Question: When is a fact not a fact?
(Answer: It all depends.)
Are you a rational thinker? Do you prefer to do things using a proven method? Well, here’s a rather startling idea for you:
Facts are constructed. They are not absolute, even though science, politics, and business pretend they are. They are fluid and dynamic like our minds. Scientific method tells us facts can be proven either true or false. If not, then it is pseudoscience. But here’s the interesting…uh…fact: there is no clear test for what a fact is.
Don’t believe me? Well, when Albert Einstein was asked how science can separate fact from fiction, brilliant hypotheses from nutty quackery, he answered, “There is no objective test.”
We Need Assumptions for Decisions
We must make assumptions. Unlike hidden biases, assumptions are a necessary foundation for every decision we make. Everything we believe is based on an unending daisy chain of assumptions. New assumptions get introduced at key points of a decision or innovation process, and if they prove fruitful, we integrate those assumptions and keep going. If a fact comes along, such as the world is round, instead of flat, or humans can communicate over radio signals, then we can reorganize our assumptions around these new facts and make fresh choices. The daisy chain remains, however.
That is the key to all our assumptions (mental shortcuts): are they working for us? Do they get us where we want to go? Who would want to have to look up every single detail of their life to determine whether it really is valid, anyway? Not me! So, bring on the assumptions! Just do it with full awareness that you are leveraging them in key decisions, and do so with caution.
How Great Marketing Creates Assumptions
Take for instance the idea that blue is the color for boys and pink is for girls. This gender-based color association has only existed since shortly after World War I. In the centuries prior to that, all babies wore undifferentiated white gowns, which allowed easy access to dirty diapers and, happily, could be bleached after wearing. Clothing for children up to the age of six or seven was treated as unisex, which certainly helped the household budget, as most had multiple children.
A little marketing and fact spinning changed all that in June 1918, when Ladies’ Home Journal published an article claiming that “the generally accepted rule is pink for the boys, and blue for the girls.” The reasoning at that time was that pink, a softer version of red, was too harsh for girls. Girls and their color blue represented clear sky and daylight. This beautiful and entirely arbitrary vision caused an uptick in children’s clothing sales.
Then the race was on. Clothing manufacturers and retailers realized that they could double the amount of clothing sold by promoting colors. By 1927 Time magazine printed a chart showing sex-appropriate colors for girls and boys according to leading U.S. stores: In Boston, Filene’s told parents to dress boys in pink. So did Best & Co. in New York City, Halle’s in Cleveland, and Marshall Field in Chicago. It wasn’t until the 1940s that manufacturers went in the opposite direction and decided that pink was for girls and blue was for boys, taking us, our collective memories, and our gender assumptions (and biases) with them.
How Business Creates Assumptions
Assumptions aren’t just the realm of twentieth-century marketers. They spring up from our recent history in business as well. Take the idea of shareholder primacy in business. I work with companies today where shareholder primacy is assumed, and, as recently as 2021, watched an interview with Simon Sinek, a major detractor, hotly debating the approach with his Bloomberg interviewers. Who had their facts right? Mr. Sinek or my clients and Bloomberg?
Shareholder primacy has only existed since the 1960s, when Milton Friedman proposed that corporations existed to maximize profits for the shareholders. Even then, no one really adopted it until the 1980s, when it really caught on, leading to takeover waves and, what we now refer to as “short-termism.” Short-termism refers to a concentration on short-term projects or objectives for immediate profit at the expense of long-term stability and sustainability. It has rapidly become the epitome of what we refer to as corporate greed. It was the foundation of the housing bubble and similar debacles. As a result, many came to the view that the corporations who focused on maximizing shareholder value might lose focus on what customers want, or they might do things that are not optimal for society at large.
Over time, as Simon Sinek and others are now suggesting, shareholder primacy can tarnish the reputation of the company and its products, resulting in the opposite of the intended effect by lowering the value of its stock. In fact, according to Harvard, it is better to concentrate on value creation over value extraction, since the former has contributed to employment instability and income inequality.
A new idea was born. New assumptions are being injected into the world.
When to Create a New Assumption
The daisy chain of assumptions is always shifting and evolving as we get new information. How we remain open and curious about whether the assumptions we are making will help us or hurt us in the long run is, as Albert Einstein suggested, lacking an objective test. What I do encourage my clients to do, at the outset of a far-reaching decision, is to test the main assumptions that will factor into their decision. When we can identify five to ten of these, then we are able to see what history and new research has to tell us about them. The most common assumption in larger organizations is closely linked to what is referred to as a sunk-cost bias, which is most frequently identified by the phrase, “That’s the way we’ve always done it.” If it’s working, great. If not, then it is time to make a different assumption and see what can happen as a result.
We all have heard that definition of insanity: doing the same thing over and over again and expecting a different result. What we don’t often stop to consider is that behind that repetitive and ineffective action is an even less effective assumption. When we stop to look at our assumptions, doing so demands we look at our inner dynamic fearlessly and honestly. When we do, we gain the self-awareness and clarity about what we are assuming just below the level of our consciousness. The shackles of our old ideas begin to fall away. Then we are finally able to make a fresh assumption. That fresh assumption is at the root of every fresh set of actions. Sometimes all we manage to assume at first is that the old assumption isn’t working any more. That’s okay. If we are brave enough to roll the dice on trying something different, it can be all we need to alter everything!
Adapted from my upcoming book Inside Out Smart.