Idea of the Week: Monoculture and Business

It is interesting to study the effects of monoculture in business. If you hire Ivy-league elite-university graduates you are effectively creating a monoculture that won’t allow for the creation of divergent opinions and strategies within your company. That can lead to grave mistakes (if somebody says X and everybody agrees) and less creativity. Ensuring diversity of backgrounds within your company seems to be a smart strategy for the manager.

As Nicholas Nassim Taleb describes in his book Antifragile, we need to create environments that not only can resist negative shocks (resilience) but can actually thrive during a negative shock (antifragile). By definition, a black swan won’t be noticed by the companies employees. Moreover so if all of them share a distinct similar education, socioeconomic background and lifestyles.

My thesis is that by integrating people from diverse origins into our team we are actually inducing antifragility within the business. A diversity of educational, socioeconomic and lifestyle conditions should lead to a diversity of opinions and tactics. Obviously, if we don’t foster dissent and discussion within the company, this thesis becomes useless.

The tech industry has been somewhat more aware of this: Jeff Bezos installed a culture of discussion and dissent at Amazon by requiring employees to create written memos with a detailed explanation of their views. The competitive structure of the industry, with multiple startups and venture capitalists competing against each other, ensures a healthy amount of dissent and diversity. In this case, destruction can lead to positive outcomes.

Traditional businesses, financial firms and consulting firms have traditionally been not diverse and thus creating a dangerous monoculture of thought that has lead us to multiple shocks and crises. Acceptance of divergence is key. The manager can become a moderator, someone who sees the clashes of divergent views as an opportunity to improve and leap forward with new insights. Monoculture of thought is dangerous.

Idea of the week, April 22, 2017.

by EJT