As I’ve noted in a prior blog entry, IBM does biennial studies of CEOs and two years ago found that innovation was no longer the top concern: managing complexity was. Moreover, the majority felt they hadn’t been trained to handle some of the complex issues they faced.
In the December 21, 2013 issue of the Wall Street Journal, Ramond Zhong wrote an Opinion piece of Andrew Haldane – The Banker Who Cried ‘Simplicity. Mr. Haldane, the Bank of England’s executive director for financial stability was speaking at a Federal Reserve Symposium and posed the question: why is it that border collies can catch Frisbees better than many humans, including one’s with Physics PhD. He observed that catching a Frisbee requires the catcher to process in real time a brain-fryingly complicated set of physical and atmospheric factors – wind, gravity, the Frisbee’s rotation and flight path. Yet “catching A Frisbee is remarkably common”.
The reason, according to Mr. Haldane, is that in complex decision-making problems, simple rules sometimes do just as well as complex solutions, if not better, You don’t have to understand the science of Frisbee-catching to master the practice. Keeping all the physics in your head would probably overwhelm and distract you – leading to missing the Frisbee. Dogs, like most humans, keep it simple: Less is more.
His point was that the financial regulators who are trying to avert future meltdowns like the 2008 Recession, aren’t following this rule – that less is more – but instead are responded with “evermore Byzantine and finely tuned rules”. He cautioned that while the global financial system can be viewed as “complex, adaptive web”, regulators are in the “stopping business” while financial decision-makers are in the “starting business” by “creating things rather than constraining things”.
His point is that smart financial market players can simplify complex decision-making by focusing on how to reach the goal. This means focusing on the most important factors that will allow them to move forward while recognizing constraining forces.
I’ve often thought about the analogous situation of a driver in a complex highway “intersection” where four roads have entry ramps with cars entering the “system”. Overwhelmingly, drivers are able to navigate forward without an accident despite the complexity of options in each lane and coming from the entry ramps. By prioritizing those factors which enable the person to move forward relatively safely, traffic continues to flow without significant collisions.
How do you handle decision-making in the face of great complexity? Share with us some examples of your successes. Maybe greater recognition of how we constantly handle complexity, will give us all, especially leaders, more confidence in handling future events.