Designing the machine from a higher level
Similarly, Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, has pioneered a technique to tackle complex problem solving by looking at issues from a higher level and analysing so-called second / third order consequences when making important decisions:
“By recognizing the higher-level consequences nature optimizes for, I’ve come to see that people who overweigh the first-order consequences of their decisions and ignore the effects of second- and subsequent-order consequences rarely reach their goals. This is because first-order consequences often have opposite desirability from second-order consequences, resulting in big mistakes in decision making. For example, the first-order consequences of exercise (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable. Similarly, food that tastes good is often bad for you and vice versa.”
On his Twitter handle, Dalio describes himself as a ‘professional mistake maker’, a quite strong statement for someone who has built one of the world’s most successful funds with $120b under management. By perceiving problems as a set of outcomes produced by a machine, he promotes critical, higher-level thinking. Looking down on the machine and analysing how the inputs, processes, structures, and the resulting outputs can be changed to create desired outcomes is what solving for effectiveness is about.
Do things that don’t scale
Airbnb is another famous organisation for applying problem-solving techniques that go against conventional, efficiency-driven models. For instance, early Airbnb employees personally travelled to hosts to take professional pictures of their homes offered on the platform, resulting in a much better user experience for early adopters that were critical in building a first core user base. In a recent post, Lenny Rachitsky, a former key employee, shares their obsession with crystallizing and stating problem hypotheses before starting a project. Their common techniques for tackling complex problems are conducting jobs-to-be-done research or preparing formal problem statements before going into execution mode.
Doing the right things, smarter
The most successful organisations combine rigorous analytical approaches, championed by classic management consulting, with creative design thinking, mostly found in innovation agencies and startups. However, while reliability-oriented management styles make a business lean, efficient and predictable in the short-term, they won’t generate new business designs, breakthrough high-growth products or entirely new revenue streams as an answer to complex business problems. Consequently, learning to utilise complex problem solving is crucial for any organisation that wants to survive.