25.06.2012

By Caspar Berry

By the time you read this article, it could likely be out of date. As I write these words, the world is bracing itself for a Greek euro exit – according to The Independent. They may well have left. They may not. The simple fact is that — right now — no one actually knows. We’re looking at events without the benefit of hindsight which you, the reader, looking back, obviously enjoy.

Hindsight is a wonderful thing. That’s been said before. But interestingly, no matter how much one values hindsight consciously, it’s so easy to undervalue its effect on us at a subconscious level and assume that the way that something turned out was the way it was always destined so to do.

Imagine a magician shuffles a deck of cards, places all 52 of them onto a pool table and asks you to bounce the white ball around the cushions until it comes to rest near one. You have a free choice as to which you think is nearest. The magician thinks for a moment and announces that it is the nine of hearts. Absolutely incredible. How on earth does he do it? He turns them all over to reveal 52 nines of hearts. Of course. Easy. That is the only way such a remarkable trick could be performed. And so obvious looking back because — you remember now — that he omitted to show them to you before performing the illusion.

You project yourself into the body of the person you were ten minutes ago with the knowledge you have now and cannot believe that you didn’t guess something so self-evident. But the fact is that before you found out the secret you were oblivious to the crucial information, it was anything but obvious.

According to the Rogers Commission, before the launch of the space shuttle Challenger NASA were aware of the design flaws of Morton Thiokol’s O-Ring but failed to address it properly. Remiss of them, of course. But obviously they didn’t know that it would lead to an explosion. It was imperfect – as probably was everything else involved with the extraordinary endeavour of propelling man into space. The commission looked back at events as we look back on the magic trick and cannot understand how someone could have made such a mistake because they cannot imagine what it must have been like to have operated without the information that they subconsciously simply take for granted.

As regular readers of this column will know, I make a living talking to companies about all aspects of risk and decision making using poker as my metaphor. At the end of a lot of such sessions, I’ll often host a poker game for participants and usually deal a table myself. I work with some of the UK’s best managers. They make demanding decisions every day, with limited information and uncertain futures. But everyone reacts the same when, after having folded a ten and a three in the first two cards, the next three cards are ten, ten, three, thus potentially throwing away a full house. “Why are you bothered?” I say as they berate their bad luck. “Because I would have won the hand,” they cry. “But you did the right thing with the information you had available to you,” I protest.

Again, consciously they understand the facts but subconsciously they chastise themselves for doing something so apparently stupid! It’s bizarre when you stop and think about it. It seems to be the most natural thing in the world to judge a decision not by its intrinsic quality but by the outcome – known only after the event.

Of course the opposite of this is something very challenging to our twenty first century sensibilities: that, away from the hypothetical baize of the poker table, there is such a thing as an intrinsically good decision irrespective of the outcome.

That seems so counterintuitive as almost to make no sense. How can the right decision be one which in actuality ends in failure? Is it possible to judge people independently of short term, noisy and irrelevant results? I would say that it is but that it is so difficult and demanding as to be way beyond the desire – or ken – of most people in management today.

About six weeks ago, the sports section of a UK newspaper debated the suitability of Kenny Dalglish to continue to manage Liverpool in light of their appalling run of results around that time. It was generally agreed by all contributors that Kenny was in trouble but that Liverpool’s place in the FA cup final is protecting him: victory in that would probably save him, defeat would likely consign him to history. But win or lose that 90 minute game he was still the same man with the same essential talents.

The question fundamentally is whether, for all his skills and shortcomings,
he should continue in the post? Not what result he gets on that particular
day - surely?

The journalists concerned apparently believed that that result — above all others — would reveal to us how good a manager Kenny really is. As though the result of a few balls bouncing one way or the other give us greater insight than, for example, going to the training ground to see Dalglish talking to his players or (hypothetically) questioning him for a morning on his tactical responses to opposition formations.

This is tantamount to judging the playability of ten-three in poker by the result of that particular hand. It is openly allowing short term results to decide the answers to much deeper, more challenging concerns and exposing us to the biases of hindsight when judging events and the quality of our decisions given what we knew without its benefits.

It’s a utopian cry to get away from being a results-based world, I know. But in a world which moves as fast as this one does; where in a couple of days literally everything can change, it is essential. By the time you read this you will know the outcome of the decisions you’re making as I write it. But a long time before that, you should be able to say how intrinsically good they actually are. Can you?