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TET Is Not The Best Comparison

Much is being made of late that the current situation in Iraq is similar to the 1968 TET offensive in Vietnam. I think the more accurate comparison would be further back in history - Hitler's invasion of the Soviet Union in 1941 or Napoleon's invasion of Russia in 1812. In both cases the invading army was pushed forward by leaders who sent their troops into battle ill-equipped for a long-term war, so certain were they of immediate victory. Initially, both invasions were wildly successful, but the lack of a long-term plan and insufficient resources lead to their defeats. Both invasions were defeated in large part by guerilla-style warfare that their troops were not trained to defeat. President Bush is finding, as did Napoleon and Hitler before him, that taking ground is not the same as winning the war.

Safekeeping Our Freedoms

With the five year anniversary of the attack on the World Trade Center towers, the price we have paid in lost liberties has become more apparent. What is disturbing about this loss is not the willingness of the general population to forgo their freedoms in the hope of securing more safety, but the ease with which those in power convinced themselves to take them. As technology progresses, the ability to restrict our freedoms becomes easier and it will only be by the virtues of those in positions of power that we will maintain them. The reaction of the Bush administration does not give comfort that we will be in good hands

Learning From Your Mistakes and Other Half-Truths of Decision-Making

It is well recognized these days to stress the impact that the methodology used for making decisions can have on the selection of those decisions. How one goes about making a decision and the structure within which the decision is made will have profound effects on what actions are considered and which is chosen. One approach will result in one set of options and decisions while another approach may yield an entirely different universe of values. Selection of an approach is very important to the eventual outcome and the probability of success.
Regardless of the methodology, however, the recommended approaches seem to have some points in common that do not appear to be fully thought out. One of these is reviewing your past decisions and learning from them, in particular any mistakes that were made. While the importance and benefits of this is obvious, why would one wittingly screw up again, the importance of reviewing one’s successes curiously is not recognized. The stress is on not repeating past mistakes and using them to build up one’s base of knowledge and experience for future decisions rather than focusing in on how to perform at one’s peak. The hope is that future decision-making will be improved and fewer bad decisions made. The assumption of this approach is that successful decisions are their own reward and simply confirm the decision-maker’s ability. Such an attitude, however, can have very bad consequences. Just because a decision proves to be correct does not mean it will lead to correct decisions in the future. In fact, it may lead to precisely the opposite outcome.
How can that be? In part the answer lies in how we perceive our ability to make correct decisions. Most of us flatter ourselves into thinking that we are better at making correct decisions than our track records warrant. If we are correct only 2 times out of 10 we will perceive that we were right more frequently and consequently be more confident in our powers of decision-making than is justified. We tend not to learn from our failures because it is our successes we focus on and magnify. It is a natural tendency to play down our failures and build up our successes, sometimes to the point of relying on a single success to rest our laurels on. Wall Street is replete with such “one hit wonders.” In general, people who make a lot of decisions believe they are doing better than they actually are, which can set the stage for bigger mistakes as confidence unwarrantedly increases.
A second drawback in not evaluating our successes is that often we are right, but for the wrong reasons. If we do not examine how we arrived at the correct solution and that in fact our reasoning was valid, we will remember that we chose correctly and not that we did so for spurious reasons. When confronted with the same set of circumstances in the future we will remember that last time we got this right and repeat our same decision without much reflection. It is reminiscent of experiments with pigeons where researchers reward them with food when they make an odd body movement. Soon they walk around exhibiting this bizarre behavior “knowing” that will produce the desired results even though there is no real correlation with their behavior and the reward. This approach is fine if we got it all right the first time around and it truly is a similar situation, but a potential disaster if our reasoning process was flawed or the situation is altered somehow. Worse, since we have confidence in our decision-making abilities we are likely to raise the stakes, magnifying the potential damage.
What are the real world implications of our delusions about thinking correctly? Recent history has been witness to financial disasters by investors and money managers who, after some extended period of success, have stumbled into financial disaster magnified by their inability to acknowledge their mistakes—Orange County, Barings Bank, Sumitomo Copper, Codelco Copper, Daiwa Bank, and others. What they all seem to have in common are individuals convinced of the soundness of their capabilities as decision-makers and the fundamental rightness of their thinking as they sink further into a financial abyss. They see no reason to change their course because they “know” they are right. Other times the poor judgement manifests itself over an extended period and not in a spectacular flameout. Why is it that so few money managers can consistently do better than a monkey with a dart board? Funds that do well one year are dogs the next and over time do not do better than the average return. Could it be that initial success tends to straightjacket the thinking of these managers and so to repeat their “successes” with ever diminishing precision?
The bottom line is that, just like learning from your mistakes, you should also learn from your successes. There are keys to success just as there are patterns of failure and both should be incorporated into one’s decision-making calculus. You should learn what allows you to perform at your best and repeat those patterns; you are looking to raise your performance level as well as keep it from dropping. A decision-maker also must evaluate whether the correct decisions in the past were due to luck or ability and whether or not conditions have changed so as to adversely affect previously correct decisions. Decision-makers must constantly recalibrate their thinking processes, fine-tuning their abilities with the latest available data on a regular basis. Otherwise, the stakes get higher, the mistakes bigger, and the headlines larger.
Another half-truth on decision-making being promoted is “thinking outside the box.” Businesses want people who can think outside the existing structures, culture, and worldviews that govern the organization in the belief that such thinking will yield results that the firm can successfully exploit. Such entrepreneurial thinking is seen as allowing a firm to respond more nimbly to competition and not find it falling behind. The business can reinvent itself to meet the ever-changing environment and improve its chances of prolonging its existence.
But is being able to “think outside the box” sufficient? Is that all that is required of the decision-maker? It would seem that the ability to think outside the box alone will not ensure success. All it may produce is a lot of ideas of unknown quality that the business, used to one way of doing business, is ill-equipped to evaluate and successfully implement. What is required is that the process of thinking outside the box provide new structures, worldviews, and processes by which the ideas can be evaluated as to their quality and how best to implement them for maximum success. To construct a new box, in other words, in which to successfully move the business forward. Then you have to be able to think outside that structure for the inevitable turning of the cycle to a new environment. It is a constant state of destruction, construction, destruction, and on ad infinitum.
A good analogy might be the relationship between a hitter and a pitcher over their opposing careers. When the batter gains the edge over the pitcher, the pitcher has to figure out a way to adjust his pitching to get ahead again. It is then incumbent upon the batter to adjust to the new pitching style to avoid striking out. As they face each other in a game and over the course of a season, they are constantly reworking their strategy to stay one step ahead of their competitor. Then they start all over again the next year.
The danger of creating new structures is that, successful though they may be, they tend to focus thinking into the new paradigm and away from new ideas. The natural tendency is to push forward into new territory gradually and settle down to enjoy the fruits of one’s labors. If you do that, however, you risk being passed by those more willing to push into terra incognito and explore all its potential riches and dangers. Unlike the common wisdom that settling down and building a life in one place is the best course, modern businesses must be more like Daniel Boone, moving further into the wilderness as the neighborhood fills up. Modern businesses must be Pioneers of the Future and not Builders of the Pyramids.
The push for new modes of thought and approaches to decision-making carries with it the danger that they will not completely address the full series of challenges facing a business today. Even if implemented with the best of intentions and to the fullest extent possible, if these prescriptions are not complete they will at best buy time and at worst lead to spectacular failure. There are no magic bullets to ensure success. It takes hard work, discipline, and not a little daring to meet the challenges of the current and future competitive environment. Any new system or approach to decision-making must be examined carefully for incompleteness as well as to its perceived efficacy. If not, a decision-maker will mistakenly go confidently into battle with his flank exposed.

DO YOU BELIEVE IN MAGIC

DO YOU BELIEVE IN MAGIC

Someone has said that the last true believers in magic, other than innocent children, are men. Men, into their 40s and above, still believe that they will somehow make it big in sports or business, as if by magic. Somehow the world will be reordered to their benefit and they will become the next NBA superstar, an Oscar-winning actor, or richer than Bill Gates. These dreams and the hope of their magical incarnation finally begin to fade beginning in a man’s 40s and linger on life-support, often until retirement when they die just before their master. It may be that the fabled mid-life crisis most men experience is not because of perceived failings in their life, but that they finally discovered there is no magic and they are doomed to their fate. Do you remember what it was like finding out there was no (fill in the blank)? Would you expect less than a crisis upon discovering that magic has left the world?
Not all men have stopped believing in magic, though. Our President and his pals are the last true believers and practitioners of magic. They believe in it so strongly and practice it so seriously that they have allowed themselves and our country to be lead into adventures that would otherwise be unthinkable. Even worse, they have cynically manipulated us with parlor tricks to achieve their magical dreams. The unfortunate part is that it has succeeded so far and appears set to succeed again for another four years. If they believe the magic won the race for them there is no telling what they will try next.
The President’s belief in magic and his ability to use it to remake the world was evident early on. Not his victory in the Supreme Court to win the Florida vote, that was just raw political muscle, but in his approach to taking office. It was fairly evident that a recession was looming when he was about to take control, but his approach was to play it up rather than paint a better picture. In part this was to lay the groundwork for his tax cuts to make them seem more necessary, but mostly it was a calculation that by doing so the recession could be sped up and therefore leave earlier. He and his minions believed they had the knowledge and power to magic the economy to do as they wanted. All it took was the right incantations and spells, then the economy would recover to send George Bush into his reelection riding a tidal wave of growth. The spells were cast, the incantations read, and the economy barely laps at the shore. True, 9/11 intervened and its impact has been severe, but rather than try new spells, he has continued to recite the old ones in the belief the magic will eventually work. Belief in magic and one’s powers to wield it die hard if at all.
Another example of Bush’s belief in magic is the whole war with Iraq, filled with wishful thinking from start to, well, not quite finish, since it’s going to go on a long time. The magic is in the belief that if we just demonstrate our powers, the rest of the world, especially the Middle East, will be in awe of our presence. The war was to have this magical outcome where Saddam Hussein would be gone, the Iraqi people would be free and grateful to the US, democracy would flourish first in Iraq and thence to all the Middle East, the Israeli/Palestinian problem would resolve itself, and the US would stand astride the region, benevolently nodding our approval. The magic was to be so powerful that all this could be done with but a singe spell.
The mindset of the Bush Gathering is akin to that we saw in the Vietnam Era, but even more dangerous. During Vietnam, policy was driven by a combination of hypocrisy, naiveté, hubris, and a belief that the leadership knew how to do the job right. The difference now is that the naiveté is gone and the other three have grown in proportion. This creates the powerful illusion of magic and control that only the Bush people can wield.
At the same time that Bush and his cohorts are doing magic in the back room, they are engaging in parlor tricks in the front. They are cynically manipulating the gullible public through sleight-of-hand, misdirection, and outright deception to hide the reality of their activities. It has succeeded enough to get George Bush reelected. Apparently a good charlatan is worth every penny.
How are Bush and company doing this and how do they get away with it in plain view? They have learned that people will go against their best interests, especially economic, if they can push issues that are so radioactive they are about to explode. While the public is fighting over these issues, Bush is busy doing the real work of his tenure, rewarding the rich and making the world safer for big business. Gay marriage is a classic case of misdirection away from Bush’s economic bailout of the rich. It is understandable why many will put their morals before their money, but do they have to have their pockets picked in the process?
Another trick he uses is to produce a fake bouquet of flowers for the audience and a pile of gold for his friends in back. The gutting of the inheritance tax is a prime example of this. Bush renamed it the “death tax” and convinced enough people that the fake flowers they get from its repeal were somehow worth the pile of gold he shoved into the pockets of the rich. There were a few small business owners and farmers who were caught by the inheritance tax, but their benefit pales into insignificance when compared to the massive windfall of the super rich.
Bush’s invasion of Iraq also demonstrates best the intermingling of his use of trickster magic and practicing the dark art in private. Bush sold the war as being necessary to disarm Saddam Hussein, fight terrorism, and free the Iraqi people while the real agenda was to remake the world with an eye on the oil prize as well. He was showing one deck of cards to the world, one which was stacked it turns out, while doing a Tarot Card reading at the same time. Even more shameful, once the fraud was exposed he managed to convince enough people that this was really what was intended all along. Ignore the fact that some of the cards were planted; it was all part of the show. Meanwhile, the magic cabal is intoning incantations and uttering deprecations to make the war move ahead. Their faith in their powers is such that they do not bother to ready themselves for the aftermath; that will take care of itself from the first spells. It is not a good sign that Bush and company cannot find a way to cast a second set of spells to get out of the mess that they now find themselves in. They still believe the first ones will eventually work.
How long will Bush believe in his magical powers and what happens when he no longer does and undergoes a crisis of confidence? I suggest before we get to that point that we engage in a little magic ourselves. We should put on our ruby red slippers and, like Dorothy, click our heels three times while repeating “There’s no place like home. There’s no place like home. There’s no place like home…” Then we can send George Bush back to his home in Crawford, Texas and be rid of the Wizard, the Tin Man, the Cowardly Lion, the Scarecrow, and the Wicked Witch.