“With Enough Eyeballs All Bugs are Shallow”

The OODA Loop

“When you think you know, there is no reason to pay attention” — Ellen Langer

In an uncertain world leaders need to pay attention to what’s happening within and outside their organisations’ four walls. Observing (the first O of Boyd’s OODA Loop⁠[1]) is critical — if you can’t see what’s really going on you’re in no position to make sense of things, create viable options, or learn from the success (or failure) of past actions.

Observing in Boyd’s OODA Loop describes the five feedback loops humans use to make sense of the world around them:

  1. Unfolding Circumstances — things you can see but that are outside your control (e.g. your competitors market moves)
  2. Outside Information — how others see these unfolding circumstances (e.g. how customers react to your competitors moves)
  3. Unfolding Interactions with Environment — how your actions impact others (e.g. how your stakeholders and rivals react to your moves)
  4. Top-down Expectations — what people, based on past experience, expect to happen (e.g. the wider market)
  5. Bottom-up Expectations — what people actually observe.

Boyd’s work reveals the levels of complexity in how humans make sense of the wider world: through observation (seeing what’s happening), empathy (recognising the impact of action on others) and engagement (understanding how our actions impact others). We aren’t rational thinking creatures alone, but use our entire nervous system (senses, emotions and reactions) to interact with the world around us.

This full-spectrum sense-making enables us to detect early weak signals of emerging opportunities and threats in our environment. We do this less through rational (inductive and deductive) thinking processes and more as abductive thinkers — making real-time connections as to why things are happening through intuition (the recognition of past patterns of behaviour and events) and insights (sudden, unexpected shifts to better stories that describe current patterns).⁠ [2]

Organisations therefore are full of natural sense-makers, using a variety of ways to make sense of the world around them so they can act in it. And organisations that employ a diversity of people maximise this sense-making capacity — tapping into wider sources of knowledge, discovering more signals in the noise and understanding better the impact on stakeholders.

Harnessing the sense-making capacity of people in a network isn’t just a nice theory, it’s a practice that has led to the Nobel Prize.

Grameen Bank was founded by Muhammad Yunus whose hypothesis was that poor people remain poor because they have no access to capital. And banks don’t make loans to poor people because the cost of credit-checking those with no collateral is greater than the interest payments they receive on the micro-loans they make. But Yunus’ great insight was that the community — a wise crowd with ‘skin in the game’ — could provide credit-checking cheaper and more reliably (profitably) than the complicated risk assessment systems banks use.

Applicants for micro-loans at Grameen had to join a community group of other loanees, who would approve the new loan or not. The community was incentivised to make ‘good’ loans (those that will get repaid) as the greater the collective amount of loans the lower the overall interest rate, while the community had to pay any ‘bad’ loans back themselves.

Grameen Bank’s ‘bad loan’ provision is less than 3% — the envy of any bank and utterly unheard of in a developing country (Grameen in Bangladeshi). It was this that won Yunus a Nobel Prize.

Bangladeshi stamp celebrating the awarding of the Nobel Prize to Muhammad Yunus of Grameen Bank

‘Skin in the game’ is a key heuristic [3] for ensuring crowds are more wise than mob-rule. The other heuristics are:

  1. Ensure you have the right crowd — Grameen’s community groups knew the people and their circumstances they were being asked to approve loans for so could estimate their propensity to repay or default
  2. Secret balloting — ‘experts’ need to make their judgements without being influenced by other ‘experts’ (a pitfall of Groupthink [4]⁠). This is why stock markets are more mob-rule than wise-crowd — fear and greed are infectious and the crowd become a mob.

Increasing uncertainty is one of the biggest headaches for leaders — but it’s important to remember that it’s the same problem your rivals are facing and you only need to outrun them. Those who learn to navigate uncertainty effectively — by, firstly, Observing what’s really going on and picking up the real signals amongst the noise —will extract more untapped value, quicker.

But effective Observation requires bringing the entire intelligence of the organisation online — not just at the most senior level, or delegated to a ‘market intelligence’ unit, (or worse, outsourced to consultants). Early and successful detection of critical weak signals of emerging opportunities and threats requires you to activate your entire organisation’s nervous system — for “given enough eyeballs, all bugs (problems) are shallow”. [5]

Govern the state by being straight-forward; wage war by being crafty. — Laozi