Tuesday, 14 January 2014

Good physics is good business

For every action there is an equal and opposite reaction, also known as the conservation of energy. These principles govern business just like they govern physics. The energy of a business can be money or the energy of staff or customers. The conservation of energy can relate to the need to be efficient. Using a small amount of energy to unlock huge amounts of energy is the goal. Just like in physics.

I just visited cost co and saw this in operation as a driving force behind a very streamlined business. Everything is focused on getting people and goods in and out very quickly. Turnover is high. Waiting is minimised space and profitability is key.

I keep seeing these principles in biology and business. This is just an observation I thought worth sharing. I wouldn't be the first to try and extrapolate from laws of physics to higher levels but it’s an idea I will be putting together over time.

Much of what we see in business has followed similar laws throughout the existence of human society. Cultures and tools have changed but the essence is about good relationships and taking advantage of opportunities. So the basic idea that one mans loss is another mans gain is the exact equivalent of every action being an equal and opposite reaction. If we look at things through this frame of reference and the physical laws really can help us understand the laws of business or any other system.

The troubles in the West represent opportunities for the East. We certainly see that reaction playing out. In the West the shift from boom to bust has hit the building and property business but encouraged the debt and recycling industries. It's not a judgement just the natural state of play.

Each era has its winners and losers which represent the equal and opposite reactions. Viewing events this way just makes business feel a little more predictable. As though, like with physics, if we know the history of an event and what generally followed the chances of similar events recurring are high.

However it is true that in physics we finally know so much of what we need to know to predict the likely outcome. At higher levels like business we cannot be so exact. Though that doesn't mean we can't see the overall patterns and act on them, if we know where to look.

Of course this analysis just poses more question that it answers. What kind of information and how much of it do we need? How do we know which pattern is being played out and which will occur in reaction?
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