Daniel Kahneman: Judgement and Bias

24 February, 2015

Daniel Kahneman has won many awards and honours, but none more surprising, perhaps, than a Nobel Prize. Why is this surprising? Kahneman is, after all, one the most eminent and influential psychologists of his time. It is surprising because there is no Nobel Prize for psychology: Kahneman was co-recipient of the 2002 Nobel Prize in Economics ‘for having integrated insights from psychological research into economic science, especially concerning human judgement and decision making under uncertainty’.

In short, what Kahneman taught us was that, before he and his co-worker, Amos Tversky (who sadly died six years before the Nobel Committee considered this prize and so was not eligible), had started to study human decision making, all economic theories were based on the same, false assumption. Kahneman and Tversky taught us that human beings are not rational agents when we make economic decisions: we are instinctive, intuitive, biased decision makers.

And, if that sounds pretty obvious to us now, then we have Kahneman and Tversky, and their long walks together, to thank.

Daniel Kahneman

 

Short Biography

Daniel Kahneman was born in 1934 to Lithuanian emigré parents living in Paris (although he was born when they were visiting family members in Tel Aviv). When Nazi Germany occupied France, the family went on the run, ending up after the war in what was then (1948) Palestine under the British Mandate, shortly before the formation of the State of Israel.

In 1954 he gained his BSc from the Hebrew University, in Psychology and Maths, and joined the psychology department of the Israeli Defence Forces, helping with officer selection. Four years later, he went to the University of California, Berkeley, where he was awarded a PhD in 1961. He returned to the Hebrew University in 1961.

It was in 1968, while hosting a seminar, that he met Amos Tversky. They started collaborating shortly afterwards. Their fertile discussions often involved thought experiments about how we make decisions and judgements, uncovering in themselves a series of heuristics – or thinking shortcuts – which they went on to observe in controlled laboratory experiments. Their collaboration continued until Tversky’s death in 1996.

In that time, they collaborated with other researchers, most notably, Paul Slovic and economists Richard Thaler and Jack Knetsch. Their many insights into how we make judgements and the application to economic decision-making eventually led to the Nobel Committee recognising Kahneman with the 2002 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

Kahneman’s 2011 book, Thinking, Fast and Slow is a summary of a remarkable life’s work. If the ideas are new to you, they may well rock your world. It is not an easy read, but it is remarkably well-written for an intelligent lay audience. Even if Kahneman’s work is familiar to you, this book will repay close reading.

Kahneman’s Ideas

There is far too much in Kahneman’s work to even begin to summarise it, so I want to focus on three biases that he discovered, which have a profound impact on the choices we make; often leading us far astray.

The Anchoring Bias

The first information we get biases any subsequent choices we make. Your father was right, or your mother or anyone else who told you at a young age that first impressions count. Systematically, the human brain takes the first information it receives, and creates an interpretation of everything else that is anchored in the inferences it draws from that first impression. In management terms, this accounts for the horns and halo effect, that biases us to seek and spot confirming evidence for our pre-existing assessment.

The Representativeness Bias

Who is a more likely person to find working in a car repair shop, changing your brakes? Is it A: a young woman with blond hair and pink eyeliner, or B: a young woman with blond hair and pink eyeliner, whose father owns the car repair shop?

If you think B, you have fallen for representativeness bias. The story makes more sense in our experience, doesn’t it? A young woman with blond hair and pink eyeliner is not a person you’d expect to see in that environment. But a young woman with blond hair and pink eyeliner, whose father owns the car repair shop, may feel right at home. But statistically, this is rubbish. For every young woman with blond hair and pink eyeliner, only a small proportion will also have fathers who own a car repair shop.

The Availability Bias

Recent events bias our perception of risk. They are more available to recall and hence have a stronger impact on our intuition than do counter examples. The classic example is perceptions of risk of train travel, after a train crash. Trains are safe: they rarely crash. Cars crash a lot: there are many accidents every day. But they are rarely reported, so we have no immediate intuitive sense of the statistics.

The Impact of Kahneman’s Work

Kahneman’s work has had a huge impact. Decision theory existed before he came along, but he and Tversky revolutionised it. But it was Kahneman, along with Tversky, Knetsch and Thaler who pretty much invented the discipline of behavioural economics – and perhaps the relationship that drove that development was the friendship between Thaler and Kahneman.

Now Behavioural Economics infuses much of public policy and social influence that corporations try to exert over us. Thaler’s book, Nudge (with Cass Sunstein) is a best seller and Thaler and Sunstein both advise Prime Ministers and Presidents. Next time you get a document from Government, or go into a store, and you find yourself complying with their wishes without thinking, there is a chance that you have been ‘nudged’. And the roots of these ‘choice architectures’? The roots are in understanding our heuristics and biases. And that was Kahneman’s contribution.

Kahneman at TED

Here is Daniel Kahneman, talking about how we perceive happiness and discomfort.

 


David Packard: The HP way

17 February, 2015

When I was a physics postgrad, all of the best electronic equipment in our lab was made by one company; the oscilloscope, signal generator, analog-digital converter and the plotter. They were made by Hewlett Packard.. My professor had a deep admiration for the quality of their engineering. Every since, I have had an almost blind faith in the quality of HP printers. Hewlett Packard was founded by two college friends, Bill Hewlett and Dave Packard. It was Packard who ran the company for many years, and his management style is the epitome of Theory Y.

David Packard

 

Short Biography

David Packard was born in 1912 and grew up in Colorado. He attended Stanford University, graduating in electrical engineering in 1934. There, he met two people who were to dominate his life: his wife to be, Lucile, and Bill Hewlett.

After a spell at General Electric and further study at MIT, Packard and Hewlett formed a partnership in 1938, starting the Hewlett Packard business with just $538 of capital, in a garage in Palo Alto, in what is now known as Silicon Valley. HP, as it is known, quickly became a successful business, becoming one of the world’s most admired companies. This is, in large part, due to the exemplary management style of its founders and of Dave Packard in particular.

In 1957, Packard wrote ‘The HP Way” a statement of the values and management principles of their business. This later (1995) evolved into the book, The HP Way, How Bill Hewlett and I Built our Company.

In 1969, Packard temporarily left the company to take up a political post (Deputy Secretary of Defense) in the Nixon administration. There, he became involved in resource management, setting up the Defense Systems Management College and in amending the 1878 Posse Comitatus Act to extend presidential powers to involve military personnel in certain civilian matters.

He returned to the company in 1972 and remained Chairman, and then Chairman Emeritus, until his death in 1996. He left around 4$ billion to the charitable foundation that he and his wife founded, and which is now administered by his son and three daughters.

Packard’s Contributions to Management

Not only was Dave Packard a model of humanistic management, but he is closely associated with his own particular style of management…

Management by Wandering About (MBWA)

Management by Wandering (or Walking) About is exactly what it sounds like. He and Hewlett would wander about the business, engaging staff in conversation, listening to them, showing respect, and empowering them to do their best work. They valued both the informality and the egalitarianism (in a time when the senior management of most US corporations ate apart, in a management dining room).  This seemed to come naturally to them both and is not, perhaps, too surprising, as they were both, like many of their staff, skilled and enthusiastic electronics engineers. You can get a good sense of the level of respect that Packard had for his people from 11  rules that Dave Packard presented at HP’s second annual management conference, in 1958 – a year after he wrote the first version of The HP Way. We cold all do a lot worse than to try and live by these rules, which you can see on the HP website.

Organisational Agility

Another important principle that HP lived by was the need for organisational agility. They maintained this by breaking the company up into smaller divisions whenever any of them grew too large (1,500 people or so). By keeping a business made of small units, each one could stay focused and  its leaders could fully understand what was going on and, crucially for a cautious business leader like Packard, stay aware of the risks it was incurring.

Innovation and Compassion

In 1972, despite early scepticism, HP introduced its first pocket calculator, which led to another round of significant growth and its subsequent investment in the computing business. I still use my HP12C financial calculator, which is so admired that there are numerous apps cloning its looks and functions on my iPhone.

But Packard’s innovative sense could also be applied compassionately. In 1970, the US economy fell into recession and many of HP’s competitors made massive lay-offs. HP did not. Instead, it agreed with all workers and management to cut wages by 10% in return for them working only 9 days out of ten. This meant that no-one lost their job and, to the company’s advantage, it also meant that there were no costs of redundancy and , when the economy recovered, they could get back to full productivity without the costs, delays and pain of re-hiring.

Quality First

The final lesson to learn from Packard is his over-riding commitment to the quality of the firm’s products. This was what had so enchanted my professor and won his loyalty. In one memo to HP staff (1961), Packard wrote:

‘Our main task is to design, develop and manufacture the finest [electronic equipment] for the advancement of science and the welfare of humanity.’

That is an ideal worthy of our respect, as well as the loyalty of one eminent physics professor.


Nancy Duarte: Story Telling

10 February, 2015

Almost anyone who calls themselves a manager, a leader or a professional has to create and deliver presentations. Whilst oratory and rhetoric have their origins in classical times, it would not be unreasonable to argue that the modern presentation is the most recently invented new literary form. Yet, as a way of communicating, its newness means many of us use it very badly; throwing data, diagrams and bullet points onto a screen with little thought about who we are speaking to and what their needs are.

But presentations offer us a powerful medium to communicate ideas and to persuade. No one has done more to understand how to do this well, and to offer her insights to the world than Nancy Duarte.

Nancy Duarte

Short Biography

Nancy Duarte studied maths at college, which I think is important: she clearly has an analytical brain and can understand data deeply. So part of her success comes, I suspect, from fusing that with an understanding of design. Her husband, Mark Duarte, started a design company in Silicon Valley in 1988, about which Nancy Duarte was sceptical. However, after making some sales calls for the business, she landed three large accounts (including Apple, for whom the company still works) and she became persuaded. She joined the business in 1990 and is now the CEO, while Mark is CIO and CFO.

As a general design agency, Duarte had little to differentiate itself from its many competitors. Nancy Duarte’s big insight (from reading Jim Collins’ Good to Great) was the need to specialise deeply, so they picked something other agencies shunned: helping their clients to create great presentations.

Some of the key points in Nancy Duarte’s career are:

  • Helping to create AL Gore’s slide deck, which he used in his presentation (and subsequently movie) An Inconvenient Truth
  • Attending UCLA’s Management Development for Entrepreneurs (MDE) MBA-level programme
  • Linking up with the other great presentation guru, Garr Reynolds, and subsequently writing her first book, Slide:ology
  • Discovering the pattern of contrasts in many great speeches and presentations
  • Turning these insights into a TED speech (below) and her second book, Resonate

Nancy Duarte’s Ideas

Nancy Duarte’s first book, Slide:ology, shows how to create great presentation graphics to show information in a clear and compelling way. But it is her second, Resonate, that contains her big idea. She describes it as a prequel to the first, and in it she sets out how you can craft a narrative flow that will make your ideas resonate with your audience; making them persuasive. Of the relationship between the two books, she says:

‘Gussying up slides that have meaningless content is like putting lipstick on a pig’.

Let’s forgive her both the cliche and the insult to porcine-kind: her point is well made. Great slides do not make a great talk, they can merely enhance it.

If you present and want to make an impact, then put Resonate at the top of your reading list. It is filled with ideas and illustrations. Let’s summarise the two big ones.

The Hero’s Journey

Duarte emphasises the importance of your presentation telling a story, and she uses several models to help explain how to do it, including The Syd Field Paradigm for screenplays. This has a three act structure, where act 1 sets up the story, with a key plot point towards the end. Act 2 creates a confrontation, with a major event around the middle. It ends with a vital plot development. And act 3 resolves the story.

Her primary model, however, is the idea of a Hero’s Journey, first developed by Joseph Campbell. Star Wars is, famously, modelled on this archetype. The distinctive point of Duarte’s analysis is this. When you build your presentation, cast your audience as the hero. You need to be their mentor and guide: showing them a possible new world, helping them to overcome their resistance to entering it, and then building their loyalty to the new idea., so they feel they can re-enter their familiar world having achieved a triumph and feeling enriched.

The Contour of Communication: The Sparkline

What I think lifts Duarte’s thinking to a new level and introduces insights that were certainly new to me, is her way of illustrating the form of a presentation and her insight into where a presentation’s power comes from.

Contour of Communication

 

Duarte suggests that all great talks, speeches and presentations alternate between what is and what could be. They start with what is, develop a sense of imbalance and then suddenly reveal what could be. Through the middle part, the second act, they alternate between the two, creating a greater and greater sense of contrast, before moving to the end section with a final transition that ends with the reward, triggered by a call to action. The dotted line represents the audiences future.

Contrast, Duarte says, creates contour, and you can contrast present and future, pain and gain, resistance and action, emotion and reason, information and insight… anything. And she offers three modes for doing this: your content, emotional register, and delivery style.

The Secret Structure of Great Talks

Nancy Duarte’s TED video is one of my favourites. For some reason, TED does not allow embedding of this particular video, so click the image and watch it on TED.

Nancy Duarte: The Secret Structure of Great Talks

Management Pocketbooks you might like


Nassim Nicholas Taleb

3 February, 2015

Nassim Nicholas Taleb is seen by many as a pre-eminent thinker of our time, and by some as a populariser with a selective reading of statistical theory. Yet without a doubt, his books have had a profound effect on business, management and public policy thinking – to the extent that he is widely feted in contexts as formal as the World Economic Forum, the RAND Corporation, and the US Government. Taleb’s focus is on uncertainty and randomness, and what it means to be resilient in the face of its inevitability. Around that focus is a breadth of philosophising and a depth of erudition that can be enchanting and off-putting in one sentence.

Nassim Nicholas Taleb

Short Biography

Offering a biography of Taleb feels like a slightly risky undertaking, in the light of his rejection of awards and honours, and the statement on his website‘s biography for conferences page: ‘Please note that the author does not allow fluffy and longer bios with information from the web. Only the official biography is authorized’

So, it is with hesitancy that I tell you that Taleb was born and grew up in Lebanon, studied at the University of Paris, where he gained a BS and MS, and at Wharton where he earned his MBA. He returned to Paris and was awarded a PhD in Management Science for a thesis on the mathematics of the pricing of derivatives from the University of Paris (Dauphine).

He spent around 20 years in the financial industry managing hedge funds and trading in derivatives for some of the world’s biggest financial institutions: Credit Suisse First Boston, UBS, BNP-Paribas, Indosuez (now Calyon), Bankers Trust (now Deutsche Bank). He also started and ran his own firm.

In 2004, after the success of his first book, he moved to becoming a full time author and in 2006, took on academic appointments too. He is now Distinguished Professor of Risk Engineering at New York University’s School of Engineering.

Taleb’s Ideas

Taleb has written four non-technical books that he refers to together as a four-volume series called ‘Incerto’ – the latin word for uncertainty. He is also working on a technical, mathematically formulated mirror work that he is making available free, online. Rather than give a link that may change, I refer you to Taleb’s site for the link.

The four books of Incerto each develop an aspect of Taleb’s thinking on uncertainty, each building on the others – although one seems to me to stand aside somewhat.

Fooled by Randomness (2004) was Taleb’s first and sets out his analysis of the extent to which randomness influences everything: most notably the financial markets. More importantly, its pervasiveness means we often fail to notice and acknowledge it. It is far easier to attribute events to agency – causes – than to randomness, but often (far more often than we think), randomness is the prime mover. This is the ‘illusion of control’.

The Black Swan (2007) made perhaps Taleb’s greatest impact to date on the world. His term – which he introduced in his earlier book – represents an event that we never see coming until it hits us. We assume that random events happen as if we are in a casino: 50% red and 50% black, the wheel will land on 14 Red one time in 37 (38 in US casinos). But some events are huge and unexpected and fall outside our usual experience, so we fail to plan for them. These can cause catastrophes.

Antifragile (2013) extends the thesis one step further. Fragility is the state of being highly susceptible to shocks. Resilience is the ability to withstand them. Taleb coins the word ‘antifragile’ to represent the state of growing stronger under uncertainty and shocks. He makes the case that this should be a design objective in financial trades, whole markets and for society as a whole. But don’t expect a closely argued technical account or even a business oriented book; Antifragile comes across more as a personal philosophy than an empirical analysis. Strong ideas, but little evidence.

Which brings me backwards to the third book in the chronological sequence:

The Bed of Procrustes (2011) is a book of aphorisms, in the mould of German philosophers like Wittgenstein. It is full of Taleb’s short pithy remarks – sometimes somewhat ornery in style. Every now and then, one hits you between the eyes and you think ‘yes, that’s spot on’. Most, however, seem like the contents of an academic teenager’s commonplace book. In all this feels self indulgent.

Taleb’s Contribution

It is hard to assess this without the benefit yet of hindsight. He is much lauded but also critiqued both for his writing style and statistical naiveté. But his central thesis – which needs barely a quarter of his wordage to demonstrate – is that randomness fools us constantly and, if we fail to understand it, it will make fools of us. The unexpected can change everything overnight and we have seen that in recent years in economics, politics, and societies.

These are important ideas and Taleb has brought them to the fore. So no manager or professional can therefore afford to be ignorant of them and nor, Taleb argues well, can they afford to not act on them. In the political, macro-economic and social spheres, however, I fear our leaders are failing us.

Taleb Talking about Antifragility at the RSA

Not so easy to follow, but it will give you a sense of both his ideas and his style. A seven minute talk followed by a discussion.


Kenneth Blanchard: Management Storyteller

27 January, 2015

It was tempting to describe Ken Blanchard as a simplifier, because that’s what he has done throughout his career; simplify the skills of management. But that is not the essence of what he does. He starts by telling a story and it is that process that both cuts away extraneous theory and also renders his ideas easy to access. Ken Blanchard has turned management theory into a successful training business to a degree that no one else has achieved.

Ken Blanchard

Short Biography

Kenneth Hartley Blanchard was born in New Jersey in 1931 and grew up in New York. He attended Cornell and Colgate Universities, gaining a BA in Government and Philosophy, an MA in Sociology and Counselling, and a PhD in Education Administration and Leadership, in 1967. From there, he went to Ohio University to become an Assistant Dean. Here, he met collaborator, Paul Hersey.

Hersey had been developing a strong model of leadership, based on his industrial experiences before entering academia in 1966, incorporating ideas from researchers like Fiedler, and Blake and Mouton. The pair worked together on a book, Management of Organisational Behaviour, that was published in 1967 and is now in its tenth edition (2012). This book included a model, then called ‘a lifecycle theory of leadership’ but now better known as Situational Leadership. It was not the first situational theory of leadership (see the earlier Pocketblog article: ‘Situational Leadership‘) but it rapidly became the best known.

In 1979, while a professor of organisational behaviour and leadership at the University of Massachusetts, Amherst, he and Hersey agreed to split and Blanchard formed a company called Blanchard Training and Development – that was later (1998) renamed as The Ken Blanchard Companies and is today one of the most successful international businesses of its kind. In that year too, he published his own model of Situational Leadership: Situational Leadership II.

The following year, he was introduced to a psychologist called Spencer Johnson, with whom he rapidly collaborated to write a short book on management, in the form of a fable-like story. They self-published ‘The One Minute Manager‘ in 1980, and it was subsequently published by Morrow in 1982. It has become the kind of best-seller that truly justifies the title: the cover simply proclaims ‘multi-million’.

This became the start of an industry with subsequent collaborations with different authors – the first handful bearing the ‘One Minute Manger brand’ – appearing every few years. Most follow the format of a younger manager seeking the wisdom of an older, more experienced teacher.

Notable contributions (and personal favourites mixed in) include:

Putting the One Minute Manager to Work (1983)

Leadership and the One Minute Manager (1985)

The One Minute Manager Meets the Monkey (1989)

The One Minute Manager Builds High Performing Teams (1990)

Raving Fans : A Revolutionary Approach to Customer Service (1993)

Gung Ho!: How To Motivate People In Any Organization (1998)

Blanchard’s Contribution

Blanchard’s contribution has been to systematise the skills of management and to explain them extremely clearly. Many British readers find the folksy fable style of his books not to their taste, but the fact is that they use simple language and compelling acronyms to make management techniques accessible and memorable.

The original One Minute Manager sets out just three simple tasks in management: one minute goal setting, to clarify what I expect of you, one minute praisings, to recognise progress and performance, and one minute reprimands, to show where you are going wrong.

Putting the One Minute Manager to Work extends this, looking at the management ABC of Activators (what a manager must do to set you up to succeed), Behaviours (your performance) and Consequences (how the manager responds to you with with support and feedback).

Leadership and the One Minute Manager introduces Blanchard’s own view of situational leadership  using the OMM format, which he later extended, in The One Minute Manager Builds High Performing Teams to leading teams. This book creates a neat merger of the situational leadership model with Bruce Tuckman’s model of group formation.

One of Blanchard’s most successful collaborations was with William Oncken Jr (and Hal Burrows), in The One Minute Manager Meets the Monkey. This presents a simple metaphor (the Monkey) for the problems managers accept from their colleagues and team members. It is a powerful articulation of the processes of good delegation and effective management of workload.

In the 1990s, Blanchard wrote four books with Sheldon Bowles, of which my favourites are Gung Ho! and High Five! (2001 – now out of print – about team working). 2000’s Big Bucks! (also out of print) is about making money. The exclamation mark in the four titles is indicative of the amplified style of writing, but all were turned into successful training programmes (not all of which persist, I think).

In summary…

There are many other books as well, some still available. Blanchard is a prodigious collaborator and his company is hugely successful in training managers across the world. I don’t think he will ever be seen as a great and innovative thinker, but without a doubt, he has a talent for tapping into oher people’s ideas and making them highly accessible, from Paul Hersey down to more recent collaborations with Don Shula (Everyone’s a Coach), Colleen Barrett from Southwest Airlines (Lead with LUV), and Garry Ridge, president of WD-40 Company (Helping People Win at Work).


Nancy Kline: Thinking Environment

20 January, 2015

The powerful belief behind coaching: whether life coaching, corporate coaching, performance coaching or any other sort is simple: If we fully understand the challenge or problem we face, then we can access our own solution to it. Nancy Kline puts it this way:

Usually the brain that contains the problem also contains the solution – often the best one.

Her contribution is to formalise a set of criteria for what she calls (and has trademarked as) a Thinking Environment. These ten conditions at once make  sense: they are both obvious and insightful.

Nancy Kline

[Very] Brief Biography

There is not a lot of information around on Kline, save that she was born in New Mexico and served on the faculty of a Quaker School in Virginia, where she and her first husband set up a satellite institution in 1972. It was there that she started to think deeply about how to create the space to think. She went on, after twelve years, to be a director at the rightwing Leadership Institute. In 1990, she married her second husband, Christopher Spence, and moved to the UK. Shortly afterwards, she set up her consulting and coaching business and wrote her first book, Time to Think, published in 1999.

Kline’s Thinking

It seems to me that the entire burden of Kline’s ideas is supported by one statement:

The quality of your attention determines the quality of other people’s thinking.

This tracks back to her and her colleagues’ observations of teenage students trying to solve their own problems for themselves and it is the the core principle of her attitude to coaching – and of the attitude of many coaches. Her book, Time to Think: Listening to ignite the human mind and her concept of a Thinking EnvironmentⓇ set out ten conditions that create a good environment in which we can think. These conditions are:

  1. Attention
    You need to listen carefully, take an interest in everything you hear, and be respectful of the ideas, beliefs and values that are embedded.
  2. Incisive questions
    In the coaching context, the questions you ask evoke awareness, so your goal is to shake up entrenched patterns of thinking that can create unwarranted limitations.
  3. Equality
    Speaker and listener deserve equal respect, attention, and time, and must maintain their commitments to one another.
  4. Appreciation
    This one reminds me of the Losada and Heaphy paper in 2004 that shows (and the methodology has been criticised) that  five to one ratio of positive to negative comments drives stronger group performance.
  5. Ease
    Creating time, without a feeling of urgency or hurry. Kline sees urgency as a destructive force.
  6. Encouragement
    Beyond the positive sense of this work, Kline also means us to engender a collaborative rather than competitive mindset.
  7. Feelings
    Letting the speaker express and experience their emotions, to release the speaker from their grip.
  8. Information
    Drawing out a complete and, as far as possible, reliable statement of reality.
  9. Place
    Selecting an appropriate physical environment in which we feel fully respected.
  10. Diversity
    Differences create opportunities. Diversity adds value.

Kline’s Offering to Organisations

Kline is clearly a master coach, and her organisation offers a range of training. Her book does not only offer a prescription for how to create an environment where people can think more clearly – and therefore solve problems more effectively. It also contains valuable insights of a range of organisational types. Along the way, what I found most useful, were some of the specific questions she suggests asking others… and ourselves. I would put Kline in a category with another asker of insightful questions, Susan Scott.

Any leader or manager can gain a lot by taking time to think about some of her questions, of which my two favourites are:

What do you really think?

What do we already know now that we are going to find out in a year?


George Eastman: Visionary Philanthropist

13 January, 2015

George Eastman is mainly remembered as the father of Kodak, seller of cheap cameras and the film-stock you use for your holiday snaps. Yet I am aware that many adults reading this will only be dimly aware of the days when you had to get your photos developed. The ability to do that, however, was a huge step forward. Who knows what Eastman would have made of the iPhone and Instagram.

George Eastman

Short Biography

George Eastman was born in upstate New York in 1854 and his father died when he was still at school. This meant leaving at 14, to get a job at an insurance company, but at the same time he studied accounting at home, with the hope of getting a better paid job; which he did.

In 1878, while working at the Rochester Savings Bank, he was introduced to photography, buying a load of then state-of-the-art equipment and learning how to use it. The big problem he saw was the need to develop images quickly, while the emulsion on the photographic plate was wet. His genius was to take a suggestion of using a dry, gelatine emulsion and find a way to make it work. In 880, he patented this innovation and one other: a machine to mass produce dry plates.

Eastman gave up his job at the bank and, with a new partner, George Strong, he founded The Eastman Dry Plate and Film Company in 1884. Eight years later, this was to be renamed The Eastman Kodak Company. In the time until his death, in 1932, Eastman proved himself a pioneer in six areas of management (at least), as well as a massive donor to academic, cultural and medical institutions across the US and in Europe.

In the final years of his life, Eastman suffered agonising pain from a spinal disorder that left him inactive and increasingly depressed. In March 1932, he committed suicide with a single gunshot through his heart. He left a short message: ‘My work is done – Why wait? GE.’

Six Pioneering Principles

1. Democratising Technology

When he took up photography, it was an expensive and complex niche pastime, that required much equipment and many skills. Eastman saw the potential to make it easier and less expensive. He took a new technology and, throughout its life, was actively involved in its maturation. Eastman wanted to ‘make the camera as convenient as the pencil’.

2. Crisis Management

Early on, some of the dry plates Eastman distributed were faulty. Without skipping a beat, he recalled everything and replaced them, using up all of his new business’s financial reserves. He recognised the value of reputation above all else:

‘Making good on those plates took our last dollar. But what we had left was more important – reputation’

3. Humanistic Management

At around the time when Frederick Winslow Taylor wanted to apply the principles of science to management, to create scientific management, Eastman took a different tack. It was a tack that would not become mainstream until Elton Mayo effectively knocked Scientific Management over and replaced it, in the 1930s, with Humanistic Management. In 1899, he started distributing a ‘wage dividend’ to all his workers, rewarding them all for their efforts in proportion to the dividend paid on the company’s shares. In 1919, he went further, handing a third of the company’s assets to his employees, and instituting life insurance, a disability benefit scheme, and a retirement plan.

4. Brand Recognition

The name Kodak is a made-up work – not a contraction, a translation or an acronym. It just sounded good to Eastman, who thought the K sound was strong (many English language comedians will also say that the K sound sounds funny – but not as funny as Q). He also chose the distinctive yellow and red colours of the logo. And the cherry on the cake was an innovative slogan, ‘you push the button, we do the rest’ that promised a new level of simplicity.

5. ‘Trust us’ marketing

That slogan is the basis of a style of marketing that is now commonplace: you can trust us, we’ll take care of it.

  • ‘Don’t leave home without it’
  • ‘If only everything in life was as reliable as a…
  • ‘You give us 22 minutes, we’ll give you the world’
  • ‘It does what it says on the tin’

You identify the brands.

6. Black-box Service Offering

No longer did people need to understand the equipment they were using. To take a photo, you needed a simple camera and a roll of film. Technologists would sort out the optics and the chemistry for you. We now live in a world where everyone from politicians to crazed loonies derides aspects of science, without stopping for a moment to wonder how a mobile phone can possibly make a voice and visual link to somebody thousands of miles away, access a billion articles, take still and moving photos, as well as add up your shopping basket, store your shopping list and ring an alarm when it is time to go.

 


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