Entropy Always Increases – The second law of thermodynamics applied to business management

Why do we experience time in one direction? In other words, why do we remember the past, and know nothing about the future? An egg falls off my counter and a mess appears on my floor. We never observe the mess on the floor spontaneously coming together to form an egg on the counter. Why? And why is it a complete certainty that my company and your company will some day go out of business?

The answer to all of these questions can be explained by the second law of thermodynamics, or the arrow of time. Entropy is the measure disorder in a system. In physics, the second law of thermodynamics implies that entropy, or disorder, always increases. Disorder always follows order. The egg on the counter is in a state of order, and when it falls to the floor it is in a state of disorder. This happens to the egg because there are many more disordered states for the egg than ordered states. It is overwhelming more likely that dropping an egg to the floor will cause a mess. But if I scoop up the mess and toss it on my counter, it is overwhelmingly unlikely that the particles will rearrange themselves back into an in-tact egg.

We observe increasing entropy all the time. My mother used to clean my teenage sister’s room, but by the end of the day the room was a mess again. Five years ago my house was brand new, but now the doors squeak, the floors creak, and yesterday the hot water heater broke. Cars break down, buildings crumble, and people grow older.

The second law of thermodynamics also implies that in order to reduce entropy in one space, entropy must increase in another. A simple example of this is cooling a room using an air conditioner. The air conditioner decreases the entropy in your room by forcing cool air in. Behind the air conditioner flows hot air, which is actually hotter than the air it replaced in the room. So it took more energy (heat) to cool your room, and even though entropy decreased in your room, it increased outside. Your room became more ordered (cooler), but the outside world became more disordered (hotter).

What does all of this abstract physics talk have to do with the companies we work for? For starters entropy predicts with certainty that your company and my company will inevitably go out of business. Perhaps they are in an ordered and profitable state now, but we know this will not last forever. Your company and my company will eventually go out of business because it is overwhelmingly more likely that they will.

Think about it this way. How many companies will celebrate a ten-year anniversary this year? According to Bureau of Labor and Statistics about 30% of businesses survive to celebrate their ten-year milestone – not bad. How many companies will celebrate 100 year anniversaries this year? A couple are still around. In fact Citigroup is celebrating its 200th anniversary this year. But how many companies are celebrating their 2,000 year anniversary this year? None.

If you are lucky, you may work for a great company that can survive long enough for you to make a living and retire comfortably. I would define great company as one that has a number of great people who expend a great amount of energy to keep the company in business. Think of these great employees as air conditioners cooling a big room on a hot summer day. As long as these great employees expend a great amount of energy the company remains in business, that is, in an ordered state. The room remains cool. But remove the great people or the great effort and the company will quickly move towards its overwhelmingly more likely destiny – a hot disordered mess.

Sadly, prolonging the life of a company may require so much energy from us managers that disorder increases elsewhere in our universes. Remember the hot air coming from the back of your air conditioner that increased entropy in the outside world? Maybe you work so hard that you ignore your family, miss your kids’ soccer games, and get a divorce. Or perhaps entropy increases in your extra curricular activities. Maybe you lose your hobbies, or maybe you stop going to the gym and you get fat. Maybe it is true that there is not enough time to be truly great at work and maintain order everywhere else in your life. Or to state it more correctly, there is not enough energy, the laws of physics prevent it.

Applying the second law of thermodynamics to business management means that our job as managers is to fight the natural tendency of entropy and disorder to increase in the workplace. Our job is to motivate and inspire others to expend a similarly effective  amount energy to keep the company profitable. If we do a good enough job, maybe those people will in turn inspire others to do a great job, and the company will survive beyond our working years. The company won’t survive forever, but a truly great manager’s legacy can ensure survival for generations.

The arrow of time moves only in one directly – from the past to the future. In ten thousand million years our universe will begin to contract. Stars will collapse, planets will crumble, and atoms will decay to light and wasted heat. Humans and any other forms of intelligent life will face inevitable inhalation. This will happen. Our current ordered state is certainly temporary. And, if only temporarily, we can fight the hopeless battle against disorder in our mini-universes. And from time to time we can stop fighting and thank God for those moments of perfect order, even if they are only temporary.

To read more about entropy check out Steven Hawking‘s A Brief History of Time, or visit some of the sites I used when writing this article:

Cover of
Cover of A Brief History of Time