Bottom Up Strategies in Business, Part 2

While venture capitalist Peter Sims in Part 1 of this bottom-up strategies series describes the iterative experimental process of discovering solutions to problems used by individuals such as comedian Chris Rock and architect Frank Gehry, economist Tim Harford, in Adapt: Why Success Always Starts With Failure, emphasizes the need to transform large organizations such as the government of Chile and the military and banking systems in the USA.

Chile was arguably the first and only country to freely choose a government that openly espoused Marxism, which occurred in the 1970 election of Salvador Allende. Tim Harford discusses why Allende’s Project Cybersyn failed to transform Chile into a prosperous country.

According to Wikipedia,

CyberSyn was a system of networked telex machines and computers developed by British cybernetics expert Stafford Beer. The network transmitted data from factories to the government in Santiago, allowing for economic planning in real-time.

Tim Harford comments:

CyberSyn is interesting not because it proves that computerised centralisation is a disaster – it does not, since Chile’s economy was under so much internal and external stress that it would surely have collapsed anyway – but because it shows the way in which our critical faculties switch off when faced with the latest technology. Western newspapers were giddily reporting that Chile’s economy was run by a computer that, by today’s standards, was a toy. But CyberSyn seemed sophisticated at the time, which was enough. Its iconic operations room looked tailor-made for Captain Kirk and Mr. Spock, with chairs whose arm rests contained screens and control panels. This control room came to represent CyberSyn to the project’s supporters and to its opponents. Yet the control room itself never became operational.

Why are people resistant to bottom-up strategies? Tim Harford speculates:

Every president is elected after promising to change the way politics works; and almost every president then slumps in the polls as reality starts to bite. This isn’t because we keep electing the wrong leaders. It is because we have an inflated sense of what leadership can achieve in the modern world. Perhaps we have this instinct because we evolved to operate in small hunter–gatherer groups, solving small hunter–gatherer problems.

Governments typically change drastically only in rare cases such as after losing a war, or a civil war, as in Chile when Augusto Pinochet toppled Salvador Allende, but Tim Harford notes that businesses are more turbulent:

Two management consultants, Tom Peters and Robert Waterman, concluded their own detailed study of excellence in business. In Search of Excellence was published to great acclaim and launched Peters’s career as one of the world’s most recognisable management gurus. The two authors, working with their colleagues at McKinsey, used a mixture of data and subjective judgment to settle on a list of forty-three ‘excellent’ companies, which they then studied intensively in a bid to unlock their secrets. Just two years later, Business Week ran a cover story entitled ‘Oops! Who’s Excellent Now?’ Out of the forty-three companies, fourteen, almost a third, were in serious financial trouble. Excellence – if that was what Peters and Waterman really found when they studied the likes of Atari and Wang Laboratories – appears to be a fleeting quality.

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