the difference between a Mess, a Problem, and a Puzzle

Sean Brady interviewed Gerald Ashley on the Simplifying Complexity podcast (27 May 2024). The main topic was the difference between a Mess, a Problem, and a Puzzle.

A rough summary from my scribbles:

Uncertainty vs. risk

Knightian Uncertainty. Some things are inherently unpredictable. Statistical analysis won’t help.

If you can turn uncertainty into a risk, you can make money.  A life insurance company doesn’t know when a given person will die. But they can use mortality tables of 500,000 people with similar attributes (65 years old, 200 pounds, male, nonsmoker).

We have lots of data, but it’s all looking in the rearview mirror. Stock charts are not a map. They are merely a record of where you’ve been.

What’s the solution?  Don’t use the s word. You really can’t know the future. It can be liberating if you have a wide enough view of thinking about things. The way forward is to accept that and try to draw from as many sources of information as you can find.

Lots of people say they are in risk management. We’re surrounded by risk managers, but we still have these failures. I think it’s because they are not managing risk—they are measuring it. There is a huge number of people measuring risk, sticking it into statistical models.

What we should be doing is trying to seek out what’s coming next. And that is a rare skill.

Russell Ackoff said there are three types of issues:  mess, problem, puzzle.

• Mess: You can’t fully define it. So you’re struggling to get the question right, let alone the answer. (low information)
• Problem: Question is defined. No definitive answer; numerous possible answers.
• Puzzle: There is an answer. (high information)

Michael Pitts (?) says a lot of issues are messes and we have a tendency to carve a bit of it off and call it a problem and come up with a solution. But then you’ve divorced it from all of the linkages in the overall mess, ignoring the network effects.

Are there established approaches to each? Gerald says:

• Mess: you need a policy statement
• Problem: Strategic level. Scenarios help.
• Puzzles: tactical level.

The world is not like chess. Things are not neatly packaged like this.

Gerald recommends a 9-minute YouTube video by Jules Goddard of the London Business School. The incentivization loop does not allow for innovation. He uses the phrase “markets punish commodities” meaning that if your product becomes a commodity, it loses pricing power. Jules Goddard – Why Overall Cost Leadership Is A Losing Strategy

From the video:

Best practice is a path toward commoditization (being the same as competitors).

The winning trajectory is unique practice.

The Data Suggest:

• Higher cost than competitors are the main pre-requisite for superior performance.
• Competitive success is the result of discovering value through insight rather than efficiency through effort.
• Cost-cutting is almost always a counter-productive strategy.

Very rarely is cost leadership a drive of superior profitability.

“On average, boards devote nine times more attention to spending and counting cash flow than to wondering where it comes from and how it could be increased.” — Tim Ambler

The art of strategy is to stay one step ahead of the need to be efficient.

Jules Goddard is the author or coauthor of:

Uncommon Sense, Common Nonsense: Why Some Organisations Consistently Outperform Others by Jules Goddard, Tony Eccles (2013)

What Philosophy Can Teach You About Being a Better Leader by Alison Reynolds, Jules Goddard, Dominic Houlder, David Giles Lewis (2019)

Business Experimentation: A Practical Guide for Driving Innovation and Performance in Your Business by Rob James, Jules Goddard (2021)