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What Were They Thinking?

What Were They Thinking?

Issue 101, March 30, 2023

Jared Diamond, author of Collapse, asked a profound question referring to the ancients in Easter Island. When they cut down the last tree on the island, what were they thinking? Seriously, what sane society would make a valuable natural resource extinct with one final hatchet job? Which in turn made their people extinct? Or how about a more complicated social problem replacing the US draft with an all-volunteer military, ultimately making war-related collateral damage and death for troops a problem principally for lower socioeconomic groups, not college grads from more affluent families for whom war is no longer personal.

But we could ask so many of the same questions., Here are just a few — in no particular order. What were they thinking?

  • Succession by the US southern states
  • The Romans using lead water pipes
  • Making Ron Johnson CEO of JC Penney
  • Prohibition
  • Filling the Hindenburg with hydrogen
  • Giving Adam Neumann and Sam Blankman-Fried access to buckets of investors’ money
  • New Coke
  • Forcing Native Americans onto reservations and children to go to boarding school
  • TikTok and Facebook unchecked
  • Decca Records passing on the Beatles
  • Trusting Larry Nassar with the US women’s gymnastics team
  • The Spartans: “That’s a pretty horse the Trojans left us”
  • Releasing ChatGPT without guardrails
  • Clearcutting the Amazon making indigenous people extinct
  • Japan attacking Pearl Harbor

Dubious Decision Making

People make bad decisions all the time without anticipating the consequences.  Whether it is for short-term gain, a quick solution to an immediate problem or issue, perceived need to calm a workforce or society uprising, the compulsion to be the white knight and reduce anxiousness of citizens, out of simple desperation or just plain stupidity, bad decisions have bad consequences.

Here’s a real-life example to put things into perspective.  A veteran online B2B publisher is convinced that his content is so valuable that he can pivot and transform readers into subscribers.  His content has been published for the past 15 years online for free. The business model is based on partnerships and so far, advertisers have been content to use the boutique platform with its solid market reputation for branding, access to C-level executives and distribution of thought leadership.

The COO has a polar-opposite position from the CEO, so she conducts a survey among readers, with 89% saying they will not pay for the product.  Despite the survey results, a freelance strategy consultant convinces the CEO to undergo an exploratory research exercise to investigate the possibility of paid circ to deliver additional revenue. She selects an acquaintance whose expertise is in paid subscriptions for brands with affinity consumer groups (think Peloton). The CEO is charged up, anticipating that he is sitting on a potential goldmine of uncollected income.

The subscription consultant creates dazzling dashboards. He prepares a competitive report using DTC brands as benchmarks. He creates a P/L showing upside revenue after 18 months. He never creates a plan with associated costs to move from one daily online article to a suite of daily articles to support a paid content model. Undaunted, the CEO still assumes readers will pay for what they have been getting for free. Again, the COO surveys readers with a hypothetical subscription offer. Again, nearly every single reader responds with no interest in paying for the content. The so-called circulation consultant pockets $35,000 for producing nothing relevant and the topic is dropped.

What was the CEO thinking?  Is it ignorance? Hubris? Stubbornness?  This story is not unique. Tons of money can be lost over pride and a false sense of importance. Or laziness. Here’s another quick example: A real estate advisory saves one of its clients $12.6 million by uncovering the fact that the client had been billed incorrectly by its own clients who ignored clauses and nuances in their deals. Instead, the developers billed bump-ups on annual leases without looking at the details in the contracts. And the client never thought to challenge the billings. What were they thinking?  Better yet, was anyone thinking?  This is a lesson that everyone can learn from to not take things for granted.

Planning Ahead

Popular wisdom would argue that the big tech firms could be accused of not planning ahead. Capital markets shape the ebbs and flows of the scope and size of a business.  It has become apparent that the unchecked exuberance of market demands during the pandemic led so many tech firms to gin up and overload their organizations.  Amazon is a classic example. Now, 30,000 layoffs later, and still counting, CEO Andrew Jassy wised up to Jeff Bezos’s vision of infinite growth (infinite jest?). And Amazon is not alone. Zoom has cut 15% of its staff; Dell, 5%; Salesforce, 10%; Yahoo, 20%; Paypal, 7%; Google, 10%, Microsoft, 5%; Meta cut 10,000 employees … and Elon Musk with Twitter is in a league it its own.  All told, over 300,000 recent college grads making over six figures (with free lunches and yoga) are on the bench.

And that’s not all.  Ford, Goldman Sachs, and Pepsico – to name just a few – have cut back rather abruptly. Hindsight is 20/20, but you have to ask the question, what were they thinking? And why did these companies all come to the realization at the same time and cut their ranks so abruptly? Groupthink can be a dangerous game.

And then there are the recent bank failures, which occurred for a variety of reasons, both internal and external. Bank management had to see it coming, but it seems the acceptance of high risk for greater rewards (gambling for the greatest short-term gain) along with the aspiration that positive momentum would be continuous, despite the warning signs, makes the what-were-they-thinking question even more compelling. At the bottom of all these fiascos is management’s lack of foresight. Or maybe too much pressure and demand from stakeholders to generate the maximum amount of profit in the short term, long term be damned.  That pressure clouds the judgement of management who can then be caught flatfooted.

Bad Decision Making

The bad decision problem has some concrete neurological and psychological foundations.  According to Kendra Cherry for Verywell, “Heuristics are mental rules or shortcuts that allow you to make judgments quite quickly and oftentimes quite accurately. But they can also lead to fuzzy thinking and poor decisions.” Contributing to that process is making bad comparisons. Cherry adds, “When making decisions, people often make rapid comparisons without thinking about their options. To avoid making bad decisions, relying on logic and thoughtful examination of the options can sometimes be more important than relying on your immediate gut reaction.”

A more relevant mindset that affects decision making is optimism bias.  That could describe the entire tech community (and our unrealistic B2B publisher). At the root of optimism bias is the belief that bad things only happen to other people. Researcher Tali Sharot describes the attitude of these optimists as “overestimating the likelihood of experiencing good events while underestimating the likelihood of experiencing bad events. This isn’t necessarily a matter of believing that things will magically fall into place, but instead overconfidence in our abilities to make good things happen.” Sounds more like magical realism thinking, which could describe the visionary entrepreneurs that put Silicon Valley on the map.

Behind the Curtain

And then there are other behaviors that can influence bad decision making:

  • Biases: Personal, confirmation, affinity, conformity, similarity, experience, and safety.
  • Being Wedded to the Past: Making decisions for the future based on a past that is neither relevant nor contextual to current conditions is a fool’s errand. Decisions in the present require input and analysis related to the present with appropriate tools and strategies based on the problem at hand. With the fast pace of change, many prior strategies that leaders have depended on are outdated almost immediately.
  • Distraction: Just add up the amount of time spent on screens, interruptions, multitasking, personal responsibilities, and the general onslaught of media headed our way 24/7, it’s a challenge to stay focused. And without focus, critical thinking is nearly impossible and results in decision making that is compromised from the start.
  • Decision Fatigue: Mike Erwin in the Harvard Business Review explains “With so many decisions to make, especially ones that have a big impact on other people, it’s inevitable to experience decision fatigue. To counter it, identify the most important decisions you need to make, and, as often as possible, prioritize your time so that you make them when your energy levels are highest.”
  • Lack of Factual Data: Bad decisions for the future of an organization can be blamed on pulling the trigger too quickly without the facts. Many organizations do not question the accuracy or quality of data that is presented to them. The application of critical thinking in analyzing the data takes a back seat to pie charts and other data visualizations that are crutches about performance, impact and even indicators because they make people feel comfortable. In a digital marketplace that recognizes the value of data and where there are so many available data analytics tools and practices, it is challenging to fathom why many organizations keep applying lipstick on a pig without recognizing the consequences.
  • Being Emotional: Making decisions under the duress of emotions – both positive and negative – can skew the decision-making process. Having an objective, trusted team as a backstop is a smart way to temper decision making while under the influence of emotional highs or lows. Leading with courage, reinforces open dialogue, is open to challenges from others and even invites constructive criticism, all of which mitigate emotional decision making.

Living in the Moment

At 2040, we believe that planning ahead, using foresight and practicing critical thinking are non-negotiable — particularly in a society that is ever changing. When we live in the moment, address the issues at hand in the moment, and solve problems in the moment, we fail to see that change is continuous. What has worked in the past or what may work in the present, may not work in the future. In the future, the factors, variables, and influences are often so different (things never really stay the same) that making decisions based on the context of today will not be relevant in context of tomorrow. By way of example, our economy is confounding many experts. The questions are how to fix high inflation, slow growth, stop more banks from failing, and even how to control stock market. Employment, despite the tech and other layoffs remains strong. This compilation of asymmetric factors and variables do not have a historical reference to fall back to.

Living in the moment seems to be a national pastime. We have noticed that many organizations focus on the day at hand, maintaining a view of the immediate short term with optimism, overlooking or dismissing the downstream consequences of potential bad decision-making.

Let’s leave you with one more decision-making consideration to ponder. Society is currently reveling in the fact that we have finally created smart machines that can think, which enable us to be more efficient and productive. We are looking forward to a future of using machines to create images, spit out marketing copy, summarize texts and emails, and even make business decisions for us. But what are the consequential impacts of AI?

Will this define our what-were-they-thinking moment? AI without guardrails can be dangerous. AI may make some workforces irrelevant. Unchecked AI could potentially change the course of human history. We may be able to predict the assets of AI to our lives, but that doesn’t guarantee that we know.

We repeat our mantra that we need to apply some critical thinking to avoid a train wreck that may be coming our way sooner than we think.

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