Less is More

As paradoxical as the title seems there is a profound truth in the statement "Less is More". When the economy is bullish no one talks about "head count issues", they just keep adding resources at will. People come up with innovative justifications why more resources are needed for a project, and there is little resistance from the management. Many support functions sprout, new centre of excellence teams that has no clear business impacts start to grow, many cross-functional teams are setup and so on and so forth.In addition many projects without complete business justification get approved. The success rate of the new products launched is not that great, but the business managers are not held accountable as the overall growth of the company isn't that bad. Over a period of time these additional resources increase the waist-line of the organisation. On top of it, terminating an employee when business is hunky-dory is a tough bullet to bite for most managers. So, on an average across the company, you find more resources than is required for the business.

When the business is bearish or during tough times like the present, the organisation is forced to shed the flab. The first steps are to reduce the contract headcounts-easiest of the decisions, reduce the headcount from support organisation, terminate the bottom 10% performers, question the premise of the centre of excellence teams and cross functional teams. Even after all these actions, if you, as a manager, cannot meet the set goals of head count reduction in your group, you start to look at the product portfolio and see which projects can be cancelled (to start with, you would not be in this position if all the projects approved had concrete business justifications). This action causes you to lose good performers. The head count reduction actions taken across the organisation lowers the morale of employees who still have a job as there is the uncertainity of when the axe is going to fall on them.

When you look back, you realise that the massive layoffs, during these tough times, is the result of the organisations not being resource-prudent to begin with, during the bullish time. Interestingly even with the reduced work force, the number of projects that an organisation does is not reduced. There could be cases of some employees working longer hours but definitely not for all the employees. So how come with less people more work gets done? Is "Less is More" not really a paradox?

To support this point, I will share with you " The case of panicky mice" - An experiment with panicky mice that confirms the reality that less is more and therefore better, not the other way around. The "New Scientist" reported the results of an experiment by a University of Phillipines professor of physics, on how panicked mice escape from an enclosed area. He developed his model based on some mice escaping, from a contained water pool onto a dry platform through doors of various widths and separations.The experimenters varied the width of the exits to allow just one mouse through, and then enlarged the opening to allow two mice, then three and so on. They also varied the distance between the exits. Second, each time one mouse escaped, they introduced another mouse into the pool to ensure the same level of panic among the mice. What did they find? The most efficient escape was when the door size was only large enough for one mouse to squeeze through. As the width of the door was increased, the mice stopped lining up and competed with each other. This actually slowed down the escape rate. This experiment suggests that an excess of resources increases competitiveness while a scarcity promotes co-operativeness.

There are examples even from nature to support this argument. According to experts, Australia has the least fertile soil on earth among all ecosystems. The soil contains about half the level of nitrates and phosphates found in similar and semi-arid regions elsewhere. The absence of glacial action or volcanic activity has meant that Australia's soils have not been replenished with nutrients for a long, long time. Plants in Australia have to work hard to get their nutrition and , having got it, need to protect it from grass and plant eating animals that live in the area. Inspite of these inhospitable conditions, however, there is an incredible diversity of plant life. It is host to some 12000 species of plants, a biodiversity that can rival a rainforest. There is a similar pattern for corals. For more than 2000km along the coastline of Australia, there stretches one of the world's largest collections of coral reef. Lack of physical protection makes these corals protect themselves and their location by producing some of the world's most potent toxins.

Eucalyptus trees in Australia develop large holes in their bases. A lay person would look upon this as a negative development on the assumption that this might weaken the tree base. In reality, the holes provide shelter for possums which leave nutrient-rich droppings as a sort of rent. So what is the explanation for this phenomenon of huge collaboration and cooperation?
In the Australian ecosystems, competition for resources is a rare phenomenon. Species tend to cooperate with each other to process, recycle and retain scarce nutrients. Scarce resources promote cooperation. Because resources are scarce, evolution selects only those species that cooperate to survive and grow. Nature favours those species that consume less, recycle efficiently and collaborate to keep the limited nutrient resources in circulation.

It is commonly believed that offering more choices and options to people adds to their happiness and sense of well-being. The reality is that, beyond a certain level of choice, the psychological impact of increasing choice is actually detrimental. A case that supports this is that, the Gross National Happiness of Bhutan decreased after different television channels were allowed to be broadcasted.

We can learn from these examples, from nature and others, that it is good to create a gap between the ambition and the resources. A feeling of fewer resources is a positive motivation. It stimulates positive action, as well as the collaborative instinct among people. The manager must try to create and maintain this gap between ambition and resources.

Before I sign off this blog I will leave with some of the well known examples of success this gap between ambition and resources has created:

• JFK's vision of putting a man on the moon had this gap.
• JVC developing the home video cassette recorder had this gap.
• US denying India access to supercomputing, helped India develop our own Param supercomputer.

Happy Reading

Ram

p.s The examples in this blog is taken from the book "The Bonsai Manager" by R GopalaKrishnan, again an excellent book to read.

Theory of Relativity

Einstein's Special Theory of Relativity describes the motion of particles moving at close to the speed of light. Eistein's theory of relativity talks about question of whether rest and motion are relative or absolute, and it shows that the objects continue to move in a straight line in space-time. Because most of us have little experience with objects moving at speeds near the speed of light, Einstein's predictions may seem strange.

However I will share a different theory of relativity that everyone of us experience day in and day out. This blog is an excerpt from the chapter on "Truth of Relativity" from the book "Predictably Irrational" by Dan Ariely. I strongly recommend readers to read this great book by Dan Ariely.

Humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather , we focus on the relative advantage of one thing over another, and estimate the value accordingly. Most people don't know what they want unless they see it in context.We dont know what kind of car we want to buy- until we compare cars, test ride them, check what our friend's have. We don't even know what we want to do with our lives - until we find a relative or a friend who is doing just what we think we should be doing. Everything is relative, just like the airplane pilot landing in dark wants the runway lights on either side of the landing stretch.

Dan makes this point with an excellent example. An advertisement for Economist subscription looked like the one given below

1. Internet-only subscription for $59

2. Print-only subscription for $125

3. Print-and-Internet subscription for $125

If you were given these choices, what would you choose? Through a survey on MIT management students it was found that 84% people chose option 3 , 16% chose option 1 and obviously none chose option 2.

When the experiment was repeated with only the following options:

1. Internet-only subscription for $59
2. Print-and-Internet subscription for $125

68% people chose option 1 and 32% option chose option 2.

By adding a decoy option of "print-only" most of them in a predicatbly irrational manner chose Print-and-Internet option over Internet-only option.

So the next time you go to a store for buying TV or Washing machine or other goods beware that there be could be a decoy optional model that would influence you to choose the most expensive option. I would not be surprised, even after reading this blog, you end up choosing the expensive one . No wonder we humans are predictably irrational.

Relativity is (relatively) easy to understand. But there's one aspect of relativity that consistently trips us up. We tend to focus on comparing things that are easily comparable - and avoid comparing things that cannot be compared easily. An example will clarify the above statement:

Suppose you are planning a honeymoon in Europe and your choice is either Rome or Paris. The travel agent gives you three options

1. Rome package which includes airfare, hotel accomodation, sightseeing tours, and a free breakfast every morning.

2. Rome package which includes airfare, hotel accomodation, sightseeing tours, but NO free breakfast every morning.

3.Paris package which includes airfare, hotel accomodation, sightseeing tours, and a free breakfast every morning.

Which option would you choose. The survey shows that most people chose option 1. When the option 2 was not given, it was a difficult to choose between Rome and Paris as the package contents were similar. Even now it is similar, but adding a decoy - Rome without breakfast, makes Rome package more attractive than Paris package. This is what we mean when we say that we tend to focus on comparing things that are easily comparable.

So next time you want you kids or others to choose an option that you wish them to choose add a decoy that is relatively inferior to that option. Going by this predicatbly irrational behavior you may have your way.

The next example of this theory of relativity is an excellent one. Suppose you have two errands to run today. The first one is to buy a new pen, and the second is to buy a suit for work. At an office supply store, you find a nice pen for $25. You are set to buy it, when you remember that the same pen is on sale for $18 at another store 15 minutes away. What would you do? Most people faced with this dilemma say that they would take the trip to save $7.

Now you are on your second task: you're shopping for your suit. You find a luxurious suit for $455 and decide to buy it, but then another customer whispers in your ear that the exact same suit us on sale for $448 at another store, just 15 minutes away. Do you make this second 15-minute trip? In this case, most people say that they would not.

Interestingly in both the above cases you save $7 for 15 minutes of your time. However in one case you take the trip and the other you dont. Is is not an irrational behavior? The problem is that we compare the relative advantage and when the percentage gain is less we do not go the extra mile eventhough the gains in absolute terms is same in both the cases. This behavior of us is exploited very well and we do not mind paying extra $20 to a $500 catering bill for soup entree when we will clip coupons to save 25 cents on a one-dollar can of condensed soup.

The impact of this theory of relativity can be seen from the next example. In 1993 federal securities regulators in America forced companies, for the first time, to reveal details about the pays and perks of their top executives. When this happened the CEO salaries went up three times the salary before executive compensation went public. The reason for this increase is because media started running special stories ranking CEOs by pay. This publicity had CEOs comparing their pay with that of everyone else. In response executives' salaries sky rocketed.

Did you ever look deeper to find why an employee is never happy with his compensation? Its because he is comparing his salary to others around - again an outcome of this relative theory. In the absolute terms his salary may be lot higher to have a better standard of living. But it does not help. As they say "The grass is always greener on the other side of the fence".

So can something be done about the problem of relativity? . The good news is that we can sometimes control the "circles" around us, moving toward smaller circles that boost our relative happiness. If we are thinking about buying the house, we can be selective in choosing the houses that are not above our means. If we are thinking about buying a new car, we can focus on models that we can afford, and so on. By learning to make the circles of comparison smaller, not larger, we can break the cycle of relativity. So next time you want to buy something, downgrade the choice by one notch. You will be lot happier and not get sucked into the vicious circle of wanting more because there is no end to this expanding vicious circle.

I end this blog with an Einstein's quote - " The distinction between the past, present and future is only a stubbornly persistent illusion".

Happy Reading.

Ram