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It’s Friday – Has Rationality Prevailed in Your Mind All Week?

A few years ago I traveled through Morocco, where it is common to see people riding on donkeys, pushing handcarts, or sitting in a corner of the Kasbah manufacturing shoes using hand tools. This made me wonder: Why is it that in some societies, nobody has a watch, but everybody has time? But in other, more modern societies, nobody has time, and everybody has a watch.

Information and time are like inseparable twins that move together in a paradoxical way

Do you ever wonder where the time that we gain by moving information faster goes? The answer: The more time we gain, the more we fill our days consuming and generating information. The big questions are, what do we really gain by moving faster, and is it possible that a faster flow of information shrinks our ability to think and act rationally?

Time fragmentation decreases rationality

As we split our time into ever-smaller fragments, we begin to feel like a juggler who adds more and more balls to the ones that are already in the air. As a result, we begin to look for better ways to juggle all the balls that come our way. Since the number of balls we juggle is limited by the available time, we reach our upper limit more often. In juggling terms, we begin to drop more balls. In terms of human capacity, we begin to act in irrational ways.

Herbert Simon, the 1978 Nobel Prize winner in Economics, first coined the term “bounded rationality,” which states that our rationality is limited by three factors: A) the information we have, B) the cognitive limitations of our mind, and C) the finite amount of time we have to make a decision. Since we have less time available to decide on problems that are more complex, the chances of making irrational decisions go up at a steady pace.

Complexity drives up risk

Even the brightest people in business are often stumped by the complexities of the two business drivers: finance and technology. Case in point: This week, Harvard University’s top financial officers had to explain a $1.8 billion loss in its investment portfolio. Yesterday, the Harvard Gazette reported that a stunning $500 million went down the drain in connection with interest exchange agreements, or “credit swaps.” The “rational” explanation offered was, “This was a once-in-a-lifetime, hundred-year-storm kind of event.” A more rational voice would have reminded these eggheads that when it comes to investing, the return on investment should take a back seat to the return of the investment.

When it comes to investments in technology, decision makers run up against two complex problems. One problem involves the objective appraisal of current systems, and the other involves the appraisal of the “new and improved” technology solution. Decision makers have high expectations, but at the same time they face time constraints, financial constraints, lack of domain expertise, and the inability to invest enough time to control the project from start to finish. No wonder a high percentage of CRM projects fail. Technology vendors rarely take the blame. They make “bounded rationality” part of their sales and marketing. Smart vendors know that buyer ignorance is an invitation for exploitation.

It reminds me of the famous line in the movie Trading Places, in which the Duke brothers tell Billy Ray Valentine (played by Eddie Murphy) “the good part”: “The good part is that no matter whether our clients make money or lose money, Duke & Duke get the commissions.”

Makes you wonder how long it will take until technology buyers begin to wake up, and instead of “buying” ROI promises, demand guaranteed results. Where is the rationality of top executives who would personally never buy a $100,000 car without a warranty, yet they are willing to spend $1 million on a software system for their companies based on a PPT slide that shows an ROI projection? Wouldn’t it be more rational to hold technology vendors’ feet to the fire? Instead of using complexity as an excuse, we should go back to the basics and not invest in anything we don’t fully understand.

Being smart stops at 110 bits per second

Herbert Simon also discovered that human beings cannot absorb more information than 110 bits per second. In a speech at a TED conference, Professor Mihaly Csikszentmihalyi explained that listening to another person requires about 60 bits per second, which explains why it becomes impossible for us to listen to two people talking at the same time.

Some people believe that they can push beyond normal limits, especially when it comes to multitasking. Neuroscientist Earl Miller said in an NPR interview, "People can't multitask very well, and when people say they can, they're deluding themselves,” And he continued, "The brain is very good at deluding itself."

What should we learn from this? First, we need to relearn how to focus on one person at a time so we can clearly understand what our customers are saying and create more value for them. Second, we need to stop deluding ourselves that we can run 100 meters in 10 seconds while we’re texting or updating our Facebook page. Remember the saying that someone who chases after two hares won’t catch even one.

Getting lost in a sea of information

Some people say that information overload is not the chief problem. The real problem is that we don’t have enough information filters. That’s like saying the problem isn’t that there is too much rain flooding the river, it’s that we don’t have enough boats and umbrellas.

How many times a day are we getting lost surfing online? The analogy with surfing is misleading since in real life, surfers ride a wave that leads to the shore while online surfing only leads us away from the shore into the deeper ocean, from where it will take us a longer time to return.

How many people start their day without clear priorities and objectives? How many managers accept unscheduled meetings or phone calls? How many salespeople call on unqualified prospects? How many show up underprepared?

The first step toward a more rational and successful life comes from our ability to recognize

a) the limits of our ability to absorb more information (It takes time to listen.)
b) the limits of our ability to act rationally (It takes time to think.)
c) our brain’s delusions of competence (We don’t gain time by multitasking.)
d) the illusion that we have enough time to solve highly complex problems effectively (It takes time to find the best solution.)
e) that we get lost easily while surfing online (It takes effort to manage our time better.)

As Clint Eastwood said in his role as Inspector Harry Callahan, “A man has got to know his limitations.” We cannot change the growing ocean of information, but we can improve the way we invest the shrinking amount of time.

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