Sleepwalking through History

On holiday, I read the excellent analysis of the run up to World War One, The Sleepwalkers, by Christopher Clark. It was not an easy read, dense with detail and names and rather long, but I enjoyed it nonetheless. The strength of the book was its refusal to be sensationalist. Characters were explained not in terms of good and evil or smart or dumb, it resisted the urge to become a detective story, and the book also avoided oversimplification.

What emerged was a picture of great complexity. Not only were the relations of many great powers intertwined, but smaller powers had a role as well. Within each power, individuals approached situations with their own slant, influenced by their own perception of national priorities but also personal factors. The media played a key role, as did cultural factors inhibiting clear communication. In an age before e-mail or easy plane transport, time delays played a part as well.

Clark paints an exquisite picture of an earlier time. Characters are impetuous, pompous or plain dumb. Many owed their jobs more to breeding than talent. The Kaiser seems close to certifiable, and we forget that he was cousin to the British king and Russian Czar. The pages of the book are sprinkled with photos of the main characters, often sporting ridiculous regalia and facial hair. But don’t read this book looking for a light comedy or detective story – these facets are not central.

The book does try to explain how the First World War came about, and finds a few root causes. The conflict was far from inevitable, but became steadily more likely owing to a combination of historical trends (such as the decline of the Ottoman’s) and moves with unintended consequences. Somehow a patchwork of interlocking alliances became two opposed blocs, step by step. Most striking is how little skill any player displayed for placing themselves in the shoes of their potential adversaries. Intentions are consistently misjudged, and demands made of other countries that just a little thought could have been seen to be impossible to fulfill.

The book also tries to derive lessons from 1914 that could be applied a hundred years later. Many have compared the current situation around the South China Sea to the European web of alliances of a hundred years ago. But such parallels are always partial and the lessons are always nuanced as well.

What is clear is that wars could happen by accident then and can happen by accident now. Fallible humans, ambiguous goals, culturally inept communications, and especially irrational fears still play a full role in international affairs. The key players may not be Barons and Lords any more but are often just as incompetent and probably even more stressed. While modern communication is faster, it is not necessarily clearer, and human nature always pushes decisions up against deadlines anyway.

I have tried to draw some of my own conclusions from the book. The first is a repeating theme of mine, that of ignorance. I studied this period at school and have subsequently read more about it, but I found myself woefully ignorant of anything resembling a full picture. The formal annexation of Bosnia, the Italian invasion of Libya, the crisis of Agadir: I had vaguely heard of all of these incidents but with no concept of their wider significance. I knew little or nothing of the relevant personalities, or of the political context aside from Britain’s.

I find ignorance a wonderful concept to embrace, and love to be reminded of my own ignorance as often as possible. It keeps me humble and also hungry to learn. What a blessing it is to know that there is enough interesting knowledge out there to fill a thousand or even a million lives, the opportunity to learn is truly endless, individually and collectively. This knowledge also gives me hope for future generations to continue to progress.

Much of my own limited knowledge of the period came from school, and I should note that the conflict was only sixty years ago then, so perspectives were narrower and more patriotic. I should imagine my knowledge of the Second World War is even more coloured for the same reason. As I learned it, characters tended to be either heroes or villains, and the reality is never so simple.

A second lesson is mentioned in the book. It is noted how certain formulations of words can take root and become unchallenged through universal usage. South Slav unity became seen as a reasonable goal in this way, despite it being almost meaningless as a concept. By referring to alliances constantly as defensive, we con our own people, we usually will misinterpret the impressions of others, and we lull ourselves into believing things are less dangerous than they really are. Sound bites and simplification make good journalism and good politics, but they carry significant dangers.

Such laziness is even more prevalent today, especially in the US. Everyone celebrates their freedom without really pausing to consider what it means and how others may be less (or more) free. Putin is displayed as a villain from the Hollywood movie, stifling any sensible thought while also potentially understating his potential for harm. Iran is usually referred to as a sponsor of terrorism, whatever that may actually mean. What is terrorism? Can any nation really claim not to sponsor terrorism?

In the same vein, consider China and its peaceful rise, a ubiquitous but poisonous phrase. The Chinese people believe it and view all the actions of their government through that lens. The Chinese leaders believe it too, and then assume that other nations believe it too, so will not attribute any other intent to their actions. Remote nations may also be too slow in challenging an aggressive intent.

A third lesson is a reminder of the law of unintended consequences. The book brilliantly links seemly independent events, and attributes actions to previous sleights. This feels an accurate description of how things actually occur and how we think. In our personal lives and in our work, we should always assume that anything we do or say will have some consequences that we fail to predict, and be ready to respond when that occurs. That is not a justification for inaction – that can have a consequence too. It is just a reminder to be ready, and perhaps also a message to try to see the world through as many pairs of eyes as possible.

The final lesson is the benefit of complexity. Most of us try to simplify our lives, for good reason, it helps us to find a way forward. It is right to try to reduce complexity, but we should always be aware that things are more complex than we sense, and also note that complexity can be our friend. If there are ten great powers (or for that matter ten family members or business partners), it is usually better that each has a complex relationship with each of the others rather than a simple structure of five versus five. Five versus five often leads to open confrontation. Complexity leads to something more incremental.

So if Obama fails to close Guantanamo or cozies to up Saudi Arabia, we should give him a break and even quietly celebrate. Politics is a complex thing filled with trade offs, some of which we can see and many of which we can’t. And it is just as well that is true, or we might have even more wars. The same applies to your CEO, and probably even to your father.

So, celebrate ignorance and complexity while being suspicious of sound bites and aware of unintended consequences. That doesn’t sound like a recipe for winning Republican primaries or even getting elected as a CEO. Which may help to explain many things about our world, and how much further it still has to improve.

Five Years Retired

Five years have now passed since I handed in my ID card and left the Shell building as an ex employee, a couple of weeks before my fiftieth birthday. At the time, I remember feeling slightly frightened. But it has turned out to be a good choice for me.

I have never been tempted to look for full-time work since. Indeed, there has not been a single day when I’ve missed being in full-time work, in any way at all. Further, I don’t recall being bored at all or of lacking stimulation. Of course, we all get a little bored while waiting for a delayed plane or standing in line at the DMV. But there has been no full day of boredom, no day of seeing time stretch out in any way that was not welcome.

I have worked, and even been paid for it sometimes. One complete surprise has been that work has sought me out, in all cases via old friends and contacts at Shell. When the chance has come I’ve usually said yes, and generally gone on to enjoy it, though I know I would be completely fine if no opportunity came again.

When people ask how I fill my time, I often laugh and then try to explain and then wonder myself how the list of things I come up with can possibly fill all the time that it does without any boredom. Adding up reading, writing, walking, swimming, eating, household chores, volunteer work, paid work, regular appointments like singing and dance lessons, and trips for movies or shows, it amazes me as well how full the weeks seem. I have a siesta most days as well.

What takes a while to reconcile is that people in regular work do all of those activities as well. The main difference is that most souls have to try to squeeze these activities into busy lives, while I have the luxury of giving them all the time they deserve and enjoying them. The first hours of the day, getting up slowly and consciously enjoying breakfast and coffee rather than wolfing them down, exemplify the difference, but the same applies to all of the things on the list. I still shop quickly, but I make sure I mix in a visit to the coffee shop and some reading.

I can also plan my week in a different way. I can do all the chores and many of the other solo activities during the day, freeing up more evening and weekend time for the family.

I guess none of this will come as a major revelation. When considering retirement, pacing activities and family time are benefits most of us will think of in advance. We’ll also be able to work out whether the changed tempo, increased family time and greater responsibility for our own calendars is something that fits our life circumstance or personality or not. I acknowledge that early retirement is not for everyone. I also acknowledge the obvious truth that most people do not have the financial luxury of being able to afford such a choice. Many of the joys of the slower tempo activities could turn into nightmares if accompanied by anxiety about money.

I’ve tried to come up with some other benefits, ones that might not be so obvious to people contemplating a life change. I also tried to come up with other downsides – but couldn’t think of any.

The first benefit is a big one – health. In Shell we sometimes did an exercise called GAPS, where G was for goals and we had to list half a dozen key goals for the coming years. I was always amazed how everyone concentrated on work goals, and I remember starting my grid with Be Fit at 55. Well, soon I will be, and, compared with before, I am.

Of course accident or diagnosis could change my life overnight, but I am sure I feel better than I did five years ago. I still sleep really well, have great vital signs like blood pressure and rarely get sick. But five years ago I was frequently extremely tired, and frequently had a pain around my right shoulder. No longer – the pain just vanished about a year after I retired. Now whether that is because of a more healthy lifestyle, or finding time to swim twice per week, or just avoiding carrying computer bags around offices and airports I don’t know, but whatever the cause, being without pain is a massive life benefit. Until thinking for this blog post, I had not made the connection.

The next benefit is options or flexibility. When we contemplate retirement, many of us can conjure up some passions or dreams to pursue. What we might ignore is that retirement creates the possibility of adventures that we can’t foresee or conjure up. For me, a big adventure has been moving to New York City. I hadn’t made the connection that this became possible only because I was retired. My wife could look into jobs in New York without the huge constraint of my own work location. At the time, we talked long and hard about whether or not New York was a good option for us, and we are both pleased that in the end we went for it. If I had been still in full-time work, the conversation and probably the outcome would have been very different.

New York has been the biggest option made possible by retirement, but lots of smaller options have been unleashed as well. None of the work I’ve accepted could have been taken on in parallel with a full time job, nor would the extent of the musical adventures I’ve taken up. My family has also had options created by the absence of a constraint from my work.

The third benefit I have identified is perspective or distance. I believe I am able to observe the world from a more complete vantage point by being retired, and to observe myself and others inside that world better as well. I think this comes from the luxury of time. When working, a lot of our attention goes on work concerns, and most of the rest of our attention goes onto activities that we have to squeeze in around work commitments. What time is left? I believe we become so immersed in the present that we can lose a wider perspective, that wider perspective that can give us knowledge, serenity, spirituality and stronger relationships, including with ourselves.

My example for this is the same GAPS grids we used to do at work. Life goals are typical of something that requires perspective. They require time and strong self-knowledge, and clarity of vision without too many immediate constraints obscuring it. I look at my own life goals at forty-five, and see a pattern of someone stuck in the moment. True, fit at fifty-five showed some perspective, but nothing like enough. I am probably typical in having shown little perspective in managing my own life through my thirties and forties. The goals I set at fifty showed more balance and self-knowledge, and the outcomes have been stronger. I’m even more optimistic for the next set.

When I chose to retire, I was able to identify some obvious benefits. There were passions I would have time to follow, many everyday things I could enjoy more, and gifts I could offer family and others. That has all come to pass. But I didn’t really consider the three huge benefits of health, options and perspective, at least not to the extent that they have come into play. Each has been a magnificent blessing for me.

What might others take from this? Well, early retirement is not for everyone. First, even the opportunity requires some rare financial blessings. But, when that grounding is in place, who will derive most pleasure from an early retirement? I think the keys are to have passions and ideas, and also strong enough core relationships, especially with a life partner, so that more time becomes a blessing and not a curse. With that strong starting point, the additional benefits can only make a good thing better.

If that does not yet describe you, then you might be better carrying on with full-time work. There is nothing wrong with that choice, since work carries many wonderful benefits as well. But then, the end of full-time work comes to most of us in the end, for many earlier than we expect. So it would be a good idea to set a life goal now to shore up those key relationships and to develop those passions. It is far from simple to have the perspective to see that, and then the space to implement it. But the costs of leaving that too late could be enormous, while the benefits can offer blessing after blessing.        

Race to the Bottom

The rate of change of technology over the last thirty years or so has been faster than ever in human history. One fun game is to watch an old movie or old documentary and try to estimate when it was made. There are clues in hairstyles and fashion and even in the way people speak to each other. But recently the biggest clues have been from the technology used.

What do the telephone landlines look like? The computers? Do they have mobile phones, and what size are they and what do they look like? What applications are people using - instant messenger, text and so on – and what about the photography? The current few years will be instantly recognizable in a few years time based on almost everyone lugging around a huge smartphone and using it pretty well the whole time – except when it being recharged.

With the speed of emerging technologies, anyone trying to make predictions has ended up looking foolish more often than not. Many companies have risen too, only to fall with a wrong bet or the next wave. I have noticed a couple of trends that seem to have generally held true through the chaos.

One trend is that predictions and early use of any particular technology are always more highbrow or elitist than later reality.

It was thought newspapers would be great educators, but before long the most popular columns were astrology, celebrity gossip and soft porn. Then came TV, initially filled with plays and documentaries but nowadays giving way to reality shows, sport, more celebrity gossip, and attempts to make us shop.

Movies are the medium that surprises me the most. I love watching real films about real people doing believable, everyday real things, but it seems I am pretty well alone in this, such is the prevalence of aliens, superheroes, escapist fantasy, war and spurious violence. Oh yes, and more porn.

The internet has spawned some wonderful practical business models, from Amazon to Uber. But what have been the most popular areas? Arguably, they are shopping, music, self-promotion, gambling, dating, and, most especially, porn. Computer games can be as simple as mind puzzles, but many of the ones that have really taken off have been based on some sort of warlike combat. Even here there is exploitation of women: I hate the advertising for one popular game that seems to be for teenagers yet features a woman with a most unlikely breast size.

Perhaps most telling have been the social uses of computers and now mobile phones. The development of e-mail was not hard to predict, and even now its uses are quite traditional, with business a mainstay. But who saw instant messaging? By the time I had even heard of it, my twelve-year-old daughter was using it three or four hours a day, mainly to flirt. Then came text, which for a long time I didn’t see the point of or use, perhaps because flirting is the main use once again. This translated to photo apps, with the most interesting being Snapchat, in which photos and messages are automatically deleted after a few seconds. Why is this so popular? Because it allows for more edgy flirting, notably using nudity.

Technology has probably been one driver of the rapid pace of social liberalization over the last generation. And that change has been rapid indeed. Female emancipation, and acceptance of homosexuality, trans gender variations, and BDSM have all progressed quickly. I love watching “As Time Goes By” on PBS, not least because I see a lot of myself in the Geoffrey Palmer character. In an episode last week, one of the girls chose to immediately cut off a relationship with a guy who made a remark about wanting to be beaten, on the grounds that he was clearly a pervert. That was only thirty years ago.

I don’t intend to sit in judgment over this, though I do find it great to observe young people these days having so few hang ups about sex and relationships compared with my own experience. The trend must confuse social conservatives mightily, as they preach libertarianism while observing in horror its effects on their codes of morality. It is interesting to note that given half a chance, most of humanity will rush to commit as many of what used to be considered deadly sins as quickly as possible: perhaps the early clerics’ sanguinity about human nature was not misplaced. Considering this also helps to understand, if not support, the attitude towards the west among the most religious and conservative societies.

A second observation about the technological revolution concerns the devices involved. A repeating theme is that the core functions and equipment become ever more wonderful, but the ancillary items lag way behind.

So, nowadays we all have beautiful mobile phones. But the batteries are way too heavy and run out with annoying regularity. If I have to travel with my PC, the machine itself is light, but all the cables I need multiply the weight and the bulk. Early computers had beautiful interfaces once you were inside an application, but required gobbledygook to gain access or fix issues.

My third observation is about a neglected category of potential users, that is older people. It is understandable that designers initially focus on cutting edge applications for early adopters or the mass market. But in my view they have missed opportunities later in the game from the elderly.

Even now most mobile phones have tiny screens with even smaller keyboards, which are highly impractical for arthritic hands and failing eyes. Early computers had so many fancy functions that older potential users were deterred by the complexity.

Further, some of the greatest potential to add value comes from the old, and not only because they are plentiful and often wealthy. These new applications reading heartbeats and other medical indicators are being marketed to fitness fanatics, while the ones who actually need it are the frail. Similarly, using technology to simplify compliance with a regime for taking medication can save lives. Even leisure applications like e-mail and photos could be redesigned for older users, via a simplified device with few large buttons.

What can we learn from these trends? It may be that companies focused on ancillary features or mature users represent the best investments. Technology companies should make sure their staff does not make the common mistake of assuming all potential users are like them, in other words young and highly technical. Some voices representing other demographics would help. I am still amazed every time I open a user manual – are these things ever tested on real human beings?

The first trend also has a message about where to focus as a startup or for which startups to invest in. Choose applications that reflect humanity in its realistic base instincts rather than ones for humans we might see as more admirable or acceptable to priests. I can’t imagine where that will lead next, but we won’t have long to wait before we find out.  

In Praise of Managing Decline

Management textbooks abound with advice about how to grow a business, and with case studies of success in doing so. We must all look to Porter’s five forces and to blue oceans to identify opportunities, then act as a disrupter before we are disrupted ourselves. There are many ways to innovate, and to acquire and motivate the most exciting talent.

This all has its place. But actually, most of the time companies are stuck in a less exciting place, that might be termed managing decline. If you think of the classical life cycle of a company, with its early adopter and rapid growth phases eventually being replaced by a more modest growth, then a plateau and finally a stately retreat, most of the time is usually in the latter phases. We should not forget, most of the money is there as well.

Further, in some ways managing the initiation and growth phases are easier. The vision is clear and appealing. The company is small and the hierarchical structure simple. Setting goals is simple, as is attracting talent and even money, if the vision is appealing enough. And growth conceals so many sins. Project overruns and cost laziness can be obscured by growth, since cost metrics in cents per unit usually improve while the unit denominator is increasing.

Most of my career at Shell I was managing decline, though of course we never described it as such. We had an established product in an established market with a loyal customer base and good margins. We had to keep challenging our cost base, and focus on keeping the existing customers happy. Disrupters came along and our market share often declined gently, and we usually reacted by slowly managing gross margins upwards and taking advantage of incumbent advantages by such means as loyalty programmes and squeezing suppliers.

It is not a surprise that little is written about managing decline since it is not all that sexy. Further, even those of us actively managing decline spend our days pretending that we are doing something else, making business plans to steal market share, acquire competitors and sometimes to expand markets and products.

Yet managing decline is not easy and it is critical. Most big non-tech companies you can think of are in this game, except perhaps in China. Think Ford, Nestlé, McDonalds, the Post Office, Time Warner Cable, Chase Bank. Whisper it softly, but large parts of Apple’s and Google’s businesses are pretty mature already. The archetypal companies for this phase are the cigarette manufacturers, whose product is essentially obsolete but still selling. These companies have some of the best long-term shareholder returns of all sectors.

Managing mature businesses require special skills. The clue comes from the original BCG matrix, where mature businesses are labelled cash cows. What cash cows need to produce is cash. A lot of the key is about being very disciplined with new investments and in eliminating parts of the balance sheet. In Shell I once termed a model for part of our European retail business OPM, standing for Other People’s Money. If you can retain a steady net income while reducing capital employed you can grow your return. So manage down capital, sell off non-core assets (and even core ones with care), and manage working capital carefully. All these moves restrict strategic freedom, but that is a fair sacrifice in many a mature business. Growth and investment and risk are allowed in mature businesses, and one trick is to hive these parts under separate management.

Important in a mature business is to really know what the purpose is, where it aspires to excel. Gradually activities can be trimmed back to the core, but the core needs protection and must not be milked too hard. That part is almost spiritual, and it also serves to retain an underlying motivation to staff.

Another key is to simplify and standardise the business as much as possible. Outsource parts of the supply chain, and use partnerships to share costs as well as to try to lock in additional customer loyalty. It makes more sense to join industry associations once a business is mature, since standardisation can reduce costs while creating some entry barriers. Scale can also be added via merging with rivals: in this case either be the one bought out or be very careful not to overpay, for goodwill on the balance sheet can kill a mature business.

Finally, be on the look out for long term liabilities that might become crippling to a smaller business. This can apply to fixed assets, but nowadays the main example is pensions. A mature business can find the number of pensioners exceeds the number of employees, and it is often the pension liability that condemns a mature business, so be smart enough to see it coming and take mitigating steps.

So there are many unwritten textbooks on the subject of managing decline in companies, and I recommend it as a career specialisation, there are many benefits to both you and your company to doing this well. Furthermore, there are numerous parallels for the skills in arenas outside business.

I was drawn to this blog subject by a neat Economist article about how cities are learning to manage decline. Even though urbanisation continues at pace globally, there are growing numbers of cities with declining populations. Detroit is the clearest example, and years of neglect demonstrate how not to manage such problems.

Usually, cities spend years in denial, and fail to cut the costs in time, and in the end build unsustainable deficits, especially over public sector pensions, and have to serve the remaining residents with inadequate operational budgets. If they only saw things coming in time, they could trim costs, work out pension deals, and reshape the city and its boundaries. Seemingly in Germany, many cities are physically contracting, buying up semi-derelict areas and returning them to nature. This is a novel concept to me, and an interesting one; I wish them luck and hope others can learn.

It is not just cities that can learn the good principles of managing decline, but countries too, whether economic, demographic or military decline. Sound planning can help, rather than policies based on denial or recklessness. The case of military decline or decline of political influence is particularly pertinent for the USA. Almost all the lessons from companies can be applied.

Keeping it simple means being less ambitious with foreign policy and focusing on home priorities. Cutting costs means rebalancing trade, encouraging immigration to keep up the base of productive workers, and challenging investment on vanity projects (while growing it on operational things like domestic infrastructure). Identifying a practical and spiritual core thatis defensible is important. Standardisation and partnership means ratifying UN conventions and using multilateral approaches wherever possible, in a more humble way than currently. The time of projecting exceptionalism should be over. It is hard to learn these lessons in time, as all previous hegemons would attest.

Finally, what is life itself if it is not one long decline, at least after we reach our forties? A keyword for mature businesses is harvesting, and this is what we can aspire to in the second halves of our lives as well. The same lessons apply. Notably, a spiritual core can act as a guide in later life. We should simplify where possible without sacrificing what really matters to us. We should reduce and simplify our balance sheets, and make sure especially that our property suits our needs before it becomes too difficult to move. We should become less fussy and less demanding of our friends as well.

Harvesting can be a glorious time, and with good luck can extend a long time. Viewed sensibly, it involves very little sacrifice. For an individual, a city, and country or a company, these can be the golden years.