3 Crucial Lessons for Leaders From the Up Side of Down

In The Up Side of Down, business author Megan McArdle argues that you have to harness the power of failure in order to succeed.

Here are three crucial, counterintuitive lessons for leaders from McArdle’s book.

The Up Side of Down: The Spaghetti Problem

The Spaghetti Problem: Limiting Assumptions & the Power of Iteration

For years, Peter Skillman was the head of user experience for Palm, the inventors of the smartphone as we know it today (and no, Steve Jobs can’t take the credit for this one).

Skillman was fond of a team-building exercise dubbed “The Spaghetti Problem.” Skillman shared his findings at the 2007 Gel conference.

In the Spaghetti Problem, a group of diverse volunteers, from students to engineers, are split into groups of three or four. Each group gets twenty pieces of uncooked spaghetti, a meter of tape, a marshmallow, and a piece of string. Each group gets 18 minutes to build the tallest structure it can that supports a marshmallow.

The results aren’t too surprising. The business school students finished dead last, undoubtedly because they spent too much time assigning roles, delegating tasks, getting VP buy-in, and creating five-year plans.

The lawyers (my tribe) did just as poorly. The lawyers were no doubt stymied by regulatory compliance and patent infringement issues, along with a profound lack of imagination (that’s why we all went to law school, after all).

The engineers acquitted themselves well, as to be expected.

But who did the very best?

Kindergartners, of course.

The Up Side of Down by Megan McArdle: Book Review

Image via Amazon. Used under fair use.

Here’s Megan McArdle’s take, from The Up Side of Down:

How did the kindergartners beat the engineers? By the simple process of experimentation and iteration. They didn’t let themselves get hemmed in by assumptions about what the rules were—they were the only group of people who asked for more spaghetti. And because they had more spaghetti, they didn’t have to waste time sitting around talking about how the tower should look, or who should get to write the vision statement. They just dove in and started creating, discarding anything that didn’t work.

Two takeaways from the results of The Spaghetti Problem:

    1. Action beats planning. Experimenting, testing, iterating. Isn’t it amazing how we’re all agilists until life beats it out of us? It’s easy to fall into the trap of talking about the problem instead of solving the problem. The two activities feel very similar psychologically after all. And college is explicitly structured to convince us that definitions, theory, and endless tail-eating discussion trumps execution and implementation. But reality doesn’t give two licks about your plan—it only bends and changes through action. That’s something kids inherently get and adults have trouble understanding.
    2. The ability to question assumptions fades with age. It isn’t simply that the kids dove into the problem. They also pushed the boundaries of the rules. Before decades of Herd influence sets in, we are much more willing and able to question the way the world works. You know that game kids play where they incessantly ask you why until you want to tear your hair out? It’s not malicious. It’s not even rebellious (from the kids’ perspective, there’s nothing to rebel against yet). It’s a natural state of questioning what they’re being told. And we would all do better to try and reconnect with that state.

Action Step — The next time your team faces a “Spaghetti Problem,” take some time to question your assumptions. Are you really seeing reality, or have you too narrowly defined the problem? Then take action, with an eye towards course-correcting as you go.

Groupidity: Market Bubbles and the Herd Mentality

You know how following the Herd can lead you to do dumb things?

McArdle calls this phenomenon groupidity: “doing something stupid because other people around you seem to think it’s safe.”

Experimental economist and Nobel Prize winner Vernon Smith tested financial groupidity in the lab. Smith built computer programs to model financial securities. Volunteers use this program to trade with one another. As a whole, the experiment reproduced the conditions of an asset market.

Smith originally wanted to understand how prices emerge from market behavior. Instead, he discovered how bubbles form.

Every group created market bubbles. Without fail.

Even when the researchers performed the test a second time with the same group of people, the repeat volunteers still created bubbles. Only on the third try do volunteers get what’s happening and prevent the bubble from forming. But this is only if you keep the same exact composition of students; adding just one or two new people to the experiment creates the bubble-and-bust cycle again.

McArdle says, “This is an important part of asset price bubbles: it feels safe to herd into stocks, or flipping houses, and safest when the most people are doing it … even though this is actually when it is the most dangerous.”

Groupidity is one of the chief side effects of the Herd mentality. The ability to go against the Herd is crucial for this very reason—Herding happens the most at the absolute peak of danger.

Action Step — What activities are you engaged in only because you see everyone else doing it? Recognize the downsides of best practices—they’re not always right for your specific situation.

Bending the Map: How Wishful Thinking Can Get You Killed

McArdle writes about “bending the map,” an absolutely chilling phenomenon culled from the world of navigation:

In Deep Survival, a stunning book about how people survive in extreme terrain, Laurence Gonzales writes about a phenomenon known in orienteering as “bending the map.” It’s summed up with a pithy quote from Edward Cornell: “Whenever you start looking at your map and saying something like, ‘Well, that lake could have dried up’ or, ‘That boulder could have moved,’ a red light should go on. You’re trying to make reality conform to your expectations rather than seeing what’s there.”

What’s incredible about the bending-the-map phenomenon is that it often leads to death.

Here’s another choice quote on bending the map from John Edward Huth’s The Lost Art of Finding Our Way:

Denial is an effective psychological defense mechanism, and map bending is one form that lost persons often engage in. A lost person might first believe he is located at a certain point on the map, but things around him do not seem quite right. He pays attention to details that confirm what he already believes to be true, ignoring all evidence to the contrary. A lost person may be looking for a creek that flows south on the map. In his mind he’s sure that he has arrived at the creek. It flows east, yet he conveniently ignores this fact and follows it anyway. It can take some time, but there comes a moment when an eerie realization hits him that something is wrong and he doesn’t know why.

Bending the map is a form of confirmation bias, of not seeing reality for what it is.

How often do you find yourself “bending the map” in your organization and in your work life? Fitting data to support a certain narrative. Ignoring signals that things might be going wrong. The more hierarchical the organization, the more likely it is you or your team are bending the map to please a superior or satisfy a mandate from on high.

Action Step — The Stockdale Paradox states that leaders succeed when they confront the brutal facts of their situation while retaining the unwavering belief that they will eventually prevail. In order not to “bend the map” and get yourself killed, you have to be brutally honest about the difficulties you face. But that doesn’t mean wallowing in despair or self-pity. Achieving great things requires believing in your ability to affect your outcomes.

Final Thoughts on “The Upside of Down”

I highly recommend The Up Side of Down by Megan McArdle. My only nitpick is with the title. Shouldn’t it be “The Upside of Down” and not “The Up Side”? But that’s about as minor as it gets. There’s a ton of useful info here for budding entrepreneurs and career W-2 types alike.

Check it out!

Top Photo Credit: courosa via Compfight cc

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