Everything Is Obvious_ _Once You Know the Answer - Duncan J. Watts [59]
In much of life, in other words, the very notion of a well-defined “outcome,” at which point we can evaluate, once and for all, the consequences of an action is a convenient fiction. In reality, the events that we label as outcomes are never really endpoints. Instead, they are artificially imposed milestones, just as the ending of a movie is really an artificial end to what in reality would be an ongoing story. And depending on where we choose to impose an “end” to a process, we may infer very different lessons from the outcome. Let’s say, for example, that we observe that a company is hugely successful and we want to emulate that success with our own company. How should we go about doing that? Common sense (along with a number of bestselling business books) suggests that we should study the successful company, identify the key drivers of its success, and then replicate those practices and attributes in our own organization. But what if I told you that a year later this same company has lost 80 percent of its market value, and the same business press that is raving about it now will be howling for blood? Common sense would suggest that perhaps you should look somewhere else for a model of success. But how will you know that? And how will you know what will happen the year after, or the year after that?
Problems like this actually arise in the business world all the time. In the late 1990s, for example, Cisco Systems—a manufacturer of Internet routers and telecommunications switching equipment—was a star of Silicon Valley and the darling of Wall Street. It rose from humble beginnings at the dawn of the Internet era to become, in March 2000, the most valuable company in the world, with a market capitalization of over $500 billion. As you might expect, the business press went wild. Fortune called Cisco “computing’s new superpower” and hailed John Chambers, the CEO, as the best CEO of the information age. In 2001, however, Cisco’s stock plummeted, and in April of 2001, it bottomed out at $14, down from its high of $80 just over a year earlier. The same business press that had fallen over itself to praise the firm now lambasted its strategy, its execution, and its leadership. Was it all a sham? It seemed so at the time, and many articles were written explaining how a company that had seemed so successful could have been so flawed. But not so fast: by late 2007, the stock had more than doubled to over $33, and the company, still guided by the same CEO, was handsomely profitable.11
So was Cisco the great company that it was supposed to have been in the late 1990s after all? Or was it still the house of cards that it appeared to be in 2001? Or was it both, or neither? Following the stock price since 2007, you couldn’t tell. At first, Cisco dropped again to $14 in early 2009 in the depths of the financial crisis. But by 2010, it had recovered yet again to $24. No one knows where Cisco’s stock price will be a year from now, or ten years from now. But chances are that the business press at the time will have a story that “explains” all the ups and downs it has experienced to that point in a way that leads neatly to whatever the current valuation is. Unfortunately, these explanations will suffer from exactly the same problem as all the explanations that went before them—that at no point in time is the story ever really “over.” Something always happens afterward, and what happens afterward is liable to change our perception of the current outcome, as well as our perception of the outcomes that we have already explained. It’s actually quite remarkable in a way that we are able to completely rewrite our previous explanations without experiencing any discomfort about the one we are currently articulating, each