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The Accidental Cartesians

2011 January 9

Want to know the future of media and technology?  There are many who are willing to point the way.  They can explain, with flawless logic, what the future will look like:   The past, mired in inefficiency and confusion, will give way to a more streamlined, rational world.

They’re usually wrong. For innovation to succeed, it has to work with people. That’s easier said than done.  People are strange, quirky, emotionally driven and often unpredictable.

Many technologists today are, in fact, anachronisms trying to revive a failed philosophy from centuries past.  They are, in a very real sense, accidental Cartesians, who confuse the rational world with the actual one.

A Rational Pipe Dream

In the late Renaissance, Rene Descartes found himself unhappy with the superstitions of the Middle Ages and set out to build a body of knowledge of which he could be certain.  He wanted cold, hard facts rather than conjecture.  He was a mathematician and had little patience for ambiguity.

Much like many today, he sought a revolution rather than an evolution.  He wrote at the time:

But as regards all the opinions which up to this time I had embraced, I thought that I could not do better than endeavor once and for all to sweep them completely away, so that they might be later on replaced entirely others which were better or by the same when I had made them conform to a rational scheme.

He thought he hit paydirt with his immortal phrase, Cogito Ergo Sum (I think, therefore I am).  Here was a foundation to build on, a fact of which he could be certain by logic alone, without relying on flawed experience.  Unfortunately, after a century of trying, his Rationalist school was unable to advance any further.

The Tabula Rasa

Across the English Channel, the Empricism of the British Enlightenment spawned many who rejected Descartes’ ideas.  John Locke wrote that the mind was a tabula rasa, or blank slate.  Therefore, to know anything, we need to have experience with it (either directly or indirectly).  There’s nothing that we can ascertain solely by thinking, no matter how hard we try.

Francis Hutcheson argued that the pure rationality Descartes advocated was simply impractical.  He wrote  “Notwithstanding the mighty reason we boast above other animals, its processes are too slow, too full of doubt and hesitation, to serve us in every exigency.”

The 18th century culminated in the skepticism of David Hume, who pointed out that, since we are slaves to our own experience, we can never really be sure of anything.  He argued that even our belief that the sun will rise tomorrow is merely a product of expediency.

(As I pointed out in an earlier post, this idea had great influence on Einstein and his theory of relativity).

While much less sure of itself, the ambiguities of the tabula rasa led to the scientific advances of the 19th century and set the stage for our digital world of today.

Efficient Markets

Despite earlier failures, a new rationalism in finance was spawned by another Frenchman, Louis Bachelier in 1900, when he wrote his PhD thesis on speculation.  It was largely forgotten, but then found a new champion in Paul Samuelson.  Soon after, Eugene Fama built Bachelier’s initial work into a full blown Efficient Market Hypothesis.

At the heart of the idea was that markets are driven by rational expectations.  Individuals might be wacky, but collectively they make sense (or so the thinking went).  Therefore, the market price is always the correct price and any attempt to outsmart the market is futile.

The idea of rational markets led to a whole slew of new theories and models including efficient portfolios, the captial asset pricing model (CAPM) and the Black-Scholes model which gave birth to an entire industry of financial engineering and risk management.  Nobel prizes were awarded, fortunes were made and all seemed well.

Science Steps In

For all of the conceptual beauty and flawless logic of the Cartesian world and efficient markets, empirical data defies its best efforts.  It seems that the world is a much messier, emotionally driven place than many would assume.

Antonio Damasio, a neurologist, discovered that patients who had their emotions impaired couldn’t make effective decisions, seriously undermining Descartes original idea that rationality is a panacea.  As for rational expectations in economics, as far back as the 1960’s Benoit Mandelbrot showed that the models didn’t reflect real world data.

More recently, behavioral economists such as Amos Tversky, Daniel Kahneman and Dan Ariely catalogued a plethora of cognitive biases that defy rationality.  Robert Shiller and George Akerlof, in their book Animal Spirits, argue that much of what we thought we knew about how markets work needs to be overturned.

And these aren’t mere academic debates.  In 1998, LTCM, a hedge fund that was founded by two Nobel prizewinning economists and had more than two dozen PhD’s on staff to run complex strategies based on rational expectations lost $4.6 billion and nearly derailed the global financial system.  More recently, of course, others finished the job for them.

The New Marketers

Lately, there has been yet another Cartesian renaissance, this time in marketing.  There is no shortage of new marketing gurus who tell us the old days of emotion driven marketing are over.  In a frictionless online marketplace, we are told, such quaint notions are passé.  Brand marketing, if it ever worked, has supposedly outlived its usefulness.

In its place we are told to expect the emergence of hyper-rational consumers who will only be interested in cold, hard facts.  New business models will obviate the need for marketing investment by going straight to the consumer.  Companies will not promote, but rely exclusively on “pull marketing” techniques.

This, of course, is the same failed idea in a new digital guise.  As technology expands choice and improves distribution, brand preference is becoming more important, not less.  Moreover, while many assume that promotion ends with a purchase, studies show that branding affects how people experience products themselves.

Ironically, as I wrote in an earlier post, one company that increasingly seems to have come to this conclusion is Google.  They are setting their sightss far beyond context advertising, are forming good working relationships with media buyers and have dropped misguided forays into selling print and radio advertising.

Working with Bounded Rationality

Of course, the issue goes far beyond context vs display ads or branding vs. direct response.  New media is, to a large extent, engineering driven.  While that’s not a bad thing in itself, engineers do tend to be, by disposition and vocation, accidental Cartesians. (Descartes himself was a mathematician of particular note).

The result is that excessively rationalist thinking permeates the digital media world.  While many of these notions are, by their nature, logical, they are often wrong.  Here’s a few examples of simple truths that defy logic but reflect real world experience:

People are strange: As neurologists and behavioral economists can attest, people do the damnedest things.  Our brains were not evolved for the marketplace, but for survival.  Our instinct is to satisfice, not optimize, to avoid loss rather than maximize gains.  We develop habits that we are reluctant to alter.

There is a difference between a specification and a brief: One particularly noticeable effect of the engineering led digital media culture is the confusion between a project specification and a brief.  Project specifications are precise.  They are an endpoint.

Briefing, however, is a process.  Clients (internal and external) rarely have a good sense of what they want.  It is therefore, the responsibility of the supplier to help them figure it out.  Throwing your arms up in frustration might make you feel superior, but it won’t get the job done.

Trial and error IS the master plan: As a general principle, the newer technology is, the worse it works.  The same goes for design.  While we have developed some helpful usability rules, the truth is that you have to constantly test and retest.  There isn’t any way to know in advance how a product or business model will perform under real world conditions.

As anybody who has bought an Apple product knows, later versions are better not simply because they are technically superior, but because they are more intuitive and easy to use.  Ironically, adding features often makes a product worse.  Performance is not a purely technical issue, but also one of taste and habit.

Rationality and logic have their place, but models, no matter how elegant, must always submit to the quirks of an irrational world.

– Greg

12 Responses leave one →
  1. January 9, 2011

    You bring up some very good points…

    Let’s start with “Working with Bounded Rationality”

    Therefore, to know anything, we need to have experience with it (either directly or indirectly). There’s nothing that we can ascertain solely by thinking, no matter how hard we try.

    [Reply]

    Greg Reply:

    Thanks, Spiro. Nice to see you here again.

    I think you went right to the heart of the matter. All too often, people involved in strategy don’t have direct experience with actually running a business or dealing with consumers. Amazingly, they often think that makes them more qualified!

    – Greg

    [Reply]

  2. January 10, 2011

    Wonderful analysis, as always.

    It seems to be a choice between extreme logic, and the irrational aspects of the human mind.

    But there is little study of the psychological processes that influence decisions. About time, perhaps. that these were added to studies on decision making?

    Best!

    Shiv
    shiv vasisht´s last blog post ..3 Target Audience&gtTarget Person&gtWho- exactly- Mr Freud

    [Reply]

    Greg Reply:

    Hi Shiv,

    Great to see you again!

    I think there is a growing body of scholarship in that area. Behavior economics is a thriving field these days and even Nobel Prizes in Economics have been granted.

    Unfortunately, a lot of it hasn’t filtered into the mainstream and we’re still somewhat enamored with rational expectations.

    – Greg

    [Reply]

  3. January 18, 2011

    If there was one word to describe this post i would use “moment…um” all we can do is know what’s going on now, with what we got, yet into the questionable future we go with momentum…

    It’s interesting between this post and the other two posts you wrote on Creating Efficiency vs Creating Value and Marketing Silos, flipping back and forth between the two I clipped from both posts to create from your words this….

    Two Types of Organizations:
    Integrated Organization: When things are new, not well understood and operational interfaces are weak. Problems lack standard solutions. Therefore, people need to be close to each other and communication has to be very intense. Without strong integration, crappy stuff doesn’t function at all.

    Modular Organization: When an industry becomes more mature, interfaces improve. Standard solutions to basic problems emerge and communication becomes more formalized. People don’t need to be so close anymore and organizations begin to specialize in different parts of the process. Modular organizations tend to be much more efficient, but less innovative.

    Creating Value
    Every successful company has to do some of both. Yet, it seems clear that a choice must be made to focus on one or the other. Moreover, as technological innovation seems to be more efficient than management innovation for driving down costs at the present moment, I would suggest that managers these days need to focus on creating value.

    Building Networked Silos
    Large scale, modular organizations will continue to control the vast majority of activity.
    Organizations who focus on the cutting edge need to be highly integrated.

    The real trick is to build connections between different types of organizations, through partnerships, informational exchange and open innovation. However, networking between modular and integrated silos is easier said than done.

    Paradigm Shifts
    Pre-Paradigm Phase: When something new comes along, nobody is quite sure what to make of it. There are a lot of ideas and opinions, but no clear consensus. It could be argued that many aspects of digital technology, digital media especially, are pre-paradigm.
    Normal Phase: At some point,, problems start getting solved and things start happening. A real consensus builds on the “right way of doing things.” It’s not perfect, of course, there are some anomalies that don’t quite fit, but generally everybody is happy.
    Revolutionary Science: Eventually, the anomalies add up and they become real problems for the dominant paradigm. A new generation of thinkers comes along with novel approaches to old problems that make significant progress in areas long thought to be dead ends.
    It seems clear that creating efficiencies is very effective when applied to existing paradigms, but not particularly good at creating new ones.

    Digital technology promises to make the shift toward value creation even more rapid and powerful. Through the web, the semantic web and other developments, creating value is becoming less about uncovering new information and more about matching problems with solutions.
    Therefore maximizing connectivity between your organization and the rest the world is increasingly becoming key to superior performance. This is not only a technological issue, but touches how you recruit, train, partner and compete.

    – Be clear about what an organization is supposed to achieve
    – Integrate People
    – Interconnect:

    If you’re clear about what your organization is doing then it should be just as clear what you should let others do. If you are part of a larger enterprise, it is very likely that you can benefit from other divisions. All too often, petty turf battles prevent doing so.

    If you’re an independent organization, you will have to find partners.

    Great Innovation is usually the result of synthesizing ideas from different disciplines

    “For innovation to succeed, it has to work with people. That’s easier said than done. People are strange, quirky, emotionally driven and often unpredictable.”

    Two types of orgs, Create Value, Networked Silos, Paradigms, “keeping it real” this is what we have to work with…. if we can understand that then we can make strides, less hype with more value…
    Spiro Spiliadis´s last blog post ..spirospiliadis- RT @rossdawson- The 9 kinds of context that will define contextual search http-bitly-fw0c7y

    [Reply]

    Greg Reply:

    Spiro,

    Thanks a lot for this. You really made me feel smart:-))

    “Less hype with more value” – I like it!

    – Greg

    [Reply]

  4. January 18, 2011

    oops :-) i meant to post comment in the consultants and confused apes post.
    Spiro Spiliadis´s last blog post ..spirospiliadis- RT @rossdawson- The 9 kinds of context that will define contextual search http-bitly-fw0c7y

    [Reply]

    Greg Reply:

    Nevertheless, it works well here:-)

    – Greg

    [Reply]

  5. January 18, 2011

    Re-reading again it seems evident to me that understanding networked silos/value networks first clearly for what they are and how they produce then makes everything else that much more fruitful and less painful…

    it’s all floating in my head still, but finding foundation in what you’ve said….
    Spiro Spiliadis´s last blog post ..spirospiliadis- RT @rossdawson- The 9 kinds of context that will define contextual search http-bitly-fw0c7y

    [Reply]

    Greg Reply:

    I think you’re right:-)

    [Reply]

  6. July 24, 2011

    Fantastic post, Greg!

    I’ve nothing to add :-)

    Cheers, Ralph

    [Reply]

    Greg Reply:

    Thx Ralph. Have a great week!

    – Greg

    [Reply]

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