How to avoid being a bear’s lunch

In his gem of a book Obliquity economist John Kay tells an old economist’s joke. An economist in the wilderness sees a bear approaching and pulls out his computer to calculate an optimal strategy for dealing with the situation. His colleague, appalled says “We don’t have time for that”. “Don’t worry” replies the economist “the bear has to work out his optimal strategy too.”

Most of us are currently facing the bear. The business situation that we find ourselves in where we have to invest time and energy in developing new revenue streams and flexible working practices is under constant threat from the bear of driving immediate profits, and his bear friend of competitive challenge.

The point of the joke is that excessive calculation of the techniques needed in the new business environment can disadvantage you in an emergency. However in Obliquity Kay goes further claiming that time and again planning the most direct route to your objectives can be a mistake if the objectives aren’t the right ones anyway. Nearly all businesses have increasing profitability as an important kpi. But in fact you can be better off – much better off – with ” being good at what you do” as your most important kpi. This will, if managed and marketed correctly, drive your profitability.

Stands to reason doesn’t it? If you work at a manufacturing company your primary job should be excellent product, your marketing job should be to deliver news about that excellent product and your Finance Director’s job should be to ensure that you are delivering profit from that excellence. It might seem obvious, but Kay’s point is that almost all of the advice delivered to chief executives from management consultants over the last decade has been about driving shareholder value as directly and as efficiently as possible. Jack Welch, much quoted CEO of General Electric who drove shareholder value further than any other CEO of the period told the FT after he’d retired “Shareholder value is the dumbest idea in the world”. He later added “The job of a leader and his or her team is to deliver to commitments in the short term while investing in the long term health of the business”.

The relationship between short term commitments and long term health can be a complex one. It can be hard to model the optimal strategy for it, particularly with new technologies and emerging markets to deal with. For media owners, for instance, creating great content which generates great audiences used to lead directly to great revenues. The world wide web and the availability of so much free great content has broken that model. And it needs reinventing fast. This is proving complicated. But to assume that you can avoid this complexity by calling in some consultants to use an off the shelf model they’ve devised against a short term objective of driving profitability by cutting costs is wrong. You’re in danger of losing the whole point of why you were successful in the first place and then you’re quite likely to end up as a bear’s lunch.

One Response to “How to avoid being a bear’s lunch”

  1. Simon Smith says:

    Ironically enough, I ordered a copy of “Obliquity” yesterday, though it has nothing to do with my finding your blog.

    Some time ago, puzzled as to why certain mathematical and mental-arithmetic problems are still difficult even when you know the method, I came across a theory from cognitive psychology that such thinking uses up a significant amount of energy: easily enough energy to make a real evolutionary difference for our ancestors.

    As such, the bear’s lunch analogy probably rings truer than the economists knew. Thinkers in prehistoric times probably did tend to become a bear’s lunch, or a cave lion’s or whatnot.

    In other words, we’re not particularly well equipped, from an evolutionary perspective, to handle complex decisions that require a lot of thinking.

    On the other hand, I think that the unconscious is capable of some remarkable processes, which can manifest as someone being creative, inspired, a genius, their saying “it just came to me”, experienced, or in those “gifted” people who just seem to make the right decision intuitively. This is not to say there is some magic involved – just that we don’t have the benefit of introspection in these things.

    There are some interesting papers on these topics. I read one some time ago that was perhaps more visionary than practical, but talked of computers that might use Artificial Intelligence, modelling all possible inputs and outcomes, and applying “survival of the fittest” algorhythms, in order to deal with complexity in decision making.

    This might have the benefit of removing human error and cognitive bias, as well as identifying the best possible decision, but the paper ended on the bewildering and slightly scarey prospect that such applications would end up working well but without us understanding how or why.

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