Cargo Cult Management

During World War II, the Allies brought significant quantities of food, medicine and other supplies to previously isolated islands in the Pacific. Natives of these islands were distraught when the Allies left and the cargo vanished, and in noting the events that had occurred prior to its arrival assumed they had caused the cargo to drop from the sky. So in an attempt to bring back the supplies, the islanders created structures that visually resembled control towers, carved headphones out of wood and made large-scale model airplanes. It was one example of what are known as cargo cults, religious practices that are brought on by the interaction of advanced societies and remote tribal people.

In his 1974 Caltech commencement address, Richard Feynman compared examples of modern “science” to cargo cults, and called the phenomenon cargo cult science. As I re-read the text of Feynman’s address recently, I couldn’t help but think of how applicable it was to modern business management.

Causation vs. Correlation

Why are most of the meetings you attend so worthless? Perhaps those holding them are simply replicating the behavior of their own superiors. “It works for him and he is the CxO, so if I do it maybe I’Il be CxO someday.” Ditto for why so many presentations contain so much content yet so little information. In my experience, it’s a result of the presenter trying to follow the company’s “proven” formula, whatever that might be (e.g., executive summary, lots of detailed text and charts to show you how smart you are, and a conclusion). Trust me on this, the formula — any kind of formula — sucks. Try telling a story instead.

The list of cargo cult management examples goes on and on. The business section of your local bookstore will provide further insight into why cargo cult management runs so rampant — it’s hard to even find authors that understand the difference between causation and correlation.

Jim Collins’ “Built to Last” and “Good to Great” are two examples of cargo cult management (oh, and bestsellers). In “Good to Great,” Collins and his team of “researchers” examined historic stock returns of potentially “great” companies relative to a market index. The research team took the top historic performers and then narrowed the list down further by looking for only those companies that did much better than their industry peers (e.g., if an entire industry did exceedingly well, the company was dropped). They compared these “great” companies to those with lower stock returns, which they deemed as merely “good.” How did they compare the two? By reading news articles and doing interviews and “systematically” coding the results into “strategy, technology, and so forth.” They then used all of this research to identify patterns they could use to tell a story about how any manager could take a company from good to great. With that formula, such a story should be relegated to the fiction section.

What if aerospace engineers employed a similar analytical approach, that of looking at historic data and use induction to find the answers in patterns gleaned from the data? Our airplanes would fly about as well as the one in the photo above.

Entrepreneurship

There are examples of cargo cult entrepreneurship as well, and startups run this way have a dramatically higher probability of running out of money. Of course, as startups that survive earn the air cover of a business with momentum they often allow inefficiency and bad management to creep into the system.

I believe that the biggest advantage a startup has over a big competitor is intellectual honesty. Most of the entrepreneurs I know start their own companies or join startups in order to do what they wanted to do at their larger [previous] employer — to do something worthwhile. They finally reach the conclusion that the only way to avoid cargo cult management is to start from the ground up. This is particularly true of technical professionals, who view intellectual honesty as core to their job. How often do you hear business people poke holes in their own arguments the way engineers do?

Which brings us back to the last line of Feynman’s 1974 address:

“So I have just one wish for you — the good luck to be somewhere where you are free to maintain the kind of integrity I have described, and where you do not feel forced by a need to maintain your position in the organization, or financial support, or so on, to lose your integrity. May you have that freedom.”

Well said.

Mike Speiser is a Managing Director at Sutter Hill Ventures. His thoughts on technology, economics and entrepreneurship will appear at this time every week.