The Total Perspective Vortex is a wonderful thought experiment. It’s also perhaps an important reminder as us in the western part of the world fret over the economic news that is following on the heels of the implosion of the credit markets.  Many are likening the situation to the Great Depression.  That’s as you say hyperbole of the worst kind-at least in the USA.  Sure things are bad an may get much worse still.  But here is a list of things that are unlikely to happen even in the case of a lengthy an deep recession:

A third of the population will not be ill clad, ill nourished, or without a roof over their head.  Prior to the Great Depression there was barely enough housing to house all the people in the country, and barely enough food, or clothing either.  Now we have a ridiculous excess of all three.

Unemployment, even if it were to reach levels of 15% would have much less impact than in the 1930s.  Most people would receive up to 13 months of government unemployment assistance.  The elderly would receive health care, the young would still be fed at school.  No panacea, mind you, but no depression.

I feel for all those who have and will lose their income and homes in these tough economic times.  But let us not give in to the scaremongering of the media, who jerk at our emotions, frighten us with fearytales, and peddle their poornography.  This country, or the western world for that matter, is not about to become some Mad Max movie set.  Unless of course we all want to believe it, in which case I’m sure we could achieve it.

The Financial Redress

Three score and four years ago our fathers brought forth upon this earthen sphere, a new order conceived in economic liberty, and dedicated to the proposition that all trade is created equal.

Now we are engaged in a great idea war, testing whether trade, or any human interaction so conceived and so dedicated, can long endure. We are met on a great trading floor of that war. We have come to dedicate a portion of our future income, as a resting place for those banks who here gave their shares that financial markets might live. It is altogether fitting and proper that we should do this.

But in a larger sense, we cannot dedicate - we cannot consecrate - we cannot hallow - liberal trade. The brave institutions, past and present, who traded here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us, the remaining, rather to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced.

It is rather for us to be here dedicated to the great task remaining before us, that from these failed institutions we take increased devotion to that cause for which they gave the last full measure of devotion; that we here highly resolve that these liberal efforts shall not have died in vain; that this world under God, shall have a new birth of freedom, and that this world order of the people, by the people, and for the people shall not perish from this earth.

Management is a form of herding.  Sometimes shepherding, sometimes cat-herding, but most of the time it’s much more complicated — like guiding a distrusting group of friends, who’ve grown apart, to regain the vaguely shared glory of some imagined past.  Envision herding a group of lions and lambs, foxes and hens, insects and birds to a meadow where the herder is paid based on how many people mistake this motley crew for a circus.

Leadership is different: leaders are to groups what cowbells are to cows — they provide a signal that others can follow.  A successful leader polishes the bell, tunes it to the sound of success, and convinces all it is the purest note ever struck.  But a false leader cannot sustain the true tone for long.  The inherent challenge of leadership is then to stay true in times of trouble, to appear — and to be — an honest broker among competing interests.  There are not many leadership tools available, other than experience, intellect, and integrity.  Not the type of things they stock at your local Home Depot. 

One constant I have observed in great leaders is that they allow — demand really — that each person they interact with become better than that person really thought they could be.   There is complexity in this.  A great leader in times of war — Churchill comes to mind — may not be so great in times of tranquility, and of course the other way around as well. 

So, are great leaders born?  Yes, of course.  They are just not born great leaders. 

We had a little ‘incident’ in the office this week.  It really started a few weeks ago when we got a super cool automatic espresso coffee maker.  It’s the kind that you just walk up to it and select the shot size, press a button and voila out comes wonderful coffee.  This all worked very well until someone put ground coffee instead of whole coffee beans into the bean container.  The machine clogged up and was ‘rendered inoperable’ as they say. No one came forward and claimed responsibility (probably a smart move if you consider the state my coworkers were in, what with the lack of coffee and all).

So, I had a couple of problems: first where to get some coffee (it’s like a 10 minute walk to the nearest Starbucks), and second how to figure out who did this and why they didn’t take responsibility (the third problem, how to fix the machine was thankfully solved since then, as one of us is a former coffee barista and she fixed the darned thing).

And then I remembered something about framing.  Not people, but problems.  And if the problem is to get people to do something they don’t want to, it’s the Tom Sawyer version of a framing problem.  Normally, when you want to learn something you ask.  So, I could go around asking people if they had put regular grounds into the espresso maker, and broken it.  This would make everyone rather upset that I was accusing them of a) not knowing what they were doing, and b) not owning up to it.

So, I could easily frame this in a way that the only person who would feel upset, was the person who actually broke the machine.  You see, it’s just about how I ask the question.  If I asked everyone who had opportunity a simple question: “I just wanted to ask everyone to confirm that they didn’t break the coffee machine.  Please respond by saying: I did not.”

Now the smart ones reading this will say that the culprit either a) will not answer, or b) simply lie.  Let’s explore that.  If you don’t answer, then I’ll remind you to answer.  Those who have nothing to hide will ultimately answer. Those who have something to hide will be reluctant to, but if only one person remains then I know who to confront.   Now, the lying scenario is if everyone says they didn’t do it, then I know that someone didn’t just ‘forget’ to tell about it, but actually and actively lied about it.  I won’t like that, but I will have learned something very important: a dishonest person is working for me, and probably a stupid one too.  Because if I put energy into it, I can probably figure out roughly when the machine broke, and thus narrow my list.

But, in the end, the framing exercise makes it a lot more likely that I’ll get the result that I want.  But logically the two approaches are equivalent. One is just a more effective way to elicit information from humans–even if the information gained is the same.

Of course, there is a third way of framing the problem: blogging about it, and letting everyone in the office know, and hoping the poor sop comes forward.

When the going get’s tough, the tough have some choices to make.  There are some schools of thought here.  The first is that this is a golden opportunity for most companies to lay off the unproductive bottom 10% of their staff.  A second is to reduce future revenue generating efforts (such as new product development projects).  A third is to ask for an across the board reduction in exempt staff salaries.  A fourth is to reduce bonuses to an absolute minimum (especially since most staff will not quit their jobs with the economy as it is).  A fifth is to shift support staff to sales efforts (hence reducing the non-productive time of sales people).  A sixth is to ask for graduated reductions in pay (those with highest salaries receiving a greater share of the cuts).  A seventh is to slash prices on all items that don’t move, while reducing prices on hot sellers less.  An eight idea I heard was to offer all customers an iPhone with their purchases, since that seems to be the only thing that’s still selling like hot-cakes.

But whatever you choose to do, how will you make the decision?  Alone with a bottle of Jack?  With Jack, and a bottle of Perrier?  Or with Jack and Pierre and Otto and Lakysha and Anil and Sergey and Wang?   Today’s companies operate in 24 time zones (or 24 home offices in one city), have wastly different local customs, regulations, and success levels.  What’s perfect for New York may not work in Tokyo, and what’s right in Berlin can seem foolish in Cape Town.

Here’s an outline of process we are using to help our customers:

Part I – And the problem is…
You have to define the problem before you plan a solution.  Too many companies attempt to make changes to their plans without defining what has changed and how the new plan should address this.

Part II — …we need a process…
You can go without a process… you just won’t be very successful.  Circles are nice for doodling.  But don’t get caught going in circles when times are tough.  Without a process, you are walking with one leg a foot shorter — and will tend to circle the room.

Part III — …that we can buy into…
So you have a process.  Great.  Does anyone buy into it?  If your process is opague and non-inclusive, no one will buy into the results.  Open it up to the relevant people and set expectations for how their input will be used.  Just because people participate, the have to know that companies are not democracies — but why not let them bring good ideas into the mix?

Part IV – … and communicate to the organization
Once the leaders decide on what to do, they have to find a way to have the followers follow.  You have your carrots and your sticks, of course.  But usually there are not a lot of carrots in a recession, so that leaves sticks…  Not a good way to have people follow leadership.  So find new carrots that don’t cost money.  Communicate, provide non-financial benefits, give stock in lieu of cash bonuses.  But whatever you do — just make sure you communicate your sincere intent (unless of course your intent it’s insincere, in which case you are unlikely to be reading this.)

So, that’s the process.  Now get going.

By the way, I make software that helps with this.  www.expertchoice.com.

Good outcomes are the result of three factors: Quality of the decision, quality of the execution, and chance.    Quality of a decision comes down to a correct assessment of the ability to execute and the element of chance (which includes risk).  Quality of execution similarly is strongly related to chance, as executing without regard to risk is foolish.

Over the past decade or two the world’s business leaders have been obsessed with execution.  Here is a typical list from Amazon that shows a strong focus on execution as strategy. A similar list of books on risk is telling.  The focus here is more tactical and technical.  Risk apparently is the domain of geeks, not general managers.

And who was focusing on decision making?  Again a simplistic list from an Amazon search is revealing: almost all the books are on the psychology of individual decision making.  Few titles on collaborative decision making, or improving businesses to make better decisions. Put simply: why has there been so little focus on decision making that marries execution and chance for better business outcomes.

The current economic crisis is immensely complex and flip summaries will not resolve it.  However, it is clear that decision making in business, government oversight, and personal behavior has been found wanting.

- A finely tuned system that executes well, when all is well, will not do in dire times — our banking system is Exhibit A.
- Risk models that model economic times when there was little risk, will not tell us about the dangers the future inevitably holds– our housing and mortgage industries are Exhibit B.
- Business leaders whose rewards are reaped in the short term, will not make good decisions for shareholders and households that plan to reap their rewards in the long-term– our current stock markets are Exhibit C.
- Government that aims to regulate the interest of all market participants while clearly sitting in the pocket of some stakeholders earns the trust of no one– our crisis of confidence now is Exhibit D.
- People who have become only consumers, and whose life-style is borrowed with abandon, one day will have to return to the values of that People–we are almost all, unfortunately, Exhibit E.

Decisions.  We all face decisions.  Hopefully next time they will be better–decisions that acknowledge the importance of risk, and decisions that take into account our ability to execute.

The Washington Post explores the decision by the Department of Defense to punt (i.e. not make a decision) regarding awarding the $35 billion air tanker contract and leave it to the next administration. The seven-year process of not making a decision has included an ethics scandal involving Boeing and the controversy around Northrop’s involvement of EADS, a European firm.

FastCompany presents “The Courage to Make a Decision.

Jeff Cornwall explores ambiguity and “seemingly irresolvable dilemmas” in decision-making.

Rob from Coconut Headsets has created a new blog, Money and Minds: A blog about personal neurofinance where he will focus on how the brain affects financial decisions.

MSNBC posts an article on their own decision to pull Keith Olberman and Chris Matthews from their anchor positions on election coverage going forward.

ESPN has posted the 10 Worst Coaching Decisions Ever Made.

We’ve created a new site, OlympicDecision, to highlight the current International Olympic Committee process around choosing a host city for the 2016 Summer Olympics. The finalists are Chicago, Tokyo, Rio de Janeiro, and Madrid. We built a collaborative decision exercise for the community to help determine what criteria should matter as well as evaluating each city against the criteria. Check it out!

From turning down the Beatles to failing to recognize Microsoft’s potential, there have been some seriously bad decisions made in the business world. Neatorama has reprinted The Stupidest Business Decisions in History.

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Some people made decisions that led to the world best discoveries while others thought we couldn’t “drill into the ground to find oil”. “Bad Quotes for Famous People” (courtesy of The Univerisity of Western Ontario) demonstrates how ingrained biases can lead to a failure to recognize potential.

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People make decisions and very often second guess themselves. Here is an article from The Huffington Post on “How To Be Satified With Your Decisions“.

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“When you have to make a choice and don’t make it, that is in itself a choice.”  ~William James

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“The hardest thing to learn in life is which bridge to cross and which to burn.”  ~David Russell

Choosing the president has little to do with qualifications.  The vast majority of the electorate (informed or uninformed, intelligent or dumb, educated or not, rich or poor) has little sense of what the president does, let alone what would make one person more qualified for that job than some other person.   Instead it’s all about which candidate can set the more favorable context and who can frame the decision voters face.

I have my own personal biases as to what I think the president ought to do, but I can’t be sure.  Watching West Wing and living in DC doesn’t make me qualified to judge.  Now there are certain well documented decisions the president makes that have long-term consequences.  These include selecting the senior leadership of government agencies, nominating judges, negotiating agreements with other countries, and acting as the commander in chief.  But few of us know much about any of this. 

Electioneering then is only marginally related to the candidates qualifications.  Instead it’s an old fashioned war of cognitive biases.  The first one is simple: choose your battlefield — frame the decision.  The candidate who can define the issues of the election to his/her advantage has an enormous advantage.  This is where money comes in.  The money allows a candidate to build a machine of influencers in two ways:  you engage the influencers in the media (talking heads, journalists, show hosts) by sending out messages that are easy to digest and it allows you to engage a community of supporters that are out there angling for money every which way.  A person who pays money to a campaign not only helps keep the machine going, but is also much more likely to try to engage someone else to vote for the candidate.

The second cognitive bias is the mere recognition bias.  We like what we know, even when we don’t know what we like.  So a candidate that is recognized by the electorate — even if that recognition is only vaguely positive – is more likely to be elected.   So getting out early and establishing a positive context with the candidates name and image is critical in national races. 

Now as any old election hand knows, national races are not won only by appealing to the base of one’s own party.  They are won just as much by depressing the turnout of the opposing candidates own party, and by appealing to the uncommitted and non-partisan voters.  This brings the money back into the picture: creating a negative context around the opponent.   As the election draws nearer and more undecided voters start to pay attention, the opportunity to influence the candidate’s context is the greatest.  At this point races will usually turn to absolute mud.

Given the preceding analysis, it is obvious why John McCain’s ill received Paris Hilton/Britney Spears ad was sheer election influencing genius.  At this early point in the race the facts are irrelevant.  Prior to Barack Obama’s world tour the bar had been set low by his handlers and he easily cleared it.  To deflate the positive press and throw up sufficient doubt, the McCain camp simply needed to puncture the positive with sustained negative talk.  The point wasn’t to strike out and make a serious point about Obama being on par with Mlles Hilton and Spears — it was only to establish a counterweighing negative conversation around Obama.  And the ads, repeated a million times over and ridiculed by most, didn’t reflect nearly as negatively on McCain (except for some political junkies) as they effectively halted the victory lap of Obama.  Changing the frame of the conversation, and establishing a negative context was the mission — accomplished.