Turbulence, and Other Business Myths

Chances are, you’ve heard from various business “experts” about leadership and turbulence. I’ve already addressed The Leadership Scam. In this post, I want to talk about turbulence and other analogies that are leading businesses into the tar pits of obscurity.

One True Analogy
In business, executives set strategy, managers work with budgets, real workers do the hard job of serving customers, and the consultants are in charge of PowerPoint presentations and analogies. In most cases, consultants are there to make executives feel good, so they set up the next project while getting paid to do the current one. Look at the job listings for large consulting firms — the number one thing they are looking for in a senior consultant is “client development,” which is code for selling more consulting projects to clients while being paid to do the current one.

Spend a little time with consultants, and you’ll hear about turbulence, whitewater environments, sports teams, climbing mountains, etc. My goal today is to blow these analogies up and introduce the one true analogy you need to understand to plan your business success.

The turbulence analogy implies the cockpit model of managing an organization:

In the cockpit model, the smart people know what they are doing. They just need to manage and balance all the resources/problems in going from point A to point B. Turbulence can be tamed through skill, mastery, and vision. They get their pictures in the press when something goes well, and a great narrative gets built around their ability to achieve strategic goals.

The only problem with this model is that it isn’t based on reality. In business, you don’t always know where you’re going. The road map provided by consultants usually leads you into the deep weeds or the desert. Analysts are usually wrong. And just because everyone agrees with you doesn’t mean your goal will still be there when you arrive. Getting business advice from Richard Branson is equivalent to getting advice on picking winning lottery numbers from someone who won the lottery. Twice.

There are thousands of sports analogies in business. There are two ideas working here: 1) that you can learn to perform at a world-class level by training the way the pro athletes do, and 2) that teams of stars outperform other types of teams. Both are false.

In sports, feedback is immediate. You hit the tennis ball or release the bow string, and within a second or two you know whether your shot hit the mark. Fast feedback and intensive training lead to mastery. Unfortunately, business has medium-range and long-range feedback, and every situation is different, making mastery illusive. Once you are good at something, the market gets tired of it and wants something else. Because of the feedback lag and the constant churn in markets, sports analogies don’t hold up. Fire any consultant who uses a sports analogy for anything except skills involving fast feedback.

Then there’s the team analogy. I’ve heard many managers saying they are putting together a world-class team and the manager plays the role of coach. This sounds great, until you see how poorly it performs in the business world. The biggest problem teams have is that each person is hired to do her job perfectly when the time comes and leave the rest of the work to other specialists. You would think this would work in many sports, but it doesn’t even work there! Michael Lewis’s book Moneyball showed how managers do better when they hire players that can complement each other and fit together, rather than hiring best-in-class stars. The team approach might work in basketball, but it doesn’t work in most sports, and it doesn’t work in business, either. Teams need to support each other in learning new skills and reacting to customer needs. What works far better than teams is a family approach, where people support each other, teach each other, learn constantly, and change roles as needed.

Cause-and-Effect Machines
I remember reading Ray Dalio’s Manifesto. It’s amazing. Much of the advice is excellent. Dalio runs one of the largest hedge funds in the world, is worth billions, gets paid to predict the future, loses bets all the time, and he thinks he can build a cause-and-effect machine to get the desired results. Look at his track record — it’s no better than an index. There are plenty of years when his machine fails to outperform the market.

It should be obvious that business is not war, and that people peddling war analogies should be taken to the back yard and made to do crossword puzzles.

I submit that the best analogy for business is to think of ecosystems. In an ecosystem, there are:

  • hundreds of simultaneous arms races, many of which are invisible
  • auctions, in which people make irrational, emotional choices all the time
  • beauty contests with winner-take-all economics
  • moving, even elusive targets
  • black-swan events, surprises that come seemingly out of nowhere
  • implicit games with unwritten rules, people gaming the system, and other people pre-gaming and re-gaming the system in response
  • data, signals, statistics, information, and numbers — many of which are misleading
  • solutions that solve problems today and create the next problem tomorrow
  • sudden death
  • the fast rise of new frontiers
  • adversaries and allies, many of which are difficult to distinguish
  • uncertainty, ambiguity, and volatility, leading to the red-queen effect

Hey wait. I changed my mind. I don’t think ecosystem is a good analogy for business. I think business is an ecosystem. Or, rather, many interconnected ecosystems. I think the affairs of men and women are ecosystems, not sports, not machines, and not games. For example, I think bond and stock markets are connected in complex ways, with ever-shifting patterns, created by millions of people making individual decisions every day. Supply chains, corporate culture, markets, education, government, and economies are all ecosystems. If you think this might be true, have a look at my book list and try some of the titles you haven’t read yet.

As so many researchers have shown, our brains are poorly designed for this reality. We are the evolutionary product of many ecosystems, but our economic systems have evolved far faster than our brains have in response. We must be mindful of the gap between perception and reality that afflicts us all. We all have belief systems, and those belief systems betray us more often than we believe. Those who understand this know that there are no quick, guaranteed fixes to complex problems. Consultants who offer to eliminate complexity or provide a pre-packaged solution are simply telling clients what they want to hear.

In the reality of today’s business, markets, institutions, individuals, economies, and society, we have very little use for most of the concepts they teach in business school. Best practices are usually anecdotes. Command and control is being replaced by alignment and autonomy. Waste and boredom are being replaced by lean and fun cultures that attack problems as they arise. Software and artificial intelligence are forcing us to rethink our place in the ecosystem every few years. If you still think there’s a tradeoff between money, quality, and time, you haven’t read Joy, Inc., by Richard Sheridan:

What are Analogies Really Good for?
We still have consultants, which means we are going to be stuck with plenty of analogies for a long time to come. So use this rule and never break it:

Analogies are good for explaining concepts, not for convincing or winning arguments.

Let me give you an example. I once read a somewhat famous story about two fetuses in the womb, talking to each other. In this story, one fetus tells the other that there’s life after birth, and the other says there’s no evidence for that. They go on like this, and the story is meant to convince you that there is life after death. This is unfortunately the kind of reasoning that people resort to when they are out on a limb, with no evidence to support their beliefs. It’s not only not a convincing argument, it’s not an argument at all.

In business, too many decisions are made using fake arguments, strong beliefs, and persuasion. When you hear someone using an analogy to convince you of something, you can either explain that they are using the wrong tool for the job, or simply don’t believe what they are selling. To make a good business decision, use evidence and the principles of decision science, and update your view as you get new information. If your company could use help adapting to your business ecosystem, come see my web site and get in touch.

Next read: The Leadership Scam