The three pillars of renewal - opportunity cost, magical thinking and learning

Profile picture for user gonzodaddy By Den Howlett January 7, 2021 Audio mode
Can we truly unshackle ourselves from the past to envision a bright, new future? I think it's eminently doable.

Learning to give - gapingvoid
(via Gapingvoid)

In this story, I'm going to talk about opportunity cost, the need to set aside magical, incremental thinking and learning because for me, these represent the three pillars upon which we will emerge from the current pandemic crisis not only fitter and healthier but wiser for generations to come. 

Towards the end of last year I became thoroughly disillusioned with about 98% of what I saw in the world of enterprise software. For me, tech marketing became nauseous to the point where I could not wait to switch off for the Christmas and New Year holiday season. Talk of resilience, sustainability, empathy, innovation and especially digital transformation started to drive me nuts. Why? For me, the context is all wrong. If you're going to use those words then the context has to make sense and simply lathering marketing content with those words means nothing. There will be plenty who say 'but these are responses to the pandemic' and they'd be right. But they're framing those expressions to answer the wrong question. 

And then we saw - at least in the UK but increasingly around the world - yet another attempt to solve the COVID crisis with yet another half baked solution in the form of a tweaked lockdown. What I now see for 2021 is a bad ending re-run of 2020. It doesn't have to be that way but the reasons behind it are important to understand if collectively, we are to emerge in a better place. Technology is unquestionably central to that but it's a fraction of the answer. 

I won't address policy issues, I'm not qualified to do so but I will replay the oft quoted saying from the philosopher George Santayana as my starting point::

Those who forget the past are condemned to repeat it

Opportunity cost

I don't need to expand on this as it relates to the COVID responses by many Western governments, you all know what I am thinking. But what about countries like South Korea, Taiwan, Hong Kong, Philippines and New Zealand?  How is it that they (largely) overcame the pandemic? There are many points of view on this topic but one that fascinated me was offered by Ben Thompson in his weekly Stratechery email entitled New Defaults. In that missive, Thompson sets out three arguments for framing a reboot in the context of opportunity cost:

  • First, it should be the default that free speech is a good thing, that more information is better than less information, and that the solution to misinformation is improving our ability to tell the difference, not futilely trying to be China-lite without any of the upside.
  • Second, it should be the default that the status quo is a bad thing; instead of justifying why something should be done, the burden of proof should rest on those who believe things should remain the same. This sounds radical, but given the fact that the world is undergoing profound changes driven by the Internet, it is the attempt to preserve the unsustainable that is radical.
  • Third, it should be the default to move fast, and value experimentation over perfection. The other opportunity cost of decisions not made is lessons not learned; given the speed with which information is disseminated, this cost is higher than ever.

The urgency of this reset should come from where all of this started: China.

Opportunity cost is a concept I learned while training as an accountant. A useful way to think about this is as follows:

  • Opportunity cost is the forgone benefit that would have been derived by an option not chosen.
  • To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others.
  • Considering the value of opportunity costs can guide individuals and organizations to more profitable decision-making.

For myself, opportunity costing has been the principle way I've understood problem solving pretty much all of my life. Don't misunderstand me. Putting numbers to the theory is not easy. It requires a degree of analysis that makes standard costing look like a walk in the park. And it can lead to wildly inaccurate conclusions. But it does offer a way of thinking that to my mind has largely been missing in the West. Thompson put it well when he quoted Dan Wang:

This year made me believe that China is the country with the most can-do spirit in the world. Every segment of society mobilized to contain the pandemic. One manufacturer expressed astonishment to me at how slowly western counterparts moved. US companies had to ask whether making masks aligned with the company’s core competence. Chinese companies simply decided that making money is their core competence, and therefore they should be making masks. 

Magical thinking

This made me sit up and think because reading that coincided with two conversations I had recently with colleagues. The first person said they are keen to see what's going on in Japan because that's where they see innovation in ways that makes the rest of us look like dummies. China, Japan, Taiwan, Singapore...get it? I can't wait to hear the outcome of those investigations. 

In the second conversation, the Western bias towards incremental change based on our worldview meant that my correspondent could not envisage a world where the kinds of restriction placed upon citizens of the Far East would be acceptable as a pre-requisite for defeating COVD. In short, our default worldview prevents us from imagining outside of our existing environment. Which is odd when you think about the way most businesses are run. There's (usually) a CEO who, through bestowed authority sets direction and articulates strategy. Then there's a board with responsibility to execute across different domains. How different is that to a government where the leader has the authority to command what we should or should not do? You can argue that once you get below the L1 people in any business, there's plenty of room for dissent and resistance but that can be overcome through incentives and penalties. 

At this point I have to pause because Thompson's lynchpin is that software answers all ills or, at least, has the potential to do so. What he doesn't say it what comes before, which is where I am going. And here, the problem of a default worldview is central to what comes next. 

Plenty of businesses are thinking about how they see the future. After all, the pandemic has been a wake up call across many dimensions. In a sense the pandemic has served to accelerate agendas that were already in play such as the move towards servitization, a topic around which Phil Wainewright has plenty to say.

But in talking to businesses, and especially larger ones with long histories, the essential question comes down to this: what problem are you trying to solve? Very often, there is no clearcut answer and where there are, those answers often look like tweaks to existing business models. That tweak may be correct in some situations but more often than not, firms are failing to adequately consider alternatives in the context of opportunity cost. Paradoxically, small businesses have proven themselves far more adept at instantiating change and I suspect that's because there are so few people who need convincing that change is relatively easy. 


If we accept this line of thinking as both reasonable and accurate then it suggests we have to be far more ruthless in our business model critique. Rather than simply looking at what's happening in terms of the common theme of a burning platform, perhaps instead we should be thinking about business models in terms of what we can't see, what we can't imagine and working from there. But in order to do that requires a mindset that is far from common but which can be acquired. In this context I am encouraged by a brilliant story told by DJ Adams titled: From Classics to Developer Advocate.

In that story, DJ says:

When I was around 14 I remember someone pointing out a brief article to me that explained that IBM (which in my mind was *the* company to aspire to work for at the time), favoured an intake that had studied Classics, over anything related to Computer Science. At the heart of that was the idea, the truth, that studying what to most folks are “dead languages”, taught many essential skills:

  • logical thinking
  • analytical processes
  • self-driven work motivation
  • a keen attention to and retention of detail
  • the ability to dig oneself out of holes by looking things up
  • an appreciation of the importance of rules, syntax and grammars
  • knowledge of how to navigate those rules and grammars

That set of statements explains the what, but it is his punchline that explains the how:

If there’s one skill above all that has provided me with the ability to stay afloat, to keep going, to enjoy my work – it’s the skill of learning. Not any computing degree, or any other degree. Not any super secret ability. Just the capacity to be curious, conscientious and consistent.

What I’m about to end with might appear as some truism that people say at the end of a bunch of ramblings like this. But I want you to know that I mean it. Learning is a skill that has to be, well, learned. But if I can do it, anyone can. I make things up as I go along, projecting what I know onto what I don’t yet know, and then filling in the gaps. That’s part of learning and growing too.

I would add that in my mind at least, we've largely lost the skill of learning. The decimation of the apprenticeship approach to learning that's been going on since the early 1980s combined with an entitlement mindset has dumbed down entire generations upon whom our future depends. It has led us to the low code-no code generation which I guarantee solves nothing. It doesn't need to be this way. 

A conclusion

Where do our storied software companies fit into this equation? If you accept, as I do, that the technical answer to many of our problems lies in the development of great code, and that we are only limited by our imaginations, then it is incumbent upon our technology providers to put aside their aversion to what is loosely termed 'consulting' and embed their people into key industry players who are inspired to think differently. In short and as Steve Jobs alluded to many years ago, we can no longer afford to be constrained by our culturally tempered 'little world.'

But we need people like DJ to lead the way, to show us the art of the possible, to illustrate why near constant change does not have to be the unsettling experience so many people believe disrupts their lives. Instead we have to collectively see our current condition for what it is and simply make the decision to find what we can't see today. After all, it is the opportunity cost question of a lifetime that urgently needs answering and which will enrich us all in ways we cannot imagine today. Put another way, it is what inspired us at diginomica to do what we do today in the ways that we do those things at a time when the prospect of launching a successful media operation sounded like madness. Are we standing still? Hell no, but the fundamental principles of sucking less every day, being curious, learning and adapting remain as constants. 

Easy? No. Doable? Absolutely. And if you want a strong hint, then think about the illustration I've used for this story and the path that DJ is on.