Decision-Making – Page 12 – understand-culture

Limitless Resources

Alexis de Tocqueville (1805-1859) – French political thinker and historian best known for his Democracy in America – wrote: “The country appears to stretch on forever and is of limitless resources. But, no matter how fast it grows, it will remain surrounded by resources it cannot possibly exhaust.”

Energy: The United States has more coal reserves than any other country in the world and represent one-quarter of the world’s total coal supply. The U.S. has 272 billion tons of coal reserves and uses about 1.1 billion tons of coal per year. At this rate, America’s 272 billion tons of coal reserves would last nearly 250 years.

According to the 2012 article “American Oil Growing Most Since First Well Signals Independence“ by Asjylyn Loder on bloomberg.com domestic output of oil grew by a record 766,000 barrels a day to the highest level in 15 years, government data shows, putting the nation on pace to surpass Saudi Arabia as the world’s largest producer by 2020.

Net petroleum imports have fallen by more than 38 percent since the 2005 peak, and now account for 41 percent of demand, down from 60 percent seven years ago, moving the United States closer to energy independence than it has been for decades.

Key natural resources: One-third of U.S. land is covered by forests (302 million hectares), making forestland the number one type of land use in the United States. One-fifth of U.S. land is timberland (204 million hectares), which is land capable of producing 1.38 cubic meters per hectare of industrial wood annually. 71 percent of all timberland in the U.S. is privately owned, while 29 percent is publicly owned.

Land: The United States has a land area of 3.8 million miles² (9.8 million km²) compared to 9.7 million km² in China, 0.36 million km² in Germany and 0.38 million km² in Japan.

Population density: United States population density per square mile is 84, compared to 365 for China, 609 for Germany, and 836 for Japan.

Disaggregate

Disaggregate: to separate into component parts; to break up or apart. Americans not only aggregate, they also disaggregate.

A manager has a spontaneous idea, calls a meeting with more than a handful of experts to discuss it, then just as quickly disbands it noting that she and they should continue thinking about it. A corporate-internal project, generously funded at first, but which does not produce the initial results expected, has the “plugged pulled” on it quickly.

When low earnings over three straight quarters has investors grumbling, executive management reacts quickly with corrective action: close plants, layoff workers, hire a consulting firm to recommend a cost-cutting program.

At least until the end of the Second World War, the United States maintained a modest standing army, forcing it during war to ‘ramp up’ as rapidly as possible, only to then after the war demobilize just as rapidly.

Aggregate. Disaggregate. Quickly. It’s how Americans utilize resources.

Aggregate

The more resources – material, budget, time, personnel – an organization has at its disposal, the more likely it will draw on them in order to solve a problem, take advantage of an opportunity, accomplish a task. Especially if the organization needs to move quickly. And conversely, the less likely it will develop approaches which conserve those resources. Americans are not known for doing more with less. Not yet.

Aggregate: formed by the collection of units or particles into a body, mass, or amount; clustered in a dense mass; composed of mineral crystals of one or more kinds or of mineral rock fragments; taking all units as a whole. From Middle English aggregat, from Latin aggregare to add to, from ad- + greg-, grex flock.

Americans aggregate. When the U.S. goes to war it aggregates overwhelming force. The current debate is how to move away from this tradition. American websites aggregate content. When start-up companies “go public” – initial public offering – financial institutions aggregate investors.

Ecological Awareness

The Germans think ecologically. They not only draw on their resources sparingly, they also try to limit the negative effects of that use. Although Germany has a high population density, it has managed to declare almost 3% of its land as publicly-protected national parks, far above the average within the EU.

Many laws have been passed to protect the environment, including strict recycling laws for bottles, cans and other packaging material. Those who can afford it choose to buy organic food.

The Germans find more and more ways to save electricity and water, both of which are expensive. As of October 2012 only energy-saving lightbulbs can be sold. The stores offer only energy-saving lamps and lighting fixtures.

German awareness of the environment gave rise to the Green Party in the 1970s, which has developed into a major political force in Germany, and recently was the junior partner in the government with the Social Democrats. Ecological concerns have become common in all German political parties.

More with Less

“Get more done with less.” An intelligent use of resources also aims to maintain balance. Germans try to avoid ‘heading down the wrong path’, especially ‘betting everything on one hand’. Instead, they try to view an individual decision in the broader context of factors and resources. Achieving more with less is a defensive approach.

Decision making latitude. Germans do their best to maintain broad latitude in their decision making, whether it be in companies, families or the government at all levels. They want to make decisions freely, not be forced to make them.

Germans strive to keep as many options open as possible, knowing well that every decision leads to action, which in turn draws on valuable resources: time, budgets, material, manpower. And because revising decisions further depletes resources, Germans try to make the right decision from the start.

Thrifty. The German people are thrifty. The national debt per person is far lower than in Europe’s southern countries and clearly lower than in the U.S.. Private household debt is considered to be a character weakness, of poor planning, an inability to manage a budget. State agencies stand ready at any time to advise German citizens on how to get their personal finances in order.

Exact calculation. Germans are known to calculate ‘with a sharp pencil’. Whether it be the mother of a family, the Chief Financial Officer of a German small-to-medium sized company or a civil servant in the local tax office, the Germans calculate precisely what costs how much, when, with what affect on the overall budget.

Germans speak of the schwäbische Hausfrau, the Swabian mother and head of the household. Swabians are known within German for being especially thrifty. They are the model for financial conservatism, for avoiding non-essentials, for holding on to their money, for saving.

Mother of Invention

‘Not macht erfinderisch’ or “necessity is the mother of invention”. Not – necessity – forces one to become creative, to work in a disciplined way, to draw on resources carefully. Process oriented thinking is the logical response to working with limited resources. One could say “necessity is the mother of processes”.

The most popular kind of food in Germany is the potato. Imported from Latin America at the end of the 1700s in response to severely limited food supplies in Germany, the potato was a perfect fit: has high nutritional content, grows in poor soil, is resilient in erratic climates.

It was the Prussian king who had heard about the oddly shaped vegetable. At first the German people did not respond to the potato, even though hunger had become widespread. The king decided to appeal to the inclination of his subjects to challenge authority.

Fences were built around the potato fields, guards were posted. The people became curious. It didn’t take long for the first thieves to recognize the value and versatility of the potato. Today’s German cuisine could not exist without that once strange object from a far away land.

Resource Comparison

If America represents a society of excess, then Germany can be viewed as representing one which may not have deficits, but knows its limits.

The U.S. has 15x as much natural gas, 5x as much crude oil, 4x as much coal, and 5x as many renewable water resources. And the list goes on.

In the year 2000, the annual use of gasoline per capita in the USA was 1,633 liters versus just 450 in Germany, electricity use was 13,672 versus 6,680 kwh.

As far as space is concerned, the numbers grow incomperable. With its 9.63 million km², the U.S. is 27x larger than Germany with its 357,000 km².

The state of Texas alone is nearly twice as large, having 678,000 km², California with 411,000 km² and Montana 381,000 km². My home state of Pennsylvania is already 1/3 the size of Germany with its 117,000 km².

All of this impacts the population density. In Germany, an average population density per km² is 231, in Northrhine-Westphalia, the most populous state, that number more than doubles to 530.

In the U.S., the figure lies at a mere 31. But let us examine the development o fthis number over the past 200 years: in 1800, there were 2.5 people per km², in 1850 3,5/km², 1900 8,0/km², and by 1950 still only 17 persons per km².

Frugal

Germans are very conservative with their resources. Waste is proof of poor and improper work, which has lost sight of what is important. This is why decision-making processes should incorporate a clear and well-defined plan for resource management.

The process of making a decision requires its own resources as well, (work, materials, time, etc.) and takes place in a context which is very much confined by the resources available, resources which must also be calculated into the process implementing the decision.

The German figure of speech ‘Not macht erfinderisch‘ – need makes one inventive – is a fitting: Being in need may lead one to become more creative and discover hidden connections, but it also enforces disciplined and effective use of available resources. These frugal tendencies strongly complement a process-oriented approach; both tendencies are different sides of the same coin.

A further important point of contrast becomes clear, when considering that the conservative use of resources also reflects a desire to keep things in balance. One doesn’t want to go rushing off in the wrong direction, ‘alles auf eine Karte setzen‘ – to bet it all on one card. Rather, one should always view important decisions within the economical context of labor and resources in its entirety. He or she who can ‘make more from less’ has successfully internalized this defensive principle.

“If worse comes to worst . . .”

There are several key phrases that Americans use when making quick, suboptimal decisions. Some of these include:

At the drop of a hat – without any hesitation, instantly; with the slightest provocation.

Back to the drawing board – when a decision fails and a new one needs to be made. First known use: 1941 in a cartoon in the New Yorker magazine.

Back to square one – when a decisions fails so completely that you have to go back to the beginning and start over.

Cross that bridge when you come to it – deal with a problem when it arises, not before. First known use: 1851 in Henry Wadsworth Longfellow’s The Golden Legend.

If worse comes to worst . . . – if the worst possible outcome of the bad decision occurs, the person saying it will do whatever he/she says next. First known use: 1596. Example: We’ll put this to market now, and if worse comes to worst we’ll refund our customers’ money.

Rash decision – a decision made without considering all of the details.

Kahneman Quotes

Daniel Kahneman is an Israeli-American psychologist notable for his work on the psychology of judgment and decision-making, for which he was awarded the 2002 Nobel Memorial Prize in Economic Sciences.

His empirical findings challenge the assumption of human rationality prevailing in modern economic theory. In the same year, his book Thinking, Fast and Slow, which summarizes much of his research, was published and became a best seller.

„True intuitive expertise is learned from prolonged experience with good feedback on mistakes.“

„We think, each of us, that we’re much more rational than we are. And we think that we make our decisions because we have good reasons to make them. Even when it’s the other way around. We believe in the reasons, because we’ve already made the decision.“

„There’s a lot of randomness in the decisions that people make.“

„Nobody would say, ‘I’m voting for this guy because he’s got the stronger chin,’ but that, in fact, is partly what happens.“

„It is the consistency of the information that matters for a good story, not its completeness. Indeed, you will often find that knowing little makes it easier to fit everything you know into a coherent pattern.“

„We’re blind to our blindness. We have very little idea of how little we know. We’re not designed to know how little we know.“

„We are very influenced by completely automatic things that we have no control over, and we don’t know we’re doing it.“