The Wisdom of Tempered Optimism

The new project is appealing.   The new purchase has pizzaz.  The new franchise will surely work well.   The new training should pay handsomely.  

Many of us want to believe the Next Thing will fix our current malaise.   Be it corporate, financial, educational, psychological or relational...we want very badly for the Next Thing to fix the “it” that’s bugging us right now.     

And maybe it will.  

But maybe it won’t.    

How can we tell?  

What if we trained ourselves to ask some questions beforehand? 

• What if it brings in half the expected revenue?

• What if it takes twice as long to complete?  

• What if the relevant authority refuses to approve it? 

• What if the costs are double the projection? 

• What if it chews up every free weekend I have for the next two years? 

If significant components go wrong and the outcome is still good, perhaps your optimism is well-grounded. 

If you need everything to go right, for all the best-case scenarios to happen to get a positive outcome, walk away.    

Many times, a spreadsheet with ranges of revenue and cost will help.   A timeline with expandable decision points will instruct.   A one-page essay answering the question “If, a year from now, this thing fails, what will be the reason?” can be enlightening.   

But it only happens by asking the questions before making the decision. 

Persevere.

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“Do” or “Responsible”?

“So, what do you do?”   Perhaps the most common question in business.

“I flip burgers.”

“I’m a manufacturing supervisor.” 

“I analyze loan requests.” 

“I umpire Class A minor league baseball”

“I’m a project manager.”  

Each describes an activity.   How the person spends her time.   Perhaps enjoyably.   Perhaps only to pay bills.

What changes if, instead, the question is “So, for what are you responsible?” 

Taken seriously, the answers might be:

“I’m responsible to properly cook hamburger patties when I get a request from the front line crew.” 

“I’m responsible for 15 people’s safety, training, productivity and quality processes to serve our customers.” 

“I’m responsible for proposing loan decisions which allow our bank to take on appropriate risk.” 

“I’m responsible for the smooth execution of baseball games allowing each player to compile accurate statistics in his quest to move closer to the Major Leagues.” 

“I’m responsible for delivering new product prototypes according to its specifications and timelines.”   

Being responsible is being professional.   It’s owning the purpose of your job and the results of your job.   It’s the opposite of just punching in and taking up space.   

Likely, people will ask “What do you do?”   

But try answering it with your responsibilities next time.   It changes your view of your job. 

Persevere.

*My thanks to Tom Peters for triggering this concept for me many years ago.  

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Fewer, Better Decisions?

Market data for 2021 show once again stock index mutual funds outperformed mutual funds managed by humans ( source ).   Fully 85% of actively managed funds fared worse than automated funds which seek to simply mimic the aggregate behavior of the market.   

Which got me thinking...why?   Mutual fund managers are very smart people, deeply experienced in company analysis.  They have clear incentives to outsmart the market.   Yet, each year, a very few do.   And those few will likely NOT be amongst the few who outperform the market next year.   Why?  

Is it perhaps the complexity and volume of decision making required by an active fund manager?   

Consider the decisions a mutual fund manager must make to succeed in a single transaction:

1. Which stock should I buy? 

2. At what price should I buy it?

3. How many shares should I buy? 

And, with purchased shares in hand, two further decisions await:

4. At what price do I sell? 

5. Do I sell all or a portion of my holdings? 

The manager must make five decisions correctly to notch a profit from a single stock purchase.   Given that most mutual funds have at least fifty, and oftentimes hundreds, individual stock positions, the number of decisions multiply like rabbits.   As the portfolio turns over, there is more cash to invest and the cycle repeats.   It’s virtually impossible to get all of the choices right. 

Contrast these decisions with those facing an index fund.   The index fund organizers simply spread the available cash across all the stocks in the underlying index in a predetermined proportion.   The only buying and selling happens as customers send cash into or out of the fund.   All of which can be automated.   

Decision making takes time and mental effort.   Even if skilled and speedy, the decision maker can only make one decision at a time.  

Can I learn from this?   

Are there arenas where one can substitute a predetermined choice, like the index fund manager does, for a more involved set of choices, like an actively managed mutual fund manager does? 

• Can I predetermine always to eat a salad for lunch rather than choosing each day what to have? 

• Can I predetermine to hit the gym four mornings each week rather than deciding if I’m up for it today? 

• Can I predetermine what my restocking level will be for a supply rather than deciding afresh each time? 

• Can I predetermine to only pursue a new product innovation if I have three independent market-size estimates rather than deciding anew on each proposal at the moment? 

We often recoil at the thought of making predetermined choices.  Lunch will forever be boring!!!   We recoil at the thought that a human can’t pick stocks better than an algorithm.   You gotta know the company!!   But are those reactions valid??

It got me thinking. 

Persevere. 

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“He was mostly honest”

A friend used these words in a recent conversation describing a former boss of his.  

I knew of that boss, from some distance. He had a position of significance in his organization and industry.  Sadly, from my observations, my pal’s observation carried validity. 

Ouch. 

Is there a more incriminating description of a person?  

You can be “mostly” a lot of things.  Mostly on time.  Mostly calm. Mostly a good interviewer. 

But you are either honest or you are not.  When others suspect your honesty, each word you say is therefore suspect. “Is THAT PARTICULAR statement one of the true or false ones?”  Trust is destroyed.  

Protect your honesty, as if it was pure gold.  

Because it is.  

Persevere.  

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Thinking Differently about Heroes

On an otherwise uninspiring Monday evening in early December, I went to a local grocery store to pick up a package of frozen puff pastry my wife needed.  I knew where it was but didn’t see it in its usual place in the row of freezers.   I asked a nearby store employee if perhaps it had moved.   He helpfully looked but could see from the label on the empty shelf they were out.  “I’m sorry,” he said sincerely.  “Hey, supply chain issues even impact puff pastry!” I added, lamely attempting humor.   I moved on to pick up a couple other items. 

A few minutes later, as I was walking to the checkout line, the same employee came trotting down the main aisle, a package in hand.   He caught my eye and excitedly handed me a box of the frozen pastry.  “We had one more but it had fallen to the floor of the freezer!”   

This was excellent customer service...I thanked him profusely and emailed the store the next day to tell them about it.   He was a hero, going above and beyond normal expectations.   

We celebrate such heroes and love these stories.   But is there more we can learn? 

What if that last package had NOT fallen to the floor of the freezer?   What if the shelf design made it harder for a package to slip and fall?   What if a daily routine for the frozen food folks included shelving anything that had fallen?   What if there was a simple light sensor on the bottom of the freezer to alert staff something had fallen?  

What if the hero wasn’t necessary at all?   

A hero is one who performs a workaround which corrects a system failure.   It’s the rep who drives four hours out of her way on a weekend to deliver a needed back order.   It’s the mechanic who comes in at 4am to get a crucial machine running again.   It’s the entry-level high school kid who realizes the customer who wanted puff pastry might still be in the store and tracks him down. 

While thanking the hero, might we be wise to not stop there?   And then say “how do we improve our system to make this workaround irrelevant in the future?”   

Persevere.    

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