(MoneyWatch) COMMENTARY I'm a big fan of the obvious. I'm forever quoting the duck test (if it looks like a duck, swims like a duck and quacks like a duck, then it's probably a duck) and Occam's Razor, which suggests that, all things being equal, the simpler explanation is generally the right one. (Wikipedia calls that an oversimplification. Ironic, don't you think?)
I'm constantly repeating those two principles like a broken record. Why? Because leaders and executives -- people in positions of authority and power -- have a tendency to spin, obfuscate and overcomplicate things that are actually surprisingly obvious, simple and straightforward.
Why do they do that? Usually because they're trying to talk people into believing something that makes no sense or buying something they shouldn't. If you think that's an oversimplification or find it hard to believe that people in authority would do such a thing, think again.
Here are some examples of leaders doing, well, what they all-too-often do (you'll get the point):
Wishful thinking. Electric carmaker Tesla has a $3 billion market cap. I'm guessing that's because CEO Elon Musk says he can make a profit selling the Model S sedan for $57,400. But in a recent article, industry expert David Cole of the Center for Automotive Researc said that's not very likely, noting that "at that low volume with this level of sophistication in an electric vehicle, I think it's going to be really hard to make money." Who do you believe?
Boards behaving badly. After all-but decimating the BlackBerry brand, RIM's board didn't bring in an outsider to shake things up, but instead promoted Thorsten Heins to CEO. And did you know that Hewlett-Packard hired Leo Apotheker as CEO even though many of its directors never interviewed him or knew why he was fired by SAP? Just 11 months later, the board replaced him with one of their own, Meg Whitman. I guess she wanted the job so, sure, why not?
Fiscal silliness. Our leaders in Washington are more or less throttling oil, gas and coal production when America's goal is supposed to be energy independence. Not only that, but proposing an increase in tax on some small businesses, coupled with increasing healthcare expenses, in a stagnant economy with over 8 percent unemployment for 42 months is somehow supposed to help create jobs and grow the economy. What am I missing here?
Fantasy land. With so many once-iconic companies like Sony and Sprint losing billions year after year when they're supposed to be in the middle of turnarounds, I get the feeling that some leaders are in the wrong field. They would have made great fiction writers. The "suspension of disbelief" factor is off the charts.
Unfortunately, this is the real world and times are hard. So how does an honest person trying to make a living and get ahead manage to avoid all this nonsense? Remember Occam's Razor, the duck test and these 10 simple principles:
- When people have a vested interest in what they're saying, meaning they stand to make money or get reelected, don't trust it.
- Say what you mean and mean what you say, even if it is repetitive, boring and won't get you on a reality TV show.
- Learn how probability works. If you flip a coin and it comes up heads 99 times in a row, it's not overdue to come up tails.
- Go with your own gut and observation, not someone else's theory or hearsay. As a wise person once said to me, "I don't believe anything I hear and only half of what I see."
- Practice saying "no" over and over again, especially when it comes to purchasing and investment decisions.
- At any given time, there are plenty of leaders and executives parading around with no clothes on. Don't be afraid to call them on it; if you don't, who will?
- Learn the difference between deductive and inductive reasoning. The former reaches valid, logical conclusions from known premises or facts; the latter makes generalizations from a few data points, like the duck rule.
- Just because you read it on the Internet does not mean it's true.
- Hope is a lousy strategy.
- Corporate officers and directors have a fiduciary duty to act on behalf of the company and its shareholders. So when it comes to making optimistic statements, they probably have way more latitude than you think.
Final word: Like the headline to this post says, trust the obvious, not the dubious. That's a pretty good strategy.
Image courtesy of Flickr user jin.thai