Thursday, November 3, 2011

Lessons from Greece on decisions

I think there are three key decision-making lessons from the current economic situation in Greece:
1. No one can avoid reality - the Greek financial situation
2. Things may not always be as they seem - the Greek Prime Minister's decision
3. Sometimes in order to get a message through someone's filter, you have to shock them

To elaborate:

1. No one can avoid reality
This one is most obvious. When it comes to decision-making, there is no doubt that Greece has made some bad decisions in recent years. Principally, they failed to address foreseeable realities. Their economy was unsustainable due to high levels of tax avoidance, overly generous government programs, and - the killer for economies based on the currently fashionable, free-market capitalism approach - little prospect for economic growth. One of the principal problems for them now is that the attitudes that led to these decisions are difficult to change overnight. I'm not saying governments shouldn't help citizens, but if they do they have to recognize how they are going to pay for it.

2. Things may not always be as they seem
When Greek Prime Minister George Papandreou shocked everyone - including his own cabinet - with the announcement he would call a referendum, I like many others asked myself "what is he thinking?" My conclusion is that maybe, just maybe, this is a brilliant and unselfish act of political suicide designed to save his country's financial situation.
Consider the information we have: Greece is in dire financial straits, and will not survive financially for more than a month at best without external help. This help comes with many austerity strings attached. The Greek people have entrenched expectations of their entitlements and what their government will do for them which are not compatible with the financial austerity. The announcement by Papandreou that he intended to call a referendum prompted the French and German governments to say effectively "it's this package or nothing." The Greek government has a very small majority in Parliament, with a confidence vote set for this Friday. And finally, the fact that no one else, not even his own ministers, knew that Papandreou was going to announce a call for a referendum on the bailout package.
Given that Papandreou knows this financial relief must go ahead, and the alternatives are worse, how can he get Greeks to realize the seriousness of the situation? The answer is to do something not only outrageous but self-sacrificing to emphasize how important and grave is the situation.
My thinking was reinforced this morning when listening to the news. First was the news that some of Papandreou's cabinet ministers intend to vote against their own government on Friday which would trigger an election. Second, and most telling, is the report that Papandreou will be meeting with the Greek President today to offer his resignation. By doing this, he will take the fall and allow the rest of his government to pick up the pieces. But they then can do so with the ammunition that acceptance of the bailout package is Greece's last hope and with the seriousness of the situation emphasized by the fall of the Prime Minister.
Is George Papandreou a bumbling politician? Or is he a noble example of a politician putting his country ahead of his own interests? Given what we often see in politics, this may seem unlikely given the filter many of us have developed about politicians, but things are not always as they seem

3. Sometimes in order to get a message through someone's filter, you have to shock them
And this is why I think the scenario I outlined in Point 2 may be true. Greeks, like all of us, have become used to our current situation. Especially when things have been unchanged for a long time, we expect tomorrow to look like today (The Prediction Trap.) Our filters have developed to see the situation a certain way, and they block information that doesn't align with that view. Just like in some of the exercises I do in seminars, we distort information that may be slightly different from the past and convince ourselves that things are the same as they have been. This is exacerbated when politicians who have to introduce unpopular change try to paint it as a small modification of what has happened in the past.
Sometimes the only way to get information pass this distortion of people's filters is to shock them in such a way that it is impossible to see the situation as anything but a new reality.

What are the practical lessons for you, in your world? First, as I've said many times before, reality always intrudes. We can't avoid, at least in the long term, dealing with reality. Second, things are not always as they seem. We look at a situation, and think we know what is going on, but in all likelihood when people are involved it is more complex than it appears. Third, because people naturally believe that tomorrow will be the same as yesterday, small changes, small variations on situations, incrementally different information may sometimes be missed. Occasionally it takes a dramatic gesture to cause people to pay attention. Sending out one more email, or tucking an important announcement in a regular newsletter, may not get the attention it deserves.

We may never know if the scenario I have outlined is true. But even as a thought experiment, I think there are lessons for the decisions we all make every day.

Read More......