Elephant in the room
Everyone in business knows about elephants. We know companies cannot strategize. We know there are bad CEOs. We know Boards of Directors seldom hold CEOs accountable, and we know that at least one giant social media company cannot be trusted. We know privacy is dead and consultants sometimes mislead their clients – OMG – for money. We know AI is extremely powerful, but overhyped. We know just about all innovation projects fail. We know personal relationships explain success way too often. We know US companies live in tax heaven. We know all these things – and so many more – but seldom talk about them. We mostly don’t talk about them at all. They’re the elephants in the room.
Let’s look at 6 elephants today. (This is the first in a series of three articles. We’ll look at 6 more elephants next time; we’ll finish up with 5 more and then offer some pointless elephant management advice.)
1. Fads
I’m as bullish about AI as the next guy. More so because I have vested interests in the field. But the reality is that the vast majority of machine learning applications are in well-bounded domains where regression is the preferred algorithm. We’ll get to true deep learning, but there are already those who believe the current bets on neural networks will only take us so far. Huge sums of money are betting on intelligent futures that will not unfold. We know this. But we also love fads – even when we know they’re fads. The bet is not if something’s a fad, it’s when and how the fad will end. Is cryptocurrency a fad? Just ask Sam.
Some of the elephants in the room are nothing more than gamblers. Some are grifters who love to create (and then trash) “unicorns” and other over-valued products, services, companies and sectors. “Pump & Dump” is a real thing. AI, cryptocurrency and NFT “art” are the current ones soon to be replaced by virtual real estate in the Metaverse, which, speaking of which, is another fad that will take at least a decade to assume its place as a game-changer – if it isn’t displaced by other technology, especially automation and more likely Generative AI (ChatGPT anyone?).
Elephants know a fad when they see one.
2. Vested Interests
Many years ago a simple phrase was uttered in another context: “follow the money.” Yes, of course, we’re here to make as much money as we can. But can we just admit that business is a blood sport, meritocracies are rare, and it’s who – not what – you know that really counts? Can we admit that all business is personal because it pays mortgages, educates kids, funds amazing vacations and finances 2nd homes? That “it’s just business!” is a lie?
How many of us look back on pieces of our careers and cringe – not because we did anything illegal (!), but because of the “passion” we brought to, for example, selling diet pills, cars, houses, consulting, insurance, vitamins, IPOs – whatever. Years (or maybe months) later, we realized the products, services, companies and industries we so passionately sold were anything but useful, and some were downright dangerous. (Now’s the time to picture tobacco, opioid and social media executives testifying to Congress.)
As immersed as I was in the dot-com bubble, I realized – hindsight is 20/20 of course – that the business models were flawed and the entrepreneurs mostly clueless. But everyone was making money – tons of money – which became the metric that defined the era. It was my metric. It’s fascinating how Internet failures launched the careers of so many one-hit losers. We suffered fools well back then, though many are now rich fools, which gives them status.
The internet bubble wasn’t a bubble at all; just an extremely generous elephant we refused to see (and hardly ever discuss – even now).
3. Platitudes
We love platitudes! Here’s one attributed to Sam Walton:
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Sam, when there’s only one store in town, customers have nowhere else to shop – at least in physical stores. Speaking of clouds, how many cloud providers are there today and how much effort is required to pack up your data and applications and fly elsewhere? Sam knew the answer: oligarchies kill competition. Everyone knows this, but we seldom ask questions about the lack of competition across sectors, like “how many companies produce the batteries that power electric vehicles?” (3 control 70% of the market [Ulrich, 2021]). What about the alleged open secret that “Google likely pays Apple billions of dollars each year to remain the default search engine that crops up on people’s iPhones and Mac computers”? What about the communications, air travel and banking industries?
How big is the elephant named Oligarchy? He’s in plain view.
4. Corporate Cultures
Let’s be honest: corporate cultures are some of the best assassins on the planet. They’re often where good ideas go to die. We all know that cultures must be feared. Want to innovate? The word itself is defined by the culture. Want to digitally transform the place? Only within existing cultural parameters. We all know that corporate culture is a constraint, not an opportunity, and we also know that the only way to change a culture is to put a financial gun to its head. As Gordon Gekko once said, “greed works.” Well, so does fear. But without fear, prevailing cultures rule.
This elephant is immovable.
5. Relationships
One of the biggest elephants in the room is sitting behind the big desk. It’s the one that writes the rules about hiring, firing, promotions and compensation. Many of the King’s and Queen’s buddies aren’t that bright or work that hard – and everyone knows it. In fact, there’s very little correlation between intelligence, productivity, personality, rank and rewards. Not “IQ,” but the ability to deduce, infer, interpret, analyze and communicate within problem settings. We all tell stories of about “the idiots” we’ve had to endure without describing how they gained power, influence and lots of money. The simple answer? They were friends with someone at the right time at the right place. Or they were imported when executives were installed. They often carry a decent handicap and are part of a well-established personal network. They’re frequently glib, attractive and well-credentialed. When huge, obvious mistakes are made – like failing to procure enough Covid test kits, mismanaging a failed IPO or missing quarterly numbers by a mile – we seldom ask how those in charge got – and kept – their jobs. Why do you think that is?
The elephants know.
6. Inequality
Massive inequality exists inside companies:
“CEO pay has skyrocketed 1,322% since 1978 … CEOs were paid 351 times as much as a typical worker in 2020 … in 2020, the ratio of CEO-to-typical-worker compensa-tion was 351-to-1 under the realized measure of CEO pay; that is up from 307-to-1 in 2019 and a big increase from 21-to-1 in 1965 and 61-to-1 in 1989 … in contrast, compensation of the typical worker grew by just 18.0% from 1978 to 2020.”
It's unlikely these ratios are good for business (or maybe they’re just irrelevant).
This elephant is actually just a little disgusted.
Yikes
These six elephants are all around us. Can you see them?
Wait until you see the next ones.
