Tuesday, I was wondering about some other striking examples of the simplicity bias, besides my 2020 blog on routines in our lives. It took me a while to realise that routines are part of the most important example of the simplicity bias: standardisation (eg, internet, language, laws, mass production). Standardisation is all around us and so common that we may fail to see it.
Standardisation has several advantages:
- cost: standardisation (eg, mass production) is cheaper than its alternatives;
- language: standardisation allows for SMART communication;
- learning/teaching: standardisation simplifies transfer of knowledge;
- time: standardisation requires less time to complete;
- quality: standardisation allows for guaranteed quality;
- transparency: standardisation (eg, Civil Code) creates a level playing field.
A consequence of the above is that exceptions (to standardisation) cause many problems (eg, costly, error prone, time consuming).
As a result, businesses often make a choice in focus between:
- One size fits all: selling many products & services (eg, business conglomerates); OR
- One-trick pony: selling one product/service and exceptionally (sic!) well.
The banking industry shows a striking example of these consequences: the Dutch (one-trick pony) payment company Adyen is worth more than the 3 main Dutch (conglomerate) banks (eg, ABN AMRO, ING, Rabobank) combined (eg, FD-2021, QZ-2019, QZ-2018, VK-2020).
Not too long ago, things were very different. Business conglomerates were favourites because of their (risk) diversification. Boston Business Journal: “In August 2000, GE was the most valuable company in the world, with a market capitalization that peaked at $601 billion. But it never recovered from the 2008 recession and has since run into myriad financial problems.”
“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” An intriguing quote by Jack Welch (1935-2020), long-time CEO of General Electric (GE).
One Trick Pony (1980) by Paul Simon
artist, lyrics, video, Wiki-1, Wiki-2
Note: all markings (bold, italic, underlining) by LO unless stated otherwise.
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