants both lower taxes and better services. Being more efficient is the way of closing the gap which is simultaneously both clearly the right thing to do and an excellent way of ducking the question, but at best shifts the parameters without fundamentally changing the nature of the problem. Hypothecation is a related sleight of hand – let’s have more money, but only for virtuous things. In the end, though, public policy is about making choices. And letting the trains freeze up from time to time is a better one than it appears in the moment to the people whose trains have failed to come.

Organisational change Systems

A bit more on Coasian hells

The Yorkshire Ranter

This is a follow up to a post covered here a few days ago which looked critically at outsourcing, starting from the fundamental question first posed by Coase on what organisations should do and what they should buy. This second post is at one level a short summary of the first one, but it’s also rather more than that. It puts forward a slightly different way of framing the question, making the point that time and uncertainty are relevant to the decision, as well as pure transaction cost narrowly defined.

There are transactions, which are in the moment, and imply no further commitment or relationship. There are contracts, which are a commitment to future transactions, and depend on shared assumptions about the future conditions in which those transactions will happen. And there are organisations, which exist in the space beyond contractual precision and certainty.

To complete the hat trick, there is also a separate post applying this thinking to Capita. Even for those less interested in the company, it’s worth reading to the end to get to the punch in the punchline:

In important ways, this is the service that Capita provided and still provides: the ability to blame problems on computers and computer people, while ignoring the physical reality of policy

Organisational change Systems

In The Eternal Inferno, Fiends Torment Ronald Coase With The Fate Of His Ideas

The Yorkshire Ranter

Organisations, including governments, follow fashions. Some of those fashions change on short cycles, others move more slowly, sometimes creating the illusion of permanence. The fashion for outsourcing, for buying rather than making, has been in place in government for many years, but there are some interesting signs that change may be coming. One immediate cause and signal of that change is the collapse of Carillion, but that happened at point when the debate was already beginning to change.

This post goes back to the roots of the make or buy choice in the work of Ronald Coase on the nature of the firm. The principle is simple enough, that it makes sense to buy things when the overhead of creating and managing contracts is low and to make them when the overheads are high. The mistake, it is argued here, is that organisations, particularly governments, have systematically misunderstood the cost and complexity of contract management, resulting in the creation of large businesses and networks of businesses whose primary competence is the creation and management of contracts.

One consequence of that is that it becomes difficult or impossible to understand the true level of costs within a contractual system (because prices quickly stop carrying that information) or to understand how the system works (because tacit knowledge is not costed or paid for).

All very thought provoking, and apparently the first in a series of posts. It will be worth looking out for the others.