The Law of Requisite Variety

For some systems, maintaining control of the system is paramount. General purpose financial reports is one such system.  High quality is expected, even demanded. High quality is a requirement of the system.

Paraphrasing from this definition; requisite variety, in the context of computer science, refers to the principle that in order to effectively regulate a system, the regulator of that system must possess a sufficient range of actions to counter act the variety of important potential disturbances that system might encounter.  The principle of requisite variety ensures that the system's internal state remains as close as possible to the desired goal state of the system.

Effectively, requisite variety requires that there be a balance or "matching" between the potential "perturbance variety" or potential possible disturbances which may occur within a system and the "control variety" which is the information such as rules available to the system to make sure the "residual variety" is as close to 0 as possible, preferably equal to zero.  

Graphically, the requisite variety equation looks like this:


Using my PROOF to explain, the requisite variety equation looks something like the following as applied to an XBRL-based digital financial report.  You create a report, say this report which is a human readable version of my PROOF report.  What are the possible "perturbances" that could occur?

Well, an easy to understand perturbance is the mathematical relations within that XBRL-based report.  A system where the math is checked by humans worked in the past, and could work in the future.  But for an automated system, such as that XBRL can enable, control variety can be added to make certain the math of the machine readable report is controlled.  (This math.)

This verification report provided by Auditchain Pacioli shows that the residual variety is zero as it relates to the mathematical relations in the report and other such things.

The mathematical relations in the report is only one potential disturbance.  The Seattle Method prescribes several other important control variety mechanisms to overcome potential disturbances: XBRL technical syntax, high-level fundamental accounting relations such as "Assets = Liabilities + Equity" (the accounting equation), what people refer to as "wider-narrower" relations, and so forth. The Seattle Method is a minimally complete set of control variety.  Others might specify more control, but it would really be hard to justify removing any control mechanism provided by the Seattle Method. Knowledgeable accountants would understand this.

A software application serves as a "regulator" to make sure the proper requisite variety is achieved.  As a professional accountant, I understand the actions of such a regulator.  Software must understand WHICH control mechanism is necessary given the potential perturbances that might occur. So there is a "matching process" that occurs; the control mechanisms are not just "random" stuff one throws into a software application.  The control variety (control mechanisms) must be appropriate and complete.

For regulators (software applications) to work effectively, those software applications need to understand the logical model of the system (in this case a general purpose financial report) being regulated.

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