Take the whole issue of training, which often gets a short shrift. The CEO will say, 'Our most important asset is our people.' However, the accountants will tell you people are an expense, so it goes on the P&L, and guess what, while we are doing mergers, we need to get rid of expenses. We fire people. If you view people from an asset standpoint, well, assets depreciate. The average half-life of a leading edge programmer is about three and a half years, which means that 50% of the programming group will lose their contemporary skills within about three and a half years. So then you do the calculation on a seven-year life expectancy, with 15% depreciation per year; therefore, we need to train these people at the rate of around 15% per year. So, if you had an asset perspective on a software team, you'd say we need to spend about four weeks a year of training to maintain the asset. It transforms totally the view of what to invest in training. Aren't there critical periods when you learn certain models? Doesn't that suggest it is very hard to change mental models in adulthood?
We're slightly cautious about this notion of the paradigm shift, where you jettison everything. You need a portfolio of models. Experience is very valuable. We argue to be careful about dramatic paradigm shifts. Companies have done this to great loss. Look at Time Warner. They acquired AOL. When you go back and analyze it, you ask what the hell was this all about? It was one of these burning the boats. Do you recommend particular steps for testing your mental model?
Behind this is the fundamental aphorism that all life is an experiment. You have conjectures and theories to explain what the hell is going on. But that's all they are. You want to look at how well this provides you with making your way through life. Business people have to understand this as well, that all business activities are inherently experimental and that when things are not going right you don't keep piling on, piling on, putting more money in. You step back and say, what's going on? You need to keep looking for evidence -- is my world view consistent with what is happening to me? If you are fixated on something, you're probably not going to recognize important stuff that is starting to appear -- signals, early warning signs. Can you give me on example of an industry or company being too fixated?
The whole perspective of the media business is a total tragedy. There was wonderful innovation going on by this 18-year-old founder of Napster. Napster went from zero to 18 million customers in 18 months! Now, that is such a profound deal, yet these media people would willfully not see this, but [Napster] regarded it as a threat, an anomaly. What was the underlying mental model that distorted it?
It was such a traumatic event because things were free. That caused instant antagonism in the discussion and blinded the media business to the positive aspects. It corrupted their view, when the dynamics should have been seen as phenomenal -- 18 million customers in 18 months. Companies can only dream of this sort of thing. What happened is, first of all they were locked into the existing view of the CD -- very lucrative, high margin. They were in this privileged position, ripping the customers off -- my words -- and also abusing and short-changing the artist. Once you get into this wonderful position from a mental model standpoint, the imperative becomes 'How do I preserve this?' How do you go about switching a model?
The most important thing, step No. 1, is to become more aware of why you make sense of the world the way you do. Who were your mentors? The second thing is to then become more aware of what is going on around you and what is the evidence telling me. What I did with my boss, [former chairman and CEO] John Reed at Citibank, was that every quarter we went out to hang out with folk. I told him I'd introduce him to Vint Cerf, the father of the Internet. Went to spend the day with Bill Gates. So not just any folk.
No, people relevant to his role and who could expand his view. People that can shape his world view. Second, be aware of how your model acts as a barrier. We give the example of Roger Bannister and the four-minute mile. Roger Bannister does it in 1954. People had regarded it as some physiological barrier. He broke it. Within a space of 18 months, 16 other people did it. What the hell happened? This barrier had now been removed. It was self-imposed.