We live in increasing complexity, bordering on chaos. There seems to be no simple answer. What are swot real pest fips? These are acronyms for strategic thinking in the complex world. The world is so complex and complicated that we need simple ways of breaking it down so that we can figure out how to think about complexity. Our brains are wired to deal with complexity, through what psychologists call heuristics, or simple rule of thumbs or even instinctive choices such as “fight or flight”.
How does one move from simplicity to complexity? Free market economic theory always propounds optimality — the first best solution. If you deviate from free markets, the implication is that the results will be second best, third best and so on. This is the linear, mechanical perspective that arose from Aristitlean logic, the foundations of Western science. Euclidean geometry is always mechanical and precise — it helped architecture and measurement and gave certainty in a world of uncertainty.
But there was always another school to Aristotle, which is binary, namely the relationship between opposites such as between good and evil, left or right. The Chinese called it yin/yang. If you go down one of two choices, you end up with four possibilities (two times two becomes four). Then from four with two choices, you get two to the third power or eight. Indeed, the computing power of modern digital devices is binary multiples of 64, 128, 512 gig and so on. Binary mathematics was discovered by 17th-century German mathematician Leibniz when he received from a French priest working in Qing Dynasty China a 64-hexagram yin yang chart. Leibnitz recognised the power of binary logic and from this was derived modern computer logic.
A unitary path is too simple. A binary choice is much better, and a two by two matrix gives at least four choices in the decision tree. Our human minds cannot handle too much complexity, so even the Chinese settled with an eight by eight matrix, hence the 64-hexagram I Ching (Book of Changes) geomancy chart. A hexagram comprises six parallel lines of either whole (yang) or broken (yin) lines. A follower of the I Ching would cast three coins that are thrown six times to create an outcome of six lines that are broken (yin) or not broken (yang). You would then have to consult the I Ching to see what your resultant hexagram out of 64 choices really means.
Since the six lines in the hexagram can change, then the logic of the hexagram is that different outcomes and their variations end up with questions or factors that you would have to interpret. The I Ching is not a forecasting methodology, but a system that helps you make decisions by thinking through what options are available (64) in a situation of uncertainty, and how randomly, these 64 options can lead to very different paths.
In other words, life gets more and more complex and complicated, and we need different methods to help us make decisions. Today’s decision system is aided by big data and artificial intelligence, which is a mathematical algorithm that massages the big data and comes up with probabilistic insights.
A swot is someone who studies a lot. But in management science, SWOT is an acronym for strengths, weaknesses, opportunities and threats. You lay out any situation you face into the four options or factors. From this, you weigh up all your corporate strengths and weaknesses, opportunities and threats and then decide what your strategy should be.
But you have to understand the context in which you make the decision. This is where PEST comes in. It stands for political, ecological, social and technological. What are the political contexts? How does the politics affect the environment, context or economic interests, and what are the social implications and perceptions? What are the technological implications or solutions?
I was trained as an accountant, where double-entry book-keeping plays a key role. So, the acronym is REAL — revenue and expenditure (income and costs) and assets and liabilities (balance sheet). Note that in accounting terms, revenue and liabilities are credits, and assets and expenditure are debits. The financial condition for every entity or legal person can be explained through the complete set of accounts that balances in the two by two REAL matrix. All debits equal credits, income equals expenditure and assets equal liabilities. If the numbers do not balance, the system is in trouble.
We also need to think in systems. The acronym FIPS stands for feedback, information, process and systems. All systems are interconnected and interdependent on its parts to form the whole. Systems operate on information. Decisions are made based on reliable data, information or knowledge. All information is processed in linear, cyclical, random, chaotic or algorithmic order, but because everything is connected and interdependent, the process occurs through feedback. Information is useless unless you get accurate feedback — whether the decision you made is good or bad.
Real Swot Pest Fips are 16 letters as acronyms for factors and together they form an eight by eight 8 times 8 matrix (64) that is analogous to the Chinese I Ching Oracle or decision-making tool. It is a simple framework for us to think through complex situations.
Today, the biggest confusion is the false binary choice between state versus market, as if you can separate the two. Excessive belief in the free market economy in Hong Kong, forgetting the political, ecological, social and technological aspects, resulted in the present state of huge inequalities that fuelled the current protests. The philosophy of positive non-interventionism assumed that with free markets would lead to self-order. The outcome was instead an unexpected self-disorder.
How do you fix disorder? Austrian economist Joseph Schumpeter thought that entrepreneurial change occurs through creative destruction. But all system imbalances and disorder need some form of state intervention. Market disorder can be creative, but excessive disorder can be destructive. Similarly, excessive state order can be obstructive to innovation. As economist Hyman Minsky observed, stability creates instability. But if entrepreneurship ends up with monopolies that are predatory on the rest of society, the state needs to intervene.
The world is dynamically changing and there is a dynamic interaction between the state and the market, between individual and society. To say that the free market will take care of everything is not realistic. Every part has a role in the whole. Having simple acronyms to deal with complex issues enables us to tell a good story. In life, stories matter.
Tan Sri Andrew Sheng writes about global issues from an Asian perspective