{"id":4316,"date":"2023-05-03T11:29:17","date_gmt":"2023-05-03T09:29:17","guid":{"rendered":"https:\/\/www.semler-company.com\/?p=4316"},"modified":"2023-05-03T11:29:18","modified_gmt":"2023-05-03T09:29:18","slug":"why-you-cant-ignore-complexity-even-if-your-reptilian-brain-wants-you-to","status":"publish","type":"post","link":"https:\/\/www.semler-company.com\/en\/why-you-cant-ignore-complexity-even-if-your-reptilian-brain-wants-you-to\/","title":{"rendered":"Why you can\u2019t ignore complexity \u2013 even if your reptilian brain wants you to\u00a0"},"content":{"rendered":"\n

In our second Newsletter<\/a>, we introduced the topic of complexity and how companies must resist the temptation to hide from it, or to fear it.\u00a0\u00a0<\/p>\n\n\n\n

Complex business decisions involve multiple factors that interact dynamically in non-linear and sometimes ambiguous or contradictory ways. These include stakeholders from internal departments, on all levels, and external actors and influences. Or even technological game-changers, such as ChatGPT and other AI technology. Often the complexity cannot be visualised or anticipated in advance, and the full complexity is first apparent in retrospect. Systemic ESG topics, for example, are generally too large and wide-ranging to gauge the precise effects of a single decision or action.\u00a0<\/p>\n\n\n\n

Some of these are unmistakable hard factors. Climate change, the effects of the pandemic, resource scarcity, a global economic downturn, and the resulting waves of economic migration \u2013 all have an immense social impact on how we will live and work in the coming decades. But we also must consider soft factors such as the demand for diversity, the skill gap, company culture, and integrity.\u00a0<\/p>\n\n\n\n

Even decisions that were previously simple have become more complex in recent years. Take the example of the purchasing department deciding which supplier to choose for their new product. The decision is no longer based on the best price and conditions. It must now take into account supply chain issues, sustainability concerns and regulations, company cash flow due to the economic downturn, changing consumer demands, and more.\u00a0\u00a0<\/p>\n\n\n\n

To survive these challenging times, companies must learn to deal with \u2013 and even embrace \u2013 complexity. And they must also be able to clearly and convincingly communicate their decisions on complex issues.\u00a0\u00a0<\/p>\n\n\n\n

Complexity and human nature <\/strong>\u00a0<\/p>\n\n\n\n

The problem is that humans are not wired to deal well with complex decisions. Our instinct, when faced with a problem, is to slow down, assess risk, and be cautious. Don\u2019t rock the boat. If it ain\u2019t broke, don\u2019t fix it. Don\u2019t make waves. There are a host of idioms explaining our natural resistance to change.\u00a0\u00a0<\/p>\n\n\n\n

Ironically, as a species, we\u2019ve managed to create an environment that has taken on a dynamic of its own and is changing so fast that we are falling behind in assessing and mitigating the implications. This fear of falling behind creates interesting contradictions, such as the \u2018master innovator\u2019 Elon Musk\u2019s plea for a moratorium on developing<\/a> LLMs<\/a>, which certainly won\u2019t happen.\u00a0\u00a0<\/p>\n\n\n\n

Whenever we deal with pathbreaking innovation, there are upsides and downsides. Now, the downsides have become so massive in complexity and scale that we need a different approach than just retaining the status quo and enjoying our numerous unconscious biases. It doesn\u2019t help that when we\u2019re consciously doing things our processing time is hideously slow and when we indulge in our unconscious biases, we\u2019re seemingly much faster (See Daniel Kahneman\u2019s Thinking, Fast and Slow<\/a>). We need other people and machines to solve the conundrum we\u2019ve created, but that then adds to the complexity. And so on and so forth.\u00a0<\/p>\n\n\n\n

How to deal with complexity<\/strong>\u00a0<\/p>\n\n\n\n

But all is not lost. We advocate a \u2018metamorphosis approach\u2019<\/a> of continuous change to deal with complexity and balance economic stability and growth. For that, you need to build capabilities that we call meta-skills, i.e., skills that are non-technical, reflective, and analytical, but not in a purely \u201crational\u201d sense. This allows you to manage systemic change rather than being distracted by topical issues, to distinguish between different levels of complexity and choose appropriate decision-making styles and processes, to be resilient in the face of overpowering challenges, and to remain human.\u00a0<\/p>\n\n\n\n

Jack Ma grew his company, Alibaba, from a small start-up with 18 employees in 1999 to an $8bn enterprise by 2015. Here\u2019s what he had to say about change:\u00a0<\/p>\n\n\n\n

\u2018At Alibaba, maintaining organizational flexibility is an area of intense focus. A few lessons stand out from its experience\u2014for instance, that it\u2019s critical to build an expectation of change into the culture from the outset. \u201cEmbrace change\u201d has been one of the company\u2019s six core values since its early years. Its founder and chairman, Jack Ma, regularly emphasizes this theme with employees, investors, and customers. \u201cIn the information era,\u201d he says, \u201cchange is the best equilibrium<\/strong>.\u2019  <\/p>\n\n\n\n

The Self-Tuning Enterprise<\/a>\u00a0<\/p>\n\n\n\n

Jack Ma is correct, change IS the best equilibrium, but the need to deal well with complexity now requires more than just embracing change.\u00a0<\/p>\n\n\n\n

Dealing with complexity requires not only changeability but a number of other activities. Among them are:\u00a0\u00a0<\/p>\n\n\n\n