Running a business is the inverse of science — or almost the inverse of science. How do we know?
Take decision-making by leaders, which can be anyone from supervisor to CEO or the board of directors. Surely you have witnessed many decisions whose logic confounds you. Yes, there may have been data to support the decision, but the confounding logic suggests either a lack of scientific rigor or the exclusion of important information.
Add to that the possibility of obfuscation, to deliberately make the decision more difficult to understand, as if you lack the brainpower to comprehend the analysis and resulting decision.
Add to that the possibility of misinformation, the deliberate or unintentional spreading of false or inaccurate information whose purpose is to fend off criticism of the analysis and resulting decision.
All of this suggests that leaders’ decisions are strongly driven by traditions or beliefs that frequently contradict scientific thinking or the scientific method.
Surely not all leader’s decisions are as characterized here. And it would certainly be unwise to put running a business on a totally scientific basis because significant amounts of information are always missing. Often (but not always), there are just too many variables to contend with. Consequently, judgment is necessary for business decision-making, to greater or lesser extents.
But we also know of many examples of poor decision-making — especially decisions made by top executives that harm people and thus become newsworthy, such as:
- FTX and Alameda Research Fraud
- Nordea Bank Money Laundering
- Opioid marketing and distribution
- Boeing 737 Max disasters
- Wells Fargo financial fraud
A business is a socio-economic hierarchy. Leaders at various levels have status, rights, and privileges that others in the organization do not have. This adds a hugely important complicating factor that further disables scientific thinking: people are usually not able to contradict the boss without fear of reprisal. So, some things cannot be said, notably, the truth.
Blanketing the organization with the fog of ignorance and passivity means that people will be slow to inform leaders of problems, which means the organization will be slow to correct problems. And surely some problems will fester into much larger problems and become very expensive to fix, such as the ones listed above.
In general, running a business is roughly the inverse of science because it is so effective at squeezing out impersonal, objective scientific thinking. It undermines the pursuit of knowledge, understanding, and causality in favor of socially constructed subjective thinking suffused with illogical thinking, cognitive biases, untested beliefs and assumptions, and preconceptions.
The origins of business are in the simple barter and trading of 10,000 years ago or more, not science. The invention of money about 5000 years ago made the exchange of goods and services even easier. With or without money, the desire of participants was for either a fair deal or, more likely, something much better than that. To this day, business retains that ancient preconception of the necessity of gaining advantage over someone else. In modern business, that could be one or more of the following: customers, suppliers, employees, communities, competitors, and even investors (e.g., convince them to sell their shares at a low price).
The ancient preconception of the necessity to gain advantage means that top leaders will constantly be trying old methods, new methods, and variations of old and new methods to achieve that outcome. Business, therefore, is a living experiment relative to its principal mission. There is nothing fundamentally wrong with the mission or the trial and error approach to achieving gain. But it is not trial and error; more often it is trial and no error.
Leaders’ status, rights, and privileges means that they enjoy the luxury of almost never being wrong, and this typically disables the rapid identification of problems and the rapid correction of problems. Errors are either ignored or assigned to someone lower in the hierarchy — preferably far down to help maintain the myth that workers are incompetent.
The practical utility of the science or engineering mindset is the ability to quickly and impersonally admit a problem exists or the truth that a mistake was made, and to rapidly make an improvement. But even top executives who are deeply trained in the science or engineering mindset typically succumb to the same luxury enjoyed by their peers of not being wrong. It’s much too alluring.
Which brings us to the wildly popular Toyota kata. Where does it fit best: running the business at the top of the organization or running the processes at the bottom of the organization? Realistically, it is the latter. Kata is ideally suited for the kinds of problems that workers encounter because that realm is free of the status, rights, and privileges that subvert scientific thinking.
In most organizations, kata is yet another tool for people at lower levels of the organization to use to solve problems and make improvements in a systematic way. Most leaders dislike having such rigor applied to their own work, whether supervisor or CEO. Their right and privilege is the freedom to do as they please. Consequently, injecting science into running a business is an uphill effort. The hope that lower-level people trained in kata will someday rise and take kata with them to the corner office will come true, thought far more as an exception than the rule.
Where does this leave progressive management, whose entire being is rooted in scientific thinking? Probably in much the same place as it has always been. And it seems likely that in the near- and mid-term, generative artificial intelligence based on large language models will do little to change that.