Richard Feynman | Human-Centered Change and Innovation

What We See Influences How We'll Act

GUEST POST from Greg Satell

“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist,” John Maynard Keynes, himself a long dead economist, once wrote. We are, much more than we’d like to admit, creatures of our own age, taking our cues from our environment.

That’s why we need to be on the lookout for our own biases. The truth, as we see it, is often more of a personalized manifestation of the zeitgeist than it is the product of any real insight or reflection. As Richard Feynman put it, “The first principle is that you must not fool yourself—and you are the easiest person to fool. So you have to be very careful about that.”

We can’t believe everything we think. We often seize upon the most easily available information, rather than the most reliable sources. We then seek out information that confirms those beliefs and reject evidence that contradicts existing paradigms. That’s what leads to bad decisions. If what we see determines how we act, we need to look carefully.

The Rise And Fall Of Social Darwinism

In the 1860s, in response to Darwin’s ideas, Herbert Spencer and others began promoting the theory of Social Darwinism. The basic idea was that “survival of the fittest” meant that society should reflect a Hobbesian state of nature, in which most can expect a life that is “nasty, brutish and short,” while an exalted few enjoy the benefits of their superiority.

This was, of course, a gross misunderstanding of Darwin’s work. First, Darwin never used the term, “survival of the fittest,” which was actually coined by Spencer himself. Secondly, Darwin never meant to suggest that there are certain innate qualities that make one individual better than others, but that as the environment changes, certain traits tend to be propagated which, over time, can lead to a new species.

Still, if you see the world as a contest for individual survival, you will act accordingly. You will favor a laissez-faire approach to society, punishing the poor and unfortunate and rewarding the rich and powerful. In some cases, such as Nazi Germany and in the late Ottoman empire, Social Darwinism was used as a justification for genocide.

While some strains of Social Darwinism still exist, for the most part it has been discredited, partly because of excesses such as racism, eugenics and social inequality, but also because more rigorous approaches, such as evolutionary psychology, show that altruism and collaboration can themselves be adaptive traits.

The Making Of The Modern Organization

When Alfred Sloan created the modern corporation at General Motors in the early 20th century, what he really did was create a new type of organization. It had centralized management, far flung divisions and was exponentially more efficient at moving around men and material than anything that had come before.

He called it “federal decentralization.” Management would create operating principles, set goals and develop overall strategy, while day-to-day decisions were performed by people lower down in the structure. While there was some autonomy, it was more like an orchestra than a jazz band, with the CEO as conductor.

Here again, what people saw determined how they acted. Many believed that a basic set of management principles, if conceived and applied correctly, could be adapted to any kind of business, which culminated in the “Nifty Fifty” conglomerates of the 60’s and 70’s. It was, in some sense, an idea akin to Social Darwinism, implying that there are certain innate traits that make an organization more competitive.

Yet business environments change and, while larger organizations may be able to drive efficiencies, they often find it hard to adapt to changing conditions. When the economy hit hard times in the 1970s, the “Nifty Fifty” stocks vastly under-performed the market. By the time the 80s rolled around, conglomerates had fallen out of fashion.

Industries and Value Chains

In 1985, a relatively unknown professor at Harvard Business School named Michael Porter published a book called Competitive Advantage, which explained that by optimizing every facet of the value chain, a firm could consistently outperform its competitors. The book was an immediate success and made Porter a management superstar.

Key to Porter’s view was that firms compete in industries that are shaped by five forces: competitors, customers, suppliers, substitutes, and new market entrants. So he advised leaders to build and leverage bargaining power in each of those directions to create a sustainable competitive advantage for the long term.

If you see your business environment as being neatly organized in specific industries, everybody is a potential rival. Even your allies need to be viewed with suspicion. So, for example, when a new open source operating system called Linux appeared, Microsoft CEO Steve Ballmer considered it to be a threat and immediately attacked, calling it a cancer.

Yet even as Ballmer went on the attack, the business environment was changing. As the internet made the world more connected, technology companies found that leveraging that connectivity through open source communities was a winning strategy. Microsoft’s current CEO, Satya Nadella, says that the company loves Linux. Ultimately, it recognized that it couldn’t continue to shut itself out and compete effectively.

Looking To The Future

Take a moment to think about what the world must have looked like to J.P. Morgan a century ago, in 1922. The disruptive technologies of the day, electricity and internal combustion, were already almost 40 years old, but had little measurable economic impact. Life largely went on as it always had and the legendary financier lorded over his domain of corporate barons.

That would quickly change over the next decade when those technologies would gain traction, form ecosystems and drive a 50-year boom. The great “trusts” that he built would get broken up and by 1930 virtually all of them would be dropped as components of the Dow Jones Industrial average. Every face of life would be completely transformed.

We’re at a similar point today, on the brink of enormous transformation. The recent string of calamities, including a financial meltdown, a pandemic and the deadliest war in Europe in 80 years, demand that we take a new path. Powerful shifts in technology, demographics, resources and migration, suggest that even more disruption may be in our future.

The course we take from here will be determined by how we see the world we live in. Do we see our fellow citizens as a burden or an asset? Are new technologies a blessing or a threat? Is the world full of opportunities to be embraced or dangers we need to protect ourselves from? These are questions we need to think seriously about.

How we answer them will determine what comes next.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Why Business Strategies Should Not Be Scientific

GUEST POST from Greg Satell

When the physicist Richard Feynman took the podium to give the commencement speech at CalTech in 1974, he told the strange story of cargo cults. In certain islands in the South Pacific, he explained, tribal societies had seen troops build airfields during World War and were impressed with the valuable cargo that arrived at the bases.

After the troops left, the island societies built their own airfields, complete with mock radios, aircraft and mimicked military drills in the hopes of attracting cargo themselves. It seems more than a little silly, and of course, no cargo every came. Yet these tribal societies persisted in their strange behaviors.

Feynman’s point was that we can’t merely mimic behaviors and expect to get results. Yet even today, nearly a half century later, many executives and business strategists have failed to learn that simple lesson by attempting to inject “science” into strategy. The truth is that while strategy can be informed by science, it can never be, and shouldn’t be, truly scientific.

Why Business Case Studies Are Flawed

In 2004, I was leading a major news organization during the Orange Revolution in Ukraine. What struck me at the time was how thousands of people, who would ordinarily be doing thousands of different things, would stop what they were doing and start doing the same thing, all at once, in nearly perfect unison, with little or no formal coordination.

That’s what started the journey that ultimately resulted in my book, Cascades. I wanted to harness those same forces to create change in a business context, much like the protesters in Ukraine achieved in a political context and countless others, such as the LGBT activists, did in social contexts. In my research I noticed how different studies of political and social movements were from business case studies.

With historical political and social movements, such as the civil rights movement or the United States or the anti-Apartheid struggle in South Africa, there was abundant scholarship often based on hundreds, if not thousands of contemporary accounts. Business case studies, on the other hand, were largely done by a small team performing a handful of interviews.

When I interviewed people involved in the business cases, I found that they shared some important features with political and social movements that weren’t reported in the case studies. What struck me was that these features were noticed at the time, and in some cases discussed, but weren’t regarded as significant.

To be clear, I’m not arguing that my research was more “scientific,” but I was able to bring a new perspective. Business cases are, necessarily, usually focused on successful efforts, researched after the fact and written from a management perspective. We rarely get much insight into failed efforts or see perspectives from ordinary customers, line workers, competitors and so on.

The Halo Effect

Good case studies are written by experienced professionals who are trained to analyze a business situations from a multitude of perspectives. However, their ability to do that successfully is greatly limited by the fact that they already know the outcome. That can’t help but to color their analysis.

In The Halo Effect, Phil Rosenzweig explains how those perceptions can color conclusions. He points to the networking company Cisco during the dotcom boom. When it was flying high, it was said to have an unparalleled culture with happy people who worked long hours but loved every minute of it. When the market tanked, however, all of the sudden its culture came to be seen as “cocksure” and “naive.”

It is hard to see how company’s culture could change so drastically in such a short amount of time, with no significant change in leadership. More likely, given a successful example, analysts looked at particular qualities in a positive light. However, when things began to go the other way, those same qualities were perceived as negative.

So when an organization is doing well, we see them as “idealistic” and “values driven,” but when things go sour, those same traits are seen as “arrogant” and “impractical.” Given the same set of facts, we can, and often do, come to very different conclusions when our perception of the outcomes changes.

The Problem with Surveys

Besides case studies, another common technique to analyze business trends and performance are executive surveys. Typically, a research company or consulting firm sends out questionnaires to a few hundred executives and then analyze the results. Much like Feynman described, surveys give these studies an air of scientific rigor.

This appearance of scientific rigor is largely a mirage. Yes, there are numbers, graphs and pie charts, much as your would see in a scientific paper, but there are usually important elements missing, such as a clearly formulated formulated hypothesis, a control group, and a peer review process.

Another problematic aspect is that these types of studies emphasize what a typical executive thinks about a particular business issue or trend. So what they really examine is the current zeitgeist, which may or may not reflect current market reality. A great business strategy does not merely reflect what typical executives know, but exploits what they do not.

Perhaps most importantly, these types of surveys are generally not marketed as simple opinion surveys, but as sources of profound insight designed to help leaders get an edge over their competitors. The numbers, graphs and pie charts are specifically designed to look “scientific” in order to make them appear to be statements of empirical fact.

Your Strategy Is Always Wrong, You Have to Make It Right

We’d like strategy to be scientific, because few leaders like to admit that they are merely betting on an idea. Nobody wants to go to their investors and say, “I have a hunch about something and I’d like to risk significant resources to find out if I’m right.” Yet that’s exactly what successful business do all the time.

If strategy was truly scientific, then you would expect management to get better over time, much as, say, cancer treatment or technology performance does. However, just the opposite seems to be the case. The average tenure on the S&P 500 has been shrinking for decades and CEOs get fired more often.

The truth is that strategy can never be scientific, because the business context is always evolving. Even if you have the right strategy today, it may not be the right strategy for tomorrow. Changes in technology, consumer behavior and the actions of your competitors make that a near certainty.

So instead of assuming that your strategy is right, a much better course is to assume that it is wrong in at least some aspects. Techniques like pre-mortems and red teams can help you to expose flaws in a strategy and make adjustments to overcome them. The more you assume you are wrong, the better your chances are of being right.

Or, as Feynman himself put it, “The first principle is that you must not fool yourself—and you are the easiest person to fool.”

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay