The Price of Denial and Arrogance

Company A and company B are both doing outstandingly well. They have a semi-monopoly of the market, their services are constantly needed and no other company can beat them. They make a grand amount of money and the shareholders receive sizable dividends. The executives make a “sea of money” and the size and frequency of bonuses increase. Young people clearly long to work in these companies because of the financial assurance. Life looks wonderful and rosy. Does this scenario sound familiar? I bet it does! This newsletter goes out to more than forty countries and I am sure that each and every one of you can relate to the example above.

BusinessI reside in Israel these days. No question, the country has done outstandingly well. It has survived the 2008 crisis quite well, unemployment rate is one of the lowest in the world in general and in the OECD countries in particular, and the standard of living is good. This could go on for many years but would you agree that it may also change? If I were to look back at examples from history – Athens, Sparta, Pompeii, Rome, Tokyo, London, Budapest… all, at one time, were the centers of the free world and at some point collapsed in shame due to arrogance and reluctance to deal with reality. Human beings are reluctant to ask themselves if it can happen to them also. I believe it is within our own natural defense systems. No one wants to believe that change, for the worse, may occur. Some marry, some establish companies and some take off to visit remote locations, never thinking it might end in an unexpectedly way.

Though I believe that we posses optimism exactly for the purpose of being hopeful, excited and energized, when arrogance  and cynicism enter the picture, we tend to ignore reality. This goes back to my point regarding company A and B. They might end up in complete different ways. Take for example the Israeli cellular industry. Three major companies were holding the majority of the market. They were doing outstandingly well with a captive audience in a country with one of the highest rates of cell phone usage. “What can break it?”, is something I heard and sensed from many of these companies’ executives for years. “Whatever can happen – will happen”, says Murphy’s law, and in times like these, whomever denies this notion, will eventually fall. So the time came, and as I humbly predicted, the cellular industry in Israel was hit with the unexpected… New companies came into the scene with cheaper rates, and the “sea of money” turned into a “sea of tears.” If you ask my opinion, intuitively, I predict that similar scenarios will happen to the cable companies, banks and transportation industries and those who will not be prepared will either seize to be, or will shrink in size with all the accompanying outcomes.

Company A can choose to be indifferent towards reality. It doesn’t improve efficiency, acts arrogantly, and assumes that the market and the clients will continue in the future just as they did in the past. Company B however, gets into an intense program of adapting to “different” times. It conducts honest and painful discussion. It presents both good and bad scenarios. Which company do you think has a better chance to succeed? If you were an investor, which company would you feel more secure to invest in? Who would you hire as your service provider? I have said it before my friends and I will repeat it a million times: Nothing is taken for granted and the fact that something WAS the way it was, doesn’t mean that it will stay that way. Things change. My two cents advice for any company is to respect the volatility of life and not to take things for granted.