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Has your boss made a stupid decision? Think again

By on January 20, 2012
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I make it a rule that I never believe someone has made a stupid decision. I have always just not understood their reasons yet.

Let me give you an example. The CEO of a major telecoms company once said that he would rather pass on the opportunity to buy one of two potential market leaders for $100 million and pay $1 billion two years later to buy whichever of the two has won.

At one level, that’s a stupid decision: pay $900 million less with a 50% chance of picking the right one (and possibly helping it win). On another, it’s sensible: acquisitions are hard enough to make work without the risk that you might have backed the wrong horse and send the entire company down the wrong path.

But at a personal level it makes even more sense. If you bought the market leader and the acquisition failed, that was tough luck. You backed the demonstrably best horse and it didn’t work out. If you bought one of two contenders and back the wrong one, that’s much harder to explain away. Career-wise, spending $1 billion was safer than spending $100 million.

The same happens in any negotiation, large or small. The other side is, consciously or subconsciously, trying to ensure that if the deal turns out badly they won’t get fired.

So a games publisher hires a market research firm to tell them that yes, the market really does want another special forces FPS.

Or a private equity firm hires a bunch of consultants to provide detailed reports so that if the deal goes badly, they can say “It’s not my fault, I hired the best to advise us” (otherwise known as “to cover my ass”, and yes, I know my place.)

Or your boss says “that’s a nice idea, now go away, write it up, give me a cost-benefit analysis, bring in the accountants to verify, etc, etc”

Fear of getting it wrong beats prospects of getting it right

In any major organisation, the key to success is not getting fired. So stupid decisions can often make much more sense if you change your point of view. When you see a stupid decision consider which of the three following things might be true:

  • The decision is in the best interests of the decision maker and the company (or country if a politician is making the decision)
  • The decision is in the best interests of the decision maker (note that I think that this is rarely about corruption – it’s the unconscious desire to protect our asses that affects us all)
  • The decision is genuinely stupid

Option three is rare.

So for example, why are there so many first person shooters on the market? Because no-one got fired for making yet another first-person shooter. Why were there so many World of Warcraft clones made? Because no-one got fired for trying to replicate the market leader. Why were so many social games companies funded over the past two years? Because no-one gets fired for backing the same type of company that everyone else was backing (especially if the experts said it was a good idea).

Raise your viewpoint

Sometimes, it’s simply that your point of view of flawed. I’ve seen developers rail against publishers who cancelled a big game when it was weeks away from being finished.

“We were finished,” the developers rant. “They could at least have released it and seen how it did the market”.”

Do they have no idea how much money it takes to release a game? Modern Warfare 2 cost $50 million to develop. The launch budget, including marketing, manufacturing, distribution and the Sony/Microsoft royalty, was $200 million. Development was only one quarter of the cost.

So a games publisher which has spent, say $2 million on development, needs to decide whether it was worth investing another $6 million to publish the game if they think it isn’t up to scratch. Canning a new game weeks before release can be a rational decision, from a certain point of view.

No-one is stupid. Perhaps misguided…

I have found it enormously useful to assume that all decisions make sense, and are never stupid. They may be irrational (in the strictest sense of the word), but they make sense when you think about how they might be influenced by fear, prejudice, self-protection or straightforward procrastination. They usually have a strong underlying reason.

Don’t waste time being cross about decisions you think are stupid. Assume the other side has a reason, however irrational. Then decide whether you can counter the reason, accept the rationale, or walk away.

Once you start looking at the world like this, it makes a lot more sense. And a world that makes sense is a much less stressful place to live in.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com