Book review: Practical Wisdom by Barry Schwartz and Kenneth Sharpe

Photo by Amazon

A few days ago I finished reading Barry Schwartz and Kenneth Sharpe’s new book Practical Wisdom: The Right Way to Do the Right Thing. I love reading and the thought process that comes with the process of reading. As a result I tend to recommend a lot of books. However, usually my recommendations are not universal but specific. Once in a while I come across a book that I think everybody must read. Practical Wisdom is at the top of that list.

The authors have a few basic claims. We need more wisdom in our lives. Not the wisdom of sages or scholars but practical everyday wisdom that will help us live better lives and make better decisions. Wisdom is the act of performing a particular social practice well—being a good friend or parent or doctor or soldier or citizen or statesman—and that means figuring out the right way to do the right thing in a particular circumstance, with a particular person, at a particular time.

Wisdom, however, is not about intelligence or intellectual capacity. Because we are all born to be wise. The problem is this wisdom needs to be nurtured, cultivated and encouraged. It requires mentioned, coaching, modeling and time to develop. We, as a society, are doing just the opposite of that. We are waging a war against wisdom. Because of different societal process our society has turned more and more to rules, incentives and standardization. As the authors put it:

The assumption behind carefully constructed rules and procedures, with close oversight, is that even if people do want to do the right thing, they need to be told what that is. And the assumption underlying incentives is that people will not be motivated to do the right thing unless they have an incentive to do so. Rules and incentives. Sticks and carrots. What else is there?

While these tools are sometimes useful, they are usually effective only in the short-term and have unintended consequences. They are unable to provide for the changing complex needs of the environment in which people operate in, and thus, lead to unwanted results:

Rules and incentives may improve the behavior of those who don’t care, though they won’t make them wiser. But in focusing on the people who don’t care—the targets of our rules and incentives—we miss those who do care. We miss those who want to do the right things but lack the practical wisdom to do them well. Rules and incentives won’t teach these people the moral skill and will they need. Even worse, rules can kill skill and incentives can kill will.

Rules are aids, allies, guides, and checks. But too much reliance on rules can squeeze out the judgment that is necessary to do our work well. When general principles morph into detailed instructions, formulas, unbending commands—wisdom substitutes—the important nuances of context are squeezed out. Better to minimize the number of rules, give up trying to cover every particular circumstance, and instead do more training to encourage skill at practical reasoning and intuition.

More than that, this reliance on rules and incentives is eroding our ability to develop wisdom and makes people who go into professions like medicine, law and education with a desire to influence and do good, hate their jobs or act in ways that are contrary to what they wanted to do when they decided to join the profession.

The challenge is to find a way to enable people to earn their livelihoods and create a viable organization without having payoffs completely control what people do—without having payoffs demoralize both the people and the practices in which they engage.

The book is a wonderfully written call to stop treating people like cogs. A call to stop measuring things just because we can and then leading our lives according to these measurements. It is an attempt to point out that there is more about being alive and working, than just thinking about outcomes, money and bottom line measurable results. It try to challenge the assumption of “one right way” and “top-down” control that is like a cancer in our societies. It is an attempt to point out to the Obliquity of our business and work. It is a praise to human judgment and ability to do good. It describes the world I want to live in and the kind of work life I want to lead. It is the book I wish I could have written. Read it. Today.

Elad

Capitalism, unions, equality, the fallacy of the average and mediocrity

Photo by finsec

A short caveat: while this post is not totally unrelated to my regular line of writing, it does somewhat detaches from my usual subject matter and is focused more on personal doubts, questions and thoughts and less on practical implications.

 

I see myself a capitalist. I believe in its basic premises. And while my views have become less extreme in the last few years and I do think there is a need to rethink and change some of the basic practical behaviors we derive from the concept, it is still a part of how I define my world views.

Within this framework I have always wondered about the idea of work unions. On a very shallow level it seems incompatible with the some of the ideas I used to think capitalism represented, so in my younger years I immediately thought of unions as something wrong. However, over the years I understood the importance of mechanisms that will put some balance into the capitalist system so it will not undo itself. Having said that, maybe because of my biased viewpoint, wherever I looked I saw unions resisting change and progress, upholding stupid rules (see this Gates talk on TED for some examples) and keeping the interests of the top quartile of employees instead of those who actually need protection. This has always bothered me.

Lately, because of current political and economic issues in Israel, I have been thinking about this issue quite a bit. This week, while listening to a freakeconomics podcast about the negotiations between the NFL league and the players union (negotiations, many of the players themselves are not privy to) I came to a realization that what troubles me about unions is something that has been troubling me about other fields as well. The misuse of the idea of equality. I have written before (see also here):

Equality is an important concept in many aspects of life, especially in the legal field, I know so well, as a former lawyer. But in real life, because equality is intertwined into our thinking DNA it is used in ways that many times hinders excellence. All men are not born equal. Whoever tells you that is lying. All man should deserve an equal opportunity to excel, to be happy and to use their comparative advantage. That is the truth. And there is a big difference between the two.

…

In western societies, equality is part of the ethos. People fought for the right of equality for ages and it is so commonplace and understood (even if not completely practiced) we regard it as a given right. The quotation “All men are created equal” is arguably the best-known phrase in any of America’s political documents. And if all men are created equal, they should be treated as equal in the workplace as well. And they think as themselves as equal. And this creates problems. Because we are not equal. We are unique. Special. With different talents, skills, perspectives, life experiences, likes and dislikes. And that means that treating us as if we are the same is wrong.

In the case of unions, the idea of equality means that unions can act like all workers are equal. If they are equal, they can talk about the average worker. It is a classic case of the fallacy of the average. Because of everybody is equal and we are taking care of the average worker we are losing the individuality. And that is the fastest way to mediocrity.

In Practical Wisdom: The Right Way to Do the Right Thing, Barry Schwartz and Kenneth Sharpe write:

That’s what Aristotle meant when he said that practical wisdom as opposed to a universal rule was necessary because of the priority of the particular. A wise person knows how to do the right thing, in the right way, with this person, in this situation. To be wise, we need cognitive and perceptual machinery that picks up on similarities without being blind to differences.

I am not an expert on the issue of unions, their history and their contribution to society. I am also not against the idea that workers should be protected to some degree and have a right to be represented. I do resent the fact that some unions focus their attention on keeping the status quo and base their thinking on a misconception of equality that leads to a discussion of averages. In general, the work of any leader, political, business, union or other, is to balance similarities and differences. I am not sure that many of the union leaders or those that sit with them to the table of negotiations are actively thinking of this balance. What will happen if both sides of a labor dispute (or even better, prior to the dispute) will start doing just that? Isn’t it worth a try?

Elad

Telos

Photo by Image Editor (and originally by Raphael)

I am reading Barry Schwartz’s new book Practical Wisdom: The Right Way to Do the Right Thing. I am sure I am going to mention it a lot here on the blog. Here is a first taste:

Acting wisely demands that we be guided by the proper aims or goals of a particular activity. Aristotle’s word for the purpose or aim of a practice was telos. The telos of teaching is to educate students; the telos of doctoring is to promote health and relieve suffering; the telos of lawyering is to pursue justice. Every profession—from banking to social work—has a telos, and those who excel are those who are able to locate and pursue it. So a good practitioner is motivated to aim at the telos of her practice. But it takes wisdom—practical wisdom—to translate the very general aims of a practice into concrete action.

If purpose is indeed an all encompassing concept that every aspiring manager should master then this idea of telos probably lies in the middle of it. While, as Schwartz says, it is only the beginning of translating that general aim into concrete action, it is a good place to start. A place I am not sure we reach for enough.

How many of you have stopped in the last week\month\year and asked – “why am I doing this”?

When was the last time you started a meeting by asking: “So, does anybody have thoughts about why we are here? Why are we doing it? What is the purpose of our work?”

In the management world talks about vision, goals and desired outcomes are ubiquitous. Talks about what lies underneath them are scarce.

I know on which side of the equation I would like to be.

What about you?

Elad

Inner natural guidance

Photo by Pratham Books

I have been reading Tal Ben-Shahar’s fascinating book The Pursuit of Perfect: How to Stop Chasing Perfection and Start Living a Richer, Happier Life and came across a reference to the Montessori Method of Education. As I was reading about it, I thought that it actually describes a big part of my approach to the practice of management. And as I wrote in the past, I believe that education and management are closely related (see for example here). I took a paragraph from Wikipedia describing the method and added the words manager and employee where teacher and child were originally written and this is what you get:

Applying this method involves the [teacher] manager in viewing the [child] employee as having an inner natural guidance for his or her own perfect self-directed development. The role of the [teacher] manager (sometimes called director, directress, or guide) is therefore to watch over the environment to remove any obstacles that would interfere with this natural development. The [teacher] manager‘s role of observation sometimes includes experimental interactions with [children] employees, commonly referred to as “lessons,” to resolve misbehavior or to show how to use the various [self-teaching] managerial materials that are provided in the environment for the [children] employee‘s free use.

Take away hurdles. No more rules but environments that support the development of practical wisdom. Experimentation and reflection.

I could not describe it better myself.

Elad

Attitude

Photo by PinkMoose

Seth Godin writes today:

If you worked on the line, we cared about your productivity, not your smile or approach to the work. You could walk in downcast, walk out defeated and get a raise if your productivity was good.

No longer.

Your attitude is now what’s on offer, it’s what you sell.

I think this is something every manager should understand. What many managers try to get out of people today is not productivity based. It is attitude based. Innovation, passion, human connection, practical wisdom. These are all things that cannot be done without attitude.

Once, we could not care less what our employees felt or how psyched they were to come to work. Those days are gone.

Elad

Shorts: Amar Bhidé on the deference of human judgment in favor of computer models.

Today, I heard HBR.org Ideacast titled Bringing Judgment Back to Finance where Amar Bhidé, author of a recent HBR article The Judgment Deficit and of a book titled A Call for Judgment: Sensible Finance for a Dynamic Economy was interviewed about the ideas in his article and book.

It is a fascinating cast and I would let you listen to it. I wanted to point to what in my view was the main idea. Over-reliance on computer models, both in finance and in other areas of life, is dangerous. While computer models and arithmetic based rules are important, they should not replace human judgment.

I must admit that when I prepared my No More Rules! presentation and wrote the MIX hack under the same title, I haven’t even considered cases where the rules are no man-made, but computer made. This, of course, leads to a different set of complexities (Hey, this is what the computer says). I think however, that the message is the same. We need people who think, how develop skill, judgment and practical wisdom. Rules, guidelines and arithmetic models are tools that should help human make decision, not replace them.

Interesting stuff!

Elad

To fail forward

Photo by KaiChanVong

[tweetmeme]

Jeff Stibel in an HBR.org blog post titled Avoid Decisions, Avoid Life, writes:

To fail forward, you must create many decisions, each incrementally improving your businesses. This is the opposite of a Six Sigma discipline and probably has no place on an assembly line (or a surgery bed). But it drives many companies forward, as they become enabled to make calculated decisions that lead to learning, growth, and ultimately success. Success by failure is not an oxymoron.

For me, Stibel’s explanation touches to the heart of the difference between the management approach of the old economy (efficiency, standardization, productivity and thus – rules!) and the new economy (effectiveness, value through human interaction, creativity, practical wisdom and thus – no more rules!).

As usual, I am not saying that Six Sigma (or all productivity driven approaches) is a bad idea or that is should never be implemented. I am just saying that the foundations on which Six Sigma (and similar methods) is built on are not fit for more and more of the challenges modern business are facing.

Failure (and more importantly, learning from failure) is the heart of innovation as it is at the heart of developing practical wisdom. If we don’t want people to become cogs, we need to create an atmosphere that promotes failing forward. Many business today depend on their people’s passion, creativity and initiative. By implementing, as Stibel says, the opposite discipline, there is slim chance of tapping into these resources.

Elad

On the difficulties of the questions-based approach

Photo by Kalleboo

[tweetmeme]

This week I spent in the Israeli Air Force training some of its commanders on different aspects of communication and feedback. While there, I tried to implement some of the issues I regularly write about in this blog, trying to practice what I preach. What did I find? It is so hard!

One of the main exercises I participated in is a simulation of a feedback situation between a commander and a soldier. After I watch the feedback I am supposed to give my opinion of how the conversation went and use a pre-determined scale to score it. The soldiers are used to being asked a question or two about how they did and then hearing an account of their performance with recommendation for the future.

I, however, believe in the importance of resisting the temptation to provide answers, so I conducted my sessions using a lot of questions, trying to allow the person de-brief himself, see other points of view and gain insights as well as develop an ability of reflexivity. I knew it is going to be hard for me to resist saying what I think is right instead of taking the slow path of asking questions. What I did not expect is the resistance of the commanders to my method.  “Just tell us what the bottom line is”, they demanded. “All these questions and self-reflection is a waste of time, we did some things right and some things wrong – tell us what!”. For a minute there, I had to question what I believe in. For a minute there, I had to ask myself, am I doing the right thing, insisting not to give them the answers? And after I thought about it a little, it just hardened my resolve.

I do believe that people do not always know what is good for them. Not because their stupid, but because the human mind is built in a way that minimizes effort, be it physical or cognitive. Just this week the blogosphere is filled with the results of a study saying humans are happier when they’re busy, but inclined towards idleness (also see here). We know from an abundance of research into behavioral economics that people are really bad in predicting what will make them happy and how happy they will be. I do believe that there are things in life that for some people, need to be forced upon them, because they are not able to appreciate them until they actually experienced them. Yes, in the short-run, this method is annoying, frustrating and time-wasting. But when it comes to developing commanders, managers, leaders and every other kind of employee, we should not focus to much on the short-run. We need patience to build an ability of practical wisdom.

It is more important to built abilities, to make sure there is no dependency and to make sure there is always a challenge for the people around us, then making them happy in the short-run. I am not saying you should NEVER give answers. It is not like I sat there and said nothing the entire week. I am just saying you should sometimes deliberately avoid it and just focus on asking the right question and helping others ask the right questions themselves. Nametag Scott has a great post on this issue this week. Here is a short excerpt:

“Is it your place to fix this?”

That’s the question you have to ask yourself.

Especially when someone you love finds themselves on the precipice of disaster.

Sometimes you have to back off.

Yes, it requires great emotional restraint.

Yes, it requires significant self-control.

But if you don’t let people come to their own conclusions, make their own decisions and make their own mistakes, you fractionize their experiences and rob them of valuable learning opportunities.

So, I ask you once again: are you resisting the temptation to give answers?

Elad

Business is a mystery, not a puzzle – information overload and judgment

Photo by Jorge Franganillo

[tweetmeme]

Umair Haque, a fascinating writer (which I quoted in my No More Rules! Presentation), wrote a captivating piece in HBR.org the other day. He discussed the famous Efficient Market Hypothesis (definition from Investopeida):

An investment theory that states it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

Haque, who constantly writes about the need for a new economy based on value creation instead of the old one that was consternated on creating money for itself, offers a new idea:

I’d like to advance a hypothesis. Call it the Efficient Community Hypothesis. It says: where efficient markets incorporate “all known information,” efficient communities incorporate “the best known information.” An efficient market is a tool for sorting the largest quantity of info. But an efficient community is a tool for sorting the highest quality info. On its own, the EMH is simply about informational efficiency: that prices incorporate “all known information.” Where it falls down is in terms of informational productivity: whether prices incorporate accurate, valid, and reliable information — high quality knowledge, instead of low-quality noise. Incorporating all known information doesn’t mean incorporating good information.

Haque deals with a very important point. Let’s assume for a minute that when the EMH was originally hypothesized it was correct (even though there is a debate about that). Well, there is no doubt today that the world has changed dramatically. Just think about the differences in quantities between the information that was available, let’s say, 30 years ago, and the quantities available today. There must be a law of diminishing returns at work here. At some point, the more information we put in, the less we gain from it. And sometimes when we abundance of information happens, just as Malcolm Gladwell tries to convince us in Blink: The Power of Thinking Without Thinking, decisions become worse, not better.

But it is even deeper than that. The EMH assumes that information is the only thing we need in order to interpret the market. If we only have all the information, we can come with the right answer – the price. It is kind of a puzzle. Give me all the information and I will give you the answer. But the stock market represents companies that work in the real world. And the real world is, well, uncertain. And yes, it is also more uncertain then it used to be 30 years ago. Even if you do give me all the information, I still need to use judgment in order to give you an answer. And it might be right, but it might not. In an article called “Open Secrets”, that is now part of his book, What the Dog Saw, Gladwell writes:

The national-security expert Gregory Treverton has famously made a distinction between puzzles and mysteries. Osama bin Laden’s whereabouts are a puzzle. We can’t find him because we don’t have enough information. The key to the puzzle will probably come from someone close to bin Laden, and until we can find that source bin Laden will remain at large.

The problem of what would happen in Iraq after the toppling of Saddam Hussein was, by contrast, a mystery. It wasn’t a question that had a simple, factual answer. Mysteries require judgments and the assessment of uncertainty, and the hard part is not that we have too little information but that we have too much.

So what Haque rightly calls for is judgment and trust and expertise on a more common basis. Knowing that we have a lot of information, that a lot of it is irrelevant and that the future is unpredictable, we need two things. First, just like in the case of the doctors described in Blink trying to decide if a patient is a risk for a heart attack, simplify our decision making process. As Gladwell says, they are swimming in knowledge, but lacking in understanding. The simplification helps their judgment. Second, we need people with more practical wisdom, ability to infer judgment and to make decisions that accept the uncertainty.

And that second issue throws me back to my point about rules. In my presentation, No More Rules! I claim that the wide spread use of rules is killing people’s practical wisdom. It is killing their judgment. Just when we have more information than ever and when we need simple good judgment more than ever, we are creating cogs that follow automated rules and formulas that treat the world like a puzzle. Life and business, is mystery, isn’t it time we face up to it?

Elad

Unlearning from Frederick Winslow Taylor

Photo by Wikipedia

[tweetmeme]

In my presentation “No More Rules!” – which earned me a few heartwarming reviews up till now (Still waiting for yours!) – I claim that the use of too many rules in management today is harmful in many ways and that we need to revamp our thinking about their use and efficiency because in aggregation they might create more harm than good.

One issues I talk briefly about in the presentation is the fact that the basic assumptions about the use of rules comes from the thinking of Frederick Winslow Taylor whose work and book The Principles of Scientific Management revolutionized American industry leading it to new levels of efficiency and productivity. In the last few days, while reading 12: The Elements of Great Managing by Rodd Wagner and James Harter, I found two very interesting references to the Taylor’s work that amplify the normative argument I try to make in the presentation.

The first is a direct quote from Taylor’s The Principles of Scientific Management:

The development of a science (of managing tasks) involves the establishment of many rules, laws and formulae which replace the judgment of the individual workman and which can be effectively used only after having been systemically recorded, indexed, etc.”.

The second quote is from Taylor biographer Robert Kanigel who wrote in the book The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (Sloan Technology):

Scientific management was degrading. In reducing work to instructions and rules, it took away your knowledge and skill. In standing over you with a stopwatch, peering at you, measuring you, rating you, it treated you like a side of beef. You weren’t supposed to think. Whatever workmanly pride you might once have possessed must be sacrificed on the altar of efficiency, your role only to execute the will of other men paid to think for you. You were a drone, fit only for taking orders. Scientific management, then, worked people with scant regard not only for the limitations of their bodies but for the capacity of their minds.

I don’t know about you, but the fact that this kind of approach is at the base of many of the achievements of the 20^th century makes me feel a little bit ashamed. Notwithstanding the fact that today’s competitive advantage does not stem anymore from productivity and efficiency (which can be replicated easily) but from innovative thinking, Art and practical wisdom, this kind of approach seems inhuman and unsustainable. And still, in the number of times I encountered Taylor in my academic education, his approach was treated with respect and as a basis for modern thinking.

History is filled with individuals that, sometimes for noble reasons, led different disciplines in the wrong way. I do not think Taylor was a bad man. He probably believed he was working for the general good. However, the long-term damage his thinking produced is felt today and probably will be felt in the future. His assumptions are so intertwined into our thinking that it is hard to identify their exact influence. It is time to let go of our Tayloristic heritage and start celebrating the capacity of human minds. History will judge us on how well we learned from Taylor’s mistakes and how fierce we were in our approach to change it.

The change begins with you. What are you doing for it?

Elad