When to simplify

Simplification is a good thing. I blogged before about simplifying your life, and still believe that is one of the smartest things we can all try to do. Life is complex enough without making it more complex than it needs to be.

We are trying to plot our way through life semi-blind. In some ways technology has made things worse. Before, most news was from close to home, most people we met had similar backgrounds, and most decisions were constrained by practicality. Nowadays we have the opportunity to understand a far richer world and to participate more broadly in it. Without making a few assumptions and using a few guiding principles, we would be paralysed.

Again as I have blogged before, I like the philosophy of Oakeshott. The theory is that we must assume we know next to nothing, enabling us to learn as rapidly as possible and to constantly renew assumptions. Yet we must also make those assumptions, flimsy as they are, and act boldly, yet with adaptability, to do as well as we can. This seems a smart philosophy to me.

When I grew up probability and statistics were for nerds like me, but in the modern world it may have become the most important branch of maths. I hope teachers have responded. Certainly there are some good books around now on the subject, such as The Norm Chronicles by Blastland and Spiegelhalter, which compares life risks using statistics and dispels many myths.

In assessing world affairs, politics and so on, it pays to assume there is more complexity than people make out. Too much simplicity is just duplicitous. Whenever I see a ten second news segment or sound bite opinion, I become wary, unless the source is one I have come to trust deeply. It is just too easy to pigeonhole leaders and whole countries as enemies, and to fall for the soft language of propaganda. Our side are allies, theirs are terrorists. It is always good to challenge such bland statements.

I wish someone would write a good book about the PR industry. I hate PR. At least with advertising, their bias is transparent and we choose whether to be taken in. PR comes with false authority and is more dangerous. Perhaps that is why it has grown so much. And news has become so shortened and popularized that often it is reduced to acceptance of PR.

If I were to write about PR, I think I would focus on statements that should raise red flags. If there is a sob story about one family, farmer or person set to lose out from a proposal, that should make me suspicious. The next line of defence is often to point out inconsistencies in a proposal, followed by a claim that it is hard to understand or hard to implement. Finally come claims that it may be a good proposal, but only if everyone else implements it too, followed closely by a claim that the proposal does not deal with the subject broadly enough so does solve the real problem.

Each of these statements has truth. Each is usually aimed at stopping something that will do more good than harm, put forward by an interest group. Wouldn’t it be great if there was a raspberry went off on our TV set anytime someone said something like that? Come on someone, write the book debunking PR!

In business, I often had strategy jobs, and one dilemma was always how much to simplify. Business situations are generally complex, and always influenced by context. But a strategist who refused to make any generalisations at all would not be comprehended or influential.

This is how the four box model came into being. These are often gross simplifications, but at least the deal with two dimensions at once, can be visualized, and offer a menu of understandable actions that will be right more often than wrong.

I loved coming up with by own models, whether four box ones or otherwise, and I still love to study the models of others. By coincidence, two were reviewed in the Economist this week.

One, How Asia Works, by Studwell, comes up with a simple theory to explain the emergence of Asian economies over the last fifty years. Seemingly, there are three steps. First, get rid of monopoly agriculture and train small-time farmers to make use of smallholdings, second back chosen industries with state support, and third stifle the finance system via capital controls.

I like this theory, since it runs counter to conventional wisdom, seems to fit most facts, and may even be repeatable. The author even accepts that context may make the model less applicable for other nations. The model makes you think and points some good potential directions. Above all, it helps to explain the current success of China, which often defies other gurus. What happens when the three steps necessarily unravel is, of course, another story.

The second book is a business book claiming three rules to explain long-term success. The rules are: better before cheaper; revenue up before cost down; and, wait for it, there is no other rule. I am less convinced by this model, since context is surely everything in this type of trade off. Easyjet has followed neither rule, yet my Easyjet shares have outperformed all my other ones. Raynor and Ahmed will probably point out that Easyjet may not be around in thirty years time, but I will counter that by saying that most short-term decisions, employment and investing decisions do not use that timeframe.

Unlike the one above, business models that I do like often point towards internal consistency. If you follow the philosophy of Raynor and Ahmed, then don’t skimp on branding or R&D. If you are Easyjet, be more pragmatic. My favourite business model book remains The Discipline of Market Leaders, which defined three distinct strategies, operational excellence, product leadership and customer intimacy, and advocated making a clear choice and linking everything in the business to the choice. Apart from failing to point out that in many contexts one choice had much greater success chance than the others, I liked that book very much.

I feel that some of my best work in Shell was in defining internally coherent business models, for example for retail businesses. Then other managers came in and, in my opinion, simplified too much, trying to squeeze everything into one business model regardless of context. Choosing just where and how much to simplify remains a key challenge.

Having made that claim, I also admit to two common pitfalls. First, once I had a model, I found it so beautiful that I did not challenge it hard enough, so much did I want it to succeed. And secondly I often became lured by the challenge of trying to solve the whole problem and failing (intellectually or politically) when I could have made progress by addressing simplified issues.

Going back to politics, often the most successful politicians these days are city mayors. They are often relieved of the role of solving the most complex problems, instead making things happen through campaigns.

This is classic, and effective, simplification. Find a real issue, create a solution that will make things better, sell and implement. Perfection is for others, achievable improvement is for good mayors.

Michael Bloomberg in NYC is a wonderful example of the effective mayor following this model. He works through campaigns. He may choose to take on an entrenched monopoly, whether taxi drivers, land owners or teachers. Or he may tackle a public health issue like obesity. Instead of trying to debate or solve climate change, he comes up with a practical plan that would help NYC.

Just this week Bloomberg announced a new sub-campaign related to health, suggesting that more NYC buildings should have accessible stairs to complement elevators. Simple, and brilliant. I hate going to places where I have to take the lift one or two floors because the stairs are basically out of bounds.

So that is another piece of advice that can work for all of us in our newly simplified lives. Operate through campaigns. It is fun and effective. Who works hardest to stop his common sense? You’ve guessed it, PR. One campaign, to limit portion sizes of sales of sugary drinks, came to grief at the hands of lobbyists for Coke and the rest, using all my raspberry arguments quoted above.