Cogito, Ergo Sum

I think, therefore I am

Rene' Descartes

Note: this is the second article of the "Philosophy for Entrepreneurs" series. You can access the first article here: https://www.dhirubhai.net/pulse/philosophy-entrepreneurship-kiran-kodithala

In this current age, entrepreneurs and CEOs, CFOs, and other professionals are respected for their ability to predict the future. Investors rely on them for advice in making wise investment decisions, shareholders review their reports to make decisions on their trades and portfolio changes, and in some companies, employees consider their leaders’ proclamations to be the gospel truth (hence the phrase  Messiah complex).

However, here is how Kahneman describes the reliability of these professional forecasts and predictions in his recently published bestseller, Thinking, Fast and Slow:

“People who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys who would have distributed their choices evenly over the options.”

Daniel Kahneman

Kahneman elaborates: “Most people fall prey to this illusion of predictability created by experts, or this idea that more knowledge equates to better predictions and forecasts. One of the factors perpetuating this myth is the rearview mirror. In other words, a human’s ability to concoct a credible story of past events creates false confidence in people’s ability to accurately predict the future.”

What’s the reason for such a disconnect?  These projections oftentimes resemble overconfident gambling bets, rather than well-thought-out approaches to solving the complex, multi-dimensional, asymmetric problems that stem from the global market, with the rapid innovation and dynamic business ecosystem of the modern world. If a CEO or CFO believes that he or she knows everything, right down to exactly who is working on a competing innovation in their garage and plotting to take down their product, they are very likely not being truthful with themselves.

What’s the cost of such an overconfident CEO?  

Just take a look at the following examples of misplaced assumptions:

Kay Whitmore,  Eastman Kodak

In 1990, Kay Whitmore’s first year as CEO of Kodak, he famously fell asleep in a meeting with Bill Gates at which integrating the company’s products with Windows was being discussed. Indeed, despite the fact that Eastman Kodak had actually developed the digital camera in 1975, Whitmore refused to take the technology seriously and failed to invest. 

John Sculley, Apple

Sculley lacked real technical knowledge and made a number of shaky product decisions, including launching the Apple Newton and moving into the camera and CD player businesses. In the end, of course, Jobs was brought back; by then, Sculley had been fired after a decade of problems.

Myself

Looking back at my own history as a CEO, I also committed several mistakes during the formative years of my business by making overconfident projections and taking unimaginable risks. This foolhardy strategy had the potential to completely destroy my company. In retrospect, I can attribute my impulsive, overconfident decision making to a lack of experience, and most importantly - a lack of skepticism.

What’s the root cause of these blunders?

The root cause is the aura of invincibility we voluntarily assign to these CEOs, assuming that they somehow possess a crystal ball and understand the current situation more clearly than others, and thus can make predictions with a higher level of precision. We do so without any real evidence, other than the outcome of a series of events that resulted in the momentary success of their startup.

The truth, of course, is that these CEOs are just as capable of making wrong choices, just as gullible as we are in trusting (and hoping) their predictions will prove true,  and worst of all - just as human as we all are in making impulsive, irrational and overconfident decisions. Our tendency towards the Messiah complex, however, can make some CEOs truly feel superhuman - which can lead them to start making foolish choices in their personal lives as well.  Just look at the following examples of these downfalls:

1. Uber Founder Travis Kalanick Resigns as C.E.O. (https://www.nytimes.com/2017/06/21/technology/uber-ceo-travis-kalanick.html)
2. The rise and fall of Elizabeth Holmes (https://www.businessinsider.com/theranos-founder-ceo-elizabeth-holmes-life-story-bio-2018-4)
3. WeWork: The rise and fall of co-founder Adam Neumann (https://www.bbc.com/news/business-49817037)

It’s convenient to think that Travis, Elizabeth, and Adam are just “a few bad apples” in a big barrel full of great apples. I feel, however, that there was nothing inherently great about them, to begin with, that resulted in their rise, and there was definitely nothing that was particularly worse about them that resulted in their fall. Daniel Kahneman attributes success to talent plus luck.

Daniel Kahneman gives us the formulas for success in these “equations:” success = talent + luck; great success = a little more talent + a lot of luck.

Or to paraphrase Warren Buffet’s comment about his own success, if he had been born to a nomadic family in the African desert, he wouldn’t be a billionaire today.

However,  so often today, successful CEOs (and their cult-like followers) assign their success purely to their talent, resulting in an overconfident, bloated ego. For some of them, this leads to poor decision making  - both in their professional and personal lives. The good news? There is a way that these poor choices can be avoided.

How do we avoid these overconfident projections and make rational choices?

The answer to avoiding these big blunders is hidden in philosophy. Let’s start with the father of skepticism.

Most philosophers struggle with answers to the big questions. Questions like, “Is there a God,” “What’s the nature of happiness,” “What’s the purpose of my life,” “Are my life choices predetermined,” and so on. Though they deliberate on these big questions, most of them have an inherent “assumption” they base their answers on. For example, theists base their answers to the above questions on their faith in God, and atheists base their answers on their core assumption otherwise. But what if we made no assumptions? And questioned everything? And by everything, I mean everything! Including our own self! 

What if we started wondering whether our own lives were nothing but an illusion and not real?

What if we were just an actor playing the lead role in the movie The Truman Show?

What if we were one of the robots in the show Westworld? Or what if the whole world was an illusion, just like in the movie The Matrix, or we were just living inside a dream, a la  Inception?

If you say these thoughts out loud to your best friend, they might think you were crazy and try to get you committed. However, Rene Descartes wrestled with exactly this level of skepticism. 

In fact, his method of questioning is named after him - Cartesian Skepticism. Rene Descartes compared all his assumptions and facts to apples, comparing assumptions to bad apples, and facts to good apples.  However, he worried that one assumption (or bad apple) could spoil the entire cart of apples if we couldn’t tell the difference between an assumption and the truth. So, he decided to throw all of the apples (or assumptions) out of the cart and question every single one of them, just like an apple picker would - one-by-one. This led him to question his own existence. 

One would argue that we exist because of the following facts about life:

We exist because we can see, hear, smell, taste, etc.

• If the above assumption is true, then would we consider the people in a vegetative state or with severe disabilities to be “non-living?” Of course not!
• If this were true, that means the characters in Game of Thrones were real. I wish Ned Stark would come back to life...

We exist because we interact with other humans.

• This assumption does not work if the other humans are part of a matrix/video game simulation.
• And again - I sure wish Ned Stark had communicated with Rob about that big secret and had stopped the mayhem before it started...

We exist because we can read, write, understand, etc.

• This can be debunked easily as well. 
• OK - you get the point, I will stop my GOT references now.

This led to his famous realization je pense, donc je suis (in French), which is famously translated to Cogito, ergo sum in Latin, and "I think, therefore I am" in English. Rene Descartes was able to confirm his existence by realizing that only a human can think - and the very fact that he is thinking about whether he is real or not makes him a human.

While Cartesian skepticism can be extremely complex for modern entrepreneurs, a successful CEO should apply a healthy dose of skepticism when it comes to strategic decisions. This can be accomplished by following Descartes’ apple cart approach - evaluating all of our assumptions one-by-one, and ensuring that we are not making mistakes in the process. CEOs - and most leaders, really -  make the mistake of confirmation bias or wishful thinking when considering options, and oftentimes make misguided assumptions just to win their argument. We see it all the time with investor presentations, company projections and other forward-looking statements. In fact, the safe harbor statement on forward-looking projections is a testament to how confident these companies are in making these statements. We see this kind of behavior with stockbrokers, CFOs, and other leading analysts as well. 

One of the best ways to create the discipline needed here is to follow the strategy that the US Military employs in their war games. Our military uses independent contractors to build a red team to fight against the US team (the blue team).

A red team is an independent group that challenges an organization to improve its effectiveness by assuming an adversarial role or point of view.

This approach is particularly effective in organizations with strong cultures and fixed ways of approaching problems. The United States intelligence community (military and civilian) has red teams that explore alternative futures and write articles as if they were foreign world leaders. Little formal doctrine or publications about Red Teaming in the military exist.

If companies were to employ talented outside consultants to play the role of the red team, shooting down assumptions and adding healthy skepticism to their projections, we would be able to avoid serious mistakes and blunders, especially ones that spring out of our own overconfidence and bloated ego.

In summary, here is a quick outline for implementing a healthy climate of skepticism and critical thinking within your organization or department:

1. Implement a culture of rational thinking - No decision should be made impulsively, no matter how smart the CEO is or how successful he or she has been thus far in leading the company. An executive should always be able to defend his strategy to his leadership team, backed up by verifiable facts and reliable projections.
2. The executive proposal then needs to be broken down into concrete decisions and action items that need to be undertaken to complete the implementation - These need to be documented in a traceable decision tree structure, where each decision is posted with the underlying details of the risk assessment analysis.
3. Implement a “Red Team” for critical decisions - This red team should be sourced from external parties with the sole purpose of identifying flaws in strategic thinking and underlying assumptions. The red team should be allowed to review the decision tree and attack the underlying decisions as well.
4. The red team presents their findings of vulnerabilities to the management team, and the management team can decide to refine the plan and models and resubmit this for the red team’s next attack.
5. The company can set a maximum number of iterations so that this project can be completed in a resource-efficient fashion.
6. The executive and the red team should both be allowed to explain their findings to the leadership team, and the decision is then put to a vote.

While market fluctuations and their related risks are unavoidable, Descartes’ skepticism can come in handy to reduce the risks of overconfidence and intuition. Hopefully applying this skepticism will make us more accurate than dart-throwing monkeys!

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Stay tuned for next article: Becoming Superman (Ubermensch) according to Nietzsche

Note: this is the second article of the "Philosophy for Entrepreneurs" series. You can access the first article here: https://www.dhirubhai.net/pulse/philosophy-entrepreneurship-kiran-kodithala