2020 in Review. CI Business Brief Book Review Column.

 As the year draws towards it’s end it’s time to take a moment to pause and look back at some of the standout business and management titles published in 2020.  It’s an understatement to suggest that the year has not unfolded as many of us may have planned in January, though with hindsight my Christmas reading last year,The End Is Always Near by Dan Carlin, was grimly prescient.  Whilst Covid has swept all before it in 2020 the pandemic comes at the end of a decade of disruption, with austerity, technological change, Brexit and Trump all challenging established ways of working and thinking.  With that in mind it’s perhaps not surprising that much ink has been spent in 2020 trying to make sense of the rapidly evolving environment we find ourselves in and we might most effectively adapt to our changing circumstances.  

 

Two books in particular offer useful insights into how digital has revolutionised established businesses and provided fertile ground for new enterprises.  In No Rules Rules: Netflix and the Culture of Reinvention Reed Hastings, CEO of Netflix, examines with the INSEAD business school professor Erin Meyer how he transformed a company initially operating as a DVD mail order service into an online streaming service with 190 million subscribers and a market share rivaling Disney.  Equally interesting is Sarah Frier’s No Filter: the inside story of how Instagram transformed business, celebrity and our culture, which looks at how Instagram has grown from the photo app purchased by Facebook in 2012 for $715 million into a business valued at $100 billion with over 100 billion users. 

 

A number of books this year have taken a longer view on the social, economic and political ramifications of the changes the digital revolution is giving pace to.  Anne Case and Angus Deaton’s Deaths of Despair and the Future of Capitalism explores the factors behind the decline in life expectancy in the United States over the past three years and the dramatic rise in deaths from suicide, drug overdose and alcoholism.  Daniel Susskind’s A World Without Work could be seen as a more positive companion piece to Case & Deaton’s book, considering the potential benefits (and draw-backs) in the growth of automisation and AI.  Alongside these two books David Goodhart’s Head Hand Heart makes a compelling case for a rebalancing of the value our society places on manual and caring labour, when compared to cognitive work. 

 

If one thing is certain it is that new, robust and adaptable approaches to working are required if we are to address the challenges that have arisen over the last decade.  In How Innovation Works Matt Ridley gives a broad, historical account of how innovative thinking and working has improved living standards and social wellbeing over the past three hundred years.  Margaret Heffernan’s Uncharted: how to map the future together looks at how long-term projects developed over generations have adapted to changing circumstances, while John Kay and Mervyn King’s Radical Uncertainty examines both successful and flawed decision making methods in a world of ‘wicked problems’.  

 

Sometimes it is necessary to look back in order to be able to move forwards. Money for Nothing by Thomas Levenson unpacks the South Sea bubble of the seventeenth century, looking at the its immediate historical impact and the broader implications for our current economic systems.  Flash Crash by Liam Vaughan has the pace of a financial thriller as it investigates the cause of the unexpected and sudden market crash on 6 May 2010, revealing not just the man behind the fall but also the vulnerability of our financial systems.  Jill Lepore’s If Then: how one data company invented the future takes a similar historical approach to the digital world, looking at the development of the Simulmatics Corporation and their use of computers to attempt to predict and influence customer behaviour in a way that foreshadows the world of Facebook and Cambridge Analytics. 

 

It’s easy to loose the individual human element when discussing ideas around economic, technological and social change. As Aaron De Smet pointed out in a recent edition of the McKinsey Quarterly, change is often felt as a form of bereavement and at the moment many of our organisations are grieving (https://tinyurl.com/y5teuxpy).  It’s no coincidence that many of the books published over the past few years have focused on health and wellbeing.  As such my final recommendation would be Jo Owen’s Resilience: 10 habits to thrive in life and work, which offers a practical tool-kit which we can use to build and deepen our resilience in anticipation of whatever unforeseen challenges 2021 may throw at us.  Happy New Year!

Five Things I’ve Learnt About Jersey in the Pandemic: Bailiwick Express Article

 https://www.bailiwickexpress.com/jsy/opinion/chief-librarian-edward-jewell-five-things-ive-learnt-about-jersey-pandemic/#.X8C3cOTfXDt

Super-Forecasters: The Art & Science of Prediction. CI Business Brief Book Review Column

Are you a fox or a hedgehog?  That is one of the questions Dominic Cummings appears to have been asking UK civil servants to consider when he recommended they read Philip Tetlock and Dan Gardner’s book Super-Forecasters: The Art & Science of Prediction. Drawing on the findings of the Good Judgement Project (a US intelligence funded initiative started in 2011 by the psychologist Tetlock), Super-Forecasters seeks to set out some basic rules and guidance to help individuals, organisations and Governments better predict what is likely to happen next.  Working alongside journalist Gardner, Tetlock has written an accessible guide to not just economic and political forecasting, but also to the skills required for clear-thinking in an increasingly complex world. 

 

The fox and the hedgehog question was first posed by Isaiah Berlin in 1953.  Berlin suggested that the fox knows many things, while the hedgehog knows one big thing. Tetlock and Gardner contend that hedgehog thinkers are more convincing and get more airtime because they have a rock-solid confidence in their belief.  Unfortunately, however, hedgehog thinkers are also statistically more often than not wrong, in-part because they lack the self-reflection and instinctive uncertainty of the fox.  As Robert McNamara, initial hedgehog-like advocate for the Vietnam War, admitted; “The foundations of our decision making were gravely flawed.  Even the best and brightest need to be challenged.”   

 

Alongside intellectual challenge Tetlock and Gardner call for clear, unambiguous language in decision making. The 1961 Bay of Pigs invasion is given as an example of when misinterpretation led to disastrous outcomes.  The US Joint Chiefs of Staff and intelligence community briefed President Kennedy that the plan had a ‘fair chance of success’.  The officer who prepared the briefing later said that by ‘fair chance’ he had in mind odds of 3 to 1 against success.  Following the failure of the invasion the intelligence analyst Sherman Kent proposed statistical definitions to describe possible outcomes, with 100% as certain, 93% as almost certain, 75% as probable and so on.  It took the failure to discover WMDs in Iraq over 40 years later for Kent’s proposals to be adopted, but now they form part of US intelligence briefings.  

 

Super-Forecasters also gives thought as to how teams and leadership styles need to adapt to best position themselves in the face of changing information and circumstances.  As the authors put it “how can you maintain the decisiveness of leadership if you are keeping an open mind?”  Primarily it is a question of making a clear distinction between deliberation and action, whilst maintaining a willingness to change.  Tetlock and Gardner draw heavily on military thinking, quoting the Israeli Defence Forces’ slogan; “plans are merely a platform for change” and the Wehrmacht’s definition of good leadership; “The art of leadership consists of the timely recognition of circumstances and of the moment when a new decision is required.”

 

Tetlock and Gardner have a similarly robust view as to how teams should ideally operate.  They recommend ‘constructive confrontation’ and ‘Active Open Mindedness’, which entails the avoidance of group think, respectful challenge, the humility to request help and confidence to admit ignorance.  Underpinning this is the belief that ‘diversity trumps ability’.  Uniform perspectives only produce more of the same, it is through a diversity of perspectives that teams excel.  It is tempting to think Tetlock and Gardner’s book may have inspired behind Cumming’s infamous blog post, calling for “weirdos and misfits with odd skills” to apply for jobs within No 10.

 

Tetlock and Gardner draw their insights into a useful nine-side appendix at the end of Super-Forecasters, setting out Ten Commandments for Aspiring Superforcasters.  Advice such as ‘break seemingly intractable problems into tractable sub-problems’ and ‘strike the right balance between inside and outside views’ provides a simple approach to analytical problems that could be used in many different contexts.  Their parting shot returns to the overriding theme of Super-Forecasters though ‘Don’t treat commandments as commandments.”  Keep an open mind and be the fox.  

Radical Uncertainty: Decision-making for an unknowable future. CI Business Brief Book Review Column

 John Kay and Mervyn King almost called their new book Through a Glass Darkly but opted instead for Radical Uncertainty: Decision-making for an unknowable future (The Bridge Street Press: 2020).  Either title would have been uncannily prescient for the environment we all now work in.  Written before Covid-19 took hold Kay and King looked at an increasingly uncertain world and asked a basic but fundamental question, how can we plan ahead and make decisions ‘when there is no rule book’?

 

With Radical Uncertainty Kay and King have written an accessible, informative and entertaining study of modern economic theory and its practical utility in guiding decision making in an increasingly unpredictable world.  Radical Uncertainty is built around three propositions;

1). The world of economics, business and finance is non-stationary and is not governed by unchanging scientific laws

2). Human behaviour is determined by evolutionary rationality, which is determined by subjective context, not objectivity

3). Humans and market economics are social activities

 

In short we live in ‘a world of uncertain futures and unpredictable consequences, about which there is necessary speculation and inevitable disagreement’.  This, for Kay and King, is the world of radical uncertainty, where ‘wicked’ problems operate beyond the rules that frame ‘resolvable uncertainty’ which normal economic models are designed to answer.  This isn’t intended as a council of despair, but rather a reminder that off-the-peg solutions will fail to resolve and potentially worsen problems rooted in radical uncertainty. 

 

Radical Uncertainty initially focuses on testing the limits of probability reasoning, in particular the Chicago School model of economics and Friedman’s Price Theory, which suggests ‘we may treat people as if they assign numerical probabilities to every conceivable event’.  Key and King acknowledge the potential benefits of what they term ‘small-world’ models to help frame thinking, but call for an approach that draws from a wider breadth of knowledge and experience.  As they conclude, ‘people who know only economics do not know much about economics’.

 

To Kay and King context is all.  They argue that real households, business and governments do not seek to optimise, most of the time they seek merely to cope from day-to-day.  This is perhaps to advocate an ominshambles model of economics, but Kay and King repeatedly illustrate how individuals and organisations tend to seek only to optimise their current position, rather than an abstracted, optimal position.

 

Radical Uncertainty is a useful primer as to how we can challenge the group-thinking that can lead to day-to-day errors and broader crisis such as the Iraq War and the 2008 financial crisis.  Kay and King suggest we acknowledge the social nature of decision making and give more consideration to ‘communicative rationality’, how we express our views and judgements to other.  In particular they suggest that we need to be conscious when putting forward arguments that we are creating narratives to describe and bring order to an uncertain world. 

 

To Kay and King the most important thing is to ensure there is always someone in the room willing and able to challenge the prevailing narrative.  As they point out Roosevelt had Harry Hopkins and Nixon had Kissinger.  In their words “beware the narrative of the hedgehog, derived from ‘universal’ explanations, ideologues and grand theories”.  As Margaret Thatcher once said, ‘every one needs a Willie’.

 

I would like to have seen greater consideration as to how AI and the operations of companies like Amazon are impacting on consumer decision making, but ultimately the focus of this book isn’t primarily economics.  Radical Uncertainty is really about leadership. It is about how together we need to forge narratives that help guide our thinking, visualise future scenarios and ensure plans are robust enough to cope with a range of plausible alternatives.  It is about how these narratives can provide a secure base for companies and communities to engage with uncertainty, allowing it to become a source of opportunity rather than despair.

How Innovation Works. CI Business Brief Book Review Column

Everything has changed.  That is the message we are repeatedly told by media and it is a message that is increasingly borne out by the evidence.  As Sir Nicholas Kenyon, Managing Director of the Barbican Centre recently wrote, "...nothing will be quite the same again, nor should it be.  The crisis has raised issues around our relationship to cities and the environment, travel, home working and our offer to local communities."  

There is a sense that we are at a hinge moment which has the potential to have profound social and economic consequences.  A moment that has risks, but also opportunity.  There aren't any ready-made guide books to the post-covid world yet, but there are books that can help us chart out some of the features of the new working environment and suggest routes through its terrain.  

 

Books like Daniel Susskind's recent A World Without Work provide an insight into how AI and atomisation is changing the employment landscape, while titles like Palaces for the People by Eric Klinenberg and Paul Mason's Clear Bright Future offer versions of how we might want to reconfigure society in the wake of technological change.  These are all helpful in sketching out what we might come to expect over the coming months and years, but perhaps what we need now is to consider how we are thinking about these problems, to ensure our minds are flexible and adaptive to the challenges and opportunities ahead.  We need to avoid jumping straight to readymade solutions.  We need to learn to innovate.  This is what Matt Ridley’s new book, How Innovation Works, sets out to achieve.

 

Ridley takes a broad, historical approach to his analysis, taking in examples from the energy industry, public health, transportation and computing to support his conclusions.  Written in an approachable and accessible manner Ridley casts a wry eye over case studies like the development of manpowered flight, where the Wright brothers succeeded in getting airborne, despite lacking the substantial government subsidies and social standing of their rival Professor Langley.   Or the story of Lady Mary Wortley Montagu, a well-read and determined 18th century noble woman who bought back to England the Ottoman practice of inoculation, demonstrating on her own children its power to provide immunity against diseases like small pox.  Against this radical approach to experimentation Ridley sets the current nuclear power industry, which he suggests has failed to thrive due to the (understandable) public reticence to atomic based risk taking.

                                             

From this collection of insightful and engaging examples Ridley draws a number of lessons.  He suggests that innovation is a collective, collaborative and organic enterprise that can only thrive in a free society when it is allowed to develop solutions to genuine market needs, rather than centrally set government requirements.  It requires 'a willingness to put in the hours, to experiment and play, to try new things, to take risks' and its vitality is constantly threatened by 'bureaucracy and superstition'.  

 

What does this mean in practice?  Ridley sets out quite clearly that innovation is generally a ‘bottom-up’ process.  It is very rarely the work of one person, instead requiring extensive research and team-work.  Ridley demonstrates that practical progress depends on a culture that nurtures experimentation, has light-touch yet effective operating systems and encourages challenge.  As the author points out, these are the traits of a successful start-up enterprise that older, more established and often more bureaucratic businesses need to embed if they are to retain their competitive edge.    

 

Ridley does have a distinctly libertarian approach to his subject and his aversion to practically any government regulation could be questioned by some.  His overall conclusion, though, is compelling.  "Innovation is the child of freedom and the parent of prosperity."  Without it we face stagnating living standards, political division and cultural disenchantment.  With it more people can lead healthy, fulfilling lives with a lighter impact on our planet's ecology.  Everything may well have changed.  Ridley’s thought provoking book challenges us to respond with a pragmatic and clear-sighted mindset.