“Heuristics are commonly defined as cognitive shortcuts or rules of thumb that simplify decisions. They represent a process of substituting a difficult question with an easier one (Kahneman, 2003).”
“From its introduction into English in the early 1800s up until about 1970, the term heuristics has been used to refer to useful and indispensable cognitive processes for solving problems that cannot be handled by logic and probability theory (e.g., Polya, 1954; Groner, Groner, & Bischof, 1983).”
“No matter how successful you are, change is always good. There can never be a status quo. When you have no money you can’t afford long-term solutions, only short-term ones. You have to always be upgrading. Otherwise, you’re f**ked. (Billy Beane, Moneyball – The Art of Winning an Unfair Game, Michael Lewis, 2003)”
“Optimism is the faith that leads to achievement…no pessimist ever discovered the secret of the stars, or sailed to an uncharted land, or opened a new doorway for the human spirit. (Helen Keller, 1880 – 1968)”
And happy new year to all of the indefatigable optimists out there, to the folks that look long and hard at the difficult questions and continue to do so in the face of so many ill-framed arguments against the right thing to do, to those that that understand that sustainability within a company is indeed an upgrade, often for the short-term to appease those who are less optimistic that will nonetheless impact the long-term and lastly to those who continue to innovate, look for ways to integrate new thinking into the heads of those who embrace dispositional optimism (presumption of stable) and suffer optimism bias (with “more weight is given to information if it favors the self or it supports a desired conclusion (Flyvbjerg, 2006)”).
I also need to be cautious and wary of the optimist in me. I do tend to believe that this year, while seeming to resemble the last, will be different. In the previous post I outlined some of the headwinds that will impact our attempts at recycling in 2019. Oil is one major concern and as well as leadership, both in government and inside companies that could make a difference. It hinges on the question that has not been asked.
Heuristics are important even as the process seems to be displaced by the unquenchable appetite for data. Bob Nease, writing for FastCompany suggested: “Using advanced analytics to mine the ever-increasing cloud of digital dust can uncover hidden patterns and generate deep insights” while quickly followed that observation with “sometimes having more data can actually make things worse, leading us to act in ways that can be counterproductive.” And yet, we crave more of it and do not ask the questions that data demands us to answer. Too often, we treat data as the rule-of-thumb answer rather than attempting to mine the questions the data offers.
Data offers answers to a variety of concerns inside a business. However, the right questions need to be asked in advance. Consider Bayes Rule, a process that allows us to update our beliefs based on new information. The view from 30,000 feet suggests that these questions are being ignored in favor of what might easily be considered status quo. Ignoring probabilities where the data might point to a real change is based on our own convenient answer.
For instance: Company A, a large, regional grocery chain. Leadership reviews periodic and quarterly financial information based on the research done. No matter that the company does not have a presence in the stock market, they do have stakeholders. In those reports, the chance to challenge the status quo has been reduced due to the fact that natural inferences to the data presented. Bias tends to trump data.
Company A publishes a sustainability document in which they profess to embrace a number of arbitrary timelines to improve their operations to increase their participation in the food donation program and be a better steward to the environment. Which situation is more likely?
- Company A has instructed every manager (and employee) to explore every available option to decrease waste, innovate where necessary and engage with outside agencies to create the possibilities they may not have considered.
- Company A is attempting to create new and profitable efficiencies in a marketplace of razor thin margins.
We want to believe the first choice is correct and the document Company A published allowed all stakeholders to feel good about the sentiment. While the feeling does not translate as well the further down the chain of command, the more removed from the top, the less likely the mandate will be carried out. Leadership knows this.
Leadership also know that donating food to support local needs must first be addressed with inventory control – better control means fewer available donate-able products. Doing this marginally increases profits and serves as a cognitive shortcut.
A vibrant donation program should have inventory efficiencies built in. However waste reduction rarely does. While the data supports it, the bias to engage in any meaningful change does not. While some sustainability documents suggest a top-down approach (purchasing sustainably sourced products for instance), those publications rarely state what the data really suggests: removing wasted food, the product left after all other avenues have been exhausted – sold at regular price, then reduced, then donated – will reduce a company’s waste removal costs by up to 50%.
At the heart of sustainability is the difficult question of coordination. Data suggests there is profit in it. The circular economy offers the logic in adopting it. All of your employees including those most distant from the top office understand it. Your customers will applaud it.
However, the question of how it can be done is still be shackled by the data leadership is offered. Even if you are not Company A, are you coming to the right conclusion based on the data you have received? Chances are, your data provides cognitive comfort. Good data however offers opportunity. In a world of thin profits, how much are you throwing away?