First published in the Financial Times on 8th May 2012.
Focus is important; stubbornness can be a liability
At a conference in Vienna last week, a perceptive speaker said that “muddling through” was actually a sound strategy in many circumstances.
He was right. Our instinct is to look for the black and white solution to a problem. But that approach applies rather better in theory than in practice. The real world is a complicated and volatile place. Neat answers might sound impressive in a presentation, but they are rarely the best policy on the ground.
By contrast, entrepreneurs tend to be experts at muddling through. They can cope with significant uncertainties in their work, while retaining a sense of confidence and a feel for priorities.
I have partnered with several highly able founders who have launched start-ups or even made offers for companies without having the necessary funding. They knew that if the deal was right they would find the money. In Silicon Valley, they have learnt the art of the “pivot” – completely changing the business model because the initial concept didn’t succeed.
Pulling off such a reinvention is hard but almost every founder has done it – because few ideas really take off in their original form. Expedience is paramount; slavish devotion to last year’s structure is irrelevant.
The essence of a bootstrapped business is a willingness to do what it takes (within the law, of course) to get things moving. That means forgoing the joys of clarity for the messy truth that comprises any new venture – imperfect products, clients who don’t pay, the wrong staff, insufficient capital and so on. Such projects prosper thanks to many incremental wins and plenty of errors, rather than a few clean victories.
When pitching to banks for loans, the usual expectation from credit officers is a precise business plan. But markets, customers and competitors simply do not behave as they are told. Commerce is subject to so many unpredictable variables that it makes little sense to pay much heed to a set of projections more than a year ahead. Rely too much on a precise set of spreadsheets, and there is likely to be disappointment – or worse.
I’m not advocating that management should depend entirely on their instincts and ignore the facts. Quite the opposite – I’m suggesting that one should remain flexible and avoid a rigid attitude based on predetermined desires. Focus and determination are important; but stubbornness in the digital age can be a liability.
Institutions, regulators and bureaucrats abhor the very idea of muddling through. They worship rules, predictability and systems. That is probably why they are so bad at innovation, and weak at coping with change. They prefer static conditions; but human affairs are dynamic. Rather than an obsession with procedure and cumbersome governance, they should embrace trade-offs and compromise.
I have noticed that many wily entrepreneurs hate to give a definitive “yes” or “no” to difficult questions. They prefer to say “perhaps”, and delay to see if more information emerges or their bargaining position improves. Most of us are impatient to know the detailed price and exact terms of a transaction; but actually tolerating vagueness for a while can be the more profitable path in the long term.
This approach does not reflect a lack of decisiveness. Rather, it demonstrates realism about the future: our ability to predict is weaker than most of us would like to admit. Last year Dan Gardner published a book on the subject called Future Babble: How to stop worrying and love the unpredictable. It is a valuable antidote to the many experts who claim to make accurate forecasts.
For many of the eurozone banks and nations, the only way to survive this crisis is to gradually resolve their difficulties by rebuilding balance sheets incrementally. There will be no big fixes. Instead governments need to seek pragmatic deals by any means necessary. They have little choice but to adopt the philosophy of muddling through.