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Simple Rules: How to Thrive in a Complex World, by Donald Sull and Kathleen M Eisenhardt
ONE of the most common issues we face is that of complexity. Our amazing world is bewilderingly complex and we have to navigate it each day in our businesses, politics, society, technology, and more. Simple rules can help us understand this complexity and perform more effectively.
The iPod’s click-wheel is similar to simple rules. It is easy to operate, but allows people to control a complex system without requiring a complicated solution.
University of California professor Michael Pollan’s nutritional insights have been proven to reduce the risk of diabetes, obesity, and heart attacks. He reduced these into three simple rules: “Eat food. Not too much. Mostly plants.” By “food” he excludes “edible food-like substances” - anything your great-grandmother wouldn’t recognise as food, or any product with ingredients an eight-year-old can't pronounce.
This book provides guidance for formulating effective rules. It starts with clarifying the objectives you wish to achieve. Rules can only be effective if they are tailored to the situations of the particular people who will use them, and apply to a single well-defined activity or decision.
Keeping the rules simple helps maintain a focus on what matters most, while remaining easy to remember and use, as is evident from Pollan’s instruction.
The number of rules matters. The set of rules should provide concrete guidance while at the same time avoiding being overly detailed and prescriptive. They need to give individuals the latitude to exercise judgement. However, too few poorly conceived rules result in guidelines that are too simplistic to solve complex problems.
There are six distinct categories or rules. The first and most basic rule is the “Boundary Rule”, used to aid in deciding between mutually exclusive alternatives.
A successful US entrepreneur the authors worked with used the rule “Enter English-speaking markets” for his foreign investments. This simple rule captured significant criteria in a single formulation that best suited his investment appetite. Most English-speaking countries have high internet usage, per capita exports, and per capita gross domestic product, making them relevant marketplaces for his technology-based products.
A small fraction of patients suffering from a rare type of stroke have symptoms that are similar to a common viral infection. Rapid diagnosis is essential in the event of a stroke. Using three simple rules a doctor can diagnose the problem with the accuracy of an MRI in about one minute, at the patient’s bedside.
The second type of rule is the prioritising rule. It applies when you cannot do everything or when people hold conflicting views about what to do. Prioritising ranks groups of alternatives where there is limited money, time, or attention.
When Alex Behring was CEO of the new Brazilian railway América Latina Logística (ALL), he had to decide where to allocate funds across the ailing railway system. He had his managers develop simple rules to rank the worthwhile proposals. They came up with four rules: the investment would have to remove bottlenecks to growing revenues, provide benefits immediately (rather than in the long term), minimise up-front expenditures, and re-use existing resources.
Within three years, ALL increased revenues 50% and tripled its operating cash flow, while maintaining the best safety record of all freight lines in the country.
The third type of rule guides reversing a decision. This occurs in many contexts: when to sell an investment, when to end the search for a mate, or when to descend from a treacherous mountaintop.
Saving clients from massive stock-market losses
In the 1930s Gerald Loeb, “the sage of Wall Street” who saved his clients heavy stock-market losses in 1929, wrote: “It is a great mistake to think that what comes down must come back up. The most important single thing I learned is that accepting losses promptly is the first key to success.”
His view was to sell when a stock loses 10% of its initial value.
There are three other type of rules that focus on doing things better, or simply getting the job done.
The first is the “how to” rule. Google used the following three rules for choosing better candidates. “Look for eccentricity,” because it often correlates with creativity.
“Look for strong referrals from other Google employees,” because top people want to work with other top people. “Avoid anyone with even the smallest inaccuracy on their résumé,” to help ensure only high-integrity people are employed.
Rules are also needed for people to work together effectively. Napoleon ordered his troops to “march toward the sound of gunfire”. This simple rule enabled his officers to coordinate their troops without knowing exactly what was happening. It ensured that the troops would be where they would have most impact.
If every Napoleonic general had used his own initiative, there would have been no coherence and a series of disconnected firefights.
Finally, there are the rules that centre on getting things done in situations where timing is a major factor.
An investment timing rule is attributed to the enormously wealthy Nathan Rothschild, who owned wealth to the value of 0.6% of Britain’s GDP. His timing rule was: “Buy when there is blood on the streets, even if that blood is your own.”
Rather than being the rule of an aloof aristocrat, this was the hard-won wisdom of a tough street kid brought up in the cramped Jewish ghetto of Frankfurt, Germany, during the siege of the French Revolutionary forces in 1796.
This valuable book shows where simple rules can be used to great effect, and provides the tools to do so. The six rules have wide application that will add significantly to your business.
Readability: Light --+-- Serious
Insights: High -+--- Low
Practical: High +---- Low
* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.
