What managers can learn from social science

The abilities that mattered most in the 20th century workforce were left brain hemisphere activities. For instance logical reasoning, linear programming and other rule based skills like accounting abilities, computer programming, etc. However, these skills are still very important and necessary today, but not sufficient. If you want to survive in the 21th century business environment, you'll need skills which are hard to outsource. Like artistry, creativity, empathy, big picture thinking, inventiveness,etc. Typical right brain hemisphere activities.

A way to test this is the so-called Duncker candle problem. Subjects are posed with three objects, sitting on a table next to a cardboard wall: A candle, a box of matches, and a box of tacks. From those, they had to make a candle holder that wouldn't drip wax. Most people fumble with the tacks and the candle, but the correct solution is to empty the box of tacks, attach it on the wall, and make an ad-hoc sconce. The problem has been considered a classic test of creativity because it requires seeing objects as being useful in ways never intended.

The essence of 20th century motivational tools (in HR) is work harder or faster and gain more rewards (the famous carrots and sticks types of rewards). Arguably, these tools work in a narrow band of circumstances. But, applied to present day jobs, where creative thinking, art, innovation and design are the key skills, these tools are counter-productive. This is not just an opinion, it has been thoroughly researched. Over and over and over again. However, managers don't seem to care.



Daniel Pink works as an individual business consultant, writer for the New York Times and Wired and now presents himself as a career analyst. In 2008 he delivered a TED presentation on the surprising science of motivation. One of the key points, in my opinion, is the notion that business still doesn't do what (social) science already knows. There is evidence based management for you. However, managers choose to ignore it. You might want to reconsider the impact of this behaviour if you read (again) about the global financial crises.

Do we learn something from this? Well, maybe. On the bright side, there is evidence on management from which we can all benefit. On the dark side, there is still an enormous gap to bridge. Why is that? Is there something flawed in the design of MBA programs? Maybe Henry Minzberg was right. In his book Managers Not MBAs, he challenges the validity of the perennially popular MBA program: a program that top-tier companies continue to rely on as essential to the creation of successful corporate leaders. As one of the great iconoclasts of management theory, Mintzberg emphasizes the need to re-examine and drastically change our traditional form of management education. As Mintzberg boldly asserts: MBAs do not managers make.

Is the evidence based management movement dead?

When you go to see a doctor, you would like him or her to make medical decisions based on scientific evidence and research. Not stick the first needle or pill in you, because he or she heard rumours that it just might work. However, in management we are still in the middle ages of science, where the alchemists still try to make gold from lead. And by alchemists I mean all types of managers (managers, consultants, coaches, interim-managers, project managers, etc.). One of the reasons why managers still make decisions based on anecdotal evidence, gut feeling or a whim is the fact that management is not a profession. Well, perhaps it is, but we lack a body of knowledge and skills. Everybody with decent qualifications can become a manager in contrast with nurses, judges or engineers. Management is still treated as a 'skill' and if you have a better story than the next guy, you just found yourself a new career.

Around the year 2000, the evidence based management movement emerged. It is a movement to explicitly use the current, best evidence in management decision making. Its roots are in evidence based medicine, a quality movement to apply the scientific method to medical practice.

Evidence-based management (EBMgt) entails managerial decisions and organizational practices informed by the best available scientific evidence. Like its counterparts in medicine (e.g., Sackett, et al., 2000) and education (e.g., Thomas & Pring, 2004), the judgments EBMgt entails also consider the circumstances and ethical concerns managerial decisions involve. In contrast to medicine and education, however, EBMgt today is only hypothetical. Contemporary managers and management educators make limited use of the vast behavioral science evidence base relevant to effective management practice (Walshe & Rundall, 1999; Rousseau, 2005, 2006; Pfeffer & Sutton, 2001). (Source: en.wikipedia.org)

Last month the annual Academy of Management meeting was hosted in Chicago and a couple of my colleagues who work for Universities went to meet people and take in the latest developments on Organisational and Management Science. The Evidence Based Management movement is still there, but progress is really slow. Most developments are exchanged in closed communities and you really have to make an effort to dig up new information and stay in the loop of recent developments. I'm now in the process of preparing an interview (together with my friend Coert Visser) with the four figureheads of the Evidence Based Management movement. These are Denise M. Rousseau, Tracy Altman, Jeffrey Pfeffer and Bob Sutton. Interviews take time, but I'm confident we'll get some answers. Wait and see what they have to say about the future of Evidence Based Management.

Simpsonize me!

This morning I was browsing the email and stumbled upon the blog of Crispian Jago. He has a blog on Science, Reason and Critical Thinking. A fellow skeptic. He made a fun posting, called Simpsons Top Trumps: Skeptics Edition. It features 52 of the top skeptics in the world. People like James Randi, Penn and Teller, Michael Shermer, Richard Wiseman and Adam Savage. It must have taken him hours and hours to compile this deck.

If you want to know what you would look like in a simpson episode, you can go to this website to Simpsonize yourself.

Outliers, the story of success

Outliers is too much focused on the American situation. The book would gain strength if international examples were used. However, the book can also be the viewed as result of therapy by Malcolm Gladwell, in order to gain insight in his own outliers status. It was a fun book to read, but I didn't gain any big insights. On occasion, you may rethink your current understanding of teams, collaboration and culture. But, no tips or tricks or lessons learned were provided. Skeptically speaking, this book contains a lot of common sense, wrapped in beautiful anecdotes, which fit well with the convictions the reader already has. This probably one of the reasons of the success of this book.

In his third book, Malcolm Gladwell takes us on a journey in the world of success stories. We learn why people like Bill Gates, Steve Jobs , Robert Oppenheimer and Bill Joy could succeed. We also learn why a genius like Chris Langdan (IQ estimated between 190 en 210) did not and still leads an average live. In a nutshell, its a story about the right man, in the right place on the right time (opportunity) combined with nurture and nature (legacy).

The book consists of two parts. Part 1 is called opportunity. The subtitle of this part could have been chance favors the prepared mind (quote by Louis Pasteur). The reader gets (re)acquainted with the 10.000 hours rule. Whatever the profession your in, in order to become a master, you have to put in this many hours, given the fact that you have the talent in the first place.

Part 2 is about the legacy of culture. Why are Americans born in the South more aggressive in nature, then their fellow Americans from the North? Gladwell described the cult of 'blood vengeance' which was imported from Great Britain, where all immigrant came from. Funny experiments to proof these differences are described. Do stress levels rise if you get insulted? In Northerners nothing happens, they shrug and laugh it off. Southerns, however, explode. The explanation of these differences is in accordance with the book Mind of the Market by Michael Shermer, which deals with evolutionary economics (the Austrian School).

An outlier is by definition an extreme. This is the description commonly used in statistics. Gladwell used a broader interpretation of the term and views it as exceptional people. People love to read stories of success. This is why self help book are so popular. But, it is the wrong assumption to think you can create your own success, just by working hard. You need a lot more then that. This is the first lesson Malcolm Gladwell teaches us.

The book starts out with the Roseta mystery. In short, this is a little Italian community in Pennsylvania. It is depicted as a closed community, which adhered to all the traditions from the old land (Italy). The physician Stewart Wolf travels trough town to give a lecture for the local medical society. One of the doctors tells him over a beer, that there almost no people with heart disease under 65 years. This comes as a shock and Wolf starts an exhaustive investigation. Eventually he learns that you have to look behind the individual characterics and also take culture and community into account.

Medical science was skeptical, but accepts his analysis. Gladwell uses this story as an analogy to convey the story of success. The reader finds out about the success of the Beatles, the internet billionaires of Silicon Valley (Gates, Jobs, Joy), the anomaly in the birth dates of Canadian hockey players, the 10.000 hours rule, misconceptions about geniuses and the origin of behavior and culture. All stories deal with exceptional people with extraordinary achievements. However, their successes would not have been possible if they didn't get a chance in one way or another..

Interview with Michael Shermer

On skepticism and evidence based management

© 2009 Richard Puyt

Dr. Michael Shermer is an adjunct professor in economics at Claremont Graduate University, founder of the Skeptics Society, chief editor of Skeptic Magazine and (co)author of many books and articles that take on everything from the existence of Bigfoot to Intelligent Design and why people believe in such phenomena. Recent publications include The Mind of The Market. He is also contributing editor and monthly columnist for Scientific American, and is the host of the Skeptics Distinguished Lecture Series at Caltech. Last summer I've interviewed him for Managementsite.com about skepticism in general and the emergence of evidence based management in particular.

The Skeptics Society is inspired by the philosophies of great thinkers, like the 16th Century Dutch philosopher and lens grinder Baruch de Spinoza, who tried to understand human nature throughout his life and the 20th Century theoretical physicist Albert Einstein, who said all our science is child play and primitive compared to reality, but it is the most precious thing we have. Skepticism is a method, not a position. Skeptics are not cynical.

Richard: On the English Wikipedia entry about you, there is the following statement: I became a skeptic on Saturday, August 6th, 1983, on the long climbing road to Loveland Pass, Colorado….I got the impression you had an epiphany. Like you denounced everything you believed in previously and chose the scientific method. Like a conversion to science. What happened on the mountain?

Michael: I was involved in extreme biking and used legal performance enhancement techniques. No drugs, I might add. Still feeling no improvements after taking herbs, vitamins, minerals, and potions of all kinds, I actually wondered if all the claims which were made on the bottles really could stand scientific scrutiny. That’s the moment I decided to go back to my scientific roots. At the time, I held a Masters in Experimental Psychology and went back to Claremont Graduate University to do my Ph.D. That’s what I actually wanted to do all my life. Become a college professor and improve the world a little by teaching.

Richard: On the internet, we can read, see and hear many of your articles, debates and lectures. The ones which stand out for us are: Why people believe weird things and the baloney detection kit. Becoming a skeptic is one thing, founding an organization and a magazine is something else. What do you hope to achieve by promoting skeptical thinking? How will things become better if more people assume a skeptical attitude?

Michael: If things sound too good to be true, they probably are (and never abandon lying as a probable explanation). Never assume. Challenge everything. Skeptical thinking is not a religion or a way of life. It’s a way of thinking, a method. It helps you to test assertions and claims. You can detect lies and half truths. When we say we are “skeptical,” we mean that we must see compelling evidence before we believe. It prevents us from believing in illusions and spares us a lot of sorrow. The Skeptics Society organization started bottom up. We are the debunk squad of pseudo, voodoo, junk and bad science. Right from the start, it received quite a lot of attention and before you know it we were on the radio and asked to appear in tv-shows like Larry King Live and Oprah.

All over the world there are skeptics organizations, like for CSICOP/CSI, Skeptical Investigations, The James Randi Educational Foundation and I even believe there’s a chapter in the Netherlands. Here in the United States we have our hands full with school boards wanting to teach intelligent design or creationism instead of Darwinian evolution. People outside the States, like you, always ask us why we spend so much time on these guys. It is a necessity. We are caught in the middle of a cultural war.

Just as Richard Dawkins is raising our consciousness about the power of evolution to explain not only life, but religion and morality as well and that it is okay to be an atheist… I’m going to do something like that in the next book project (Mind of the Market), which is to raise the consciousness about the power of evolution to explain economics, evolutionary ethics and how markets can be moral, complexity theory to explain how markets rise, and that it is okay to be a libertarian (fiscally conservative, socially liberal). Libertarianism is based on the principle that people are free to think, believe, and act as they choose as long as they do not infringe the equal freedom of others. The part of infringement is where the rubber meets the road…
(YouTube: The Amazing Meeting 5: Michael Shermer, Evolutionary economics, part 1

Richard: On the 12th of February 2009 it was exactly 200 years ago that Charles Darwin was born. This year we celebrate his live and work. The school of evolutionary economics draws from the work of Charles Darwin on evolutionary biology. In your book Mind the Market you advocate this school. What fascinates you about evolutionary economics and how does it translate to our everyday life?

Michael: Since I was a teenager, I’ve been a libertarian. I noticed that there are not so many of us and that most people find us a bit strange. Most people have a hard time with the idea of so much freedom in the market place. Now, why is that? When I started applying evolutionary thinking to the process, thinking about folk intuitive notions of things and why people get so many areas of science wrong intuitively, it began to make sense to me. With folk astronomy we have an intuitive notion that the world is flat, celestial bodies revolve around the earth. That’s the way it feels. The planets are wondering gods that determine our future.

In folk economics, we have an intuitive notion that excessive wealth is wrong. Economic systems must be designed from the top down. We misunderstand and mistrust ‘the invisible hand” of the market place (note: Charles Darwin also read the work of Adam Smith). The reason why folk science so often gets it wrong is that we evolved in an environment radically different from the one in which we live. We still have a sweet tooth and biological inclination to eat fat, because food was always scarce. That’s why we have an obesity epidemic right now. Our senses are geared for perceiving objects of middling size, between say ants and mountains. Not bacteria, molecules and atoms on one side of the scale and stars and galaxies on the other end. We live to short to witness evolution, continental drift or long-term environmental changes. That’s why we still have an inclination to want products now, versus products later at a considerable discount. It is human nature.

According to the Austrian school of economics, if you “create” too much money, the indicators in the market go haywire. That’s why we probably should go back to the gold standard. The value of money needs to be backed up. This should prevent us from creating money from thin air. It also makes you wonder if the spectacular economical growth over the last 25 years was maybe based on nothing. Normal growth rates are between 2 to 3% per year, instead of 20%. Makes you wonder.

Richard: Nassim Nicolas Taleb is a literary essayist, epistemologist, researcher, and former practitioner of mathematical finance and calls himself skeptical empiricist. He wrote Fooled by randomness and The Black Swan. Since the crisis in 2008 he is an activist for a Black Swan robust society. On the 7th of April 2009 he wrote an article in the Financial Times, where he states; We’ll see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news. Sounds like he also advocates evolutionary economics. Taleb's contents that statisticians can be pseudo scientists when it comes to financial risks and risks of blowups, masking their incompetence with complicated equations. How does skeptical thinking prevent us from becoming epistemological arrogant?

Michael: Well, I actually know Nassim quite well. He’s even a bigger skeptic than me. A lot of people think he is arrogant, but I disagree. In his book The Black Swan, he made some valid points. For instance, you have to take all data into account. Not only count the successes, but also the failures. The same problems arise in science magazines. Reports about failures are equally important, but are much harder to get accepted by the editorial boards of scientific magazines. If the chance is 50/50, then the payoff has to be twice as high as the risk. Loss hurts us much harder. This comes all down to biology. As for statistics, how can you predict the 100 year flood, if your data set only covers the last 10 years? Be humble and very aware of the limitations of your knowledge. Risk calculations and probabilities is not the same as fact finding. There is always bounded rationality in decision making. Nassim predicted the meltdown of the economy and the black swan emerged. That’s why he has so much fun in challenging people who make claims they can’t backup. He’s very popular right now.

The only remedy I see to avert epistemological arrogance is humility. Be humble before the market. But when the market goes up again, we’ll probably forget all the previous warnings and start over again. The cycle will repeat itself. The market now hit rock bottom. If you buy right now, you’ll make a huge profit. And that will probably happen on occasion. Then we’re back on anecdotal evidence and confirmation bias. We tend to have a short term memory. It’s human nature.

Richard: In Managers Not MBAs, 2004, Professor Henry Mintzberg at McGill University challenges the validity of the perennially popular MBA program: a program that top-tier companies continue to rely on as essential to the creation of successful corporate leaders. As one of the great iconoclasts of management theory, Mintzberg emphasizes the need to reexamine and drastically change our traditional form of management education. As Mintzberg boldly asserts: MBAs do not managers make. What do you think about this assertion?

Michael: I think he’s right. Maybe I can tell you an analogy. By contract, my book publisher in New York can choose the images and the titles of my books. I can only “approve”. If I don’t agree they can still go ahead. I asked them who chooses the pictures for the books. Well, just the three of us, they replied. I proposed to ask my followers on the internet (over 50.000 skeptic readers) to give their opinion on the best book cover, by putting up 3 pictures of covers on my blog, but they opposed fiercely. I would be in breach of contract and this is not the way covers are picked out in publishing. They think that their way is the best way and are not inclined to change. I could test things for them within an hour. Heck, they can test it for themselves a local Barnes and Nobles, but they simply refuse. They have never tested their theory and don’t see any benefit in changing. I think they should. They’ll probably end up selling more books.

Richard: The emerging evidence based management movement is introduced by Jeffrey Pfeffer and Robert Sutton in 2006. It is based on the same sort of thinking and discipline that has improved the practice of medicine to work on the management of medical organizations so that the management can be held to the same standards as the doctors in terms of the rigor of thought and analysis. What are your views on the emergence of this movement?

Michael: Management is a broad spectrum. But, I like the principle. Where I think it might trip up is anecdotal evidence to support claims and confirmation bias. That’s why I like the wiki’s. You have constant interaction and improvements. This probably doesn’t work in all fields off course. For instance, in astrophysics, I doubt if anybody outside of the professional field could make a useful contribution, let alone understand the matter. But, it is not outside of the realm of possibilities. Open and peer reviewed theories are the best, because they get constantly challenged. On my site, I also invite people to help improve Wikipedia. Be skeptical! It can only improve (scientific) theory.

Richard: In science there is much debate about the level of evidence. The dominant way of conducting science is the way physicists and mathematicians gather scientific proof. Big samples (n>1000), complex formulas, impressive charts, etc. Social scientists argue that this is not the preferred way to conduct research. Especially when researching management. What is in your view the preferred way to conduct research in science from a skeptical point of view?

Michael: There are two types of scientific research: experimental and comparative. In the social sciences, especially in economics and business, we cannot run controlled experiments and manipulate variables like we can in laboratory experiments. Instead, we have to wait and see what happens in natural experiments that are run by people trying different techniques. For example, communism was a 75 year experiment on collectivization of the means of production, and we see how well that worked compared to capitalistic systems during the same period of time. We can compare, say, South Korea to North Korea, the former employs capitalism while the latter uses communism. The average annual income per person in South Korea is several tens of thousands of dollars. The average annual income per person in North Korea is less than a thousand dollars. That is a natural experiment that we can collect data from and draw our conclusions.

Richard: Thank you very much for your time and this interview.

References

• Committee for skeptical Inquiry: http://www.csicop.org/
• Homepage van Michael Shermer: http://www.michaelshermer.com/
• Homepage van Nicolas Nassim Taleb: http://www.fooledbyrandomness.com/
• Minzberg, H, © 2004, Managers, not MBA’s: A Hard Look At The Soft Practice Of Managing And Management Development, Pearson Education Limited, ISBN 0273663240
• Pfeffer, J. & Sutton R, © 2006, Hard Facts, Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management, Harvard Business School Press, ISBN 1591398622
• Skeptical Investigations: http://www.skepticalinvestigations.org/aboutsi/index.htm
• Scientific American: http://www.scientificamerican.com/
• Shermer, M., © 2007, The mind of the market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics, Times Books, ISBN 0805078320
• Stichting Skepsis: http://www.skepsis.nl/
• Taleb, N.N., © 2007, Fooled by randomness: The Hidden Role Of Chance In Life And In The Markets, Penguin books Ltd, ISBN 0141031484
• Taleb, N.N., © 2008, The Black Swan: Impact of the highly improbable, Penguin books Ltd, ISBN 0141034599
• Taleb, N.N., © 2009, 10 principles for a black swan proof world, The Financial Times, http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabdc0.html
• The Austrian school of Economics: http://en.wikipedia.org/wiki/Austrian_School
• The James Randi Educational Foundation: www.randi.org
• The Skeptics society: http://www.skeptic.com/about_us/
• Wikipedia: http://en.wikipedia.org
• YouTube: the Amazing Meeting 5: http://www.youtube.com/watch?v=-KVJZJ4MSic

Contact:
Michael Shermer can be reached by email

Acknowledgement:
Thanks to Coert Visser (www.solutionfocusedchange.com) for helping with the preparation of this interview.

About the author:
Richard Puyt is a management consultant (CMC), editor and part time lecturer. More information: Facebook / Dutch LinkedIn Innovatief Organiseren Community / Dutch blog Innovatief Organiseren / Puyt Consultancy.