When I was 5 or 6 years old, I did not understand what ‘the straw that broke the camel’s back’ meant. One day, my father made a simple experiment. He made a mini-table from card paper, then loaded several matchsticks one by one on its surface till the table collapsed under their weight. Since I had observed the process, I knew the table did not collapse due to one matchstick. That small experiment demonstrated to me how we may wrongly attribute causation – or apportion blame – to one factor, when the real problem may be more complex.
Political expediency can often lead to multivariate problems being framed as black-and-white issues. Such reductionist framing further leads to ineffective, single point solutions.
These days, we are seeing much evidence of this logically flawed way of thinking. The UK economy is tanking? Blame Gordon Brown! The banks screwed up? Flog Fred Goodwin and strip him of his knighthood*! Don’t understand where the economy is headed? All we need is political will and we will be magically out of this mess!
Now that governments have shored up banks’ balance sheets – a phenomenon reported as “taxpayers now own the banks”, never mind UKFI or our considerable fiscal deficit, which just means that some random foreign country creditor really owns our collective derrières, but I digress – they are indulging in piecemeal ‘fixing’ of problems. Limit executive compensation, ordered Mr Obama. Why, in the UK, our own Mr Brown is reportedly cross at the mention of bonuses, never mind banks are contractually bound to pay bonuses to many, such as sales people in parts of the bank that are not investment banks. Labour Party’s deputy leader, Harriet Harman, rashly declared a former bank chief’s bonus unacceptable in the ‘court of public opinion’. It is worth noting that as a lawyer and an elected MP, Ms Harman should have greater regard for the courts of law than the court of public opinion.
All these knee-jerk reactions point to one thing. That few have the intellectual capacity to comprehend the complexity of strategic problems, leave alone solve them using perfect rationality. In a rush to populism, politicians are wont to framing problems in a black-and-white, or you-are-with-us-or-you-are-against-us mode.
Multivariate problems are nothing to be scared of. They provide an opportunity for creative problem-solving, provided the goals are clear.
Business problems, like political ones, are complex and multivariate too. There are strategic goals, problems, people and their agendas, limited executive time and resources, to name but a few. External factors such as competitors and regulators are also to be considered in framing and solving strategic problems. Can businesses afford to focus on one variable and ignore all the others? Probably not, for that would not be very different from the politicians’ handling of the current crisis and would result in equally arbitrary, quick-fix solutions.
Multivariate problems are nothing to be scared of. The more the variables, the more the ways to combine and permute them, to build trade-offs, to be creative in problem-solving, provided the goal, the objective is clear!
I know some of my clients are currently working on their growth plans. Which of the many variables mentioned earlier can they afford to ignore? Probably none. But can they prioritise some goals over others? Definitely. With home markets stagnating, many British companies are working on their international growth and consolidation. How might they allocate scarce resources? Well, the goals would drive the allocation of resources and executive time. What about risk and uncertainty? Businesses take calculated risks and deal with uncertainty at all times not just in tough times like the present, when they might have to be a tad more cautious.
Politicians can learn to love – and solve – multivariate problems. It may however need them to admit they were wrong in the first place.
All this does not mean that businesses never make sub-optimal decisions or mistakes. They do. After all, some banks did allow unbridled trading in mortgage assets with obscure risk profiles which has contributed greatly to the current economic crisis. But mostly, they are acutely aware that complexity is unavoidable and reductionism is not the best answer. Accountability in businesses, contrary to popular press, is enforced quite strictly.
Perhaps businesses can teach politicians to love – and solve – our multivariate problems. But that would first require the politicians to admit that they were wrong about something and that their responses were knee-jerk and driven by no clear goals except populism.
Making them admit it? Now that is a multivariate problem quite in its own league.