Downstream effects

Better decisions can be made by taking a moment to think about downstream effects.

When Wal-Mart cut costs by removing store employees, they just ended transferring the massive burden of stopping shop-lifting to the local police.

In an attempt to improve their demographic balance, Russia tried paying women money to have kids. But, they found an increase in abandonment rates. After collecting their pay outs, women were dropping these kids in orphanages. Sweden’s answer to helping improve demographics was to have an incredible range of maternity benefits. A Swedish woman can take 16 months of maternity leave (13 of them paid at 80%) until her child is 8 years old. If she has 3 children, that’s 4 years of leave. Sadly, women in their twenties are among the largest unemployed groups in Sweden.

On the flip side, Google outsourcing TensorFlow, an open source machine learning library, helped a Japanese farmer and former engineer create a system for sorting cucumbers.

And, the African Great Green Wall initiative is likely to have long term ripple effects beyond just preventing the Sahara desert from increasing in size. When 21 countries come together to plant trees, there’s plenty Africa and the world gains from the effort.

downstream effects, externalities, unintended consequencesThanks to The Economist for the image

Every one of these stories is a story about the downstream effects of decisions. In Economics, these are called externalities or unintended consequences. Every decision we make has unintended consequences. In some cases, the negative downstream effects can be so powerful that they can just override any positives from the first order consequences of the decisions.

As a result, we must discipline ourselves to push all decision making conversation into the realm of downstream effects. All company destroying decisions started out as good ideas in the short term… with bad downstream effects.

Unintended consequences

Most decisions we make have unintended consequences. These unintended consequences are typically caused by the downstream effects of a decision, i.e., your decision results in something (that you likely hoped for), that, in turn, causes something you probably didn’t intend.

There are 2 ways to avoid negative unintended consequences –

1. Experience. If you’ve experienced it before, you know what to expect and how to guard against it. This is how good lawyers earn their keep. They are fantastic at scouring all available legal literature to make sure you are protected from negative consequences of important decisions.

2. Developing the discipline to let it play out in your head. While experience is ideal, if we’re learning and growing, it is likely that we’re exposing ourselves to new situations. And, developing the discipline to let the trickle down effects of our decisions play out in our head is vital to making good decisions. Lazy decision making has bad consequences – a decision whose immediate effects may look good may have bad after-effects. It is only when we make the effort to let decisions play out in our head do we understand the real trade-offs involved. Making decisions by understanding trade-offs to the best extent possible is good strategy.

A simple example of this is letting people schedule times on your calendar for meetings at random. If you have meetings scheduled every 2 hours every day this week, say goodbye to doing work that matters.

The interesting thing about letting the effects of decisions play out in your head is that you often realize that, while the context may be different, you’ve experienced something similar in the past. And, when realize you’ve seen the movie before, you also know exactly how it ends.

unintended consequences, decisions