Peter Cochrane: The threat of optimisation

The reason why Mother Nature and some civilisations enjoy longevity is down to their relative inefficiency

As a young engineer in the late ‘70s it dawned on me that the reason why Mother Nature and some civilisations enjoy longevity is down to their relative inefficiency. This came to mind as I experienced first-hand the damage that financial optimisation inflicted on systems large and small.

Very often, the resulting costs were multiples of the projected savings. Since that time, I have published, presented and demonstrated to managers and accountant the havoc they could wreak through their lack of holistic thinking and lack of basic understanding. However, this has been to little avail.

Recently, there have been a number of first-class examples:

• The rush to get the Boeing 737 Max to market against new offerings from AirBus saw engineering excellence overrides by a management in a system that rewarded those hitting artificial (KPI) targets attempting to deliver in less than 50 per cent of the normal schedule time. Engineering shortcuts were mandated and passengers died in their hundreds as a result. At the same time the company has been driven to the brink!
• Covid-19 hit the planet as if we had never studied or modelled pandemics! Truth is, we have been doing so since the early '90s and fully understand the need for a surfeit of hospital beds, PPE and intensive care equipment. But country after country either didn't take this on board, chose to ignore it, or lapsed in their focus and dedication. Many also closed local industries and manufacturing in the rush to exploit the cheaper labour market of South East Asia.
• And now to the weather and rare events! By saving a few million in salt, de-icer, snow-ploughs and other equipment, because bad snow storms are now rare events, a country can lose billions in trade, working days, wasted fuel, road, rail, dock, and airport closures.

Without exception, underinvestment, under-provision, and JIT based on long, strung-out supply chains and singular suppliers ultimately incurs costs that far outweigh the savings or other benefits.

By and large, a region like the EU or North America can support around three large plants for the production of car components, white and brown goods, but to have none at all is not a viable option if you want a reliability of supply and a resilient economy.

So, how come? By analogy; would you like to drive to work in your family car or an F1 racing car? One will be much more exciting than the other, but that one will be unreliable, expensive and a dog to maintain, whilst to other will just run and run year after year with minimal maintenance.

The physics actually goes like this: all systems - man made or otherwise - have been shown to exhibit a ‘bathtub curve' of life and reliability. Early failures and deaths (infant mortality) are followed by long periods of stability, good health, failure free operation, followed by the wear out phase and failure/death.

But as we increase performance and/or efficiency, then the wear out and death phase come in earlier and earlier.

So, I can feel my blood run cold when I see ‘optimisation' being taught in an abstract sense at business schools to be slavishly implemented later by unthinking and unknowing managers and accountants. Chasing peak performance is always a very expensive race, and can turn out to be fatal

Perhaps worse, I have seldom witnessed anyone produce a complete analysis that features resilience - i.e. the ability to recover from a crash. This incompleteness unnervingly skews the overall performance of any system, and in nature it governs the survivability of entire species, including ours!

Professor Peter Cochrane OBE is the former CTO of BT, who now works as a consultant focusing on solving problems and improving the world through the application of technology. He is also a professor at the University of Suffolk's School of Science, Technology and Engineering