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We need to solve the wisdom deficit in business

September 10, 2019
Borderless Future

It seems we’re living in an era of extreme consequences, as the impact of business on the climate and human outcomes becomes clear. Perhaps every era is one of significant consequences, but the proverbial “problems coming home to roost” feels apt for right now.

In reaction, the business community is shifting its stated intention. Notably last week, the powerful industry association Business Roundtable “redefined the purpose of a corporation” toward broader stakeholder benefit, rather than just shareholder benefit. That is a positive step, but as many have said, actions will speak louder than words.

Even more important may be the business world re-valuing the role of wisdom in business. The body of knowledge and principles that accrue from experience and exist in fundamental laws of nature are under-discussed and under-invested in business, meaning we’re doomed to repeat mistakes and continue a decreasingly joyous spiral downward.

Changing course is possible, preferable, and more profitable.

Why does business culture lack wisdom? Three factors stand out: the pursuit of shareholder primacy, the innovation mantra, and an entrenched assumption of being right.

Shareholder primacy, the theory most infamously espoused by Milton Friedman, suggests that any talk of corporations’ social responsibilities is a “fundamentally subversive doctrine.” One of the many problems with this theory is that shareholder primacy creates a completely blinkered view of the world: Leaders’ attention is trained on one thing. This ignores the reality of the complex, living, evolving ecosystem in which corporations operate: a vast system of cause and effect. Managing for one short-term metric in a complex ecosystem inevitably results in unintended—or actively ignored—consequences, like a compromised democracy, unsafe products, and rampant extremism. You can ignore the health and realities of the ecosystem for a while, but it’s not wise.

The innovation mantra, championed by legions of business schools and mega consultancies promising “digital transformation,” is another form of blinkered thinking. Just looking forward with a product-centric, efficiency-optimized mindset ignores the lessons to be learned by looking back, or around, or deeply inside or outside. This leads to companies innovating for superficial, myopic “advancement,” like high-fructose corn syrup instead of sugar, opioids instead of safer treatments, addictive technologies rather than technologies that serve well-being. The innovation mantra almost invariably solves for the short term. Wisdom-based innovation would consider the bigger picture, including human outcomes and lessons from nature’s 13.8 billion years of R&D.

The arrogance of being right permeates business. From the product development process that too often resorts to what people will accept rather than actually need, to the marketing process that too often resorts to manipulation (“growth hacking”) rather than honest advocacy, to internal hierarchies that assume rightness flows downhill, to the language of war (“blitzscaling”) that establishes which side we’re on. Being “right” precludes learning. In Gods of the Upper Air, Charles King tells how a group of anthropologists led by Franz Boas in the 1930s debunked the inherent superiority of Western civilization, a thesis that underpinned the Nazis and colonialists, among others, and was “the greatest moral battle of the time.” Inherent superiority means you miss the wisdom and unique perspectives of other people and cultures. Perhaps the latest front in that ongoing moral battle is debunking the inherent superiority in business.

These ego-driven forces have led to Pyrrhic victories. In business, “success” has been achieved, but achieved with tunnel vision rather than panoramic vision. We can do better.

How might wisdom play a greater role in business? We can accumulate more knowledge (not just data), operate from principles, and have a greater capacity to sense and evolve.

Accumulating more valuable knowledge can come from more empathetic listening. Words matter here: thinking of people as “consumers” means we’re only considering a tiny percentage of their lives; thinking of people as “people” means considering their entire experience. “Consumer research” may show that product engagement will be high; empathetic listening may show whether the product leads to obesity or health, hatred or happiness, value creation or destruction. Asking the right questions may be more powerful than having the answers. While swamped in superficial information from countless A/B tests, emails and big data, we need to accrue more valuable knowledge on human and societal outcomes.

Rather than making decisions from the reflexive filters of “share growth” or “profit,” companies could make more principled decisions. Ray Dalio, in Principles, tells how Bridgewater systematized the process of distilling principles from each moment of success or failure, and also from vast research into history, culture, and industries. And they look inwards too: studying the team’s characters, so they can understand each other better, and derive principles about successful teams. To Dalio, principles are not dull values statements to be put on the wall, but “fundamental truths that serve as the foundations for behavior that gets you what you want out of life.” Bridgewater’s operations and investments are run with its principles. This principle-driven culture is not an eccentric, altruistic experiment, or “unadulterated socialism” as Friedman might have charged; it created the most successful hedge fund of all time. By mechanizing the creation and application of principles, Bridgewater captures and applies wisdom. This wisdom is what creates value.

Finally, wise companies reject the base instincts of fear, scarcity, and control. In the book Reinventing Organizations, Frederic Laloux describes high-performing companies (like Patagonia, Buurtzorg, FAVI) that have shifted to a more evolved mindset based on trust, abundance, and growth (personal, team, and company). In these organizations, people can be more themselves, management can be less dictatorial, and the organization, having dropped the pretense that it can predict and control the future through rigid strategic plans and top-down hierarchy, can evolve faster and more fully. Fear and control kill wisdom; trust and growth let it thrive.

Operating business from wisdom seems at once both obvious, given the business and human advantages, but also radical, given today’s management practices. Doing so will take more than redefined purpose, but the practice of a new mindset that values and applies wisdom. Dalio didn’t beat the market by applying the “accepted” management and investment credos, he built value by building wisdom in his team and company. That’s the opportunity ahead for the rest of the business world.

By Sebastian Buck

Source: Fast Company

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