“the most precious opportunities to deepen our knowledge are whenever reality is significantly different than our expectation.”
Reported percentage increase in sales was wrong. They included shops they weren’t selling to a year ago, which distorted the figures. Increase per shop was about 60%.
Goldratt went to Holland to find out why he was wrong about the figures.
results were better than required. why rethink the solution? The fact that he was wrong about the size of the effect of the conservatism also refutes his ideas about the reason for the conservatism.
he thought the shop’s margin on its products was about 35% like supermarkets, but it is actually 15%.
so one unsold loaf wipes out profits of five sold loafs, so shops are more conservative in their bread orders.
How can we tell whether the new policy has removed the loss of sales from conservatism?
To eliminate the effect eliminate the cause. bread making company can take back a loaf for a full refund but this just shifts the loss to the bread maker rather than the shop. their margin per loaf is higher but will the increase of sales make up for the losses?
bread is plastic wrapped and has a four day shelf life so can sell it to institutional customers. can sell weak old bread to a biscuit company for more than flour.
since leftovers don’t damage the company if a driver sees there are no leftovers he gives the shop more tomorrow and if there are too many leftovers he cuts what he gives them tomorrow.
have to keep going and work out other implications of new understanding. since new policy will eliminate the shops’ conservatism only need one delivery a day.
also came up with another idea for increasing profit. replenishing to consumption frees up 3/4 of their warehouse space. also since only one delivery a day most of the trucks are unused for most of the day. so the company can ship additional fast moving goods without much increase in operating expenses.
making more products to distribute would require a lot of new investment, but they could use their sales and delivery abilities to sell stuff from other brands.
How does one practice thinking clearly?
avoid circular logic
start with an effect and ask why it exists. sooner or later reach entities that can’t be directly sensed: abstract entities.
when dealing with people first attempt to find a cause often leads to an abstraction, such as “conservatism” or emotions like love and hate.
it’s easy to fool yourself when dealing with abstraction through circular logic: tautologies.
example: the team lost the game because they didn’t have enough motivation to win. how do you know? because they lost the game.
circular logic doesn’t imply that the given cause for an effect is wrong but that it hasn’t been substantiated.
“sales of our product are declining because the market taste is changing.” but many possible causes of declining sales: economic downturn, price increase etc.
if you also know that sales of an alternative product are rising may think sales decline is a result of changing tastes.
to substantiate a cause another observable effect of that cause is needed. then you want to look for a deeper cause.
if you don’t think a second effect exists you may give up on searching and keep your original idea.
inherent simplicity helps cuz it sez causes converge, so each cause will have more than one effect and there will always be another effect to look for. if you can’t think of another effect you’re thinking too narrowly.
in many cases another predicted effect is already known to us.
example: people resist change, the bigger the change the bigger the resistance. but many people look forward to changes like getting married or having a baby.
Popper: a test should be capable of showing an idea is wrong. most ideas are wrong and will be refuted.
people are careless about making derogatory claims like “people resist change”. this is part of our culture and biases us to ignore predicted effects that are incompatible with that claim.