Breaking the Knowledge Bank

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There must be a special thrill in watching your ideas become cliché. Few could better speak to that thrill than Daniel Kahneman. In 2002, the legendary psychologist was honored with a Nobel Prize in Economics. His achievement: showing the world that economics has lost touch with the social realities that it claims to describe. (And they say the prizes are political.)

To his list of accomplishments, Kahneman can add the fact that many of his findings are now “obvious.” Someone who announced to a present-day board of executives that “Humans are inherently risk averse” might be greeted with nervous laughter and worried stares. Almost everyone knows that the statement is well-supported and universally accepted, and most know what it means. People are not rational optimizers of profit, because they would rather avoid a loss than pursue an equal (or greater) gain. If Deal A guarantees you $20, and Deal B gives you 80% odds of gaining $30 with 20% odds of losing $10, wouldn’t you take Deal A? If so, you’d be “predictably irrational”: deal B nets you $22 on average.

But what we know to be true doesn’t always touch our outlook. Our loathing of loss still distorts our perception of change. An executive faced with a market disruption and teetering profit margins might know that the loss is reversible, and still long for the bygone days of steady earnings. Strangely absent is his relief that the stagnant, limiting order of the status quo no longer applies, creating a rare window for mobility, and a fleeting chance to push performance higher than the old market would have allowed.

This bias can be conquered. The first step is to make a habit of internal disruption. If you play with each new practice and gadget on the horizon, you’ll soon see how each innovation reveals a new direction for growth. “How will we keep up with the people who use this?” becomes “How have we not been using this?” Once that instinct is developed, external disruptions will engage it too, and fear of decline will give way to relief at movement.

Yet all too often, companies that practice internal disruption mistake the part for the whole. They fixate on “information technology,” and equate innovation with new software, hardware, and devices. Information technology is far broader than that: it encompasses the systems, protocols, and practices that allow for the transmission of expertise. In short, it encompasses Knowledge Management (KM).

Anyone who thinks that KM is taken care of by language and writing doesn’t fully grasp the challenge. Language and writing are data compression systems, in which dense networks of causation are hacked apart, and arranged on the straight line of time. What we call “factual” knowledge, or “knowing that,” consists of segments on this line. “Procedural” knowledge, or “knowing how,” consists of reassembling those segments in conceptual space, and learning your way around the finished network. It is the difference, in short, between knowing that humans are naturally risk averse, and training yourself to be a human who isn’t. The second takes time, and doing it slowly may cost the economy billions.

When we come back, we’ll tell you how to pass on your knowledge network in a few fast, manageable chunks. When you make a habit of disruption, and learn to disrupt the way your knowledge is managed, your company will be prepared to seize the opportunity in each risk. (If you’re impatient, schedule a consultation today.)

 

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