The search for good decisions continues

It’s been an interesting ten days for Obama (and the rest of us) . . .

Oil rig blows up, sinks, and unleashes a torrent of oil. It is Obama’s fault because he authorized offshore drilling and / or he didn’t respond quickly enough or in the right way.

A couple of FBI guys blow the tail on the Times Square bomber and Emirates doesn’t read their email. Still, in 54 hours we grab prime suspect number one before he leaves the country, manage not to read him his Miranda rights (that will never happen again) and more arrests have begun in Pakistan and elsewhere. It is Obama’s fault for not being in Time Square to personally apprehend the guy and/or direct the bomb squad, because the FBI lost site of the guy, and because Democrats are soft on terrorists.

“Ahmand in the dinner jacket” comes to town in the middle of the once every five year nuclear non-proliferation summit and makes a spectacle. It’s Obama’s fault for letting him in the country, for suggesting that talking to the guy made sense, for not allowing the Israelis to bomb Iran, for not being tough enough, and for not figuring out a way to isolate Iran even though Russia and China, and we know they do what we want, won’t go along.

Arizona detonates the national debate on Immigration (among other things). It’s Obama’s fault for not being born here, for being a socialist, for not having an answer, for not being able to tell Congress what to do and get them to do it, and for being a racist.

Lindsey Graham throws a shoe, first on Climate / Energy and then on Immigration. It’s Obama’s fault for being partisan, for not being able to work with the GOP, for not letting the GOP run everything even though he was the one that got elected by a landslide, for not being born here, and for having an agenda.

American Idol turns in another dumb week, ratings suffer, and Simon Cowell is even harder to fathom and stomach. It is Obama’s fault because Idol is on Fox and everything is Obama’s fault on Fox.

The only thing Obama and the Administration knew they were going to have to deal with going into last week was the UN. They could guess on Arizona. And I didn’t mention all the other inconsequential things like running two wars, trying to figure out if Europe and the Euro are going to incinerate and launch a full scale sovereign debt crisis, hosting the Navy football team, and the hundred other things that show up on his daily briefing that none of us know about.

Point one: To all the people who think Obama isn’t acting fast enough or up to your liking, get a clue. It’s been a bit of a week. In retrospect, the same could possibly have been said about W at Katrina but I still say he handled that one poorly (and there was advanced notice and a lot of it). Yeah, he signed up for the job but if you have to admit there have been a few things vying for his attention.

Point two: Everything is not Obama’s fault. Increase the budget and resources 100 times and a couple of flat foots can still blow a tail (just to pick one item). They got the bad guy. Yeah, not on the first trip wire but the backup systems worked. The same cannot be said for BP. Not to be too tart here, but in response to the conservative meme that government can do nothing well, and certainly nothing as well as private enterprise: I would score this one Government 1, private enterprise 0 in the overall competence category, at least in the HOLY %&^! category for this week.

I get emails every week at www.decision-quality.com asking for permission to reprint, quote, and distribute one or more papers I wrote on decision-making.  It’s been forever since I actually looked at what I wrote so I went back and looked.  Here’s a snip from a paper on innovation I wrote.  The words seem useful even today . . .

Having participated in the tail end of it as a go-to-market consultant to a number of incubator companies, I had a ringside seat to both the good and the really ugly of the dot.com excitement. At literally the height of the boom, days before the wall started coming down, I wrote a kind of innovator’s credo that I called the disruptor’s dilemma, which had the following dimensions.

Nothing is Known. If it really hasn’t been done before, there are few if any known market requirements, and therefore your planning and projections are pretty much guesswork.

What Used To Work, Won’t.  The strategies and tactics that worked so well in the value system you just left probably won’t work in the market space you’re about to enter.

Half of What You Decide Is Wrong.  As a result of the first two points, you have to make the assumption that at least half of the decisions you make are probably wrong.

Half Of What You Learn Is Right.  You’ll spend every waking minute on a massive learning curve, and the feedback you’ll receive will usually be completely contradictory.  You should worry if that’s not the case.  The question is: where is the truth?

All Of What’s Right Is Only Useful For Half As Long As It Used To Be.  Just because something is true, doesn’t mean it will continue to be true.

Success Is Out There, It’s Just Somewhere Else.  If you keep learning, adapting, and innovating you might just succeed.  It’s just that success probably won’t lie where you thought it would.

Depending on your point of view, this is either a recitation of the worst of the dot.com hyperbole, or it is a reasonable set of guidelines for nurturing innovation. This led me to articulate what I then saw, and still see, as the “Six Laws of Successful Innovation,” which are as follows:

Your plans won’t hold up so compress your planning.  Bring the right people to the problem; stress test your thinking, make clear decisions, keep your documentation simple, and launch decisively.

Keep it simple. Complexity shows up all by itself.

Once you launch, go fast and hard.  Compress your learning into small segments of time and space. Think in 100-day increments.

Embrace your mistakes.  Mistakes are good because they tell you what not to do, so don’t cover them up. You’re probably going to make a bunch, so plan how you’re going to learn from your mistakes.

Expect the unexpected. You’re going to whack some beehives in the process (particularly if you’re really innovating), and the bees are going to swarm.  Don’t expect the market to sit around and watch as you try to redefine reality. Expect pushback.  Expect to be counterattacked from unexpected directions. Expect partners to make silly decisions.  It should all tell you that you’re doing something right.

You’re going to win in unexpected ways so build your organization, rewards structure, and partnership agreements accordingly.

You cannot survive . . .

3 seconds without spirt and hope

3 minutes without air

3 hours without shelter in extreme conditions

3 days without water

3 weeks without food

3 months without companionship or love

Roughly right and worth remembering.  Everything else takes care of itself.

John Stewart has a field day with the lunacy and stupidity of “Confederate History Month.”

We love a good story. There are lots of reasons this is true. For example . . .

• We’re raised listening to stories, some read, some told.
• Most of the media we consume is narrative based.
• Culture is communicated, instilled, and passed along through stories.
• We use narrative as a mechanism for processing stimulus and memories into something we can use.

We non-scientists know this later point to be true simply by observing our own internal dialogs. For example, when we feel wronged by someone, what do we do? We replay the story of the wronging over and over again in our heads. And then what happens? We change the dialog and the outcome of these stories as we imagine all the devastatingly clever things we should have said.

In the same way, when we think about the future we construct stories that encapsulate our hopes and fears. Depending on the content of the stories we imagine, and the intensity with which we imagine them, we might call this activity daydreaming, visualizing, or obsessing.

This internal process of story telling doesn’t stop with a single drama. We tell the story over and over, changing bits and pieces as we go. And then we go further. We assemble the stories into a broader meta-story that becomes the narrative of our lives. If a particular person has wronged us, we might resurrect other tales of being wronged in a similar way by other people. Or we might string together stories about other times that person did something to us we didn’t like. By doing this, we wrap stimulus, response, and specific memories together to create a narrative.

This act of linking stories together, either looking backwards or forwards, is a function of our wiring to use meaning and pattern making as a way of making sense of what goes on around us. We order our memories and what we perceive to be facts into a pattern that makes sense, a narrative that has meaning.

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Decision-making is the means by which we most directly shape our lives. Some decisions we make consciously; many more are “automatic” decisions made in response to stimulus. The first type of decision-making is a distinctly human domain. Other species don’t have the same breadth of cognitive tools, and therefore can’t be described as true decision-makers.

If we want to improve our life results and get more of what we want, we must make different and higher-quality decisions. The other choice is to keep doing the same things over and over or hope that someone or something will come along and help us out.  This is called Magical Thinking.  It isn’t helpful.

Most of us are not as good at decision-making as we think we are. Why not? One of the biggest reasons is our succeptibility to influence by the people around us, something writer Laurence Gonzalez calls “groupness.”

Everyday Survival

Laurence Gonzales. W. W. Norton & Company 2008, Hardcover, 288 pages, $6.39

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A fine video on the topic of practical wisdom by Barry Schwartz.  I was particularly taken on his point of view on “practical wisdom.”

“Practical wisdom,” Aristotle told us, “is the combination of moral will and moral skill.” A wise person knows when and how to make the exception to every rule, as the janitors knew when to ignore the job duties in the service of other objectives. A wise person knows how to improvise,as Luke did when he re-washed the floor. Real-world problems are often ambiguous and ill-defined and the context is always changing. A wise person is like a jazz musician — using the notes on the page, but dancing around them, inventing combinations that are appropriate for the situation and the people at hand. A wise person knows how to use these moral skills in the service of the right aims. To serve other people, not to manipulate other people. And finally, perhaps most important, a wise person is made, not born. Wisdom depends on experience, and not just any experience. You need the time to get to know the people that you’re serving. You need permission to be allowed to improvise, try new things, occasionally to fail and to learn from your failures. And you need to be mentored by wise teachers.”

Bill Smith has a nice Main Street business. He is the third generation of his family to run the company. The government is his biggest customer.  He’s a member of the community and his employees are too.  His employees pay taxes but Bill doesn’t because he made a sweet deal with the city fathers to keep his business in town. Bill hates the government.

Bill decides to sell his business to his good friend Dick. He needs the money to pay for his third divorce. Dick, who doesn’t know anything about Bill’s business hires Bill back at more than his existing pay package.  Dick doesn’t use his own money to buy Bill’s business, he borrows all of it from from Bob.

Servicing all that debt, paying that big salary, and generating a return for Dick puts a strain on the business Bill’s grandfather built.  Bill announces that he can no longer afford to offer health care and that people will need to take a pay cut.  He blames the government (the one he got the tax break from; the one that buys half his product) and foreign competition.  He blames his employees.

Meanwhile Bob has bundled Dick’s loan with a bunch of other loans and sold them to George.  This allows Bob to lock in his return while completely eliminating his downside.  George pays Bob to service the loans.

Bill becomes less and less interested in doing things that made his grandfather’s business great, like developing new products, thinking of new ways to delight customers, and keeping his employees motivated. He has too much to do courting his soon to be fourth wife.  He moves out of town to a big house.  He plays golf with Dick, Bob and their Senator.  They discuss things that they shouldn’t, but there’s nobody around to listen or to enforce the law anyway.

Dick needs more money to fund his other financial adventures so he pressures Bill to increase his margins and generate more cash.  Because Bill hasn’t been taking care of business, most of his customers have moved on.  In fact, the only customer he has any more is the government.  He blames his employees. He makes a contribution to his Senator’s PAC. Soon another contract shows up.  He also cuts benefits further, cuts pay, and fires his older workers.  He travels to China and negotiates a contract to have some of his manufacturing done there.  Margins improve. Bill and Dick pays themselves a bonus.

Meanwhile Dick buys three more businesses with money he borrows from Bob. He’s now his own conglomerate. Bob is celebrated as a hot shot at his bank. It’s a great American Success Story. Dick pays himself a bonus. Bob gets paid a bonus. George buys more loans from Dick which he packages and resells. He also buys a credit default swap that will pay off big if Bill’s business goes in the tank and shorts the stock of the bank where Bob works.

It turns out that the orignal loan to Dick had a variable rate and reindexed after three years.  Payments are now going up.  Dick, Bob, and George all want more money from Bill.  Productivity at Bill’s company has gone down, perhaps having to do with the fact that the employees have taken repeated pay cuts, have no more benefits, and have watched as their brothers and neighbors have been fired over the past several years. Bill blames them for the financial pressure he’s feeling . . . when he’s not blaming the government, the same one that buys his product and to whom he doesn’t pay taxes, and the Chinese competition that he buys from.

Bill makes across the board cuts.  He also borrows more money to buy some equipment that will allow him to replace even more employees.  He buys a new car with tinted windows so he doesn’t have to look at all those sullen homeless people that keep popping up. He gives himself a raise.

Oh no, suddenly the economy turns sour.  Who could see it coming?  Nobody.  These things just don’t happen.  It’s not supposed to be this way!  It’s a plot!

Bob is in a panic because his whole world has just collapsed: He may have to close up the summer place early this year! He pressures Dick to collect his loan even though it’s not due.

Now Dick is in a panic.  All of his loans are coming due, he doesn’t actually have any equity, and his investors want their money back . . . and there isn’t any.  It turns out he used it to buy art, boats, jewelry . . .

Now Bill is in a panic.  He fires even more people, becoming nothing more than sales agent for the Chinese. He blames rapacious lenders. He blames short-sighted shareholders. He blames his employees for not doing more.

Bill goes to town hall meetings and rails at the blight of all those homeless people in the town he used to live in.  He becomes apoplectic at the idea of the government stepping in to help his former employees, even though he doesn’t actually pay any taxes himself.  Taking money from the government is socialism.  It’s nothing but income redistribution from productive people like Bill, Bob, and George to people who should do more to help themselves.  He and Dick pay themselves a bonus.

In the end, the company that Bill’s grandfather built and his father turned into a success is closed. George makes a killing on the credit default swap and even more on shorting Bob’s bank.

Dick goes to jail where he finds religion.

Bob now specializes in troubled debt and is making a fortune. Again.

Bill rediscovers his grandfather’s entrepreneurial fervor.  He is now seeking stimulus money from the government he loathes and didn’t pay taxes to in order to start a new business building wind mills.  He will buy parts and assemblies from the Chinese and Fins and use equipment bought from the Germans, Japanese and Chinese to do final assembly. He will get a tax credit for hiring back some of his old employees at 60% of what he used to pay them.  He offers no benefits figuring that the socialist government he hates will take care of that.

The first thing he does upon receiving his stimulus money is pay himself a bonus.

The second thing he does is make a contribution to the local Tea Party.  He’s mad as hell and he’s not going to take it anymore.

And so it goes.

We are all like Goldilocks when it comes to choices.

For most of the things in our lives, we have too many choices and the differences are miniscule.  Walk down any aisle in your favorite supermarket, warehouse club, or electronics store if you need an example.

We hate making choices in situations like these.  There is more information than we can manage in working memory.  We become overwhelmed.  So rather than make a choice, we pick.

Making a choice means we have considered reasons for doing something.  We can discern the distinctions, they are relevant, and they are meaningful.

Picking something means the opposite.  We are not able to discern meaningful, relevant, or interesting distinctions (even if they exist).  So we give up and go with the (red, cheap, tall, short, closest, easiest, etc.) one.  Any reason will do as long as it makes the confusion stop.

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