Learned Helplessness

The Ability to Choose Greg McKeown

That quote sounds like something Viktor Frankl would say only it’s Greg McKeown in Essentialism: The Disciplined Pursuit of Less.

How is it that we forget our ability to choose?

One important insight into how and why we forget our ability to choose comes out of the classic work of Martin Seligman and Steve Maier, who stumbled onto what they later called “learned helplessness” while conducting experiments on German Shepherds.

Seligman and Maier divided the dogs into three groups. The dogs in the first group were placed in a harness and administered an electric shock but were also given a lever they could press to make the shock stop. The dogs in the second group were placed in an identical harness and were given the same lever, and the same shock, with one catch: the lever didn’t work, rendering the dog powerless to do anything about the electric shock. The third group of dogs were simply placed in the harness and not given any shocks.

Afterwards, each dog was placed in a large box with a low divider across the center. One side of the box produced an electric shock; the other did not. Then something interesting happened. The dogs that either had been able to stop the shock or had not been shocked at all in the earlier part of the experiment quickly learned to step over the divider to the side without shocks. But the dogs that had been powerless in the last part of the experiment did not. These dogs didn’t adapt or adjust. They did nothing to try to avoid getting shocked. Why? They didn’t know they had any choice other than to take the shocks. They had learned helplessness.

We’re much the same way — this reminds me of the fixed versus growth mindset. If you try something and never get better you eventually give up, believing that nothing you do will matter. Grit, the ability to muddle through that without giving up, is more important than IQ. And best of all, you can develop it.

What does learned helplessness look like in organizations?

When people believe that their efforts at work don’t matter, they tend to respond in one of two ways. Sometimes they check out and stop trying, like the mathematically challenged child. The other response is less obvious at first. They do the opposite. They become hyperactive. They accept every opportunity presented. They throw themselves into every assignment. They tackle every challenge with gusto. They try to do it all. This behavior does not necessarily look like learned helplessness at first glance. After all, isn’t working hard evidence of one’s belief in one’s importance and value? Yet on closer examination we can see this compulsion to do more is a smokescreen. These people don’t believe they have a choice in what opportunity, assignment, or challenge to take on. They believe they “have to do it all.”

The Japanese Art of Decluttering and Organizing

"When you are choosing what to keep, ask your heart; when you are choosing where to store something, ask your house."
“When you are choosing what to keep, ask your heart; when you are choosing where to store something, ask your house.”

The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing explores how putting your space in order causes “correspondingly dramatic changes in lifestyle and perspective.” Marie Kondo, the author, recommends that you defy conventional wisdom and start by discarding and only then thoroughly organize your space in one go.

All of this seems more relevant than ever. We’re surrounded by things only to buy more things. We have no idea what we have or what we need. Worse, most of these things are not things that we love. Getting rid of things and simplifying your life sounds easier than it is. In part because when we get down to it, we just don’t know how to make those decisions between what to keep and what to throw away.

Her approach is not a simple technique. It addresses why most people fail to stay tidy.

The act of tidying is a series of simple actions in which objects are moved from one place to another. It involves putting things away where they belong. This seems so simple that even a six-year-old should be able to do it. Yet most people can’t. A short time after tidying, their space is a disorganized mess. The cause is not lack of skills but rather lack of awareness and the inability to make tidying a regular habit. In other words, the root of the problem lies in the mind. Success is 90 percent dependent on our mind-set.

To acquire the right mindset, she argues, we need the right technique. There is a fundamental misconception that the ability to tidy comes from experience. Most of us tidy up a little bit at a time. We should however tidy up in one shot. This brings visible results.

A change so profound that it touches your emotions will irresistibly affect your way of thinking and your lifestyle habits. …

When people revert to clutter no matter how much they tidy, it is not their room or their belongings but their way of thinking that is at fault. Even if they are initially inspired, they can’t stay motivated and their efforts peter out. The root cause lies in the fact that they can’t see the results or feel the effects. This is precisely why success depends on experiencing tangible results immediately. If you use the right method and concentrate your efforts on eliminating clutter thoroughly and completely within a short span of time, you’ll see instant results that will empower you to keep your space in order ever after.

What is Tidying?
She breaks down the physical act of tidying into two aspects: “deciding whether or not to dispose of something and deciding where to put it.” Tidying is a tool, not an end. “The true goal,” she writes, “should be to establish the lifestyle you want most once your house has been put in order.”

There is a saying that “a messy room equals a messy mind.”

When a room becomes cluttered, the cause is more than just physical. Visible mess helps distract us from the true source of the disorder. The act of cluttering is really an instinctive reflex that draws our attention away from the heart of an issue.

Why Storage Experts are not the Answer
We all want the quick solution: organize my junk better. But this does nothing to get rid of clutter.

What is the first problem that comes to mind when you think of tidying? For many, the answer is storage. My clients often want me to teach them what to put where. Believe me, I can relate, but unfortunately, this is not the real issue. A booby trap lies within the term “storage.” Features on how to organize and store your belongings and convenient storage products are always accompanied by stock phrases that make it sound simple, such as “organize your space in no time” or “make tidying fast and easy.” It’s human nature to take the easy route, and most people leap at storage methods that promise quick and convenient ways to remove visible clutter.

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Putting things away creates the illusion that the clutter problem has been solved.

Why Tidying by Location is a Fatal Mistake
Kondo exposes why tidying by location doesn’t address the problem and recommends a way to avoid this common pitfall.

The root of the problem lies in the fact that people often store the same type of item in more than one place. When we tidy each place separately, we fail to see that we’re repeating the same work in many locations and become locked into a vicious circle of tidying. To avoid this, I recommend tidying by category. For example, instead of deciding that today you’ll tidy a particular room, set goals like “clothes today, books tomorrow.” One reason so many of us never succeed at tidying is because we have too much stuff. This excess is caused by our ignorance of how much we actually own. When we disperse storage of a particular item throughout the house and tidy one place at a time, we can never grasp the overall volume and therefore can never finish. To escape this negative spiral, tidy by category, not by place.

Two Essential Actions of Tidying

Effective tidying involves only two essential actions: discarding and deciding where to store things. Of the two, discarding must come first.

There are two further types of tidying: daily and special event tidying. Daily tidying is the act of using something and putting it back. Special event tidying is putting your house in order. Until you have done the “once-in-a-lifetime” act of putting your house in order, any attempt to tidy on a daily basis will fail.

Start by Discarding

The secret to success is to “tidy in one shot, as quickly and completely as possible, and to start by discarding.”

Do not even think of putting your things away until you have finished the process of discarding. Failure to follow this order is one reason many people never make permanent progress. In the middle of discarding, they start thinking about where to put things. As soon as they think, “I wonder if it will fit in this drawer,” the work of discarding comes to a halt. You can think about where to put things when you’ve finished getting rid of everything you don’t need.

Deciding what to discard

This is where people often have the most trouble. Until reading The Life-Changing Magic of Tidying Up, I focused on how to throw things away, not why.

Kondo, however, totally changed my perspective on this.

There are several common patterns when it comes to discarding. One is to discard things when they cease being functional— for example, when something breaks down beyond repair or when part of a set is broken. Another is to discard things that are out of date, such as clothes that are no longer in fashion or things related to an event that has passed. It’s easy to get rid of things when there is an obvious reason for doing so. It’s much more difficult when there is no compelling reason. Various experts have proposed yardsticks for discarding things people find hard to part with. These include such rules as “discard anything you haven’t used for a year,” and “if you can’t decide, pack those items away in a box and look at them again six months later.” However, the moment you start focusing on how to choose what to throw away, you have actually veered significantly off course.

A better approach is to choose what you keep, not what you dispose of.

I had been so focused on what to discard, on attacking the unwanted obstacles around me, that I had forgotten to cherish the things that I loved, the things I wanted to keep. Through this experience, I came to the conclusion that the best way to choose what to keep and what to throw away is to take each item in one’s hand and ask: “Does this spark joy?” If it does, keep it. If not, dispose of it. This is not only the simplest but also the most accurate yardstick by which to judge.

You may wonder about the effectiveness of such a vague criteria, but the trick is to handle each item. Don’t just open up your closet and decide after a cursory glance that everything in it gives you a thrill. You must take each outfit in your hand. When you touch a piece of clothing, your body reacts. Its response to each item is different. Trust me and try it.

Keep only those things that speak to your heart. Then take the plunge and discard all the rest. By doing this, you can reset your life and embark on a new lifestyle.

How to get Started

My advice to begin tidying not by room but by category does not mean that you should start with any category you like. The degree of difficulty involved in selecting what to keep and what to discard differs greatly depending on the category. People who get stuck halfway usually do so because they start with the things that are hardest to make decisions about. Things that bring back memories, such as photos, are not the place for beginners to start. Not only is the sheer volume of items in this category usually greater than that of any other, but it is also far harder to make a decision about whether or not to keep them.

In addition to the physical value of things, there are three other factors that add value to our belongings: function, information, and emotional attachment. When the element of rarity is added, the difficulty in choosing what to discard multiplies. People have trouble discarding things that they could still use (functional value), that contain helpful information (informational value), and that have sentimental ties (emotional value). When these things are hard to obtain or replace (rarity), they become even harder to part with.

The process of deciding what to keep and what to discard will go much more smoothly if you begin with items that are easier to make decisions about.

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The best sequence is this: clothes first, then books, papers, komono (miscellany), and lastly, mementos.

What to do When you Can’t Throw Something Away

Human judgment can be divided into two broad types: intuitive and rational. When it comes to selecting what to discard, it is actually our rational judgment that causes trouble. Although intuitively we know that an object has no attraction for us, our reason raises all kinds of arguments for not discarding it, such as “I might need it later” or “It’s a waste to get rid of it.” These thoughts spin round and round in our mind, making it impossible to let go.

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When you come across something that’s hard to discard, consider carefully why you have that specific item in the first place. When did you get it and what meaning did it have for you then? Reassess the role it plays in your life.

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Every object has a different role to play. Not all clothes have come to you to be worn threadbare. It is the same with people. Not every person you meet in life will become a close friend or lover. Some you will find hard to get along with or impossible to like. But these people, too, teach you the precious lesson of who you do like, so that you will appreciate those special people even more.

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When you come across something that you cannot part with, think carefully about its true purpose in your life. You’ll be surprised at how many of the things you possess have already fulfilled their role.

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To truly cherish the things that are important to you, you must first discard those that have outlived their purpose. To get rid of what you no longer need is neither wasteful nor shameful. Can you truthfully say that you treasure something buried so deeply in a closet or drawer that you have forgotten its existence?

Kondo argues that by keeping so much stuff, we’re not valuing what we have.

The fact that you possess a surplus of things that you can’t bring yourself to discard doesn’t mean you are taking good care of them. In fact, it is quite the opposite. By paring down to the volume that you can properly handle, you revitalize your relationship with your belongings. Just because you dispose of something does not mean you give up past experiences or your identity. Through the process of selecting only those things that inspire joy, you can identify precisely what you love and what you need.

In a world where we often focus on how to get more than we already have, sometimes the best approach is to remove something we already have. “Letting go,” Kondo says, “is more important than adding.”

The Life-Changing Magic of Tidying Up is a fascinating look into how to put our house in order and the psychology behind why we can’t let things go.

(image source: flickr)

Innovation: The Attacker’s Advantage

If you believe Thomas Kuhn’s theory outlined in The Structure of Scientific Revolutions, then the pace of change happens slowly at first and then all at once.

Innovation: The Attacker’s Advantage, an out-of-print book from 1984 takes a timeless look at this theory and applies it to innovation. This is the Innovator’s Dilemma long before the innovator’s dilemma.

The perspective of Richard Foster, the book’s author, is that there is a battle going on in the marketplace between innovators (or attackers) and defenders (who want to maintain their existing advantage).

Some companies have more good years than bad years. What’s the secret behind their success? Foster argues it’s their willingness to cannibalize “their current products and processes just as they are the most lucrative, and begin the search again, over and over.

It is about the inexorable and yet stealthy challenge of new technology and the economics of sub situation which force companies to behave like the mythical phoenix, a bird that periodically crashed to earth in order to rejuvenate itself.

The book isn’t about improving process but rather changing your mindset.

Henry Ford understood this mindset. In My Life and Work, he wrote,

If to petrify is success, all one has to do is to humor the lazy side of the mind; but if to grow is success, then one must wake up anew every morning and keep awake all day. I saw great businesses become but the ghost of a name because someone thought they could be managed just as they were always managed, and though the management may have been most excellent in its day, its excellence consisted in its alertness to its day, and not in slavish following of its yesterdays. Life, as I see it, is not a location, but a journey. Even the man who most feels himself ‘settled’ is not settled—he is probably sagging back. Everything is in flux, and was meant to be. Life flows. We may live at the same number of the street, but it is never the same man who lives there.

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It could almost be written down as a formula that when a man begins to think that he at last has found his method, he had better begin a most searching examination of himself to see whether some part of his brain has not gone to sleep.

Foster recognizes that innovation is “born from individual greatness” but exists within the context of a marketplace where the S-curve dominates and questions such as “how much change is possible, when it will occur, and how much it will cost,” are critical factors.

Companies are often blindsided by change. Everything is profitable until it isn’t. But leading companies are supposed to have an advantage. Or, are “the advantages outweighed by other inherent disadvantages?” Foster argues this is the case.

The roots of this failure lie in the assumptions behind the key decisions that all companies have to make. Most of the managers of companies that enjoy transitory success assume that tomorrow will be more or less like today. That significant change is unlikely, is unpredictable, and in any case will come slowly. They have thus focused their efforts on making their operations ever more cost effective. While valuing innovation and espousing the latest theories on entrepreneurship, they still believe it is a highly personalized process that cannot be managed or planned to any significant extent. They believe that innovation is risky, more risky than defending their present business.

Some companies make the opposite assumption. They assume tomorrow does not resemble today.

They have assumed that when change comes it will come swiftly. They believe that there are certain patterns of change which are predictable and subject to analysis. They have focused more on being in the right technologies at the right time, being able to protect their positions, and having the best people rather than on becoming ever more efficient in their current lines of business. They believe that innovation is inevitable and manageable. They believe that managing innovation is the key to sustaining high levels of performance for their shareholders. They assume that the innovators, the attackers, will ultimately have the advantage, and they seek to be among those attackers, while not relinquishing the benefits of the present business which they actively defend. They know they will face problems and go through hard times, but they are prepared to weather them. They assume that as risky as innovation is, not innovating is even riskier.

These beliefs are based on a different understanding of competition.

The S-Curve

S-Curve

The S-curve is a graph of the relationship between the effort put into improving a product or process and the results one gets back for the investment. It’s called the S-curve because when the results are plotted, what usually appears is a sinuous line shaped like an S, but pulled to the right at the top and pulled to the left at the bottom.

Initially, as funds are put into developing a new product or process, progress is very slow. Then all hell breaks loose as the key knowledge necessary to make advances is put in place. Finally, as more dollars are put into the development of a product or process, it becomes more and more difficult and expensive to make technical progress. Ships don’t sail much faster, cash registers don’t work much better, and clothes don’t get much cleaner. And that is because of limits at the top of the S-curve.

Limits are the key to understanding the S-curve in the innovation context. When we approach a limit “we must change or not progress anymore.” Management’s ability to recognize limits and change course becomes key.

If you are at the limit, no matter how hard you try you cannot make progress. As you approach limits, the cost of making progress accelerates dramatically. Therefore, knowing the limit is crucial for a company if it is to anticipate change or at least stop pouring money into something that can’t be improved. The problem for most companies is that they never know their limits. They do not systematically seek the one beacon in the night storm that will tell them just how far they can improve their products and processes.

Foster argues that if you don’t understand limits and S-curves you get blindsided by change. I think that’s too neat of an argument — you can understand limits and S-curves and still get blindsided but the odds are reduced. You can think of the S-curve as the blindsided curve or the attacker’s curve depending on your perspective.

For the S-curve to have practical significance there must be technological change in the wind. That is, one competitor must be nearing its limits, while others, perhaps less experienced, are exploring alternative technologies with higher limits. But this is almost always the case. I call the periods of change from one group of products or processes to another, technological discontinuities. There is a break between the S-curves and a new one begins to form. Not from the same knowledge that underlays the old one but from an entirely new and different knowledge base.

I think this argument is starting to sound a lot like the Innovator’s Dilemma but 15 years sooner.

Technological discontinuities are arriving with increasing frequency because we’re in the early stages of the technological revolution. Eventually these developments will revert to the mean and disruptive innovation will become less frequent and incremental innovation more common. Disruptive innovation favors the attacker whereas incremental favors the incumbent — going from Zero to One will be harder.

As limits are approached incremental improvement becomes increasingly expensive.

At the same time, the possibility of new approaches often emerges—new possibilities that frequently depend on skills not well developed in leader companies. As these attacks are launched, they are often unnoticed by the leader, hidden from view by conventional economic analysis. When the youthful attacker is strong he is quite prepared for battle by virtue of success and training in market niches. The defender, lulled by the security of strong economic performance for a long time and by conventional management wisdom that encourages him to stay his course, and buoyed by faith in evolutionary change, finds it’s too late to respond. The final battle is swift and the leader loses.

This means the standard “stick to your knitting” argument becomes contextual and thus psychologically difficult. Sometimes the best strategy may be to move to something unfamiliar. I’d argue that the competitive drive for efficiency makes a lot of companies increasingly fragile. Most dangerous of all, they are blind to their fragility.

The S-curve, limits and attacker’s advantages are at the heart of these problems and they also provide the key to solving them. For example, there are people, call them limitists, who have an unusual ability to recognize limits and ways around them. They ought to be hired or promoted. There are others who can spot ways to circumvent limits by switching to new approaches. They are essential too. Imaginary products need to be designed to understand when a competitive threat is likely to become a reality. Hybrid products that seem to be messy assemblages of old and new technologies (like steam ships with sails) can sometimes be essential for competitive success. Companies can set up separate divisions to produce new technologies and products to compete with old ones. S- curves can be sketched and used to anticipate trouble.

None of this is easy. And it won’t happen unless the chief executive replaces his search for efficiency with a quest for competitiveness.

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Most top executives understand, I think, that technological change is relevant to them and that it is useless and misleading to label their business as high-tech or low-tech. What they don’t have is a picture of the engines of the process by which technology is transformed into competitive advantage and how they can thus get their hands on the throttle.

“If change occurs at the time learning starts to slow,” wrote Phillip Moffitt in a 1980s Esquire article entitled The Dark Side of Excellence, “… then there is a chance to avoid the dramatic deterioration. If we call this the ‘observation point,’ when you can see the past and the future, then there is time to reconsider what one is doing.”

Understanding Limits

Limits are important because of what they imply for the future of the business. For example, we know from the S-curve that as the limits are approached it becomes increasingly expensive to carry out further development. This means that a company will have to increase its technical expenditures at a more rapid pace than in the past in order to maintain the same rate of progress of technical advance in the marketplace, or it will have to accept a declining rate of progress. The slower rate of change could make the company more vulnerable to competitive attack or presage price and profit declines. Neither option is very attractive; they both signal a tougher environment ahead as the limits are approached. Being close to the limits means that all the important opportunities to improve the business by improving the technology have been used. If the business is going to continue to grow and prosper in the future, it will have to look to functional skills other than technology—say marketing, manufacturing or purchasing. Said another way, as the limits of a technology are reached, the key factors for success in the business change. The actions and strategies that have been responsible for the successes of the past will no longer suffice for the future. Things will have to change. Discontinuity is on the way. It is the maturing of a technology, that is the approach to a limit, which opens up the possibility of competitors catching up to the recognized market leader. If the competitors better anticipate the future key factors for success, they will move ahead of the market leaders.

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If one knows that the technology has little potential left, that it will be expensive to tap, and that another technology has more potential (that is, is further from its limits), then one can infer that it may be only a matter of time before a technological discontinuity erupts with its almost inevitable competitive consequence.

Thus finding the limit becomes important.

Finding the Limit

All this presumes we know the answer to the question “Limits of what?” The “what,” as Owens Corning expressed it, was the “technical factors of our product that were most important to the customer.” The trick is relating these “technical factors,” which are measurable attributes of the product or process to the factors that customers perceive as important when making their purchase decision. This is often easy enough when selling products to sophisticated industrial users because suppliers and customers alike have come to focus on these variables, for example, the specific fuel consumption of a jet engine or the purity of a chemical. But it is much tougher to understand these relationships in the consumer arena. How does one measure how clean our clothes are? Do we do it the same way at home as the scientists do in the lab? Do we really measure “cleanness,” or its “brightness” or a “fresh smell” or “bounce?” All of these are attributes of “clean” clothes which may have nothing whatsoever to do with how much dirt is in the clothes. … These are complicated questions to answer because different consumers will feel differently about these factors, creating confusion in the lab. Further, once the consumer has expressed his preference it may be difficult to measure that preference in technical terms. For example, what does “fit” mean? What are the limits of “fit”? If the attribute that consumers want cannot be expressed in technical terms, clearly its limit cannot be found.

Further complicating the seemingly simple question of “limits of what?” is the realization that the consumer’s passion for more of the attribute may be a function of the levels of the attribute itself.

For example, in the detergent battles of the 1950s, P&G and its competitors were all vying to make a product that would produce the “cleanest” clothes. It was soon discovered that in fact the clothes were about as clean as they could ever get. The dirt had been removed, but the clothes often had acquired a gray, dingy look that the consumer associated with dirt. In fact, the gray look was caused by torn and frayed fibers, but the consumer did not appreciate this apparently arcane technical detail. Rather than fight with consumers P&G decided to capitalize on their misperceptions and add “optical brighteners” to the detergent. These are chemicals that reflect light. When they were added to the detergent and were retained on the clothes, they made the clothes appear brighter and therefore cleaner in the consumer’s eyes, even though in the true sense they weren’t any cleaner.

The consumers loved it, and bought all the Tide they could get in order to get their clothes “clean,” that is optically bright.

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Another complication with performance parameters is that they keep changing. Frequently this change is due to the consumer’s satisfaction with the present levels of product performance; optical brightness in our prior example. This often triggers a change in what customers are looking for. No longer will they be satisfied with optical brightness alone; now they want “bounce” or “fresh smell,” and the basis of competition changes. These changes can be due to a change in the social or economic environment as well. For example, new environmental laws (which led to biodegradable detergents), a change in the price of energy, or the emergence of a heretofore unavailable competitive product like the compact audio disc or high-definition TV. These changes in performance factors should trigger the establishment of new sets of tests and standards for the researchers and engineers involved in new product development. But often they don’t. They don’t because these changes are time-consuming and expensive to make, and they are difficult to think through. Thus it often appears easier to just not make the change. But, of course, this decision carries with it potentially significant competitive risks.

The people that should see these changing preferences, the salesmen, often do not because they have a strong incentive to sell today’s products. So the very people that organization has put into place to stay close to the customer often fail to keep the organization informed of a changing landscape. And if they do, it’s still a complicated process to get companies to act on that information.

… The people we rely on to keep us close to the customer and new developments often do not. So our structure and systems work to confirm our disposition to keep doing things the same way. As Alan Kantrow, editor at the Harvard Business Review, puts it, “Our receptor sites are carrying the same chemical codes that we carry. We are thus likely to see only what we expect and want to see.” The chief executive says, “I’ve done good things. We’re scanning our environment.” But in fact he is scanning his own mind

Even if sales and marketing do perceive the need for change, they may not take their discovery back to their tech nical departments for consideration. If the technical departments do hear about these developments, they may not be able to do much about them because of the press of other projects. So all in all, changes in customer preferences get transmitted slowly, usually only after special studies are done specifically to examine changing customer preferences. All this means that answering the “limits of what” question can be tricky under the best of circumstances, and much tougher in an ongoing business.

There are limits to limits of course. First, just because you’re approaching a limit doesn’t meant there is an effective substitute that can solve the problem better. However, “if there is an alternative, and it is economic, then the way the competitors do battle in the industry will change.” Second, it’s possible to be wrong about limits and thus draw the wrong conclusions.

A great example of this is Simon Newcomb, the celebrated astronomer, who in 1900 said “The demonstration that no possible combination of known substances, known forms of machinery and known forms of force, can be united in a practical machine by which men shall fly long distances through the air, seems to the writer as complete as it is possible for the demonstration to be.” Two years later he clarified, “Flight by machines heavier than air is unpractical and insignificant, if not utterly impossible.” It wasn’t even a year before the Wright brothers proved him wrong at Kitty Hawk.

Diminishing Returns

One mistake we make is to confuse time and effort.

It is not the passage of time that leads to progress, but the application of effort. If we plotted our results versus time, we could not by extrapolation draw any conclusion about the future because we would have buried in our time chart implicit assumptions about the rate of effort applied. If we were to change this rate, it would increase or decrease the time it would take for performance to improve. People frequently make the error of trying to plot technological progress versus time and then find the predictions don’t come to pass. Most of the reason for this is not the difficulty of predicting how the technology will evolve, since we have found the S-curve to be rather stable, but rather predicting the rate at which competitors will spend money to develop the technology. The forecasting error is a result of bad competitive analysis, not bad technology analysis.

Thus, it might appear that a technology still has a great potential but in fact what is fuelling its advance is rapidly increasing amounts of investment.

Psychologically, we believe the more effort we put in the more results we should see. This has disastrous effects in organizations unable to recognize limits.

S-Curve pairs

Often there is more than one S-curve, the gap between them represents a discontinuity.

Efficiency Versus Effectiveness

Effectiveness is set when a company determines which S-curve it will pursue (e.g., vacuum tubes or solid state). Efficiency is the slope of the present curve. Effectiveness deals with sustaining a strategy-efficiency with the present utilization of resources. Moving into a new technology almost always appears to be less efficient than staying with the present technology because of the need to bring the new technology up to speed. The cost of progress of an established technology is compared with that of one in its infancy, even though it may eventually cost much less to bring the new technology up to the state of the art than it did to bring the present one there. To paraphrase a comment I’ve heard many times at budget meetings: “In any case the new technology development cost is above and beyond what we’re already paying. Since it doesn’t get us any further than we presently are, it cannot make sense.” The problem with that argument is that someday it will be ten or twenty or thirty times more efficient to invest in the new technology, and it will outperform the existing technology by a wide margin.

There are many decisions that put effectiveness and efficiency at odds with each other, particularly those involving resource allocation. This is one of the toughest areas to come to grips with because it means withdrawing resources from the maturing business.

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In addition, many companies have management policies that, interpreted literally, impede moving from one S-curve to another. For example, “Our first priority will be to protect our existing businesses.” Or “We will operate each business on a self-sustaining basis; each will have to provide its own cash as well as make a contribution to corporate overhead.” These rules are established either in a period of relaxed competition or out of political necessity.

The fundamental dilemma is that it always appears to be more economic to protect the old business than to feed the new one at least until competitors pursuing the new approach get the upper hand. Conventional financial theory has no practical way to take account of the opportunity cost of not investing in the new technology. If it did, the decision to invest in the present technology would often be reversed.

Metrics become distorted and defenders believe they are more productive than they are. Attackers and defenders look at productivity differently.

Even if a defender succeeds in managing his own S-curve better, chances are he will not be able to raise his efficiency by more than, say, 50 percent. Not much use against an attacker whose productivity might be climbing ten times faster because he has chosen a different S-curve. All too frequently the defender believes his productivity is actually higher than his attacker’s and ignores what the attacker potentially may have to offer the customer. Defenders and attackers often have a different perspective when it comes to judging productivity. For the attacker, productivity is the improvement in performance of his new product over his old product divided by the effort he puts into developing the new product. If his technology is beginning to approach the steep part of its S-curve, this could be a big number. The defender, however, observes the productivity through the eyes of the market, which may still be treating the new product as not much more than a curiosity. So in his eyes the attacker’s productivity is quite low. We’ve seen this happen time and again in the electronics industry. Products such as microwaves, audio cassettes and floppy discs failed at first to meet customer standards, but then, almost overnight, they set new high-quality standards and stormed the market.

Even if the defender admits that the attacker’s product may have an edge, he is likely to say it is too small to matter. Since the first version of a wholly new product is frequently just marginally better than the existing product, the defender often thinks the attacker’s productivity is lower, not higher than his own. The danger comes in using this erroneous perception to figure out what is going to happen next. Too often defenders err by thinking that the attacker’s second generation new product will require enormous resources and result in little progress. We know differently. We know from the mathematics of adolescent S-curves that once the first crack appears in the market dam, the flood cannot be far behind. And further, it won’t cost nearly as much since the first product has absorbed much of the start-up costs. No doubt this will be a big shock to the defender who will tell the stock market analysts, “Well, the attacker was just lucky. There was nothing in his record to suggest he could have pulled this thing off.” All true. From the defender’s viewpoint there was nothing in the attacker’s record to suggest that a change was coming. But the underlying forces were at work nevertheless, and in the end they appeared.

Innovation: The Attacker’s Advantage explores why leaders lose and what you can do about it.

How We Can Improve Our Decisions

I gave a keynote speech at the Pender Investment Conference in early November. This was a great venue to talk about some of the things I’ll be discussing in more detail at Re:Think Decision Making this February in San Francisco.

One of the most common things people ask me is how we can improve our decisions. Better decisions are a function of two things that sometimes conflict: making fewer mistakes and having better insights.

Pender was kind enough to put together a summary of the speech that I wanted to share with you.

Relevant Thought Processes

Rationality

When Charlie Munger was asked the secret to his success, he responded “I’m rational.” But what does it mean to be rational?

In investing as in life, there is perhaps nothing more useful than developing thought processes that help determine what is true and what is best to do, and that lead to rational action and belief.

In order to take actions that fulfill our goals, we must base those actions on beliefs that are properly calibrated to the world. We all want our beliefs to align with the way the world actually works and we also want to maximize the chances of achieving our goals, based on the resources at our disposal.

Emotion

We tend to think of emotion as the enemy of rational behavior and that removing emotional biases from our decision making process will make us more rational. However, while emotions can impede rational decisions, they can also facilitate them. Emotions serve a valuable role because they help us focus.

​​“… emotions stop the combinatorial explosion of possibilities that would occur if an intelligent system tried to calculate the utility of all possible future outcomes. … In short, emotions get us in the right ballpark of the correct response.” — Keith Stanovich

Biases

But we often have patterns of behavior that cause us to fall short on rational thinking.

One way of looking at this is that our brains have two ways of reacting. One is an automatic mode. This is when our minds, without thinking, have an immediate reaction to a situation with little or no conscious effort.

This is how we evolved. This is our instinct. I don’t have to think very hard when I see a lion coming at me. I quickly respond to the situation in order to maximize my odds of safety. Academics call this System One thinking.

System Two thinking is when we allocate our scarce resources of attention and effort to mental activities in order to (hopefully) make better decisions. We must pay attention or we are likely to end up behaving in a way that is not rational. That is, in a way that fails to acknowledge how the world works, or failing to use the tools at our disposal in the best way possible to achieve our aim.

If we believe the premises that mental resources are scarce and we require these resources to make decisions, it stands to reason that when it comes to searching for a reason to do something our brains shut off when we see an idea that we think fits. We stop thinking because thinking is resource intensive and our bodies are designed to conserve resources.

So this has some interesting implications for decision making. Rather than trying to eliminate these innate biases, a better way is to develop mental models.

Decision Environments

Most of us make decisions in an environment where it is very hard for us to behave rationally.

I’m hard pressed to imagine an environment less conducive to rational decision making than that of the modern office worker. It is hard to make rational decisions in this pressured environment.

Now picture Warren Buffett sitting at his desk with his feet up and reading. Look at his empty calendar. He has no meetings and he doesn’t even have a computer in his office. He’s in Omaha for a reason.

​​“It’s very easy to think clearly here. You’re undisturbed by irrelevant factors and the noise generally of business investments. If you can’t think clearly in Omaha, you’re not going to think clearly anyplace.” — Warren Buffett

Buffett is smart enough to structure his environment to reduce decisions, interruptions, and encourage focus.

Our routines influence our decisions as well. One of the objectives of good decision-making is to ensure that decisions are not influenced by irrelevant information.

​​“The most successful people don’t have super-strong willpower when making decisions. Rather, they conserve their willpower by developing habits and routines, so they reduce the amount of stress in their lives. … The more choices you make, the harder they become. To save energy your brain starts to look for shortcuts. One shortcut is to be reckless and act impulsively (rather than rationally). The other shortcut is to do nothing, which saves as much energy as possible (and often creates bigger problems in the long run).” — Roy Baumeister

If you agree with that then it impacts how you organize your day. You may decide to meet clients in the morning as you know that later in the day, they (and you) are likely already at a point of “decision fatigue”.

Circle of Competence

​​“You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.” — Warren Buffett

It’s a simple concept: Each of us, through experience or study, has built up useful knowledge on certain areas of the market. We do not necessarily need to understand the more esoteric areas to invest capital. Far more important is to honestly define what we do know and to stick to those areas. The circle can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.

If you cannot understand the variables that govern a given situation you are probably outside of your circle of competence. Ideally you’d pass this decision off to someone for whom this is inside their circle of competence. But what can you do if you are outside your circle of competence and have to make a decision quickly?

Inversion

Carl Gustav Jacob Jacobi, the German mathematician said, “invert, always invert” recommending that “many hard problems are best solved when they are addressed backward.”

This model is one of the most powerful thinking habits we can adopt. “Indeed,” says Charlie Munger, “many problems can’t be solved forward.”

Think about what makes life good. Now invert the process and think about what would make life bad. Knowing what would make life bad gives you a shortlist of what to sidestep. Both thinking forwards and thinking backwards can result in action, however, despite your best intentions, thinking forward can in fact increase the odds that you’ll cause harm, while thinking backwards is actually less likely to cause harm – call it the avoiding stupidity filter.

Decision Journals

As participants in the financial industry, offering guidance, advice, and opinion to clients, your product is decisions. So you should care enormously whether you’re providing good advice or bad advice, and continuously looking for opportunities to learn.

The key to providing good advice is to have a good process. Ultimately, the process matters more than the outcome because the outcome doesn’t always tell you if you made a good decision or a poor one.

If you have a good process and a good outcome that’s deserved success. If, however, you have a good process and a bad outcome, that’s what I call a bad break. If, on the other hand, you have a bad process and a good outcome, that’s just dumb luck. And finally a bad process with a bad outcome is really just poetic justice.

When asked how we can improve decisions, Daniel Kahneman, one of the preeminent psychologists in the world who won a Nobel prize in economics, said, without hesitation, buy a very cheap notebook and start keeping track of your decisions: A decision journal.

The basic idea is that whenever you’re making a decision of consequence you should write down what you decided and why. Perhaps you want to do this with your clients, ask them these questions as they are making an investment. It could facilitate great future discussions, regardless of whether the investment is a success or failure.

Conceptually, this is pretty easy but it requires some discipline and humility to implement and maintain.

Conclusion

The long and short of it is: In your decision making, spend less time trying to be brilliant and more time trying to avoid obvious stupidity. Avoiding stupidity is easier than seeking brilliance.

The Difference Between Losing and Being Beaten

life is available

From Essentialism: The Disciplined Pursuit of Less

Larry Gelwix coached the Highland High School rugby team to 418 wins with only ten losses and twenty national championships over thirty-six years. He describes his success this way: “We always win.” With a record like Highland’s he has the right to make the statement. But he is actually referring to something more than his winning record. When he says, “win,” he’s also referring to a single question, with its apt acronym, that guides what he expects from his players: “What’s important now?”

By keeping his players fully present in the moment and fully focused on what is most important— not on next week’s match, or tomorrow’s practice, or the next play, but now— Gelwix helps make winning almost effortless. But how?

First, the players apply the question constantly throughout the game. Instead of getting caught up rehashing the last play that went wrong, or spending their mental energy worrying about whether they are going to lose the game, neither of which is helpful or constructive, Larry encourages them to focus only on the play they are in right now.

Second, the question “What’s important now?” helps them stay focused on how they are playing. Larry believes a huge part of winning is determined by whether the players are focused on their own game or on their opponent’s game. If the players start thinking about the other team they lose focus. Consciously or not, they start wanting to play the way the other team is playing. They get distracted and divided. By focusing on their game in the here and now, they can all unite around a single strategy. This level of unity makes execution of their game plan relatively frictionless.

What really struck me about Larry was his approach to winning and losing. As he tells his players: “There is a difference between losing and being beaten. Being beaten means they are better than you. They are faster, stronger, and more talented.”

To Larry, losing means something else. It means you lost focus. It means you didn’t concentrate on what was essential. It is all based on a simple but powerful idea: to operate at your highest level of contribution requires that you deliberately tune in to what is important in the here and now.