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Jewish World Review April 20, 2001 / 27 Nissan, 5761

Nicholas G. Carr

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Consumer Reports

Problems with non-linear thinking -- LINEAR THINKING has gotten a bad rap in recent years. Business pundits and techie soothsayers have urged us to stop going in straight lines, to abandon the view that the future emerges from the past in a series of fairly predictable steps.

They've proclaimed, in their breathless voices, that we live in an era of unprecedented disruption and dislocation. Everything's changing in chaotic, unforeseeable ways. To thrive in the topsy-turvy business world, we have to let go of our outmoded assumptions of incremental progress and embrace nonlinear logic.

I have a one-word response: Baloney.

No, I'm not a head-in-the-sand Luddite. I understand that scientific knowledge progresses in crooked and often broken lines. And I know that certain digital technologies, such as microprocessors and optical networks, can for a time expand their capacities exponentially rather than linearly, with unpredictable effects.

But even as technology advances by leaps and bounds, people remain stubbornly linear in their behavior. Day after day, they go from point A to point B and on to point C. If they change their habits at all, they do so at a glacial pace. And guess what? It's those very same people who spend the cash that is the ultimate source of all business revenue and profit.

Here are a couple of simple but telling facts. According to a Media Metrix study of Internet use last year, 92 percent of U.S. households still access the Web via dialup connections, and nearly 40 percent of that group have modems that operate at 33.6Kbps or less. Never mind the painfully slow rollout of dependable broadband access; there are a heck of a lot of people out there who haven't even bothered to upgrade to a 56Kbps modem.

And the average Internet user doesn't exactly live online, either. NetRatings statistics for February reveal that the typical Net surfer logged on 18 times and visited a grand total of 10 unique sites. It's nearly 10 years since the start of the great Internet revolution, and loads of people are still quite happy getting onto AOL a few times a week to check their e-mail.

When applied to business decisions, nonlinear thinking is often destructive. It leads companies to get ahead of their customers, developing and launching cool new products and services that few people need or want. It's great to beat your competitors into a market, but if you arrive before your customers, you're in big trouble. Just ask the founders of entertainment site or b-to-b exchange Chemdex - two once-cool businesses that are now belly-up.

Nonlinear thinking can also lead to industry-wide overcapacity as companies rush to prepare for levels of demand that materialize more slowly than projected. Look at all the optical-systems providers that a few months ago were flying into seemingly endless blue skies and today lie buried in unsold inventory.

Amplifying these problems are two other factors. First, it typically costs a lot more to pioneer a new technology than to come along later when the bugs have been worked out and prices have dropped. Second, there's the time value of money. If you invest too early in an opportunity, the odds of ever earning a real return on that cash go way up. Once in a while, a first-mover profits from its aggressiveness. More often, the rewards go to the fast followers.

There are times when wild speculation is appropriate - in research efforts, scenario planning exercises and risk management, for instance. And creative thinking is always valuable. But when making day-to-day investment, operating and marketing decisions, be sure your thoughts stay anchored to the here and now.

Nicholas G. Carr is an executive editor of the Harvard Business Review. Comment by clicking here.


© 2001, SHNS. This first appeared in The Industry Standard