Matrix: Stay or Leave? Rethinking Government in Accelerated Times
By Daniel R. Schnaider, Co-Founder, Wisefy, Brazil
October 19, 2024
“The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work… when you go to church… when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth… that you are a slave, Neo. Like everyone else, you were born into bondage. Into a prison that you cannot taste, see, or touch. A prison for your mind.”
—Morpheus, *The Matrix* (1999)
In the span of four weeks, the world has witnessed numerous intense events that reflect our hyperactive reality: exploding pagers, the death of Hassan Nasrallah and Yahya Sinwar, Iran launching missiles against Israel, a devastating hurricane and strikes at major U.S. ports—not to mention ongoing crises in Ukraine, Venezuela, Sudan, among others.
Parallel to our daily news, in a realm akin to tectonic shifts, we face existential concerns: nuclear proliferation, pandemics, biological warfare, cybersecurity, disinformation, antibiotic-resistant bacteria, artificial intelligence, and environmental degradation—the list is extensive.
In a recent article, “Bridges to Shared Humanity” I warned about the preference for analytical tools that delve deeply into silos to solve the planet’s challenges, rather than adopting a synthetic approach that views each silo as part of a larger system—a fundamental method for creating sustainable social ecosystems.
When a new CEO takes the helm of a company, especially one facing difficulties, the first changes often involve redefining goals and, consequently, altering the organizational structure. A prime example is Satya Nadella, who, upon assuming leadership at Microsoft, set a goal to transform the company into a cloud-focused enterprise, reorganizing teams and products accordingly.
Now, how much do governments adopt best management practices to become more efficient and intelligent? In large corporations, it’s common to consolidate back-office functions—such as finance, legal, IT, and procurement—into shared service centers. Instead of each business unit maintaining its own team, organizations can achieve economies of scale, specialization, and higher quality, resulting in improved efficiency and cost reductions.
Consider Brazil, with its 5,570 municipalities. Imagine how the country could enhance services for its population if duplicated costs were eliminated or repurposed, reducing the amount collected or focusing on the “core business”—the services provided to citizens.
Imagine if federal, state, and municipal governments worldwide adopted open standards like the SWIFT banking protocols or the interoperability formats used in the medical sector, such as HL7 (Health Level Seven International) and FHIR (Fast Healthcare Interoperability Resources). SWIFT is a globally recognized standard widely used by banks for international financial transactions, ensuring security and uniformity between different banking systems. In the medical sector, formats like HL7 and FHIR enable hospital systems and laboratories to share health information effectively, without the need to adapt each individual system.
Organizations that utilize open standards in their infrastructures increase operational efficiency and reduce costs. The adoption of open APIs in governments can promote transparency and social oversight, allowing citizens and researchers to access public data in a standardized manner, facilitating the research and analysis of public policies, and improving governance and civic engagement. The ecosystem of open standards, as seen in the Interoperable Europe Act, aims to facilitate the exchange of information, data, and technologies among all public bodies of the European Union and promises to represent the advancement that digital integration and cooperation can ensure in developing innovative solutions.
Faced with the monumental challenges awaiting humanity this century, we must understand that governmental inefficiency drains essential resources from other areas. Global government spending in 2022 was approximately $35 trillion or 40% of global GDP. An article by McKinsey & Company shows that, on average, public sector organizations are less efficient than their private sector counterparts for various reasons, ranging from legislation to the complexity of their structures and political influences.
One of the factors that most negatively impact the public sector is procurement laws for products and services, which are highly susceptible to corruption and fraud. According to data from the World Bank (2021), about 13% of global GDP was directed to procurement budgets—approximately $13 trillion per year.
Studies indicate that governments frequently exceed budgets in public projects, such as the case of the Rio de Janeiro Olympics, which surpassed its projected costs by more than 50%, reflecting a mentality of less caution and responsibility in the use of public resources. Additionally, the Petrobras scandal illustrates how corruption schemes can inflate public contracts, resulting in more than $20 billion being diverted.
The lack of oversight in public procurement laws is another significant economic issue. According to data from the OECD (Organisation for Economic Co-operation and Development) and the World Economic Forum, it is estimated that bribery in public contracts adds 10-20% to total costs. This not only increases the price paid by the administration for goods and services but also harms market competition and directly impacts taxpayers’ resources.
Improving the quality and efficiency in the use of public budgets could free up about $1-3 trillion per year for other priorities.
Ideas to improve the government’s procurement system include: automated and random selection of auditors; opening the auditing profession to certified individuals instead of solely public employees; having the specific purchase budget held as a guarantee in a financial institution pending auditors’ approval and government acknowledgment; focusing on outcome-based procurement rather than effort-based, creating mechanisms for micro-concessions ranging from five to ten years; and standardizing protocols, files formats and APIs to enable oversight by civil society, among others.
In computing, there is a term called “garbage collection”—an automated process that removes unused data from a system’s memory, ensuring efficiency and preventing programming failures. Both public and private organizations suffer from the lack of garbage collection mechanisms. However, when it comes to the public sector, it is our money at stake, not someone else’s. I once heard that costs are like our nails; they must be trimmed from time to time. For this reason, we need to formally establish a garbage collection system for governments.
Finally, there’s the issue of structure. In the private sector, upon recognizing the company’s new goals, resources are prioritized, and organizational structures are altered to meet the new vision. An example is IBM’s creation of its services division in the 1990s, followed by strategic acquisitions like PWC’s consulting arm. What structural changes have governments made to address society’s priorities? How much do these changes survive transitions in government? To what extent does the budget reflect goals and priorities?
The change could involve adopting a matrix structure, successfully used by several efficient and successful organizations (e.g., Google, Procter & Gamble). Take, for instance, the Ministry of Telecommunications, which should serve as a service area for other ministries, as it is fundamental for Defense, Education, Health, Small and Medium Enterprises, among others. Another example would be the interconnection of various other ministries with the Ministry of the Environment, given the environmental crisis we are experiencing. After all, we need to educate future generations about sustainability, rethink the infrastructure of tunnels, bridges, airports, ports, roads, as well as agriculture, cities, science-technology-innovation, mining and energy, and the Treasury.
Nearly all the challenges that threaten humanity were created by humans. It is hard to believe that the same organizational structures—with the same processes, ways of thinking, deciding, executing, and learning—that created the threats to human life on Earth in the first place, will suddenly be capable of solving them. As a global society, what are our goals, and what is the best structure to address them? These questions are as urgent as the challenges themselves.
To find answers, my friends, various global leaders, and I await you at the Horasis Global Meeting, an event that seeks to discuss current challenges. Hosted for the first time in South America, the meeting will take place between October 25 and 26 in Vitória, Brazil.
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By Daniel R. Schnaider, Co-Founder & CEO of Wisefy AI Powered Supply-Chain
