First Friday Book Synopsis

"…like CliffNotes on steroids…"

Paul J.H. Schoemaker: A second interview by Bob Morris

Paul J.H. Schoemaker is a pioneer in the field of decision sciences, among the first to combine the practical ideas of decision theory, behavioral economics, scenario planning, and risk management into a set of strategic decision-making tools for managers. He is co-author of a landmark book on the subject, Winning Decisions: Getting It Right the First Time. He has written nine books, the latest of which is Brilliant Mistake: Findings Success on the Far Side of Failure (Wharton Digital Press 2012). In addition, he has written over 100 academic and applied papers, which have appeared in such diverse journals as the Harvard Business Review, the Journal of Mathematical Psychology, Brain and Behavioral Sciences, and The Journal of Economic Literature. Given their global applicability, his writings appear in at least 14 languages. His scholarly work ranks in the top one percent in academic citations globally as measured by the International Science Index (www.ISIHighlyCited.com).  He is also an entrepreneur: he is founder and executive chairman of Decision Strategies International, Inc. Finally, Paul is a dedicated educator: he is research director of the Mack Center for Technological Innovation at the Wharton School of the University of Pennsylvania, served for five years as a director of the Decision Education Foundation, conducted hundreds of lectures and executive seminars around the world. A native of the Netherlands, Paul lives on the East Coast with his wife; they have two children.

Here is my interview of Paul. To read the complete interview, please click here.

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Morris: When and why did you decide to Brilliant Mistakes?

Schoemaker: Two issues have always intrigued me.  First, when the founder of Honda claims that success is 99% failure, I wonder why we label the necessary steps toward success in such a negative way?  Failure and its twin sister “mistake” too often get a bad rap.  Second, when executives tell me that they learned the most in their careers from mistakes, I wonder why they don’t make a few more.  In the book, I suggest that we should make more mistakes (given how valuable they often are), but most people deeply reject that seemingly silly notion.  I was also fascinated with Thomas Watson’s counter-intuitive advice, as founder and Chairman of IBM, that if you want to succeed faster, you need to make more mistakes.  Our ambivalence about mistakes in business seemed an underdeveloped topic to me, especially the paradoxical notion that some errors will prove to be brilliant over time.

To learn maximally from mistakes, we need to commit more errors than we deem optimal as judged within the bounds of our limited rationality.  This idea may be hard to swallow.  Yet, it is the quintessential insight of this book. To my way of thinking, mistakes can be brilliant in two ways.  The first is to learn from an unexpected setback so much that it starts to dwarf the cost of the mistake.  The second way, which is more difficult to achieve, is to create strategies, organizations or cultures where people can make the types if mistakes where the learning benefits far exceeds the cost of the mistake.

Morris: Were there any head-snapping revelations while writing it? Please explain.

Schoemaker: Hardly any “head-snapping revelations,” but certainly a few surprises. Successful people tend to have a different view about mistakes than most ordinary people.  Not only are they more tolerant of them (in themselves and others), but they often embrace them.  Notable examples are Steve Jobs who celebrated his mistakes during a commencement speech at Stanford, or C.K. Rowling who argued that she could not have produced the astoundingly successful Harry Potter series (books, movies, accessories) without having hit rock bottom first.

In the arts and humanities, people embrace mistakes more readily than in business, I feel.  As trumpet great Wynton Marsalis put it so well, if you are not making mistakes, you are not playing jazz – you are not trying.  I believe the same applies to life, since that requires a great deal of improvisation as well.  I don’t think that perfectionists, or people who eschew mistakes for other reasons, realize their full potential as human beings, either for themselves or others

A surprising conclusion is that people who are more risk-averse should make more deliberate mistakes, since they can be used as hedges. This was counter-intuitive to me at first.  A strong portfolio case can be made for investing in mistakes.  For a risk-averse decision maker, it may be worth putting some money in a project expected to yield a loss provided this investment offers a sufficient hedge in case other investments sour.  Even though that seemingly inferior project will not raise profit expectations, it can help reduce losses in case bad scenarios happen.  Similarly, a deliberate mistake can be viewed as a hedge against conventional wisdom, one that will have a high payoff when the majority view of the crowd happens to be wrong (but a loss otherwise in all likelihood).

Morris: Please explain the approach you take in the book to establish a case for making brilliant mistakes.

Schoemaker: In the book, I draw more on behavioral decision theory and its close cousin, behavioral economics, than portfolio theory or options thinking.  Because humans suffer from bounded rationality and furthermore don’t know what they don’t know, the only way to overcome myopic frames, overconfidence, and incremental career progress is to innovate beyond the bounds of our self-limiting world views.  I describe a long list of past business mistakes – as judged by the conventional wisdom at the time – that proved to be brilliant.  These include personal copiers, selling via pet stores, ATM machines, credit cards for students, organic food, fractional jet ownership, and tobacco-free cigarettes.  Just as these ideas were ridiculed at the time, there are many silly ideas floating around today in business that will prove to be brilliant in the future.  The challenge for managers is to recognize them, and this can only happen if leaders create sufficient space for productive mistakes to occur.  In most companies, brilliant mistake may already have been made, but the brilliant part lies dormant because there is little appetite or capacity to mine the mistake.  Since the tuition was paid, why not extract the lesson?

Morris: All of your previous books are research-driven. Is that also true of Brilliant Mistakes?

Schoemaker: I build on the strong foundation of decades of research in behavioral economics and decision psychology.  I offer a practical plan for separating destructive from constructive mistakes, for learning to make more of the brilliant kind.  I encourage leaders to embrace this quality, to milk it for all of its evolutionary and learning potential.   For those rationalists who deem the notion of a Brilliant Mistake to be an oxymoron, I would recommend that they take a portfolio view. A strong case can be made for investing in projects that are expected to yield a negative return. For a risk-averse decision maker, it may be worth putting some money in a project expected to yield a loss provided this investment offers a sufficient hedge in case other investments sour.  Even though that seemingly inferior project will not raise profit expectations, it can help reduce losses in case bad scenarios happen. Similarly, a deliberate mistake can be viewed as a hedge against conventional wisdom, one that will have a high payoff when the majority view of the crowd happens to be wrong (but a loss otherwise in all likelihood).  My book provides the formal argument for those interested.

Morris: Mistakes can either be intentional or unintentional. Please cite a few examples of mistakes (i.e. those that are deliberate and purposeful) can be beneficial.

Schoemaker: Mistakes have been the cause of great discoveries and revolutionary new insights.  It was bad judgment that led the Wright brothers to try to fly: everybody knew at the time that humans couldn’t fly and never would.  In 1895, just eight years before their fragile construct took to the air, Lord Kelvin, the esteemed British mathematician, physicist and president of the British Royal Society, had unambiguously declared that “heavier-than-air flying machines are impossible.”

It was relative ignorance that prompted Albert Einstein, a lowly patent clerk in a Swiss law office, to pose some silly questions about the nature of time, space and energy.  Albert Einstein made at least 23 mistakes in his published (and refereed) scientific publications.  Some of these were necessary to achieve his monumental insights about the deeper forces of nature.

At a more mundane level, I describe a young woman deciding to date any person asking her out and in the end marrying someone she wouldn’t have given a second look.  She was willing to test her preconceived notions about Mr. Right and companies should perhaps do likewise when hiring new talent.  Hiring in your own image is seldom the best approach.

Morris: In the Preface to Brilliant Mistakes, you observe, “For most people, the problem is not that they make too many mistakes but too few.” Are there any examples of that in your own experiences thus far?

Schoemaker: Although there has not been that much brilliance in my own life, there are several personal examples that I would consider “brilliant” mistakes at my own level.  One concerns my decision to take a two-year sabbatical with Royal Dutch/Shell’s planning group in London just after having been promoted to associate professor at the University of Chicago.  Many colleagues deemed this a mistake since my academic career was going well and leaving the world of scholarship might cast doubt on my commitment to research etc.   This risk was indeed real, and my two-year absence from publishing probably did not help my academic career.  But it also opened up new vistas about life beyond academia and led me to found Decision Strategies International, which for 20 years now has served leading companies around the world in the fields of strategy and decision making.

The second mistake concerned our family’s move from Chicago to Philadelphia without there being any single compelling reason to do so.  We were quite happy in Chicago but I left nonetheless to be closer to family, friends and colleagues I had worked with in academia and business.  It turned out to be a great move, without regrets and many new experiences that Chicago would probably not have offered.

In the book I describe a third example, where our company decided – against its better judgment – to respond to Requests for Proposals (RFPs) that came in over the transom.  We had good reasons to believe it would be a waste of time to pursue such RFPs, but then decided to challenge this key assumption.  It turned out that we were wrong; some of these random RFPs proved quite valuable to us in terms of new clients and growth.

Morris: Which factors have the greatest impact on a decision’s outcome? Which of them seems to have the greatest impact? Why?

Schoemaker: Companies that want to compete on innovation are well-advised to become more error-tolerant in practice and develop better methods for capturing the lessons from mistakes.   Such companies should also emphasize that managers (especially younger ones) who are involved in project failures, are to be viewed as being on a fast learning track, rather than an exit track.  Given the significance of failures and mistakes that have led to success, there is potential value from the lessons learned if they are documented, captured and shared. Career development benefits should follow for those involved in the right kinds of failure, assuming they learn and apply the lessons to avoid mistakes in the future.  This can be tested via performance reviews as well as actual on-the-job behavior.

The deeper challenge in all this is that leaders must learn how to celebrate the egg that people invariably have on their face, award.  This president of an Ann Arbor business decided to institute a Golden Egg to make sure his organization would extract as much learning as possible from past failures.  This story is detailed in the book.  His viewpoint was that mistakes are valuable assets that belong to the organization.  To hide them and not share the lessons would amount to destroying shareholder wealth.  At first, few managers wanted to receive the Golden Egg award, but after a while it became much sought after.  Winners would proudly regale visitors in their office with the tale of their failed venture and proudly share its lessons.   The president created a true learning culture.

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To read the complete interview, please click here.

Paul cordially invites you to check out the resources at these websites:

Home Page: please click here.

Wharton’s Mack Center: please click here.

His Amazon page: please click here.

His Wikipedia page: please click here.

A video: please click here.

Wednesday, May 23, 2012 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Erik Calonius & Ten Steps Ahead: An interview by Bob Morris

Erik Calonius

Erik Calonius is a former reporter, editor, and London correspondent for the Wall Street Journal. He served as Miami Bureau Chief for Newsweek magazine, where he was nominated for the Overseas Press Award, and as an editor and writer for Fortune magazine, where he was nominated for the National Magazine Award. He has collaborated on some 20 books, and recently with Dan Ariely on the NY Times bestseller, Predictably Irrational. He has authored two books: The Wanderer: The Last American Slave Ship and the Conspiracy That Set Its Sails and, most recently, Ten Steps Ahead: What Separates Successful Business Visionaries from the Rest of Us. He has a degree in English Literature from Ohio Wesleyan University and a masters degree from the Columbia University Graduate School of Journalism.

Note: To read Calonius’ discussion of The Wanderer, please click here.

Morris: Before discussing Ten Steps Ahead, a few general questions. First, to what extent did your formal education prepare you for a career in journalism?

Calonius: My formal education helped. But my writing today rests largely on my innate love of storytelling, and my years with the Wall Street Journal. The Journal was a great place to learn how to write. A very demanding place, I must add. But if you had the stuff to write front page stories (and fortunately I did) they gave you a lot of encouragement and opportunity.

Morris: Who has had the greatest influence of your personal development? Please explain.

Calonius: I’d have to say my son, who from his infancy through his teens taught me patience, forbearance and selflessness. As you will see, Ten Steps Ahead is dedicated to him.

Morris: Who and/or what have had the greatest influence on your professional development? How so?

Calonius: My peers in journalism have been my greatest supporters and mentors. One of my close journalism buddies works at Starbucks now. Another drives a tour bus.  Another is head of Time Inc. Another is the business editor of the New York Times. Another is head of Bloomberg. Wherever they have landed, they have all helped me along my way.

Morris: Now please focus on Ten Steps Ahead. Please explain its title and subtitle.

Calonius: We see people–Steve Jobs, Richard Branson, Warren Buffett–who are always ten steps ahead of the rest of us.  These folks are business visionaries. And the question the book asks (the subtitle is “What separates successful business visionaries from the rest of us”) is HOW do they do it?

Morris: In the Introduction, you assert that the brain is a “visionary” device. How so?

Calonius: If you look at the palm of your hand, and then close your eyes, you can see it there. The brain not only allows us to see things like, that, but, in our imagination, to move the parts around. In a greater sense, though, the brain is a visionary device because it allows us to find patterns in life, see missing parts, solve problems. That’s why we are able to take new stock of business visionaries–we, through the new discoveries of brain scientists and cognitive psychologists, have new tools to understand the brain and its effect on our performance and behavior.

Morris: What are neurotransmitters and why are they significant?

Calonius: Very simply, they transmit signals throughout the brain. The interesting thing is that was find that they form constantly–that our brain is very supple, and that (if we use it) we can make all kinds of new connections. So we are constantly learning new things. So many people settle into a rut, into straight and narrow thinking. But they don’t have to.

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To read the complete interview, please click here.

Wednesday, March 2, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , | 1 Comment

Erik Calonius & The Wanderer: An interview by Bob Morris

Erik Calonius

Erik Calonius is a former reporter, editor, and London correspondent for the Wall Street Journal. He served as Miami Bureau Chief for Newsweek magazine, where he was nominated for the Overseas Press Award, and as an editor and writer for Fortune magazine, where he was nominated for the National Magazine Award. He has collaborated on some 20 books, and recently with Dan Ariely on the NY Times bestseller, Predictably Irrational. He has authored two books: The Wanderer: The Last American Slave Ship and the Conspiracy That Set Its Sails and, most recently, Ten Steps Ahead: What Separates Successful Business Visionaries from the Rest of Us. He has a degree in English Literature from Ohio Wesleyan University and a masters degree from the Columbia University Graduate School of Journalism.

Note: To read Calonius’ discussion of Ten Steps Forward, please click here.

Morris: Before discussing The Wanderer, a few general questions. First, to what extent did your formal education prepare you for a career in journalism?

Calonius: My formal education helped. But my writing today rests largely on my innate love of storytelling, and my years with the Wall Street Journal. The Journal was a great place to learn how to write. A very demanding place, I must add. But if you had the stuff to write front page stories (and fortunately I did) they gave you a lot of encouragement and opportunity.

Morris: Who has had the greatest influence of your personal development? Please explain.

Calonius: I’d have to say my son, who from his infancy through his teens taught me patience, forbearance and selflessness. As you will see, Ten Steps Ahead is dedicated to him.

Morris: Who and/or what have had the greatest influence on your professional development? How so?

Calonius:  My peers in journalism have been my greatest supporters and mentors. One of my close journalism buddies works at Starbucks now. Another drives a tour bus.  Another is head of Time Inc. Another is the business editor of the New York Times. Another is head of Bloomberg. Wherever they have landed, they have all helped me along my way.

Morris: What prompted you to write The Wanderer?

Calonius: As I describe in the preface, I was walking through a museum at Jekyll Island, Georgia and there, on the last wall was a photograph of a painting of the yacht Wanderer. It said that the ship had deposited some 400 Africans on the shore of Jekyll in 1858. I was surprised; I’d never heard of it. Soon I found that the details had been lost in the fog of history. I was looking for a book to write, and this turned out to be the one.

Morris: During your research for it, were there any head-snapping revelations?

Calonius: The greatest revelation was that at the end of the 1850s–just a few years before the Civil War–the largest African slave trading port in the country was not New Orleans, or Charleston, or Savannah, but New York City. I was also surprised to learn that the Southern firebrands who wanted to secede from the Union also wanted a civil war within the South, from which they hoped to emerge victorious and shape an oligarchy.

Morris: Although the slave trade was declared illegal in the U.S. in 1808, it continued for about 50 years thereafter. Here are two separate but related questions. First, to what extent did the absence of a Constitutional amendment prohibiting slavery share responsibility for the continuation of slavery even after 1808?

Calonius: It was the African slave trade that was declared illegal in 1808, meaning you couldn’t import Africans into the states. Slave trading domestically was legal. An amendment prohibiting slavery was suggested, but never enacted because of southern opposition.

Morris: The Wanderer is the last documented ship to bring a cargo of slaves from Africa to the United States on November 28, 1858. When the Wanderer reached Jekyll Island, Georgia from, Africa, approximately 409 of the enslaved Africans had survived. A prosecution of the slave traders was launched, but the defendants were found not guilty. Why?

Calonius: It’s a complicated story, but essentially by the time the conspirators were tried, the nation was already barreling toward civil war. Southern men were not about to hang their own–particularly when the North was even more active in the African slave trade, and not a man there had gone to the gallows.

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To read the complete interview, please click here.

Wednesday, March 2, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , | Leave a comment

Dan Ariely on irrationality in the workplace

Dan Ariely

Thanks to McKinsey & Company and its Quarterly, those of us who admire Dan Ariley and his work have access to an especially enlightening interview (February 2011).

To see it, please click here.

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The behavioral economist explains why executives need to recognize—and embrace—the irrational forces that affect themselves and their employees.

Although Dan Ariely is an academic by trade, he is a pragmatist at heart. The Duke professor and best-selling author brings his theories to light through practical applications and behavioral experiments, where irrationality is almost always certain. Ariely has written two books on the subject — Predictably Irrational and The Upside of Irrationality — and recently sat down with Olivier Sibony, a director in McKinsey’s Paris office, to share his insights into human behavior that can help companies make better decisions.

Watch the conversation in our video interactive, or download a PDF of the transcript.

Saturday, February 19, 2011 Posted by | Bob's blog entries | , , , , , | 1 Comment

   

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