Ego-driven optimization

· 459 words · 3 minute read

Most of the organisations are like a complex system consisting the self-interested agents who are supposed to optimize the output expected on macro level. It means the agents are assumed to work for the interests of the whole system. Or maybe not. Maybe they are supposed to deliver what is required from them, without caring much about the working principles of the system as a whole. They do what they should do to satisfy the needs of the system.

Principal-agent problem suggests that the principal hires the agent to perform a task on their behalf. The principal delegates some decision-making authority to the agent. However, because the agent has their own interests, which may not always align with those of the principal, there’s a risk that the agent may take actions that are advantageous to them rather than to the principal. This misalignment of incentives can lead to problems such as moral hazard and information asymmetry.

It is important to note that in this case we are assuming the role of a principal that can dictate and direct the individual agent throughout the process. Thus, the agent can be self-organized, but it is not self-deciding, at least not always.

So, within such an ecosystem, we can assume the agents are looking for the most optimal ways (lowest cost for highest return) to satisfy the needs of the principal. However, their optimization won’t take into consideration the behavior and interests of other agents which have the same goal. Their optimization are ego-driven in this sense. Unless regulated by the principal, this can easily result into a mess.

More specifically, the agents that acts purely out of self-interest without regard for the collective system, this could lead to increased disorder or metaphorical “entropy” within the system. if every sub-organism acts egoistically, they may deplete shared resources (a concept related to the Tragedy of the Commons), leading to a breakdown of the system.

Without some coordinating mechanism or central control (in the form of incentives, regulations, monitoring, etc.), the system may become increasingly disorganized, and its overall effectiveness could decrease. To create a system that works seamlessly, the principal has to design mechanisms to align the agents’ behaviors with the overall objectives of the system. This requires both a preliminary design that takes into consideration as much potential behavior scenarios, and adaptability that creates flexibility towards unforseen behaviors of the agents. Most importantly th adaptation or the central governance should be developed fast enough, so that the agents will not find another alternative solution that deviates from the overall design, process flow and architecture. Because, if each agent defines an own process flow, it increases the disorganization and results into an unmanageable chaos, which is not very efficient for the central system.