The story about Russian hacking is eyebrow raising for sure, but the thing that jumped out at me from the article I read in the New York Times was the note about the company SolarWinds and how their CEO was hyper focused on profitability and growth at the expense of security, (and possibly to the detriment of national security.) SolarWinds is an extreme case of what happens when cost cutting drives decisions but its instructive as a lesson to think about the cost/benefit of cost cutting as a means to drive bottom line growth.
Everyone can make their balance sheet look terrific by cutting overhead to the bone, whether its development, cybersecurity, marketing, facilities, insurance, or whatever. Decisions to cut these costs tend to be based on experience because they view the past as evidence that nothing bad will happen in the future. It reminds me of a quote from Maria Konnikova’s book, The Biggest Bluff: How I Learned to Pay Attention, Master Myself, and Win:
“Our experiences trump everything else, but mostly, those experiences are incredibly skewed: they teach us, but they don’t teach us well. It’s why disentangling chance from skill is so difficult in everyday decisions: it’s a statistical undertaking, and one we are not normally equipped to deal with.”
We fall back on our past experience when looking to make decisions about the future. What have we gotten out of making this kind of investment in the past? But the truth is that our well of experiences is limited and we fall victim to the law of small numbers. We just don’t have enough experience and make decisions assuming that the past few occurrences will hold true in the future. As Konnikova also points out, the way to become good at poker is to play A LOT of poker.
The pandemic has been instructive about this on a number of levels. We witnessed the lack of personal protective equipment because we had allowed the strategic stockpile to dwindle. “Why replenish it?? We haven’t had a pandemic in almost a century, right?” Our recent experience overrode our long term knowledge. Pandemics happen. And we should be prepared.
One of the takeaways of the pandemic is evidence of how much cost cutting companies can get away with. Remote work seems to be effective, letting people access company networks from their own devices on insecure connections is efficient, and reducing staff to become leaner while increasing employee workloads is attractive. The ten months we’ve been struggling through has been instructive. All of these things have worked so far. But at what cost? Will we start to see data breaches in the future? Will employees become less loyal as they lose physical connectivity to their employers? Will mistakes get made as employees strain under the additional workload?
Which brings me back to making a decision about whether a particular business investment is worthwhile. I recommend looking at the larger business landscape rather than falling back on your own experience. How are other successful companies handling those kinds of decisions? Where are they cutting costs? Where are they making investments? And how are they making these decisions? Are they game planning out worst case scenarios and seeing whether the company will survive that level of disruption?
People are starting to draw all sorts of conclusions about what we’ve learned from the pandemic. There’s a renewed focus on areas of investment and ideas for cutting costs. Leaders are starting to make sweeping proclamations around the future of operations and what their companies will look like going forward. But our sample size is still small and there are still lessons to be learned.