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Summer 2007

"I think therefore I am" Descartes
"I think therefore I am, I think." The Economist

Wise leaders seek out and nurture trusted advisors. One of the most important and often least sought after advisors is the Fool. Fools provide the valuable and potentially hard to swallow feedback that courageous leaders value.

Does thinking about thinking just give you a headache? Well take some aspirin and relax while your local Sage gives you some practical insights on thought, decision and action. There is evidence that shows that we humans tend to make a quick decision based on our guts and then set about finding the evidence to justify our decision. When our decision process is stated that clearly, it just doesn’t sound, well, rational. It isn’t.

Here’s a practical example. What do you believe about global warming? Does it exist? If it does exist, is it just a statistical variation of natural causes? Or is it caused by humans? Don’t know? Don’t care? If you were to take a logical approach to your decision, you might borrow from Blaise Pascal, the 17th century mathematician and philosopher and come up with these four conditions:

• You conserve energy as though global warming does exist.
  
  • If you’re right and global warming exists, you gain a better future.
  • If you’re wrong global warming does not exist, you lose nothing and maybe save a few bucks on energy costs.
• You use energy as though global warming does not exist.
  
  • If you’re wrong and global warming does exist, your loss could be catastrophic.
  • If you’re right and global warming does not exist, you gain nothing & lose nothing.

The purely rational mind would look at those 4 conditions and assess the risk of each. In 3 of 4 you either break even or gain. In the 4th condition, you court catastrophic loss. Pascal would then postulate that the only rational thing to do is to conserve energy as if global warming existed. This choice would mitigate against the potentially catastrophic loss.

Now move from your personal belief and behavior to your business. Where in the 4 conditions does your business fall? Just as individuals do, businesses make decisions based on what they believe. Also, like individuals, the rational decision is to change behavior so as to avoid catastrophic loss.

By now, some of you have decided that this newsletter is about global warming; it isn’t. It’s about how we decide and how we act. First, our companies could simply act as if what they believe is true and not examine other possibilities. Or, our companies could examine the 4 conditions and weigh the costs and returns and then decide how to behave.

Think back to the days when Detroit was Motor City and the Big 3 automotive dealers were king of the hill. Had they examined their beliefs about competition, the 4 conditions might look like this:

• We believe viable competition exists in the automotive industry
  
  • We right and therefore we will stay competitive, we win
  • We’re wrong there is no viable competition but we lose nothing by behaving as if there is
• We believe no viable competition exists in the automotive industry
  
  • We’re wrong, we lose catastrophically
  • We right, there’s no viable competition, nothing lost, nothing gained

The American Big 3 automobile manufactures took the risk that no viable competition existed and they clearly lost the wager. They bet that they were invulnerable to competition and now Chrysler is European owned and Ford’s last bastion, the truck, is under heavy fire from a Japanese manufacturer.

What does your company believe about itself and about the market? Does it act as if there were no viable competition? Or that customers are so loyal they’d stay even if there were competition? Does it act as if no key employee will ever leave or retire? Does it act as if no natural disaster or act of terror will ever touch it? Does it act as if energy will always be affordable?

Are you willing to take those bets?

Sometimes companies are willing to take the risk because there may be costs associated with behaving as if the worst case scenario will happen. For example, if the Big 3 had acted as if there were viable competition, research, development and design costs may have been higher. If your company behaves as if a natural disaster or act of terror could touch it, then there will be costs associated with offsite data storage, safety plans, etc.

The important thing is to think about your beliefs and decide how you and your company want to behave in the short and long terms.

And as for global warming, you might want to rethink retiring to beachfront property...

Review of Never Rule Without A Magician, A Sage and A Fool

"While applying the richness and meaning of Jung’s archetypes in this book, its universal appeal is that the reader need not be schooled in Jungian archetypes to understand and profit from its pertinent message. I think this book’s value results from its practical insights regarding leadership in the context of today’s business environment."

Judy Principe, published in APT Bulletin of Psychological Type, Vol. 30 No 1 2007

Read more about key advisors in Never Rule Without A Magician, A Sage and A Fool by visiting www.novakassoc.com and downloading a FREE chapter.