Monday, May 18, 2009

The Choice: Uncommon Sense

When asked by his daughter Efrat, what choice he had made that has impacted his life the most, Eli Goldratt decisively states “I wanted to live a full life.” (Goldratt pg.1) So begins a narrative between a father and daughter on the freedom of choice: freedom to think and to understand, a philosophical explanation of Eli Goldratts fundamental system of beliefs as influenced by his theory of constraints. Consistent with his other books, Goldratts simple narrative writing style attempts to convey his erudite thoughts to the layman.
In chapter one: What choice do we have, he lays the foundation for the rest of the book by discussing what he believes it takes to live a full and meaningful life. Most people want to live an easy life, he says, and that is just an excuse. He talks of opportunities and being prepared when faced with choices. “If someone is not prepared, what freedom of choice does he have?” (Goldratt pg.7) The first time I read that statement I passed over it and kept reading. A few sentences later my mind was still wrapping itself around those words. When someone is not prepared for the opportunities that life presents, because of both external and internal obstacles, he is limiting the choices he is able to make in response to those opportunities. He likens freedom of choice to ones ability to recognize situations that can be transformed into opportunities. A perception of reality that is half full. His theoretical meaning of freedom of choice is “….the choice to invest in overcoming these obstacles.” (Goldratt pg.8)

Goldratt defines what he believes to be the most profound obstacle to ones understanding of reality as the fallacy that people believe it is complex. (Goldratt pg.8) With this perception of a complex reality, people search for sophisticated explanations for complicated solutions.
He says this is devastating because as a scholar of physics, he has observed in the universe complexities that man can only understand, and ultimately explain scientifically, through simplicity. Furthermore, that the attitude of most people is that the more sophisticated something is, the more respectable it is. (Goldratt pg.9) He calls this a “ridiculous fascination” because; it voids the need for people to use their brain power in understanding reality. This is understood in science by the four fundamental forces of nature; strong, weak, gravity, and electromagnetic. These four basic forces, controlled by particle exchange, are used to explain the most complicated relationships between atoms and molecules. I don’t doubt Goldratt, a physicist himself, understands the simplicity of these scientific laws in forming his theories. He emphatically states that “the more complicated the situation seems to be, the simpler the solution must be.” (Goldratt pg.8) This is a shared mindset within the Universities physics department and here in lies a balance between reductionism and Ockhams Razor. Here Goldratt is applying the principle of parsimony recognized in physics, special relativity, and quantum mechanics, past a scientific method to encompass a framework to perceive reality. This framework is contrary to most peoples common thought process and once understood, presents a freedom to think beyond the obvious conclusions and explore outside the box. This is applicable to life in general as much as the business decisions presented in the following case study that frames the next few chapters.

The case of BigBrand is a retelling, and subsequent analysis, in which Goldratt relates this distorted view of reality within a large company. The perception in this company is that they are too big and too complex to see changes to their bottom line from changes on the macro level. In reading the chapter on uncommon sense, three things stood out to me. The first is that in their review of the logistics of their supply chain it was evident to even myself, a student of quantitative methods, how the concepts and processes could and should have been applied: specifically various seasonal forecasting methods. In their conversations, Goldratt walks them through various outcomes contrary to what was perceived as the status quo. He explained how “sold out” should not always be regarded as a positive thing because that means they are losing potential revenue by not having the necessary inventory. I was a little surprised by the fact that I sensed within this company a group mindset towards forecasting that they used the uncertainty that accompanies it as an excuse for poor business decisions. Their organizational culture seemed to be one that accepted inconsistencies in supply and demand because that just how business works. I perceived a level of ignorance in their contentment in maintaining the status quo. His suggestions to order smaller quantities instead of ordering for a whole season and hoping you have enough or hoping you don’t have surplus, seemed a real life example of a moving average forecast with a seasonal adjustment or exponential smoothing. The whole case seemed like common sense and Goldratts daughter addresses this in his next chapter - Why is Common Sense Not Common Practice.

Efrat, a behavioral psychologist, attempts to unravel her own complex perception of reality in relation to this company’s case. As she delves into it she discovers psychological barriers that previously prevented her from approaching the case from a scientific point of view like her father. She talks of the protective mechanisms we all develop in response to a perceived problem and how those protective mechanisms tend to lower our expectations about life. In the context of this case study, managers had limited their options and expectations by limiting their thought process to merely cutting costs. Once the protective mechanisms are identified they can be taken into consideration when observing and analyzing any situation.
“Natura valde simplex est et sibi consona.” Translated this means “nature is exceedingly simple and harmonious within itself.” (Goldratt pg.35) Goldratt supports his phrase, Inherent Simplicity, on this statement from Sir Isaac Newton. To better understand what that means he uses the illustration of Newton’s three Laws of Motion. He points out that Newton did not create these laws, only discovered them. (Goldratt pg.36) Newton revealed the “Inherent Simplicity” that was there by continuing to ask the question why until a clear cause-effect relationship was defined. The point Goldratt is making is that for everything that seems complex, if you ask the why question enough times you will eventually get down to the foundation where the root cause is straightforward and simplicity is universal.

With the importance of simplicity acknowledged, he goes a step further and says that “the opposite of simplicity depends on your definition of complexity”. (Goldratt pg.42) He goes on to explain complexity using the follows systems.

With fewer dots and no confusing arrows, system A only has four elements. Upon initial observation system A appears to be simpler. However, Goldratt looks beyond the prevailing definition of complexity. That is, “the more data elements one has to provide in order to fully describe the system, the more complex it is”. (Goldratt pg.40) He looks at it in terms of degrees of freedom. In this case he is looking at the minimum number of points one has to touch in order to impact the whole system. If the answer is one point then the system has one degree of freedom. If the answer is two points then the degrees of freedom is two, and so on. With this in mind system A has four degrees of freedom opposed to system B which only has one. The cause and effect arrows connect all points in system B. So if you impact one data element or point you will impact the whole system indirectly. He proposes that if you are a scientist, or a manager for that matter, you are not interested as much in the description of the system as you are the difficulty of controlling and predicting its behavior. He now defines complexity not as the opposite of simplicity but rather, in terms of degrees of freedom. “The more degrees of freedom the system has the more complex it is.” (Goldratt pg.41) With this in mind complexity and simplicity can coexist independent of each other because they are not mutually exclusive.

Now that he has laid a logical foundation for system analysis, he addresses the contradictions and conflicts that arise when the human element is introduced into the equation. He makes the interesting statement that “reality doesn’t contain contradictions, but it is full of conflicts.” Further more, that a conflict is “a situation where we want a contradiction.” (Goldratt pg.47) Let me unwrap that, a contradiction is what occurs in the hard sciences. A conflict occurs in the soft sciences. When faced with a contradiction, it is understood that somewhere along the analysis an erroneous assumption was made. Conflict, within this context is detrimental because it adversely leads to compromise. This is dangerous because a compromise can not always be reached that is void of undesirable effects. What Goldratt suggests is to treat conflict like a scientist treats contradiction. In doing so, when conflict arises where an acceptable compromise can not be reached, it is tacit that one of the underlying assumptions is flawed. This flawed assumption, when identified, can be removed from the thought process and in effect removing the cause of the conflict, thereby, eliminating the conflict from the equation.

To summarize, the second obstacle that prevents people from productively using their brainpower is the faulty perception that conflicts are certain and that at best we can hope to do is seek an adequate compromise. So what Goldratt means by Inherent Simplicity is that “reality, any part of reality, is governed by very few elements, and that any existing conflict can be eliminated.” (Goldratt pg.56) With this in mind let us return for a moment to the Big Brand case and identify how Goldratt approached his analysis with Inherent Simplicity. The first thing he did was focus on what was not working and assumed the reason to be a single root cause. He was not there to fix what was not broken. He concentrated on the undesirable effects and took for granted that they were the result of an undesirable compromise. Efrat states that people generally tend to suppress chronic problems because they have given up on the possibility of those problems being solved. He addressed the root cause rather than a symptom. He was able to do this because he was able to overcome the psychological barrier that is the tendency to conceal the big problems. As a result, when he evaluated the Big Brand case, he identified the root cause to be logistical. Inherent Simplicity allowed Goldratt to think that the shortage and logistics problems could be solved because they were the product of a root conflict that could be removed once identified. Efrat summarizes this when she says that “Part of the belief in Inherent Simplicity is that any conflict, including root conflicts, can be removed by removing one of the underlying false assumptions.” (Goldratt pg.52)

Next he identified the underlying assumption that the only way to order the right quantity was to know what the demand would be in advance. Their zone of indifference created a blind reliance on the perceived accuracy, or lack thereof, of forecasting. They went wrong because they settled with the margin of error that comes with forecasting. Thereby, compromising even though they knew the forecasted information received was inaccurate. However, the key false assumption, and subsequent compromise they made, was that this large scale demand forecast was the only information they could obtain. This was the faulty assumption in Big Brands business mindset and this was what Goldratt addressed with them. One of the suggestions he posed was ordering more frequently and in smaller quantities based on last value forecasting.
In exploring this idea of addressing root causes as related to identifying assumptions within conflicts and contradictions, it is important to clarify what is meant by assumption. An assumption can be defined as a core belief that guides behavior and, consciously or unconsciously, frames how to perceive and think about any given situation. As a behavioral psychologist, Efrat applies Inherent Simplicity in her profession, which is a soft science, by addressing conflict objectively. This can be difficult because human relationships tend to be subjective in nature, especially with individuals whose psychological issues are internal. Nevertheless, when treating a patient she makes use of her father’s priori about addressing conflict. Once she properly articulates the core conflict, she too, reveals the underlying assumptions and attempts to guide a patent to realize alternatives to change those assumptions. She attempts to relate this back to a business setting by suggesting that “Maybe the only difference between individuals and organizations is that in cases of organizations the underlying assumptions are perceived not as assumptions but facts of life.” (Goldratt pg.53) There is a legitimate level of validity in her statement. In referring back to Goldratts thoughts on sophistication, it would not be a stretch to visualize a scenario within an organization in which a zone of indifference existed that when faced with a sophisticated assumption, they merely accepted it as fact without a great deal of thought. This sounds like a destructive and precarious mindset however; I have observed it to be common.

The remainder of the book, Goldratt talks about the importance of harmony, seeing issues from others perspective, and of organizational relationships, both internal and external, that encourage a win-win situation for all sides. The chapter on Thinking Clearly and Tautologies deserves a research paper in of itself, as I could not do it justice with just a paragraph. Goldratt simply states that “the key to thinking clearly is to avoid circular logic, that’s all.” (Goldratt pg.117) Consistent with his explanations, he draws on the hard sciences to elucidate. When one reaches deep enough where we can no longer use our senses, he states that we have to start using abstract entities. (Goldratt pg.118) He points out that we know entities like atom or enzymes exist not because of direct information from our senses, but rather, through logic. The difficulty, and therein danger, with these entities is that they can not be verified by direct observation. The importance of “abstract entities” in thinking clearing is the risk of ending up in what he calls “la-la land”. (Goldratt pg.117) This is where he says it is easy to fall into the trap of tautologies or circular logic. Here again is the danger with people’s fascination with sophistication. Here, he says, the road to sophisticated nonsense is wide open.

A definite course in logic, he continues to explain ideas like cause-effect convergence and how people’s comfort zones affect their behavior. Some concern was raised, that will require further thought on my part, by Goldratts statement that a key to thinking clearly is the belief that people are not bad. (Goldratt pg.143) Part of my Judeo-Christian theology is the belief that because of the fall of man we are born into this world with a sinful nature, therefore bad: or in the least flawed and in need of rebirth through reconciliation with our creator. I can go as far as to say that mans intentions are not bad. However, some of the worst acts of human history were birthed with the best of intentions. Maybe what Goldratt is referring to in his belief that people are not bad is the philosophical belief in Natural Law, or as C.S. Lewis referred to it, Universal Morality. That is, an innate sense of right and wrong. In this sense I can follow Goldratts thought process.

The final chapter concludes the book the way it began; a question between father and daughter. The concluding conversation explores the relationship between emotion, intuition, and logic. Intuition is the fuel that feeds logic and consequently clarity of thought. With clarity of thought comes an ability to apply God given brain power and intuition to reach a full life. This is one of the better books I have read in a long time because it was able to convey ideas into practical quantitative thought processes and mindsets that I can apply in my day to day life. I will conclude with a cause-effect progression that is a by-product and unavoidable result of constantly practicing clear thinking. (Goldratt pg.157)

“Naturally when we practice thinking clearly…..we tend to concentrate on our areas of interest….The more we succeed in thinking clearly the deeper our emotions in those areas become. The deeper the emotions, the stronger the resulting intuition. The stronger the intuition, the higher the chances to successfully apply logic; the higher the chances to achieve good results. And since these results were achieved in our areas of interest, they are meaningful in our eyes. The more meaningful the results the deeper are the emotions and so on and on.”

Goldratt, Eliyahu M. (2008). The Choice. Great Barrington, MA: The North River Press.
Pgs. 1-173. ISBN 978-0-88427-189-5