“Just one thing”

In a scene in the movie, Central Intelligence, Kevin Hart’s character is reconnecting with a high school classmate, “Fat Robby,” played by Dwayne Johnson.

Hart asks how he got in such great shape. Robby responds:

I didn’t do much really. All right.

I just did one thing.

I worked out 6 hours a day, every day, for the last 20 years. Anybody could do it, right?

That reminded of something I see in the telling of a lot of success, and failure, stories.

People try to boil it down to just one thing.

But, the real story is more like what Johnson says after that. It really wasn’t just one thing.

Hart’s face is the typical response you get when you try to explain it’s really more than just one thing.

Walmart’s success is a good example.

The first thing people think about Walmart is low prices.

Many people think that’s the ‘just one thing’ for Walmart.

They missed that Walmart invested heavily in its supply chain management, long before other retailers. They did this to help save costs and keep prices low, but it also had an unexpected benefit. It meant that stores were stocked and shoppers more often found what they wanted.

Even the second generation Walmart management lost sight of this, and other, important value dimensions as they focused on the ‘just one thing’ of low price in the 90s and 00s.

They kept costs low by doing things like servicing shelves less and cutting cashier labor to the bone.

This led to messy, disorganized stores and long lines at the checkout.

Walmart may have what you want on the shelf, but they made it less appealing and less convenient to get it.

For a lot of customers, cleaner, more organized stores with shorter checkout lines became more appealing, even if the prices weren’t rock bottom.

Losing customers to competition made Walmart management realize they had neglected the importance of these other value dimensions. So, they put more effort into keeping stores clean and organized and making it easier to check out.

Business improved.

It’s good to remember that success and failures usually come down to more than just one thing.

Many times those other contributors are not obvious.

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Don’t get caught in the justice trap

I enjoyed this post from David Henderson on EconLog about why businesses hire employees and that it is worthwhile to avoid the justice trap.

Henderson quotes good advice from Jeffrey Tucker:

Sincere apologies and genuine admissions of error and wrongdoing are the rarest things in this world. There is no point at all in demanding apologies or in becoming resentful when they fail to appear. Just move on. Neither should you expect to always be rewarded for being right. On the contrary, people will often resent you and try to take you down.

How do you deal with this problem? Don’t get frustrated. Don’t seek justice. Accept the reality for what it is. If a job isn’t working out, move on. If you get fired, don’t seek vengeance. Anger and resentment accomplish absolutely nothing. Keep your eye on the goal of personal and professional advancement, and think of anything that interrupts your path as a diversion and a distraction.

And perhaps a bit more powerful from Walter Oi regarding Japanese internment camps in World War II:

…the Japanese-Americans were treated unjustly, but that the best thing to do for them was to move on and not create a new government program.

I agree. It is very easy to get caught in the justice trap and dwell on how you have been wronged, but that isn’t the least bit productive. Get over it.

Megan McArdle on Failure

I agree with most of what Megan McArdle has to say about failure in this EconTalk podcast.

Why is failure valuable?

…because that’s how we get information.

What about the typical success story?

…when you see the cover of a business magazine, it’s always this genius with his folded arms staring at you and the piece goes through all these brilliant ideas. But in fact when you talk to entrepreneurs, that isn’t how they experienced it. Usually how they experienced it was: We had this great idea and then it turned out that didn’t work, so we did something else. Or it turned out: It didn’t work and we went out of business.

Where do we learn to start avoiding failure?

…having failed is an important skill that kids need to learn. And the right time for them to learn it is when they are kids. And when the consequences for that are actually pretty low.

One of the book talks that I gave, a 10th grade girl came up to me afterwards and she said, You know, I would really love to try to fail, but I’m in an AP (Advanced Placement) program; only 5% of the people who are in the program are going to get a 4.0; and I just can’t afford to take a class that I wouldn’t get an A in.

And I just thought: America, you are doing it wrong. It’s not that kids shouldn’t work hard in school. That’s not what I’m saying. But the idea that at the age of 15 you have to be so self-protective that you can’t take any risks at all is insane. Because when is going to be a better time? When she is looking for an assisted living facility?

I might rephrase that first part, though. Having failed isn’t the important skill. Learning to deal with failure is and learning to overcome the fear of failure is another important skill.

It seems like soon after we get past the trials and errors of learning to walk, run, talk and ride bikes, we forget that trial and error is how we learn and we tighten our tolerance for error.

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Parasitic failure feedback loops

I recommend reading George Will’s, Detroit’s Death by Democracy.

He starts with an analogy that I agree with and have used before:

The ichneumon fly inserts an egg in a caterpillar, and the larva hatched from the egg, he said, “gnaws the inside of the caterpillar, and though at last it has devoured almost every part of it except the skin and intestines, carefully all this time avoids injuring the vital organs, as if aware that its own existence depends on that of the insect on which it preys!”

Government employees’ unions living parasitically on Detroit have been less aware than ichneumon larvae.

He provides us with a good axiom on feedback and failure:

When there is no penalty for failure, failures proliferate.

That’s something I encourage us to be aware of in all systems. What happens with failure? Is failure a negative reinforcing feedback (as it is in capitalism and sports) or a positive reinforcing feedback (as it is in government).

Then Will exposes the positive-reinforcing feedback loop:

Steven Rattner, who administered the bailout of part of the Detroit-based portion of America’s automobile industry, says, “Apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs.” Congress, he says, should bail out Detroit because “America is just as much about aiding those less fortunate as it is about personal responsibility.”

There you have today’s liberalism: Human agency, hence responsibility, is denied. Apart from the pesky matter of “voting in elections” — apart from decades of voting to empower incompetents, scoundrels and criminals, and to mandate unionized rapacity — no one is responsible for anything.

Things fail

Here’s an interesting post from Arnold Kling on EconLog. 

In it, he discusses federalism and cartel federalism. Few people consciously view government in these terms, but should.

Federalism is the idea that governments compete for citizens, much like how companies compete for customers. When people are free to move, they tend to move to areas that offer governments they find more attractive.

As a small example, when I was ten years old, my parents moved seven miles to exit a poorly performing school district to a better school district.

Cartel federalism is when political elites, driven by similar motivations as business people, try to reduce competition between governments by colluding to offer similar types of government.

Bastiat reminds us to “treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.”

For the same reason, we should treat all political questions from the viewpoint of the citizen.

When I studied engineering, they taught us to avoid designing systems that have a single point of failure. Why? Because things fail.

No matter how durable and reliable we believe something to be, we don’t possibly know enough to know with certainty it will not fail.

We forget that when it comes to governments. Enron failed and hurt a small portion of the economy. The Soviet Union failed and took down the whole economy. That’s a single point of failure.

Even with governments, it’s good to have choice and competition. Why? Because things fail.

Why private is better that public

This post by Don Boudreaux on Cafe Hayek reminded me of the insight that made me realize that private markets are more effective than public (government or politically-driven) markets.  It’s a two-parter.

Part I:  You first have to realize that most plans fail.

Part II: Feedbacks in private market clean out the failures, reward successes and encourage learning from failure.  In the public markets, feedbacks are not as strong to clean out failures while other feedbacks reward failure and there is little incentive to learn from failure.

Do you have any compelling arguments against that?  I haven’t heard any.

The arguments I’ve heard are “some government programs succeed” (which does not counter the insight, since it only says that successes are less likely, not impossible) or “the private market won’t invest in some things, that’s why it’s the government needs to do it” (that should be telling) or “voting works better than the private market, that’s why we vote (yet we all pretty much have the shoes we want, but at least half of us generally don’t have the politicians that we want).”

More about Part I:

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Unproductive failure?

My friend, Lane Meyer, directed me to an excellent article, Fail often, fail well, in The Economist.

I’ve been posting enough recently on failure, that I have decided to add it as a category for this blog.

The Economist article reinforces what I have written about, that failure is necessary to have a chance at success and that the stigma on failure is unproductive.

It also makes a distinction on failure that I’ve been thinking about lately as well.

But simply “embracing” failure would be as silly as ignoring it. Companies need to learn how to manage it. Amy Edmondson of Harvard Business School argues that the first thing they must do is distinguish between productive and unproductive failures. There is nothing to be gained from tolerating defects on the production line or mistakes in the operating theatre.

That’s a good distinction to make.  The article gives this example of unproductive failure:

James McNerney, a former boss of 3M, a manufacturer, damaged the company’s innovation engine by trying to apply six-sigma principles (which are intended to reduce errors on production lines) to the entire company, including the research laboratories.

I’m not sure I’d agree with that.  With 20/20 hindsight, this appears to be an obvious unproductive failure.  But, I’m not sure the impact of six sigma on innovation was well known prior to McNerney’s trial and from that trial we all learned something — that six sigma is a great tool for consistency in operations but not so good where we need leeway for experimentation.  Thanks Jim.

I think a good example of an unproductive failure is running up credit card debt to buy clothes, cars and electronics and then declaring bankruptcy.  Or promoting a high school assistant football coach to a head coaching job in the NFL.  There’s a very small chance that some form of success could come from these actions — but it’d be a fluke.

While I’m not sure there are any rules to distinguish upfront a productive and unproductive trial, I do believe the distinction is a good idea to keep in mind when trying something.

At the very least you should be asking if the trial, or something like it, has been tried before and what the results were.  If it was a failure, then it’s good to think about why and why you think your trial may not be.

This won’t always be definitive and prior similar failures do not need to keep you from trying again, but considering such things can help set expectations and keep you disciplined to staying with a low risk trial.  Many times I’ve seen people, convinced of their own brilliance, bypass the trial phase (or worse, ignore or misread the results from the trial) to invest heavily in something to become a hero, usually becoming the goat.