How Economic Thinking Can Benefit Consumers, Managers, and Entrepreneurs | Part 8: The Solution Is In How We Solve Problems

Barry L. Linetsky

We have seen that an immediately available technique to improving one’s own managerial performance when planning is to make it a standing policy to extend one’s appreciation for taking into account the second and third-order consequences and implications of one’s proposed actions across an expanding time period. The farther out one is able to project and consider, the better.

Those implications already exist and can be evident in our planning based on what we should know and anticipate about causes and their effects. It is incumbent upon managerial leaders to put forth the mental effort to think about the ripple of consequences on their business systems and business model rather than evade that responsibility. It is always better for managerial leaders to be proactive in the anticipation of the causal effects of their actions than to be caught up in a cycle of “unforeseen” consequences and “unanticipated” reactions that make our decisions, and those of others engaged with us, needlessly ineffective and inefficient, if not outright harmful or disastrous.

A competent and qualified manager is expected to know the essential facts of the problems they are charged with solving and the foreseeable implications of their decisions, actions, and instructions. They must recognize that both immediate and foreseeable problems exist simultaneously, and, like it or not, both have to be dealt with as requisite components of problem-solving and responsible leadership. Too often unwanted second- and third-order effects are initially anticipated and ignored, only having to be dealt with in the near future in the form of newly arising and compounding problems. 

As the expression goes, you can pay me now or pay me later.

When managers claim they have no time for forward planning, no time to think about the implications of their decisions beyond the immediate present moment, when they find themselves in perpetual crisis and reactive mode, then they are at the point of dysfunction and no longer capable of effective managerial leadership. 

What such managers-in-crisis need is assistance from the organization to address the root cause of their dysfunction. What they don’t need is more of the same in the form of panicked and unthinking short-term narrow responses that they will repeat again tomorrow and the next day. Effective managerial leaders take the time to think and make the effort to control the future.

The teaching and advice from economists like Mises, Hazlitt and Hayek and business thinkers like Drucker, Deming, Jaques, Goldratt and others, is that problems and solutions are interconnected, with far-reaching consequences and impacts in space and time, and each has to be seen as a component of a larger whole, not as an isolated fragment to be resolved only when it presents itself in the immediacy of the here and now. 

What I’ve learned is that the best solutions to complex human problems will be brought forward and implemented through the basic elements of praxeology and longer-range integrative system thinking to effectively guide human action in the achievement of our chosen and desired ends. 

Successful human action requires a method that is available to everybody. Economic thinking can help provide a solid foundation to seeing beyond the immediate and the obvious to increase our visibility into future cause and effect outcomes to increase our effectiveness in achieving our desires and improving human well-being.

ADDITIONAL RESOURCES

An introductory lecture about Mises’ Human Action and economic thinking by economist Robert Murphy, author of Choice: Cooperation, Enterprise, and Human Action.

A short but prolific and readable book by Mises, Profit and Loss.

© 2019, Barry L. Linetsky. All Rights Reserved. 

Barry Linetsky is a Partner with The Strategic Planning Group in Toronto, Canada, where he and his colleagues have been helping executives and owners align their business purpose with customer values since 1994. Barry is the author of the acclaimed book The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press), and an Honorary Disney History Institute Historian. Barry is also a writer, photographer, researcher, and business strategy enabler. Read his blog and learn more at barrylinetsky.com.