Jason George shares an article that explores building contingency at the cost of agility, and why taking the safe route may be more costly.
The next time you travel by airplane, look out the window and see if you can count how many engines are attached to the wings. Chances are pretty good you will find only one on each side. This holds true even on routes with long stretches over water or harsh terrain that provide no suitable diversion sites in case of mechanical trouble.
With few exceptions, most jets in commercial service now come fitted with two engines, a notable change from the status quo in the middle of the 20th century. In those earlier days of air travel the norm was to have four, and not because they provided the optimal ratio of power or efficiency. The main reason for this redundancy was the perceived unreliability of existing engines.
If there were only two to begin with, a blown piston or other mishap would leave just a single engine operating, a prospect too risky for regulators. This led manufacturers and their airline customers to converge on four engines as the standard. (For obvious reasons of symmetrical thrust an odd number wasn’t a popular choice, although some models featured a third engine embedded in the tail.)
What’s more, regulatory bodies like the Federal Aviation Administration in the U.S. mandated that aircraft couldn’t stray too far from possible landing sites, in case of emergencies requiring immediate help from the ground. This meant routes were carefully plotted not to take the shortest distance between origin and destination but to stay within range of potential diversion airports throughout the flight.
Key points include:
- The great circle route
- Known unknowns
- Getting rid of the safety net
Read the full article, Calculated risks and the costly status quo, on JasonGeorge.net.
Jason George provides a riveting read on cost and value, cunning tactics, and strategies from behind the scenes of manufacturers and pricing models.
The choice of a mattress is fraught with implications, given how much of life is spent asleep and the infrequency of their purchase, not to mention the high price tag. Manufacturers are keenly aware of this and do their best to stoke the wallet-opening concerns of customers, using florid language to highlight coil counts or the latest in cushioning technology. Models receive names that evoke cruise ships or luxury sedans or vaguely European locales, and are further tagged with inscrutable indicators somehow related to quality.
Buyers are at a natural disadvantage as the innards of the product are invisible, leaving them to trust that the features advertised are present in the product and actually meaningful. Mattresses are difficult to transport and even harder to return, so the category does not lend itself to comparison shopping.
Behind the scenes, manufacturers have quietly consolidated and gained scale, rolling up the industry into a handful of mega-players, each with numerous offerings across the price spectrum. As the market matured these were increasingly sold in standalone shops dedicated solely to mattresses, featuring spartan décor, opaque pricing and a haggling experience not unlike that of a car dealership.
To top it off manufacturers adopted an especially cunning tactic to obscure costs and keep prices high. They created unique names for identical products and distributed them to exclusive sales outlets, ensuring that consumers would be unable to check prices at a competing store. Imagine if a Honda Accord was called by a different name at every dealership and you get the idea. Maximizing bewilderment and confusion led to a highly profitable business model for many years, such that mattress stores sprouted up across the United States, jammed into often marginal real estate.
Key points include:
- Transparent fixed pricing
- Profitability through complication and confusion
- Authenticity as a core value
Read the full article, Coercing customers or creating true value, on jasongeorge.net.
Jason George shares a post that explores the Harvard Business School’s case method of teaching; and how this experimental approach in the construction of their classrooms became a model for many industries to follow.
Harvard Business School’s campus is an extreme outlier, even when compared to those of peer institutions with similar histories. Situated on the Charles River across from the main buildings of its parent university, the self-contained layout was originally conceived in the 1920s. At the time of construction, funding constraints scuttled plans for a dedicated classroom building. Burgeoning enrollments plus the favorable economics of the post-World War II years brought this need back to the foreground.
HBS was a pioneer of the case method of teaching, which involves continuous interaction between faculty and students, so the traditional classroom design with a grid of desks would not suffice. Architects tasked with creating an alternative experimented with a tiered seating arrangement curving around a central space, from which the professor could guide the discussion as a conductor directing a symphony. This allowed students to more easily see and engage with both their teacher and each other.
The new configuration was piloted with a full-scale working mockup before blueprints were finalized. Nevertheless, builders realized their approach was somewhat experimental and might need modification as pedagogy changed. They found an unusual way to accommodate this. When assembling the steel framing they employed I-beams that were longer than usual, minimizing the number of internal load-bearing walls. Although it was more expensive and difficult to install up front, this choice meant that if teaching requirements or student needs changed, classrooms could be torn down or reconfigured without the expense of knocking down the main structure.
Key points include:
- Airport design
- Building with flexibility or future-proofing in mind
- An overhaul of Britain’s National Health Service
Read the full article, Flexibility and fragility: Bend or Break, on JasonGeorge.net.
Jason George takes us back a few years to an original disruptor, Aereo, a company that tried to bypass regulations and use technology to distribute media content in the days before Netflix and the subscription-based business model.
The scrappy technology startup faced an existential threat. The company was down to its final arguments in the United States Supreme Court, where the ruling would determine its fate and if millions of invested dollars would be lost. The fact that Aereo existed at all was a byproduct of arcane telecommunications regulations, which had evolved over the decades along with the medium of broadcast television, which it intended to disrupt.
The American government mandated that over-the-air channels using the public airwaves be distributed for free. Their shows could be viewed by anyone with a basic antenna. This could be a clunky means of accessing television, as broadcasting is subject to the vagaries of weather and topography that interfere with the signal.
Cable and satellite providers stepped into the gap, becoming the preferred entertainment sources for many households. In addition to numerous specialty channels they always included the primary broadcast networks viewers demanded. The wrinkle in this arrangement arose from the fact that television providers had to pay over-the-air networks for the rights to carry their programming, even though a home viewer could presumably access the same content for free.
Areas of interest in this article include:
- Subscription fees and copyright infringement
- Innovation and regulatory workarounds
- Modern capitalism and corporate value creation
Read the full article, Innovation and Hacking Regulations, on the Jason George website.
Jason George shares an origin story of management consulting and lessons from the barnyard to highlight the benefits of putting people and practice before personal profit.
Marvin Bower faced a critical choice. He had led McKinsey & Company from its earliest years, in the process helping to define the fledgling field of management consulting. Now nearing retirement age, it was time to hand the reins to the next generation of leaders. As the principal shareholder in the partnership, Bower’s ownership stake was a gold mine, appreciating to many multiples of its value since his joining roughly thirty years prior.
To cash out he could sell to a third-party buyer interested in taking over operations. Alternatively, he could require the current partners of the firm to buy out his stake at market value. This would involve significant indebtedness that could constrain future agility.
Bower chose a radical, nearly unprecedented path. When the time came for him to step down as managing director, he elected to sell his shares back to the partnership at their nominal book value instead of their true market price. In the process he would forego a massive windfall, while also setting an example that would reverberate throughout the organization for decades to come. For Bower, a one-time gain was not worth more than investing in the culture and health of the institution he had laboriously built up.
Points of interest in this article include:
- Bain & Company’s downturn
- The twist in modern capitalism
- Establishing the ownership structure for investing
Read the full article, How giving away value can create more, on Jason’s website.
Jason George explains with delightful simplicity how the formula used by Dr. Seuss to tell a story is a good example to follow for presentations. The distillation of the core idea to ensure comprehensive understanding that opens the door to deeper exploration.
Author Theodor Geisel was dealing with some tough constraints. The audience for his next book required an instantly captivating story with a clear narrative arc, but there was a catch: they could only process a limited set of words, ideally fewer than 300, most of which would have to be monosyllabic. This was understandable given his target was students in the first grade, who would be around six years old.
Geisel had written children’s books previously, but this was to be his first in a new publishing imprint aimed at the youngest readers. After wrestling with these limitations for almost a year, Geisel worked out a deceptively sophisticated tale that differed markedly from those of the simple reading primers used to increase literacy in 1950s America. It featured a whimsical cat whose unexpected encounter with two children generated amusingly outlandish antics, all told with unusual irreverence.
Read the full article, Simplicity rules – Short and sweet, on JasonGeorge.net.
Jason George provides insight on the changes that may emerge after the current crisis.
A good strategy should be responsive to the various scenarios that could plausibly materialize, but even the most tightly crafted ones get blown apart when their subject is hit by an asteroid. In our current situation the object wreaking havoc on a planetary scale happens to be a microscopic bit of encapsulated genetic information containing less data than an image used as website filler.
Starting in an animal market in a city that is larger than many globally prominent ones and yet unknown to the average person outside China, the newest coronavirus variant has managed to vaporize years of effort and planning. Retail, hospitality, and travel businesses have watched their markets disappear overnight, the wealthy are packing off to second homes away from the urban crush, and politicians are unleashing fiscal and monetary interventions at a scale unprecedented in history.
Insights on the future of the new normal include:
- Behaviour changes
- Humanity exposed
- The fragility of supply chains
- Robust systems
Read the full article, Strategy, disrupted. Everything has changed, on Jason’s website.
Jason George uses the evolution of the aviation industry as a means to explore the cost of risk aversion and how it can stymie growth.
Building in every possible contingency as part of a strategy can end up producing something so encrusted with extraneous elements that agility is compromised. Alternatively, it may hew so closely to known and safe paths that it ends up losing the novelty that would make it compelling. If you can’t cut yourself loose from a certain strategy or mental model, your degrees of freedom become limited. In the process new paths are closed off, even though they might unlock a different way of operating. Sometimes caution is a crutch whose real costs are not adequately calculated. A better path might involve getting rid of the safety net.
When faced with ambiguity too often we choose the guaranteed loss, which might be greater than the as-yet unknown costs of taking the riskier path. The safe route may be comfortable, but it is costly.
Points explored include:
- Contingency as part of a strategy
- Product cannibalization
- The cost of the safe route
Read the full article, Calculated Risks and the Costly Status Quo, on Jason’s website.
Jason George explores the sale reach and marketing savvy of Time and Newsweek to demonstrate the success of a strategy that encompasses a large demographic; he then explains how and why the internet disrupted this model by pursuing the individual.
In the early twentieth century Americans seeking the news had plenty of print sources to choose from, many of which were local papers. Even smallish towns had markets deep enough to support multiple publications, each jockeying to make their presence known in a bustling marketplace. Beyond the daily news cycle there was demand for a more reflective, comprehensive perspective. This space was filled by magazines that bypassed regional reporting in favor of issues with national significance.
These titles curated articles across a wide range of topics, assembling them into issues with broad appeal. Among this group Time and Newsweek would become two of the most prominent, launching around the same time and reaching similar audiences. Their solidly middle-market voices helped them grow steadily in circulation, able to attract urbanites on the coasts as well as those in the heartland.
Areas explored in this article include:
- Why markets fragmented into specialized verticals
- How needs of large constituencies affect behavior across industries
- The challenges of size and risk(s) of growth
Read the full article, The Challenges of Size, on Jason’s website.
Jason George explores the relationship between the human need for ritual, community, and purpose, and the organizations or entrepreneurs who see that need as their next opportunity.
Come all ye faithful
Some of the devoted choose to meet in the early morning, braving the cold and arriving at their nondescript buildings in the predawn darkness. The name on the sign outside might reference “soul” or “cross,” but there is nothing outwardly grand about these places. The real draw is the service about to start inside.
The congregants’ earlier interactions have acclimated them to social norms like dress codes, so they choose their attire with the fastidiousness of early Puritans. This leads to a generic sameness among the group—deviation would make one stick out, and this experience is not about the individual.
Key points include:
-The pursuit of salvation through testing the body
-How brands like SoulCycle and CrossFit fulfill the need
Read the full article, The Business of Religion, and the Religion of Business, on Jason’s website.
Jason George takes a look at the mind maps of the London Cabbie to illustrate the difference between storing knowledge in the brain and accessing knowledge stored elsewhere.
Having been built up over hundreds of years into its current dense and meandering tangle, London’s road network shows few signs of the regularity that characterizes its counterparts in younger countries. Prior to the advent of cheap map technology, anyone wanting to explore unfamiliar neighborhoods would need a detailed atlas to find addresses or landmarks. Finding the desired spot was akin to playing Where’s Waldo, given the thicket of alleys and courts and lanes laid out with no obvious organizing principle.
One group was notably unfazed by this challenge. London’s black cab drivers developed a well-deserved reputation for their ability to navigate to any points in the metro area with ease, with no reference to guide them. This was not accidental, as to earn their license each had to pass a legendarily grueling test that came to be known simply as the “Knowledge,” a requirement first instituted in the era of horse-drawn carriages.
Topics covered include:
-The knowledge economy
Read the full article, How learning changes your thinking — Mind what you know, on Jason’s website.
Jason George tackles the intricacies of tariffs and taxes and discusses the potential of a fair system that takes into account concentrated benefits and diffuse costs while dealing with the interests of the few vs. the masses.
Observers who dig even a little into government policy in areas like tariffs or taxes might note some peculiar features. Regulations are often crafted to provide benefits to a favored constituency, while the corresponding costs are borne by the broader population in some opaque way that individuals can’t discern. As a result everyone ends up paying slightly more for healthcare, or cars, or chocolate bars, while the folks who sell those things get some economic protection.
Topics covered include:
-The handshake problem
-Hidden group costs
-The cumulative effect of multiple narrow interests
Read the full article, The Collective Action Problem and True costs, on Jason’s website.