Why Experience Does not Make Us Wiser?

It is a common accepted standard that experience is the best teacher. The common belief is that the more experience we have the wiser we become. However is this really true? Does the past help us predict the future?

Take into account the common swan, it is white and until the 17th century it is accepted that all swans are white. John Latham in 1790 shocked the world by discovering that the common swan is not always while, they are also black. This is somewhat a proof that not all we know are always true. How do we know what we know? Why do we never expect unexpected events? Herein lies the foundation of the Black Swan phenomenon.

In 2007 Nassim Nicholas Taleb published the book "The Black Swan" about our inability to predict the future from the past. The Black Swan is all about rejection of the cause-and-effect principle and reminds us that we tend to cling most tightly to pillars that we see toppling, hence our experience does not make us any wiser since we can't correctly predict the unexpected. Taleb of course made a lot of money during the financial crisis in 2008 to 2010.

Is this a new discovery? A new philosophy? Absolutely not! In 1912 Bertrand Russell wrote the book "The Problems of Philosophy" which provided answer to the difficult question of "Does the past help us predict the future?", and it is sadly NO. What we should acknowledge is that biggest catastrophes usually come as a complete surprise to us. That's why according to Russell, we should always questions the things we take for granted.

Imparting Knowledge along a Cross Road

After being awake till 3 in the morning working and contemplating on things, it dawned to me that it would be good for me to impart some knowledge about leadership and management. After more than 16 years in the industry and 2 post graduate studies in management and business administration I don't think I am qualified to lecture about management but I can share some that I know and the knowledge I gathered over the past 2 decades. This will perhaps take more than 30 entries on this blog so read on..... And enjoy the ride!

So here we are in the cross roads, everyone reaches this point at least once in a lifetime. This is the point where we ask ourselves where now?, what's next? what does the future hold?. Let me draw on a model developed by The Grove in San Francisco, its called "The Personal Compass". Instead of telling to go buy their workbook or attend their workshop let me just share my view on this particular visual model.

Imagine yourself standing on a middle of a cross road there are six possible ways to go instead of four. Now you have to choose which way to go the direction signs says:
• The beckon road
• The dream road
• The sensible road
• The road not travelled
• The familiar road
• The road back.

Each direction is full of meaning which road are you going to choose?
• Follow the road that beckons showing the way to what you always want to try.
• Take the dream road to follow your wildest dreams, regardless whether you achieve your goal or not.
• Step to the road that seems to be most sensible and follow the advise of people you trust the most.
• Jump into the path you never considered before, perhaps a few nice surprises lies ahead
• Walk on the road have been to and always know where it leads.
• Take a step back to the place where you felt the safest.

To some the decision is easy; to most of us it is not. Before you take the first step consider these questions on your decisions:
• Where did you come from? How did you become who you are? What decisions have you taken? What are the obstacles in life you passed through?
• What is really important to you? What are your values? What do you believe in? What if everything fails, what remains?
• Which people are important to you? Who are affected by your decision? Whose opinion do you value the most?
• What is stopping you? What aspect in life is preventing you from choosing the really important things?
• What are you afraid of? What causes you to worry? What is bothering you?

Now you decide. When is the last time you did something for the first time?

Is purchasing logical or emotional?

I read an article by Harry Metcalfe of EVO called “The Insider” on how we thinks consumers get it wrong by buying the wrong car all the time, well 80% of the time. He elaborated that journalistic remarks or reviews on a particular model do not have an impact or influence on consumer’s preferences and he thinks that consumers does not necessarily disagree with journalists perspective but they are forced by the salesman when it comes to signing on the dotted line. And I quote “And secondly, punters should buy the car they really want and not what the salesman wants them to buy. Follow that bit of advice from this particular motoring journo, and it might even save you some money.”

So in Harry’s world he believes that journalist like him are always right in telling their readers which cars are best but that readers always buy the wrong car since they almost never buy what he recommends. This raised the question to my mind, Is buying logical or emotional? My take is it depends on the product. If it is a product that is purely of emotional value like jewelry, cosmetics and accessories then buying is emotional. Consumers buy based on what how the product make them feel. How about cars? Is it not that consumers buy based on their feelings when driving the car? Or looking at the car? Well actually not. This is where Harry got it wrong, consumer’s buy cars not because of their emotions but they do so out of logic, well except the super rich who don’t care what they spend.

In a lot of cases it is no different from professional purchasers in a any company. They purchase a product based on its perceived and proven value. They purchase a service based on its added value. The question is should you blame the sales guy for this?

Product demo, should it be perfect?

Have you been in a situation where you are looking at a product demo and it failed? Does it sound very common?

Actually it does, majority of product demo in the technology sector fails. Just take in to account the demo that Microsoft did at the Mobile World Congress during Steve Ballmer's key note address. Have you seen that? If not here's a short summary...Steve introduced Windows Phone with awesome capabilities then Joe Balfiore showed the Windows Phone live on stage and then bang!... a few of his demo cases failed. Is that acceptable? Does this outline how bad Windows Phone is?

In my perspective if you demo a product make sure you are well prepared and make sure that your uses cases always work. Or am I alone in thinking as such?

Invest or Monetize? Early Exit or Long Road Ahead?

The financial world is moving again, notable by the increasing number of new investments compared to the past 3 years. Having said that I spoke to a friend thi weekend whom I have not seen for ages who is having what I consider the most wonderful dilemma in the world. He is in the business of building medical infrastructure, hospitals in that regard. Currently he has this wonderful project to build an ultra-modern hospital of which he found an investor willing to finance the entire business from build to operation for 5 years then later find a big buyer. At the same time a bigger medical company approached him and willing to buy the entire project now at a premium considering future results.

So he asked for my advice. Well to me it was a simple question of financial benefits. Both offers look the same at the surface, although the value of money now is higher than the value of the same amount 5 years in the future. So next item is risk and reward, what is the probability that the project will fail compared to it becoming a resounding success and how much gain is five years going to give. This is a much harder point to consider and only he can actually answer.

Most importantly is how much he enjoys working on this project in the next five years compared to doing something else. I can't provide the answers and only him can decide, however if you are to decide what will you choose?

If I am in his shoes, and I would love to be in his shoes right now, I will most likely choose the most compelling and yet most challenging path between the current project and what I will be doing next.

How does emotion affect business decisions?

During negotiations, how does a one’s emotion affect his or her decision making? There have been countless of research done on controlled environment about the effects of decision making such as the ones publish by Bechara, Naqvi, Dunn, Damasio (gut feeling), Ming and Young (anger and fear in project and financial decision making), Barnes, Thagard, Sayegh (emotions distort reasoning), Lowenstein and Bagozzi (decisions can be anticipated), Isen and Shalker (effect of emotions in decision making), Isen and Patric (mood maintenance). There are more, however I am not writing a lecture so let’s skip them. In the business world Warren Buffet’s famous advise "emotions should be left out of the investing process” is as famous as the man himself.

The common belief is that in a controlled environment the emotions like anger makes people commit more resources to a failing project, fear makes people abandon efforts when the going gets tough, happiness makes people takes less risk, sadness makes people take higher risk. Humans are naturally emotional creatures do emotions play a big part in our decision making process. For example when buying a mobile phone or a car design and performance plays an important factor since it elicits emotion.

But how about in the business world where decision makers are trained to separate emotions from decision making, where financial models and controls becomes a huge factor making the decision maker as cool headed as a computer crunching the numbers, where every logical aspects are carefully calculated and planned. How does emotion play a role? In my observations during the past 15 years both during commercial negotiations and technical management emotion still plays a big role when a decision maker is presented with a choice. Emotion also plays a part in plotting strategies and plans. Even the great Buffet introduces emotions much like any brilliant negotiator to break an impasse.

Looking back, how did your emotional state affected your decision making at that time? How did your decision affect the final outcome?