Fixing what’s not broke, yet.
Walking the bookstore aisles
In Thinking, Fast and Slow, Dan Kahneman posits: the use of intuition rather than a systematic method of decision making is often misleading in making key business or organizational decisions.
Pick up Blink: The Power of Thinking and Stories Employees Tell: Race, Skill & Hiring in America. The noticeable intersectionality of these two texts is that majority of hiring is done based on gut feel (intuition).
Put these texts together and read in between the lines: is the same intuitional reliance applied to other key decisions?
Is the intersectionality of these facts a contributing factor to the questions we always ask about companies: How did they miss that? How did they mess that up? Devah Pager, a Harvard sociologist, lays the foundation of empirically proving that racial discrimination is correlated to firms that fail. I ask further questions that are based on team composition as indicators of bad decisions.
Risk & opportunities: why fix it when it’s not broke?
There is little incentive for a firm that’s doing well to change its practices.
One. Majority of top managers are paid through company stock based on performance, which is measured through non-standard metrics.
Two. Stock price is driven by subsequent quarters. Will a company beat Wall Street estimates? Basically, a company could be working to overfit a model that’s based on growth numbers that are based off intuition.
Take the intuition, the short-term views of management incentives and the markets.
FYI: It’s OK to make the dough right now.
But that requires in-groups. No dissenters and no views that will change the course of business. We are growing at 10%; why change?
Intuition and optimistic tendencies create blind spots that in-groups aren’t going to see. The incentives are short term to boot.
But a company’s life isn’t meant to be short term. The stock price should actually be about the long term value.
So, a big question is how in-groups that hire in their likeness are actually detrimental to the long term performance of the business.
If your hiring is done on a gut basis — can’t one assume other business decisions are made similarly — and hence should be subject to even more scrutiny?
Instead of asking why a company should change its short-term growth trajectory of 10%, shouldn’t we ask bigger questions?
Including out groups and improving growth by 1–2% is the wrong question.
What is that the right question?
Shouldn’t we be asking how much of the 10% growth will be shaved off or completely decimated to 0% by letting in-groups with narrow gut feels navigate organizations in a rapidly changing environment where those gut feels are nearly irrelevant?