Warren Buffett’s longtime associate, Charles Munger, recently passed away at age 99. He was determined to leave a record of his thoughts for evaluating human psychology, specifically “misjudgments.”
“I’ve long been interested in standard thinking errors,” he opined. “I sought good judgment, mostly by collecting instances of bad judgment, then pondering ways to avoid such outcomes.”
It’s evident Munger was a believer in German mathematician Carl Gustav Jacob Jacobi’s “Invert, always invert” maxim. This was especially true during his military service in World War II, when Munger served as a meteorologist, focusing his efforts on predicting ice and fog—the most threatening phenomena for pilots.
One of the principles in Munger’s lengthy essay, “The psychology of human misjudgment”, concerns the power of incentives, or the “Reward and punishment super-response tendency.” Munger cites the example of the Xerox executive who was troubled by the slow sales of the company’s newest and greatly improved machine. Why would the salesmen steer customers to an older, inferior product? He found out their commission arrangement was the root cause.
While I don’t know that many of our instrument salesmen are commissioned per se, they have sales goals for products the manufacturer wants to move—wireless, for example. There might be a nice reward, such as a trip to Las Vegas by meeting such goals or exceeding the volume of one’s peers. This is not to say that Mildred, our esteemed factory representative, would play down wired or bussed solutions to hype up wireless ones, but such incentives are there because they work. You might just see a little less of her because her other customers are purchasing more of the incentivized products.
I once worked with an engineer who was very intelligent, but apparently very convinced that all the salespeople who called on him were slackers. Carlos (not his real name) was good for a wealth of purchase orders—he always found funding to buy instruments. But salespeople dreaded their meetings because Carlos thought it was necessary to challenge, criticize, and ultimately demonstrate he had more knowledge of their product than they did. Maybe the mental flogging was intended to encourage his vendors to become better, but this punishment surely must have had a stifling effect on any collaboration. Proposals that missed some details of a specification were simply thrown out, rather than cycled back for a correction or update.
Imagine a future where you purchase controls and instrumentation by interacting with a robot (or a phone app), which is where we seem to be headed. Will the specifier-as-mouse-clicker be solely answerable for the desired fitness-for-purpose: accuracy, durability and robustness? Will we miss having a knowledgeable, expert human, who shares some accountability for quality and performance of their product? We’ve all experienced the strategy (punishment) of “saving on staffing by making our customer work harder.” We experience it with self-check-in at the airport, self-checkout at the grocery store, or IT resources that answer from distant continents (you end up doing all the work). If we’d rather encourage succeeding generations to engage in decades-long instrumentation and controls careers, experienced controls professionals should reflect on this as an incentive to provide what mentoring they can. Do you suppose the old proverb “two heads are better than one” will apply when the other head is a robot?
There are rewards and punishments at play in other facets of our discipline. The engineering. procurement, construction (EPC) firm’s contract engineers are incentivized to charge their hours to a client’s project, rather than to overhead such as training, research or administration. So why are we shocked when we get mostly mechanical output in our deliverables, with scarcely any imagination or innovation? Meanwhile, the client’s project manager is motivated by cost and schedule. If a thoughtful engineer suggests a late change that would make the project better for the ultimate operator, what’s the chances it will be approved? “Change is bad” says the project guy, and many such innovations are left for the organization and methods (O&M) organization to implement, if they’re undertaken at all.
So robotic trudging is incentivized on several levels. If we’re encouraged to restrict our imaginations to such a degree, it also becomes a disincentive for the creative innovator to join us.
Munger’s extraordinary discipline was key to guiding the investment decisions of his partner, Warren Buffett. His lifetime of studying misjudgment can benefit control endeavors as well.
