We’ve spilled a lot of ink talking about pattern recognition in previous Letters. It’s that uncanny power of highly experienced professionals to be able to sniff out the right answer with incomplete information. Observing someone skilled in this art can be equal parts awe-inspiring and frustrating. As they cut through pitches like a ginsu knife, the grizzled veteran appears to expend almost no energy on computation, instead relying on a gutteral sense that is rarely off. You can read their books, follow their careers, and still fall well short of developing your own masterful pattern recognition. So what gives? Is there a shortcut to this ESP or is there no substitute for decades of exposure?
In this Letter we’re going to explore one tool in accelerated pattern recognition, the use of probabilistic frameworks. Generally framed as eponymous laws (Parkinson’s Law, the Peter Principle, etc.), these vaunted frameworks are badly abused in pop management circles. However, if harnessed properly and taken in the proper context, they can be a powerful catalyst for effortless answers that are right — most of the time.
If only I Knew Then what I Know Now
There’s a stubborn paradox hidden in the generational transfer of information. Those that came before us wish they knew at their outset what they know now, but their efforts to inform us at an analogous stage are futile.
Why are we so bad at learning from the folks who stood in our shoes a generation ago? Why are they so bad at teaching us? Why is the repetition of predictable errors still the dominant methodology for practical learning?
Part of the problem is context. It’s hard to absolutely trust our ancestors when they operated in an environment that seems so foreign to us. What can Sir William of Ockham teach us in a world where the internet exists, and devotes petabytes to cat videos?
Another problem is evidence. While modern organizational theorists like Peter Drucker present mountains of examples to support their claims, the scientific method is still far from fully expressed in his work. He may well be right, but what are the consequences of blindly following his advice to “Manage by objectives”? It’s in the nature of pattern recognition that it derives its power from a subjective reading of a limited dataset. Resulting learnings can be persistently accurate, but are difficult to reverse engineer. This makes us wary of trusting them. Drucker himself admitted, when caught in one of several notable SNAFUs, that “I use anecdotes to make a point, not to write history.”
When aphorisms trend towards platitudes, our BS meter presents yet another barrier to acceptance. Buffet’s advice to wait for the fat pitch or ASDF’s advice to listen twice as much as we speak may well be worth our attention, but they’re so general and so oft-repeated by those we wouldn’t describe as “successful,” that they lose their power to influence us.
So how are we to use these nuggets of usually-right wisdom? By placing them in context and employing them as tiebreakers, not a replacement for edification. The superpower of pattern recognition is not evinced in technical analysis, but rather in decisive action enabled by the presentation of dualities in tension. Invest or not? Hire or pass? Internal or outsourced? SQL or NoSQL? These are the scenarios where reaching into your bag of generally-prescient tricks can have the biggest impact on your outcomes.
10 FRAMEWORKS TO GET YOU MOST OF THE WAY THERE
Here are ten of my favorite probabilistic frameworks. They come from management science, philosophy, and plain old science. Take them with a grain of salt, and use them to up your decisiveness quotient. You’ll be right, most of the time.
- Parkinson’s Law. “Work expands to fill the time available for its completion.” A notable corollary: “Expenditure rises to meet income.” The thrust? Time and effort are gaseous. Barring other factors, they expand to butt up against deadlines, financial stressors, or any other room in which they’re placed. Shrink the size of the room if you want to stem the bleeding.
- The Peter Principle. “In a hierarchy, every employee tends to rise to his level of incompetence.” Why is Tom running product? Simple. He was a good engineer, and a good engineering lead, so he got promoted again — until he reached a role where he was no longer excelling enough to be promoted. The Peter Principle is a powerful indictment of the way traditionally hierarchical organizations are structured. Excellent individual contributors become mediocre managers and then horrible directors simply because there are no tools in our organizational frameworks for compensating and motivating extraordinary individuals at the level of contributorship where they are most valuable.
- Occam’s Razor. “When multiple explanations are offered for a phenomenon, the simplest full explanation is preferable.” The grandaddy of all conceptual frameworks, Occam’s razor is a powerful force for reductionism in your decision making process. Because of the tendency of the universe towards disorder (entropy), it is increasingly unlikely that a more complicated chain of events will lead to any given end-state. When presented with two paths, choose the simple one — it’s probably right.
- Hanlon’s Razor. “Never attribute to malice that which can be adequately explained by stupidity.” A useful corollary: “Do not invoke conspiracy as explanation when ignorance and incompetence will suffice.” Use it like this: When Occam’s Razor fails due to 2 explanations being equally simple, favor the one which places the causality on human failure as opposed to malicious intent. I see far too many “high-conflict personalities” espousing conspiracies to be interested personally. A bit of cynicism is good, but it’s better applied to human performance than to venom.
- Alder’s Razor. “What cannot be settled by experiment is not worth debating.” This one is also known as “Newton’s Flaming Laser Sword,” definitively winning the Urbach Letter’s prestigious “best name for a framework” award. This is your ticket out of circular arguments. Design an experiment, or stop talking about it. This should be law of the land in your organization.
- The Pareto Principle (80/20 Rule). “80% of consequences stem from 20% of the causes.” If Occam’s razor is the grandaddy of eponymous laws, the 80/20 rule is the insolent teenager who thinks he has the answer to everything. Vast swaths of modern management theory are based upon the idea that 20% of team produces 80% of work product, 80% of revenue is derived from 20% of clients, or other bastardizations of Pareto’s Principle. The true power of this framework is that it asks the question: Is there truly parity between effort and result? The answer is rarely yes, and the root-cause-analysis is rarely fruitless.
- The Categorical Imperative. “Act only according to that maxim whereby you can will that it should become a universal law.” What would happen if everyone acted in accordance with the proposed concept? Would it be sustainable? Immanuel Kant asks us to universalize all of our actions and decisions as a way of quickly testing their morality. It works pretty well as a feasibility check too.
- Murphy’s Law. “Anything that can go wrong will go wrong.” Poor Edward A. Murphy, Jr., his brilliant aphorism has been reduced to near-mysticism by generations of hapless repetition. Contrary to popular belief, Murphy’s Law does not concern gremlins or poltergeists. What Mr. Murphy intends to get across to us is that under stress, systems fail at their weak points. Because systems are often unstressed until public presentation, they fail spectacularly, at precisely the seams which were overlooked. Don’t launch without a staging environment. Don’t neglect load testing. Don’t neglect vigorous red teaming. Don’t let your first time stressing the system be the first time there will be real consequences for failure. Respect Mr. Murphy.
- The Lindy Effect. A mind-bending paradox, the Lindy Effect states that “future life expectancy of non-perishables is proportional to their current age.” Essentially, Lindy posits that every additional period of survival for a technology implies a longer, not shorter, distance to its end of life. I find the Lindy useful for pressure-testing disruptive ideas. Staying power is staying power. Unlike for living beings, an extra year in the mainstream lengthens projected lifespan.
- Hofstadter’s Law. “Writing the Urbach Letter always takes longer than you expect, even when you take into account Hofstadter’s Law.” Length of project completion time is impossible to predict accurately, even when building in a buffer. That’s why agile management’s weakest link is velocity tracking. Instead of trying to master-plan your day, set macro-priorities. If you receive a time estimate from someone in your critical path, remember that it’s impossible for them to accurately build buffer into their time predictions. If you make a commitment contingent on that work, it’s on you to correct for Hofstadter’s Law, nobody else will. Blaming lateness on being “blocked by Tina” is your failing as much as it is Tina’s.
Cool Thing of the Week:
Like many of you, I went paperless as soon as I got my hands on a Treo (remember those? or were you a sidekick person?). The modern iPhone’s Notes and Photos abilities would seem to render the humble index card obsolete, but this one has a place in my heart, and in my suit jacket every day.
As I started spending more time in places where electronic devices aren’t welcome, I began the search for an old-school solution. The “jotter,” or index card holder, was my answer. I choose this one, and stock it with this pen. But the cards themselves are far more important than the holster you choose. The dot-matrix is the perfect middle ground betwixt, lines, graph, and empty cards. It enables free drawing but provides a comforting reference for prose or sketching. Levenger’s model has the opacity and weight dialed in. They are not precious, they are meant to be used. Write letters, take notes, and share contact information. They’ll become a trusted friend to you, as they have to me, in no time.
Get /Giphy With it:
Useful JPEG to send to colleagues:
After years building startups in NYC, and a stint helping McKinsey & Co. develop their startup accelerator, I’m now leading the charge @ Brandt & Co., a boutique consultancy serving investors and founders in the early-stage ecosystem.
If you like the Urbach Letter, the best way to give back is emailing me copious atta-boys to print out and stick on my fridge.
The second best way is connecting me to your friends at family offices, VCs, and terrific startups. For investors, Brandt & Co. focuses on a class-leading diligence product to shine light on technically complex early-stage investment targets. For founders, we aim to prepare them for institutional scrutiny and provide the tools to help their companies grow and scale.