by Pawel Motyl
Routinized decision-making is therefore the natural and appropriate approach when you’re dealing with fixed conditions, and the decision itself is repeatable and has been tested on numerous occasions. One way or another, this mode kicks in without our conscious participation, which can be risky when we treat a less than obvious problem, requiring somewhat deeper analysis, as routine.
The other two decision-making approaches are called advocacy and inquiry; 1 they each involve a conscious process and rational consideration, but are otherwise significantly different from one another.
In advocacy mode, when we encounter a problem that requires us to make a decision, we rely on our prior experience, knowledge, and sense of the situation to point us toward an appropriate solution. Once we find a starting point, we look for information to confirm that our idea is a good one, and if we find that information, we make our decision and then act on it. In this mode, decision-makers and teams operate quickly and effectively, looking for key pieces of information that are pertinent to the choice to be made. Advocacy therefore works in numerous situations where we are dealing with classically understood risk management—that is, when we know what the consequences of a decision will be and how likely it is that they will occur. It is enough, in such circumstances, to analyze whether the assumed approach is confirmed by concrete, tested data. The vast majority of business decisions are made in this mode, as it enables us to save one of our most precious resources: time.
A weakness of the advocacy mode is that it offers a superficial, incomplete analysis of the available information, especially in conformist teams operating under tight deadlines. In some cases, information can even be filtered in such a way that only data that support a particular choice are presented, so as not to arouse any doubts or extend the discussion of the problem. This kind of mistake may be forgivable in a fraught situation, but in an uncertain one—such as a black swan—where we are unable to assess the likelihood of certain consequences of a decision, or even what those consequences might be, the advocacy approach can be literally fatal. Eurocontrol’s response to the eruption of the Eyjafjallajökull volcano (discussed in the Introduction) is a classic example of such a mistake. While the initial decisions taken were correct (halt air traffic, as we’ve never been in such a situation before and we don’t know what the actual risk to flights is), the later ones were equally wrong. Eurocontrol went into advocacy mode, only accepting arguments that demonstrated that flying in such conditions would end in disaster and that, as a result, their decision had been correct. Data that disagreed with this thinking, data presented by the airlines, who were testing their machines in the real world, were either ignored or rejected by the organization.
A very similar error was made in 1998 by the decision-makers at Daimler-Benz and Chrysler as they prepared to merge the two companies. On the surface, everything looked great: they’d done their due diligence, and so had a detailed analysis of the prospects for the merged company, which clearly demonstrated the real benefits of the decision. The further work progressed on the merger, the more enthusiastic about it the two CEOs, Jürgen Schrempp of Daimler and Robert James “Bob” Eaton from Chrysler, became, and the more their optimism was shared by the other executives. So, the CEOs were passed more information confirming that this was a match made in heaven—analyses showed opportunities not only for increased sales, but also for significant cost reductions in the newly created company. When the merger finally took place, no one doubted how sensible a deal it was. And yet, almost at once, obstacles to daily collaboration and communication arose, and open conflicts between managers and teams occurred with great regularity, resulting in a lot of poor business decisions being made. The result of all this? The share price for DaimlerChrysler AG, $100 on the day of the merger, plummeted to less than half of that in the course of two years.
Despite the efforts of the company’s bosses and innumerable internal projects supporting integration, the problems couldn’t be resolved, and in 2007, Daimler opted to legally separate from Chrysler. It sold its shares for just under $7.5 billion to Cerberus Capital Management, but received less than $1.5 billion from that sum as the remainder had to be handed over to support Chrysler. That wasn’t the end of the bad news. Before the separation agreement came into force, Daimler also had to cover ongoing losses, which came to $1.6 billion. The Germans ended up paying out about $600 million. In business terms, though, the decision to split wasn’t a bad one—not least because Daimler had extricated itself from future pension liabilities included in the contracts of Chrysler employees. For Chrysler, the story ended much worse. In 2009, their suffering exacerbated by the economic crisis in the USA, the company filed for Chapter 11 bankruptcy.
The cause of the unexpected collapse of what was widely referred to as “the deal of the century” lay in the over-selective analyses of both firms prior to their merger. In the course of their due diligence they examined only business factors—which, to be fair, did look positive (product portfolios, markets and customer segmentation, financial and operational perspectives, etc.)—and ignored the enormous cultural incompatibilities not only between the two firms but, worse still, between the two nations they called home. Daimler was a conservative organization, quite hierarchical and dominated by a culture of thorough, methodical operations and decision-making based on solid figures. Chrysler was heavily decentralized, and emphasized freedom of operation to the point where it expected its employees to make their own decisions, be creative, and even take risks. It will probably come as little surprise that these differences dealt a body blow to the merger, generating all sorts of conflicts, hampering everyday work, and negatively affecting morale in the company. The potential problem of cultural differences, which probably seems obvious to anyone reading this, was missed, because the information was provided and analyzed in a way that would support the merger.
In the context of a black swan event, which is the situation Daimler and Eurocontrol found themselves in, the third decision-making approach—inquiry—should be the only option. With inquiry mode, the decision-maker tries to analyze all the available data, to review the evidence from all angles, involving as many people and perspectives as possible. This leads to open, constructive discussion and an intellectual battle of ideas (detailed discussion of different options, actions, and possible scenarios), but without affective (personal) conflicts. The crucial factor in inquiry-based decision-making is diversity: people from different positions within an organization and with a variety of experiences should be involved in the analysis and preparation stages before a decision is made. The more cognitively diverse a team is, the deeper and more multifaceted the discussions will be, and the more meticulously the decision-making process will be conducted. Inquiry is certainly the most time-consuming approach, but it helps anyone using it to make the best possible decisions, based on a thorough analysis of the data and assessment of possible scenarios.
The consistent application of the inquiry approach helped John F. Kennedy resolve the most serious problem that arose between the superpowers during the Cold War: the 1962 Cuban Missile Crisis. Paradoxically, it was a success whose beginnings lay in the failure of the Bay of Pigs operation.
After Fidel Castro took power in Cuba in 1959, socialism was perceived to have come dangerously close to US soil. One of his first decisions—to nationalize private property in Cuba—enraged Americans, who lost around $2 billion in assets as a result of the decision. In response, in October 1960, the US government imposed a trade embargo on the island. But that wasn’t all. While Eisenhower was still in office, the CIA set up Brigade 2506 in Guatemala, composed mainly of Cubans who opposed Fidel Castro and who had immigrated to the USA after his victory. The aim of the brigade, which comprised almost fifteen hundred people, was to attack Havana and overthrow the authorities. The CIA presented the outline for the operation, as well as a range of arguments and figures confirming it would be a guaranteed success, to Eisenhower’s successor,
JFK, who ultimately signed the order. So, on April 17, 1961, five divisions of Brigade 2506 landed on the beach at Girón in the Bay of Pigs, and within forty-eight hours... it was all over. The Cuban army, led personally by Fidel Castro, rapidly took control of the situation. Over a hundred members of Brigade 2506 were killed, and several hundred more (the figures vary according to which source you consult) were arrested and either sentenced to thirty years’ imprisonment or sent back to the USA in exchange for $30 million worth of tractors. Many, if not most, people immediately began to speculate that the CIA was behind the entire operation, provoking an enormous scandal which resulted in its leader at the time, Allen Welsh Dulles, being forced to resign.
The mistakes made in preparing the Bay of Pigs operation can be summed up as a typical error of process: a highly complex decision, played out in a context of uncertainty, was made using advocacy instead of inquiry, in an environment dominated by a group hell-bent on military conflict. But that’s not the worst part. It later transpired that the army and CIA representatives had deliberately excluded from the discussion any experts from the US Department of State who were well informed about the local situation and the realities of Latin America and who did not support the operation. As a result, the discussion and analysis were rendered positively skeletal, with a whole range of critical assumptions—for example, the time needed to transport Brigade 2506 from the beach at the Bay of Pigs to the mountains, almost 19 miles from the coast and how the Cubans actually felt about things—were left unchecked. It was assumed that any strike against Fidel Castro would be supported by the local people, a presumption that turned out to be totally unsubstantiated.
Kennedy took responsibility for the disaster and decided to radically change how decisions of key importance to the nation were made, with the aim of forcing his advisors to operate via the inquiry mode.
His chance came barely a year later, when escalating tensions had the world teetering on the brink of nuclear war. Directly after the Bay of Pigs debacle, the Soviets had decided to take advantage of the situation in Cuba, placing missiles capable of carrying nuclear warheads on the island. This gave them a chance of catching up in the arms race, as in 1961 the Americans had managed to place Jupiter missiles on territory belonging to Turkey, which had joined NATO a decade earlier. The operation to deliver forty-two SS-4 and twenty-four SS-5 missiles to Cuba began in the first half of 1962, and was soon detected by US intelligence. On August 15, 1962, a US Lockheed P-2 Neptune surveillance plane spotted the Soviet ship Omsk heading for Cuba, and on October 14, Colonel Richard S. Heyser, after seven hours’ piloting a U-2 spy plane, captured film footage confirming Washington’s worst fears: in Cuba, barely 90 miles from the Florida coast, Soviet missile launchers capable of delivering nuclear warheads had been installed. JFK reacted instantly. Wiser now, thanks to his Bay of Pigs experience, on October 16, he convened a meeting of EXCOMM (the Executive Committee of the National Security Council), which was composed not only of top-level representatives of the army and intelligence services, but also people outside of military circles. The Committee’s actions were accompanied by several principles. First, all EXCOMM meetings had to involve not just experts in the field, but also representatives from other disciplines (e.g., military decisions were made not only by army and intelligence services personnel, but also by people from the worlds of business, diplomacy, academia, and so on). Second, committee members were told to be skeptical at all times and to dig deeper to understand everything under discussion, no matter how little they knew about certain topics. Third, all formalities and notions of hierarchy were set aside during the meetings, and Robert Kennedy and Theodore Sorensen, a long-standing friend and advisor to the president, made sure this rule was obeyed. The most important principle, though, concerned the head of state himself: aware of just how much his opinion might affect the opinions of other people in the meeting (the authority trap!), he decided not to take part in the group’s initial sessions.
The situation was extraordinarily grave and demanded the detailed analysis of a range of options. The two extreme scenarios (do nothing or launch a massed assault on Cuba) were unbelievably risky, as they each introduced a black swan—nobody knew how the Soviets would react, given that successfully placing nuclear warheads on Cuba along with launching a large-scale American invasion could constitute a justification for embarking on an all-out nuclear war. 2 Two working groups were set up within EXCOMM. One had the task of drawing up a detailed plan of attack, which the army was pushing for, while the other was to look for solutions that might prevent the installation of nuclear warheads on the island. After much discussion, the second group proposed a compromise solution in the form of a sea blockade of Cuba by the US Navy to make it physically impossible to supply the warheads. On October 22, President Kennedy opted to back the compromise option, much to the chagrin of the generals, who had already announced the mobilization of 180,000 soldiers and planned over 1,000 air sorties on the first day of the operation. A total of forty vessels were sent to the area of the blockade, led by the heavy cruiser USS Newport News. This move bought the Americans some time.
However, the sea blockade didn’t resolve the problem, and in the days that followed the situation continued to escalate, with warning shots being fired from US ships. As the end of the month grew closer, one outcome seemed increasingly inevitable: direct confrontation between the two superpowers. On October 26, 1962, for the first time ever, the United States was put on DEFCON 2.
One of the EXCOMM members was Llewellyn “Tommy” Thompson, a former US ambassador to Moscow who knew Nikita Khrushchev and his wife very well. Thompson reckoned from the very beginning that Khrushchev had been trapped in an increasingly dangerous game. Following the death of Stalin, Khrushchev had come to power by ruthlessly eliminating his rivals, Lavrentiy Beria—who was sentenced to death for what Pravda, the hugely popular government-backed newspaper of the time, reported as “criminal activities against the Party and the State”—and Georgy Malenkov—a former prime minister who was exiled—and the Central Committee of the Communist Party still included many supporters of the two deposed dignitaries, hawkishly waiting for the slightest show of weakness in the General Secretary. According to Thompson, Khrushchev absolutely had to emerge from the Cuban missile crisis with a simple message: I saved Cuban socialism from US aggression. The business of locating warheads faded into the background. In terms of image, it was more important to preserve Fidel Castro and the political system on the island. On October 27, 1962, during the decisive EXCOMM meeting regarding the eventual attack on Cuba, there was an extraordinary exchange of opinions between President Kennedy and Thompson. The president, convinced that attack was the only option, had decided to take that route. He stated firmly and authoritatively: “We’re not gonna get the weapons out of Cuba probably anyway through negotiation.” Thompson’s reply surprised everyone: “Afraid I don’t agree, Mr. President. I think there is still a chance. The important thing is for Khrushchev to be able to say ‘I saved Cuba, I stopped the invasion.’” Such direct, public disagreement with the president simply didn’t happen in those days. The EXCOMM members at the meeting were dumbfounded. Robert S. McNamara, then Secretary of Defense, said many years later: “That takes a lot of guts.” 3
As a result of Thompson’s declaration, Kennedy, despite his earlier convictions and the enormous pressure being placed on him by the military, and in particular by General Curtis Emerson LeMay, Chief of Staff of the USAAF, decided to halt the attack. Negotiations took place behind the scenes, which offered some hope of resolving the problem. The decisive moment occurred on October 27. In the course of a few hours, two messages came from Moscow. The first was signed by Khrushchev and sounded distinctly conciliatory. In it, the Soviets demanded a declaration from the USA that Cuba would not be attacked; in return, they offered to remove their missiles. Before a response could be drafted, another message arrived, this one obviously from a group of hard-liners. Its tone was dis
tinctly harsher and it contained a direct threat that if the USA attacked Cuba, the USSR would respond with all the military means it possessed. It said nothing about removing the missiles. A startled EXCOMM assessed the situation. Yet again, Thompson proved invaluable, as he suggested to the president that he should respond to the first message and say nothing about the second one. Kennedy once more agreed with his advisor’s opinion and publicly announced that the United States did not intend to attack Cuba, and that they were waiting for Khrushchev to withdraw the missiles as he had declared. Kennedy adopted a positive approach toward the General Secretary in his official statements to the media, declaring him to be a great statesman. Unsurprisingly, Khrushchev did the only thing he could in that situation: accept the USA’s position and withdraw the missiles. 4 Though a nuclear conflict between the superpowers had been avoided, Khrushchev paid a heavy price. Barely two years later, in October 1964, he was removed from power in a conspiracy led by Mikhail Suslov, Alexei Kosygin, and Leonid Brezhnev, who became the new General Secretary of the Communist Party. One of the official reasons for Khrushchev’s removal was diplomatic failures in the international arena.