I have been reading an interesting book, “Leadership and Self-Deception” by the Arbinger Institute. The author(s) put the quite philosophical notion of self-deception in a business context. If you find the book, I strongly suggest you to spend a couple of evenings to read it; it’s not big, just about 170 pages.
The book initiated some musings…
In our high-tech world we all like innovations. Every businessman dreams about Yahoo and Google success. We all know the stories of entrepreneurs who became multi-millionaires overnight. And Canada is a land of entrepreneurs, you know.
Bright ideas can make us rich. All needed is just proper circumstances, to be in the right place at the right time. Well, some luck, probably. If we hire a group of very bright people, say, software developers, who can sit all night and come up with something brilliant in the morning. Isn’t it what we need? Another ICQ? Netscape? iPhone has enormous success. Brilliant ideas will make us rich.
Sounds like a strategy… more… like a business strategy… right?
By the way, there is no sarcasm, I agree with almost everything I have just said. But…
Many years ago a strange twist in my career brought me to the futures market. I worked for a bank using somebody else’s money, then I played using my own money, then I even worked as a trader on the floor for a little while. I did not make a lot of money, but I learned one lesson.
When you buy (or sell) futures, you are essentially bid for something that is going to happen in future. To support your claim you put some money in so-called margin account. If the market goes as you predicted, your margin account increases, if the market is against you, the money is taken from your account. The transaction is made every day after the future trades. And at the end of the game your margin account shows exactly how much you made or lost. If the amount of the money at the end of the journey is bigger that in the beginning you obviously won. If it is smaller, you lost.
So, if you predict the future correctly, you margin account will accumulate some money. Well, here is a caveat.
You may be absolutely correct about the price of the commodity in 12 months and therefore correctly predict the future price. However, if during these 12 months the market moves up and down, and sometimes against your prediction, you may not have enough money to support your margin account. Remember, when the market is against you, you may have to put money into your margin account. If you can’t do it, your trade is terminated. Even if you predicted the future price correctly, you still lose.
Imaging a company that predicted a high-tech future correctly. For example, betting on total usage of Kindles in 2012. The company starts developing software for Kindle, say, for the lawyers. And the company starts spending a lot of money, as lawyers are still very conservative and prefer paper to any digital document. And if there is a small mistake, say, lawyers eventually start using Kindles, but in 2022 only. The company will spend money working on that brilliant idea. But they will be out of business soon, since they could not support their operations.
Am I against innovations? NO! I am just saying that any business needs a supporting mechanism, some cash flow that will take them through 2012 to 2022 and finally bring billions to them.
We all know how to achieve stable cash flow. In theory. We know, that we need to constantly improve sales. We need to constantly improve process. We need to constantly improve culture.
I want to talk about culture. The self-deception mechanism can make us believe that everyone in our company believes in our bright Kindles idea. And everyone wants to sacrifice to achieve that bright future. Most of the people though need to eat, to support their families. And they like stability. One of the common nonsense that employers like to convey to their employees is that people need to (must!) like changes. Otherwise they are some kind of second-class citizens. NO! People don’t like changes, people like stability in their lives. A little of surprise does not mean changes; it just supports the feeling of stability. Stability means constant sales for the business and proper process to deliver according to the sales.
No, I am not against innovations, bright ideas and coding all night with a lot of pizza and music. I am just saying that all is needed to support it is the stable basis.
