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Comment by rbanffy | Hacker News Reader

I loved the doublethink involved in "There’s no stupidity in the story. The managers in both companies did exactly what business school professors and the best management consultants would tell them to do".

When you play chess, you shouldn't optimize your strategy for short-term capture of your opponent's pieces.

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But the analogy to chess is another sign of short-term thinking. There is no end of the game if the company is to survive.

Company execs are optimizing for their own good. They won't be around forever, so they need an exit strategy (end game) that works out for them. If it takes the company down, well so be it. Was it a good idea for Groupon investors to take a bunch of money out of the pool in the last round of financing? You can bet they see an end to the game.

The end of the game is beating your competition to the next disruption. Then, you start another match.

Forgive me, but that seems vague. The ending of chess is easily decidable, but how do you quantify 'disruption'?

The first example that comes to my mind is Apple. When audio compression and bandwidth allowed music to be transfered trough internet connections and P2P networks threatened to disrupt the music market, they had iTunes ready and quickly cut deals with record labels. Now they pretty much own the legal music market.

The second one is the HP pocket calculator. Before it existed, nobody knew how bad slide-rules were. HP disrupted their own market for desktop calculators (but did it before someone disrupted it for them)

Apple is also playing this post-PC game with their mobile platforms. They are fighting against Android for a better position on the next round. It looks like the next match won't take long to start.

I don't at all disagree with you that disruptive innovations happen but, the problem as I see it is that you've simply _described_ some past innovations of such a sort without hitting the sticky problem of quantifying such a thing. How do you 'call' a 'match' and on what authority?

The analogy to chess, I assert, rather breaks down quickly, as most analogies tend to, when examined closely. A two-agent zero-sum game is mathematically unlike an n-agent non-zero-sum game with non-total knowledge.

If I could quantify it, I would probably be able to accurately predict it. The chess analogy was only to point out how optimizing for short outcomes can be against your best interests.

they had iTunes ready and quickly cut deals with record labels

For the record, Apple didn't have iTunes "ready," and the deals with record labels didn't come quickly. Napster was released in 1999. iTunes started life as SoundJam, and wasn't released until 2001. The iTunes store didn't come until 2003.

Apple dominated the legal music market because of the marketing and UX superiority of the iPod over its MP3-playing predecessors, not because they were first at anything.

You are rigtht. I mixed the events up. The iPod was launched shortly after Napster became mainstream, but, still, Jobs played his cards skillfully and cornered the market before others realized what was happening.

No, the end of the game is whatever you decide gives you an outcome that makes you happy. If you don't want to have to start another match, you optimize for making your current match a big enough win so you can bow out afterwards. That may or may not be in the best interests of the other players involved.

But you very likely will if your rewards for playing chess are only based on the results of your next ten moves.

That's one of the key issues here: almost everyone optimizes for the short term win, because that's how they maximize their compensation. By the time the long-term consequences of their decisions are known they've moved onwards and upwards.

yep, public companies have report cards every three months and need to show "progress".

All depends on how you measure progress. If someone starts asking "what's the next-gen product" at board meetings you may see some real progress.

After listening to Apple's and HP's earnings calls, I think progress other than margin or revenue is lost on people who matter in the financial world.

Let's hope this behaviour is self-limiting.

The other important measures are also more falsifiable, and more changeable between companies and industries. Every company has margins and revenues. You could argue that investors ought to understand the businesses they own, but that doesn't mean they will.

"Doublethink" is a bit harsh. It's probably diplomacy on the part of the author, rather than active self-deception.

I don't think it's either, actually.

He's saying that, according to the MBA playbook, the executives of both companies did exactly what they were "supposed" to. The ultimate outcome was negative for Dell, and it isn't because the Dell executives were straying from current conventional managerial wisdom but because they adhered to it.

Saying "you can do exactly what the MBAs tell you to and still end up screwed" isn't doublespeak or diplomacy; it's getting straight to the heart of his overall criticism.

His overall criticism fairly explicitly targets the common MBA value of maximizing short-term profit. That's what he's being diplomatic about.

Yes, but I think that's a bad analogy because winning a chess game is good for you, but preserving a national infrastructure of innovation and manufacturing is good for everyone.

It can be difficult to make choices that preserve the common good at the expense of one's own short term good.

preserving a national infrastructure of innovation and manufacturing is good for everyone.

I don't think this is self evident (at least for manufacturing). Why should the focus be on national, as opposed to global welfare? How long before humanity reaches the point where it cares about the fates of all people rather than just a subset defined by national borders?

Whether one is focusing on national or global wellbeing, the point is the same-- the incentives work against either.

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