Diversity & Thinking

A bug in the matrix

Friends,

I hope that everything is well with you and yours this morning.

Unfortunately, I cannot say the same for myself. Earlier this week, I got some kind of stomach bug, as did my wife. For the last few days, we have thus taken turns cramping, sleeping and looking after our three-and-a-bit-month-old daughter.

In other words, I have not had much time to write - for which I apologize profusely. Until normal services are resumed next week and we dig deep into customer acquisition, I will therefore today offer a subchapter from Strategy in Polemy in the hope that it will, at least, provide something worth reading in the meantime.

Have the loveliest of weekends.

Onwards and upwards,
JP

Diversity of thought

For all the advocacy of diversity in all its forms, it remains something altogether more publicly claimed than privately supported – an à la carte from which to select the morsels most appealing. Diversity of thought is often particularly difficult to grapple with. Even those most progressive are perfectly happy to ignore a line of reasoning because it, or whoever came up with it, fails to mirror their particular worldview.

As one might suspect, this can lead to rather eyebrow-raising levels of hypocrisy. For example, some strategists refuse to acknowledge certain authors’ bodies of work that contradict their own views on the basis of needed diversity (a logical contradiction), while conveniently ignoring said requirement when the very same authors happen to instead confirm their beliefs. Ignoring evidence is intellectual suicide at the best of times, but one had at least hoped for a bit of consistency.

Either way, the modus operandi has little effect other than to make the strategists in question prisoners to their own actions. Diversity of thought must include the right of the person with whom one does not agree to also have their thought recognized. As Rosa Luxemburg wrote in Die russische Revolution. Eine kritische Würdigung, freedom is always the freedom of dissenters.

But just as diversity has meaning beyond what most realize, diversity of thought has purposes beyond intellectual integrity, both on individual and group levels.

Starting with the micro, increasing diversity of thought means increasing the number of mental models one has at one’s disposal. Many strategists unfortunately read too little or too narrowly. Though this may be for a myriad of reasons – lack of time, lack of interest, lack of insight into the limitations of their knowledge and so on – it means that the latticework of mental models upon which they can hang experience, to steal a line from Charlie Munger, is limited. In turn, this leads them to believe that there is only one way of thinking strategically – their way. Everyone else is assumed to either share it or be wrong.

From an individualistic career perspective, it can perhaps make sense; increasingly, companies are looking for specialists and the more focused you are on any one thing, the easier you are to place and thereby recruit (though also, one might observe, easier to replace). From a company perspective, however, this is senseless. A collection of specialists is not the same thing as a generalist.

In order for diversity of thought to improve the odds of success on a team level, it is therefore imperative to have a generalist leading the effort; a specialist is likelier to view information through a narrow lens, miss crucial context and thereby skew the result. But it is equally important that the team is truly diverse, as Page’s diversity prediction theorem proves: the squared error of the collective prediction equals the average squared error minus the predictive diversity. Or to put it in less mathematical terms, when the diversity in a group is small, the error of the crowd is large.

This tends to be difficult to square for those enamored with meritocracy. “Get the best team working on it” is often corporate speak for getting similar people together. Alas, so doing defeats the purpose of the exercise; a singular shared mental model equals a singular angle through which to view the world – and a significant risk of believing it is flat as a result. Putting a homogenous team together in strategy can be particularly dangerous as it may concern competitive dimensions; if everyone has the same training, the same qualifications, the same skills and the same models, the produced strategy will inevitably be predictable (although this is something that few companies seem to have figured out).

This is not to say that one should ask everyone in the organization for their opinion and work out the average, though one occasionally sees the argument put forward. Perhaps the strongest proponent of the approach is James Surowiecki who, in The Wisdom of Crowds, contended that conclusions of a randomized group can be even better than those of experts, as groups can aggregate a large amount of dispersed wisdom. The most famous example of this was provided by Sir Francis Galton. In 1907, he asked 787 visitors to a farmers’ fair to guess the weight of an ox. None of them got the answer right, but when Galton averaged their guesses, he arrived at a near perfect estimate. Often lost in the commentary, though, is that most were farmers and thus had experience and an understanding of the physiognomy of bovine creatures. A group of McKinsey consultants, by contrast, would not have come as close.

I digress.

Another issue is that Surowiecki, much like Condorcet, assumes that opinions are independent. If they are not, and all mental models share a common bias that leads them astray, the likelihood that the group’s majority will decide correctly instead falls closer to zero the more the group increases. The same applies if only a few people within the group have access to accurate information.

Instead, the practical solution is to increase mental models in the team within reason – five more likely than fifty – while ensuring both sufficient independence and information. This, admittedly, requires a careful and steady hand. In many organizations, especially those active in professional service verticals, being not only available but popular is often a prerequisite to inclusion in projects. Being perceived as “uncomfortable” – a potential consequence of critical dialogue exposing unconsidered angles – can lead to exclusion, particularly if you are a junior.

But just as it is important that strategic teams are diverse, so too is it that diversity includes breadth of experience; partly because it will help said employees become more experienced, partly because they will bring a naïve view, partly because complacency is commonplace. Much like how companies may experience strategic drift, employees may experience knowledge and/or competence drift.

Of course, not all that which is novel is good, but leaders in strategy must encourage critical examination of ideas old and new alike. ‘Challenging the orthodoxy’ has, unfortunately, become a modern corporate platitude. What organizations tend to mean is for employees to bring new ideas to work that everyone will like and the business can make money from, not to challenge the status quo in order to find a better path.

Ultimately, strategic thinking is not about conforming to one line of thought, nor is business strategy about finding the one plan to rule them all. Rather, the task of the strategist is to manage problems in ever-increasingly effective ways by continuously observing, challenging, learning and updating.

In a sense, this is also what separates theory and practice, respectively, from praxis - and that is what this newsletter is all about.