Bounded Irrationality

As I cruise into the last four weeks of my MBA programme here at BI, I'm starting that quite natural process of asking - "so, what did I learn?" The process is aided and abetted by the fact that exams, an end-of-year consulting project and tight last minute deadlines all more or less amount to a demand to an answer to this exact same question, condescended with that vague air of scholastic contempt which interposes the personal pronoun and an italicisation of the past participle: "so Daniel, what did you learn?"

Taking a contemplative break from this rather persistent inquisition this morning on the subway to school, I was re-reading the book that first made me ever want to study an MBA - "In Search of Excellence". I was actually re-re-re-reading this book when I first realised I wanted to study an MBA, but either way, I remember the time and place clearly enough: on a beach in the south of Spain, almost to the day this time last year. The book for me brought about the exciting possibilties of a hybridisation of academic analysis and business practice in an open, vocal and persuasive way at a time in my life when I was tired and emotionally burnt out by the quite contradictory combination of mundane day-to-day sameness of order-filling and madness of consistent pressure derived from working and drinking with colleagues and clients into the early hours every morning that the finance world offers up in plentitudinous quantities. More than anything, reading what Tom Peters and Bob Waterman had written only just after I was born reminded me that I needed to go and get a further education.

This was the passage that struck me this morning, sitting on the old Norwegian underground trains, between sips of coffee:

The numerative, rationalist approach to management dominates the business schools. It teaches us that well-trained professional managers can manage anything. It seeks detached, analytical justification for all decisions. It is right enough to be dangerously wrong, and it has arguably led us seriously astray.

It doesn't tell us what the excellent companies have apparently learned. It doesn't teach us to love the customers. It doesn't instruct our leaders in the rock-bottom importance of making the average Joe a hero and a consistent winner ...

... the rational appraoch to management misses a lot. When the two of us went to business school, the strongest department was finance, a majority of the students had engineering degrees (including ourselves), courses in quantitative methods flourished, and the only facts that many of us considered "real data" were the ones we could put numbers on ...

... Rational means sensible, logical, reasonable, a conclusion flowing from a correct statement of the problem. But rational has come to have a very narrow definition in business analysis. It is the "right" answer, but it's missing all of that messy human stuff, such as good strategies that do not allow for persistent old habits, implementation barriers, and simple human inconsistencies. Take economies of scale. If maximum process efficiency could be reached, if all suppliers produced flawless supplies and produced them on time, if absenteeism were absent, and if sloppy human interaction didn't get in the way, then big plants would outproduce small ones. But (research indicated otherwise) ...

... The centralist problem with the rationalist view of organizing people is that people are not very rational.

And it's still pretty true today: a sizeable portion of my MBA class are engineers by training, a sizeable concentration of the classes are quantatitative (even a subject as ethereal as "strategy" is not content to accept its qualitative generic status, and has to consistently be forced - often reluctantly - into models and paradigms), and even if this particular MBA programme I am on is less quantitatively focused than perhaps MBA's specialising in Economics or Finance (and to be fair, there has been a large attempt to make it as qualitative as possible), then almost every professor, student and guest speaker is itching to demonstrate some kind of mathematical know-how - I haven't even seen a slideshow presentation without numbers or some sort of matrix model in the last year!

So I'm not about to wax lyrical on the empirical methodologies of Weighted Average Costs, Multiple Regression Analysis or any other of the numerative calculations I've learned how to do this year, but instead I want to focus on what brought me here to Oslo, and the tie back in some of things above about rationlity. I was originally due to go and study in Lausanne, Switzerland (the irony hasn't been lost on me that either way, I would have spent half the year in snow), until I took an unscheduled holiday up to the very north of Norway, to a place called Tromsø where my girlfriend is from. I like Tromsø - it's a very remote, peaceful city, nearer the North Pole than it is to London, and is how Hong Kong might have looked had it been located about three thousand miles north and never been developed - there is the same dramatic backdrop of the mountains and the city is marooned in the same way on an island connected to the mainland via a bridge. The two cities are such polar opposites in every oher way it's not a connection I imagine many other have made before, but the connection was true enough for me, and anywhere that even resembles the demographic of Hong Kong instantly makes me feel at home, since this is the place where I grew up for which I hold the fondest memories and strongest feelings. Waking up one morning with the midnight sun glaring over the mountaintops and over the water just below, I realised that attempting to commute for the year between Geneva and Oslo probably wasn't going to be the most practical of activities, certainly not from a logistical or financial standpoint but most of all from an emotional one. On this morning, at the end of August, two weeks before the MBA programme was due to begin, I phoned the administration at the BI and asked them if they had any places left. They did, and pretty soon, after some calls to colleagues for references, I found myself on a flight down to Oslo to attend an interview and take an exam, and that's how I ended up in Oslo.

But this was not a calculated decision, nor was it a cheap one or an obvious one - after all, Oslo is the most expensive capital city in the world now - but it was the single best decision I have made in my life thus far. I have had a fantastic year here in Oslo, and met some people who I will consider close friends for life now, and the Norwegians are pretty open and hospitable compared to most nationalities. Most of all, this MBA has represented for me not just a pedagogical excercise in numerative and technical training, but, and I think I speak for others on the programme here too, a more ethereal, emotional and personal learning curve of sorts.

To the chargrin of much of the trading floor back in London, a former boss of mine used to say that he could trace the moment when he first really began to make a success of his career back to one morning, when before work in the early hours he found himself in front a mirror, looking into his own reflection. The image shook him so much in that he suddenly realised all the things he didn't know, all the things he hadn't yet done, all the things he was not that he went into work that morning with a clear agenda to make a phenomenal success of his career. This year was for me that moment in the mirror, that abstract from the false egoism abetted and abated by long hedonistic London power-drinks and dinners, and the morning I can trace it back to was that morning at the end of August in Tromsø.

The irony is, through the making of a quite irrational decision, I have discovered more rational faculties in myself than I have ever done. And this is my point: to deny one's own irrational composites - and the irrational composites of life or even business (which is just a practical and intellectual extension of life) - is an act of self-deceit, it is in essence, to deny the unexplainable in the order of life to oneself. And one can hardly make a sound decision based on incomplete information.

I can already see the eyes rolling of some that know me here, them saying to themselves "you've completely lost me here". Well if that's the case, let me try and sum it up like this. Winston Churchill once said "Kites fly highest against the wind, not with it." The metaphor stands true for the innate irony of human beings - in the polar opposite of a situation or circumstance we often find surprisingly the characteristics most opposing to those presented by the situation. In the same way, in choosing this MBA by letting go of my attempt to control everything in the most vain, rational way possible, I have in fact found more rational faculties than ever before in my life.

When you most need or want something (in any context, and it's especially true in a business context), let go of it and allow the counter-circumstance to prevail, and here you will most likely find what you were looking for. It's a far too often forgotten truth.