dispatches from the new world of work

Odds and Ends

No #1 seeds made it to the Final Four—a big news story. (Well, not Iraq or Ukraine.) But do your probabilities more or less right, and it's not so odd. I figure the odds of a #1 seed making it to the Final Four is 21%, and of winning the whole shebang is 6%. My assumptions are that a #1 seed has a 95% chance of winning round #1. A 70% chance of winning round #2. Then: 60%, 55%, 50%, 50% in the subsequent rounds. That yields the 21% and 6% above. George Mason's odds of getting to the F4: around .0003, or three in ten thousand. (My assumed per game odds for a #11 seed aiming for the F4 are 30%, 10%, 10%, 10%.)

My interest in this actually has to do mostly with organization design. Six victories wins the NCAA tournament—and it ain't easy statistically no matter how talented you are. Hence, let's consider a 6-layer organization making a decision—evaluating the right and wrong choice at each rung of hierarchy's ladder. And let's be generous, and imagine each level has a whopping 80% chance of making the right decision. So the odds of eventually getting the thing right are 0.8 to the 6th power—and that's 0.21, or 21% (just like emerging in the F4 if you're a #1 seed). Not so hot. It's like the communications game in which 10 people whisper a simple message to the person next to him or her. We start with "Jack's a smart guy to consider the middle-age market," or some such. Ten dilutions later, no malice involved, we end up with a simple, "Jack's an idiot"—or something quite close. It's a heck of an argument for de-layering in any situation.

Probability buff that I am, I was reminded of all this while reading a review of ex-neocon policy guru Francis Fukuyama's latest book, America at the Crossroads. The neocons' mistakes that have led to exceptional foreign policy over-reach, per Fukuyama, were based to a significant degree on overestimating the lessons associated with the end of the Cold War and the Soviet collapse. New York Times reviewer Paul Berman puts it this way: "The neoconservatives, [Fukuyama] suggests, are people who, having witnessed the collapse of Communism long ago, ought to look back on those gigantic events as a one-in-a-zillion lucky break, like winning the lottery. Instead, the neoconservatives, victims of their own success, came to believe that Communism's implosion reflected the deepest laws of history, which were operating in their own and America's favor—a formula for hubris."

The point of this Post—combining neocons, org decision-making, and the final Four—is the absurdly common tendency to get the odds of sequential events totally and dangerously wrong. "Six layers of management? Hey, our guys are all smart as a whip. We'll get it right." Well, if "smart as a whip," per me, is 80% odds of getting a decision right at any level—then the overall success odds end up, when calculated more or less correctly, quite discouraging. Mis-appreciation of realistic odds, particularly based on a simplistic story line ("smart as a whip," No.1 seeds are invincible, "Reagan won the Cold War single-handedly because he listened to the theories of thus and such neocon theorists") are incredible dangers to the Las Vegas bettor, the corporate chief, and the foreign policy planner alike.

Viva George Mason. (Hey, you can beat long odds—about once every half century, anyway.)

Tom Peters posted this on 03/27/06.

Comments

There always has to be hope, whatever the statisticians tell me about probability. Holding on to my dream is what it is all about. There is no better feeling than proving you were right all along when some or maybe many doubted you.

I found this lovely quote.

"Success is not measured by what you accomplish but by the opposition you have encountered, and the courage with which you have maintained the struggle against overwhelming odds."

Orison Swett Marden

Posted by Trevor at March 28, 2006 5:25 AM

Hi Tom,

I haven't yet read Fukuyama's new book, and I look forward to it. I know Fukayama left the neo-con fold, but I am not sure the lessons he took away are correct; surely some believe the overreach is the product of underestimating luck as a factor leading to the decline of the Soviet Union and ultimately, hubris. I tend to think we've had that since we told a certain King to bug off.

Isn't that really the story of America (and our foreign policy)? Is it lucky to have weak neighbors? Is it lucky to have oceans surrounding your country? Is it lucky to have had framers of your constitution critical enough of government to limit it more than had ever been done? I could go on and on, but suffice it to say, The United States could just as easily have been called the United States of the Luckiest Bastards on the Planet.

Is it any wonder the hubris extends to business (and basketball)? I like the long odds. What were the odds of some guy opening 9,500 coffee shops that charge between $1.80 and $4.50 for a cup of coffee. That's hubris, and you got to love the half-century victories, don't you?

Anthony

Posted by S. Anthony Iannarino at March 28, 2006 6:08 AM

First, you have to believe foreign policy has "over-reached," which I do not. Second, you have to take Tom's assumptions about the odds of winning each round at face value, but statistics and assumptions don't mix well. Third, you have to forget that probabilities change when there is an element of certainty introduced--i.e. SOMEONE will go 6 and 0 to win the NCAA tourney. The new American political mantra: "The gov't doesn't do what I want them to, therefore, they suffer from "hubris."

Posted by Mike at March 28, 2006 7:46 AM

I guess I was attracted to Fukuyama's Cold War assessment because, as someone who lived through the entire Cold War and indeed fought in it in Vietnam, I think it's a downright miracle that we didn't destroy each other.

Study in hubris, too much and the right amount (in retrospect): JFK listened to his "neocons" and F*&^%$ up the Bay of Pigs. (The CIA director, Alan Dulles, was fired, among other things.) Then the boys--Air Force GEN LeMay and my best pal's dad, Navy CNO Anderson--wanted to bomb the hell out of Cuba a little later when we found missles. Fortunately (again, in simplistic hindsight), McNamara (whom I otherwise loathe), Bobby and JFK de-hubrised the dialog and eventually defused the Cuban Missle Crises. (My uncle, a Marine general on Okinawa at the time, "ordered" my aunt and two cousins to leave DC, he was so sure the Big Arsenal would be put to use.)

Posted by tom peters at March 28, 2006 8:49 AM

To across-the-board endorse hubris is a little much, I think. The Republic was saved around 1798 by John Adams' unpopular decision to back off of war with France. (As I vaguely recall.)(I am prepared to be corrected on that--I'm sitting in a hotel room in Huntington Beach CA.)

Posted by tom peters at March 28, 2006 8:52 AM

Even Gorbie the Soviet loser of all time has recently mentioned the "h" word re USA politics and policy.

Neolibs - cons - republicans - democrats -- there isn't much difference among them re foreign policy and practice, and domestic policy and socialist leanings.

The USA has had a make your own luck run of freedom - there need to be more USA models springing up worldwide - the communist, quasi-com, socialist and fascist models lurk in the void. USA citizenship = #1 prize.

Posted by Sean at March 28, 2006 8:59 AM

$5 on UCLA to win it all given their D and amazing final 4 heritage.

Posted by Sean at March 28, 2006 9:06 AM

Tom you confused me with the statistics. If we assume that there is a "right" and "wrong" choice (big assumption since choices are rarely binary), then the organization as a whole, without assumptions of knowledge/business saavy/etc. has a 50% probability of making the "right" choice.

Correct me if I'm wrong, but it seems you feel (strongly! emphatically!) that the person who bubbles up the problem that leads to the choice has a higher probability of making the right choice (80%). Successive layers of management, however, can't actually reduce the probability that the right choice is made -- that would assume that at each point of the decision tree, there is a DIFFERENT choice to be made, and that the probability that the organization has made ALL of those decisions correctly is 21%.

Delayering does change the probability of organizational outcome, insofar as it changes the location where most decisions get made. Mississippi Power devolved decision-making to the distribution-unit level after Hurricane Katrina, so that storm directors made cost decisions not only on what crews repaired what where, but also on how many cots, how many showers, how many trucks and how much fuel to buy. If you have a system for doing that, great. If not, your organization could still screw up.

Posted by Robin at March 28, 2006 11:01 AM

"To across-the-board endorse hubris is a little much, I think. The Republic was saved around 1798 by John Adams' unpopular decision to back off of war with France. (As I vaguely recall.)(I am prepared to be corrected on that--I'm sitting in a hotel room in Huntington Beach CA.)"

Tom (Mr. Hubris) Peters backing off of an endorsement of hubris? Say it isn't so. You're not going all level-5 leadership on us, are you?

As a student of founding of our country (which I know you are, as well) and our history, I think it is wrong to assume that France would have had greater success in a military occupation of the United States than England did a few years earlier. It would have been their second front and our ally would have been England! And Adams, the old, crusty revolutionary that he was, would have given them hell.

Adams in fact did try to negotiate for an ending to the privateering of our ships (which were attacked because we limited our trade with France, choosing to side with England and call it neutrality), but at the same time he prepared for war--including building three warships (not an easy task at the time). France, being, well . . . France, asked for a bribe (the XYZ affiar), and we responded with the creation of the Navy, and the commission of 1,000 of our own privateers.

In naval matters, we won 9 of 10 engagements.

We only successfully concluded negotiations with the original Mr. Hubris, Bonaparte, in 1799.

You may also remember Adams for the Alien & Sedition Acts restricting dissent.

Posted by S. Anthony Iannarino at March 28, 2006 12:23 PM

"Tom (Mr. Hubris) Peters backing off of an endorsement of hubris? Say it isn't so. You're not going all level-5 leadership on us, are you?"

Anthony, you sent me scurrying to dictionary.com. I remain a great fan of "irrational exuberance," of boldness bordering on recklessness, of risktaking against long odds. But our pals at dictionary.com give us this for "hubris": "overbearing pride or presumption; arrogance." I suppose it is a form of arrogance to proceed with a venture against long odds. But "overbearing" and "arrogance," two words I loathe, suggests a contemptuous disregard of the odds. I like doing a Don Quixote, but with a smile.

Posted by tom peters at March 29, 2006 1:10 AM

Agreed on "overbearing" and "arrogance," two very unflattering words.

As long as you are still pridefully tilting at windmills, the world is as it should be, and I remain your faithful Pancho Sanchez.

Posted by S. Anthony Iannarino at March 29, 2006 9:14 AM

Hubris in modern governance seems overreaching - esp re USA mayhem politics and policy - checks and balances and radical media so firmly entrenched.

French though seem another story as they implode from within now and in the decade[s] to come - then again viva la France comeback if they can pull it off.

Posted by Sean at March 29, 2006 9:20 AM