The Single Minded Pursuit... Is this why Businesses, Organizations, and Governments Fail? episode artwork

EPISODE · Nov 6, 2020 · 46 MIN

The Single Minded Pursuit... Is this why Businesses, Organizations, and Governments Fail?

from The Best Paragraph I've Read... · host Zac & Don

The Best Paragraph I've Read: "The worlds of both economics and business have adopted the view that without a simplifying, unitary objective, an organization will be unable to make robust, consistent, and societally optimal decisions. Luminaries such as economics Nobel laureate Milton Friedman and superstar finance professor Michael Jensen have made the argument so convincingly that it has effectively become embedded doctrine: There should be a unitary objective whereby more is always better. This is why the implicit rule in most incentive systems is that selling more is better—always. At Sears Auto Centers in the 1990s, more repairs per customer was better, with no upper bound. At Wells Fargo in the 2000s, more accounts opened was better, with no upper bound. With no balance consideration evident, employees followed the rule to such extremes that they created existential reputational threats for their organizations. Both companies apologized and agreed to settlements. In energy, more proven and probable reserves is always better, so we get dangerous drilling and relatively unlimited hydraulic fracturing. In managing labor costs, greater “labor-cost efficiency” is always better, so there is limitless outsourcing of jobs to low-cost jurisdictions. In antitrust policy, more short-term efficiency is always better, so mergers are now enabled by the efficiency defense. As part of the Washington Consensus, more deregulation and fiscal austerity is always better, so countries engage in deregulation and austerity to comply. In the health-care system, more efficient use of working capital is always better, so minimizing buffer stocks of personal protective equipment made all sorts of sense—until a pandemic hit." This paragraph comes from an essay in Barron's titled: "How Endless Maximization Is Ruining Business."  The essay is written by Roger L. Martin. https://www.barrons.com/articles/roger-l-martin-the-idea-that-more-is-always-better-is-ruining-business-51602261886 Zac and Don discuss whether it is good for businesses, organizations, and governments to operate with a single minded pursuit.  Is it possible that they miss nuance and ignore complexity at their own peril?  Zac and Don also talk about how this mentality impacts education and other aspects of life.

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