What Were They Thinking? 2040's Ideas and Innovations Newsletter, Issue 101
Issue 101, March 30, 2023
Jared Diamond, author of Collapse, asked a profound question referring to the ancients in Easter Island. When they cut down the last tree on the island, what were they thinking? Seriously, what sane society would make a valuable natural resource extinct with one final hatchet job? Which in turn made their people extinct? Or how about a more complicated social problem replacing the US draft with an all-volunteer military, ultimately making war-related collateral damage and death for troops a problem principally for lower socioeconomic groups, not college grads from more affluent families for whom war is no longer personal.
But we could ask so many of the same questions., Here are just a few — in no particular order. What were they thinking?
Succession by the US southern states
The Romans using lead water pipes
Making Ron Johnson CEO of JC Penney
Prohibition
Filling the Hindenburg with hydrogen
Giving Adam Neumann and Sam Blankman-Fried access to buckets of investors’ money
New Coke
Forcing Native Americans onto reservations and children to go to boarding school
TikTok and Facebook unchecked
Decca Records passing on the Beatles
Trusting Larry Nassar with the US women’s gymnastics team
The Spartans: “That’s a pretty horse the Trojans left us”
Releasing ChatGPT without guardrails
Clearcutting the Amazon making indigenous people extinct
Japan attacking Pearl Harbor
Dubious Decision Making
People make bad decisions all the time without anticipating the consequences. Whether it is for short-term gain, a quick solution to an immediate problem or issue, perceived need to calm a workforce or society uprising, the compulsion to be the white knight and reduce anxiousness of citizens, out of simple desperation or just plain stupidity, bad decisions have bad consequences.
Here’s a real-life example to put things into perspective. A veteran online B2B publisher is convinced that his content is so valuable that he can pivot and transform readers into subscribers. His content has been published for the past 15 years online for free. The business model is based on partnerships and so far, advertisers have been content to use the boutique platform with its solid market reputation for branding, access to C-level executives and distribution of thought leadership.
The COO has a polar-opposite position from the CEO, so she conducts a survey among readers, with 89% saying they will not pay for the product. Despite the survey results, a freelance strategy consultant convinces the CEO to undergo an exploratory research exercise to investigate the possibility of paid circ to deliver additional revenue. She selects an acquaintance whose expertise is in paid subscriptions for brands with affinity consumer groups (think Peloton). The CEO is charged up, anticipating that he is sitting on a potential goldmine of uncollected income.
The subscription consultant creates dazzling dashboards. He prepares a competitive report using DTC brands as benchmarks. He creates a P/L showing upside revenue after 18 months. He never creates a plan with associated costs to move from one daily online article to a suite of daily articles to support a paid content model. Undaunted, the CEO still assumes readers will pay for what they have been getting for free. Again, the COO surveys readers with a hypothetical subscription offer. Again, nearly every single reader responds with no interest in paying for the content. The so-called circulation consultant pockets $35,000 for producing nothing relevant and the topic is dropped.
What was the CEO thinking? Is it ignorance? Hubris? Stubbornness? This story is not unique. Tons of money can be lost over pride and a false sense of importance. Or laziness. Here’s another quick example: A real estate advisory saves one of its clients $12.6 million by uncovering the fact that the client had been billed incorrectly by its own clients who ignored clauses and nuances in their deals. Instead, the developers billed bump-ups on annual leases without looking at the details in the contracts. And the client never thought to challenge the billings. What were they thinking? Better yet, was anyone thinking? This is a lesson that everyone can learn from to not take things for granted.
Planning Ahead
Popular wisdom would argue that the big tech firms could be accused of not planning ahead. Capital markets shape the ebbs and flows of the scope and size of a business. It has become apparent that the unchecked exuberance of market demands during the pandemic led so many tech firms to gin up and overload their organizations. Amazon is a classic example. Now, 30,000 layoffs later, and still counting, CEO Andrew Jassy wised up to Jeff Bezos’s vision of infinite growth (infinite jest?). And Amazon is not alone. Zoom has cut 15% of its staff; Dell, 5%; Salesforce, 10%; Yahoo, 20%; Paypal, 7%; Google, 10%, Microsoft, 5%; Meta cut 10,000 employees … and Elon Musk with Twitter is in a league it its own. All told, over 300,000 recent college grads making over six figures (with free lunches and yoga) are on the bench.
And that’s not all. Ford, Goldman Sachs, and Pepsico – to name just a few – have cut back rather abruptly. Hindsight is 20/20, but you have to ask the question, what were they thinking? And why did these companies all come to the realization at the same time and cut their ranks so abruptly? Groupthink can be a dangerous game.
And then there are the recent bank failures, which occurred for a variety of reasons, both internal and external. Bank management had to see it coming, but it seems the acceptance of high risk for greater rewards (gambling for the greatest short-term gain) along with the aspiration that positive momentum would be continuous, despite the warning signs, makes the what-were-they-thinking question even more compelling. At the bottom of all these fiascos is management’s lack of foresight. Or maybe too much pressure and demand from stakeholders to generate the maximum amount of profit in the short term, long term be damned. That pressure clouds the judgement of management who can then be caught flatfooted.
Bad Decision Making
The bad decision problem has some concrete neurological and psychological foundations. According to Kendra Cherry for Verywell, “Heuristics are mental rules or shortcuts that allow you to make judgments quite quickly and oftentimes quite accurately. But they can also lead to fuzzy thinking and poor decisions.” Contributing to that process is making bad comparisons. Cherry adds, “When making decisions, people often make rapid comparisons without thinking about their options. To avoid making bad decisions, relying on logic and thoughtful examination of the options can sometimes be more important than relying on your immediate gut reaction.”
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