Sunday, 8 March 2015

Billy's Forty-Fourth Law: In business, everything takes longer than you think it will.

Hofstadter's Law: It always takes longer than you expect, even when you take into account Hofstadter's Law
Douglas Hofstadter

              OK, so I found the very law when searching for pithy quotes on line.  This is another example of a concept from another field, computing science, finding its way into the business realm.  This law is closely related to the Twenty-Third Law…Up is slow and hard, but down is fast and easy.  The difference is the direction and the reasoning. 
I am working with a client whose business needed a bit of a shake-up.  Unfortunately, part of the problem was masked by a very strong division that was effectively propping up the remainder of the company.  When the sales of that division faltered, the truth was revealed. As Warren Buffet once said, ”Only when the tide goes out can you see who’s swimming naked.”
The company’s problems were revealed dramatically, and the owner and I went about developing new strategies and the accompanying tactics for fixing the problem. The owner went about rationalising his staffing levels…fancy talk for downsizing, and reviewing prices, products and even customers.  The work was exhausting, stretching the owner in ways he didn’t think were possible until he was forced to develop new skills and engage in strategies fundamentally different from those previously employed by his firm. 
The firm's owner told me that this was not just a new chapter in his business, but a whole new volume! I was eagerly anticipating the results of these efforts.  When his year ended, I was disappointed.  I had anticipated greater profits, and instead the company broke even.  Now this was a substantial improvement from the previous year’s losses, but still, I believe we deserved a better fate.  The effects of the changes we made clearly took longer than I had anticipated.

The Optimism Bias

When I was doing some research on this subject, I ran across the term, the Optimism Bias. This is the notion that the rational rules of life don’t apply to optimists.  They believe that they are at less risk than others in areas as diverse as driving to smoking.  They believe in themselves and are thus less likely to be realistic than they really ought to be. 
I fell into this trap.  Although I know that the effects of change take time to show themselves in terms of results, I was so convinced that the plan was sound and the execution so well implemented that the results would be nearly immediate. I was kidding myself, another victim of the Optimism Bias. How could a rational, self aware guy like me fall into such a trap?

Illusory Superiority

Part of the explanation is illusory superiority.  This is the phenomenon by which most people believe that they are of above average in fields such as intelligence, problem solving and driving.  (I heard of a study that one exception is looks…more people rate themselves as average of below average looking than above average looking.)  I thought that since I helped come up with the strategies, the normal laws of economics, business and even physics would not apply.  Talk about self-deluded Billy!
Sometimes, the trick is to be patient.  A friend of mine started a business called Travelers Mobile. Fed-up with high roaming charges, he found a source for local SIM cards for prepaid mobile phone plans in the US, UK, and several European countries.  You order the SIM before your vacation, activate it in an unlocked mobile phone when you arrive, and you have a local phone and phone number.  (I am a customer, and had a UK phone number on our last trip to England.)  He was frustrated in all the efforts he put in to the development of the website, logistics and marketing.  He quit working on the business, and his sales slowly went up.  It seems that his efforts were effective, however; it took more time than he anticipated for sales to climb. 
We entrepreneurs are, for the most part, a very optimistic lot.  The combination of the Optimism Bias and Illusory Superiority create this time surprise.  Sometimes, it is best to be a little bit patient before scrapping one idea for the next.  By the way, if you want to get a SIM card for Canada, the USA, UK, Mexico, Europe or Australia, go to and George will get you set up. 

No comments:

Post a Comment