Are Minds Like Parachutes — Working Only When Open?

An Ode to The Skeptic


Minds are like parachutes; they function only when open. What does this quote from Tommy Dewar, the scotch distiller, mean for organizations today? Is it necessary to have an open mind? What if you are a skeptic?

Read on as we draw upon history in business, science, and war to recommend a healthy dose of skepticism for organizations of all sizes. Also included are tools to help you find your inner skeptic.



In a Nutshell

Minds are like parachutes; they function only when open.

This quote advocates absolute open-mindedness. However, drawing upon history, The Strategist recommends a healthy dose of skepticism for all. The key takeaways on Skepticism in Business

  • You Don’t Always Have To Be Open-Minded To Create Value — we cite Enron, Subprime Bubble, and IBM as cases when skeptics changed the game
  • Find Your Hairy Green Balls As A Cure Against Bullshit — create mental models that help you test whether an idea or information make sense
  • Crash Test Your Ideas — play the Devil’s Advocate, recruit skeptics or involve tough-but-fair stakeholders to critique your ideas

We have recommended science-based frameworks for activating skepticism. We will continue to refine them to suit a business context. Your builds, and feedback are welcome!

Sincerely,
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Cultivate Your Inner Skeptic
Attention Economy

4,406 words | 17’37” reading time | 62/100 readability (better than NYT)

Editor’s Note

Some language in this article may be offensive. Reader discretion is advised.

Author’s Note

This article is a perspective on Skepticism in an organizational setting. It is NOT a knock on free thinking and open minds. Indeed, a balance is required to create the most value.

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Elvis Comes Crashing Through The Skylight


Let’s take a poll. Read the quote below and guess which company used it in one of their advertisements.

It is a small word, but it is a quick, sharp, and abrupt word. It is the chosen word of the nonconformist, the defiant, and the visionary. It is a confrontational word. It challenges what’s thought to be impossible. If you are not afraid to ASK WHY you can change whatever it is you want.


You might think this is an excerpt from an Apple commercial of the late 1990s. After all, the copy is not unlike the ‘Think Different’ campaign. The montage that accompanied it indeed had an Apple-esque vibe. This particular commercial was called An Ode to ‘Why?’. It landed on American TV networks on February 06, 2000 — the introductory ad for a campaign created by an advertising agency named Conquest.

Their client — Enron.

If you haven’t heard about Enron, it is time to get out from underneath that rock.

Enron was the pick of American companies in those days. It was an investor’s wet dream, a Wall Street darling celebrated by the mutual funds, the rating agencies, the investment banks, your aunt, and her uncle.

And why not?

Kenneth Lay, the company’s founder, and Jeffrey Skilling, Lay’s second in command, had expanded Enron’s market capitalization nine-folds through the 1990s. Its sales had similarly increased from $4.6 billion to $40.1 billion in that period. It had transformed from a mundane gas pipeline firm to an energy trader that saw itself as an iconoclast worthy of the commercial above.

Armed with a self-professed “restless dissatisfaction with the status quo” and proud of “its ability to quickly grasp how most things can always be improved,” Enron was going to change the world.

Its coverage in the business press certainly bolstered Enron’s hubris further. From Fortune and Forbes to Business Week and Wall Street Journal, most American media had long thrown ticker-tape parades for the company and its executives.

Take Fortune magazine, for example. From 1996 to 2001, it had accorded Enron the title of The Most Innovative Company in America — six years in a row. In April 2000, the magazine decided to throw in the proverbial panties too when, shaking with literal orgasms, it published this —

Imagine a country-club dinner dance, with a bunch of old fogies and their wives shuffling around halfheartedly to the not-so-stirring sounds of Guy Lombardo and his All-Tuxedo Orchestra. Suddenly young Elvis comes crashing through the skylight, complete with gold-lamé suit, shiny guitar, and gyrating hips. Half the waltzers faint; most of the others get angry or pouty. And a very few decide they like what they hear, tap their feet... start grabbing new partners, and suddenly are rocking to a very different tune.

In the staid world of regulated entities and energy companies, Enron Corp. is that gate-crashing Elvis. Once a medium-sized player in the stupefying soporific gas-pipeline business, Enron in the past decade has become far and away the most vigorous agent of change in its industry, fundamentally altering how billions of dollars worth of power — both gas and electric — is bought, moved, and sold, everywhere in the nation.


The Media Circus helped drum up Enron’s stock price. The price had climbed 26% in a single day to $67.25 on January 19, 2000, on the back of Enron’s announcement that “it was creating a way to trade excess capacity on fiber-optic networks.” Enron could find a way to trade human souls if that were possible. It certainly found a way to trade conscience. And that paid, at least for a while.

The Con of Enron | Source


Between 1999 and mid-2001, Enron’s executives cashed in stock options worth over a billion dollars. Its stock hit an all-time high of $90.56 on August 23, 2000, and continued to trade above $60 through March 2001.

Then, the tide turned.

Slowly but surely, the great American story began to unravel. High profile exits, accounting red flags, self-dealing partnerships, years of shoddy corporate governance, outright fraud, and executive impropriety brought Enron to its knees.

By the time it filed for bankruptcy on December 02, 2001, Enron’s stock was trading below $1. Millions of shareholders had lost tens of billions of dollars, and over 20,000 Enron employees had lost their pensions and retirement savings.

Elvis came crashing down the skylight.

The Unraveling — Enron’s Stock Price from Aug 23, 2000 to Dec 23, 2001 | Source



I should tell you right now that this is not an account of Enron’s fall from grace. Numerous writers and experts have done a postmortem of that scandal over the years. I have hardly anything insightful to add.

What interests us here is the role played by the mainstream of Wall Street (banks, hedge funds, analysts, rating agencies), the Business Press, and even the authorities in allowing the Enron hoax to survive for as long as it did. Instead of asking Enron questions, they hopped on the company’s ‘new economy’ bandwagon. They were the believers, the open-minded institutions and individuals who ended up needing the proverbial parachutes when Enron came crashing down.

The hoax got caught is thanks largely to a few people who refused to toe the line. Instead, they decided to look at the evidence. They were the skeptics who took Enron’s advice and decided to ask ‘Why?’.


The Reporter, The Trader, The Analyst, & The Assh*le

Ode To Why | Conquest/Enron


As early as 1998, The Economist stated that “Enron’s electric dreams” were “not entirely free of anxiety” and that its push for electricity’s deregulation into a price-driven commodity was “quite a gamble” from the perspective of retail customers.

In June 2000, when the company was strutting around like it was the Bee’s Knees, the magazine questioned its executives’ hubris, asking, “Is Enron really so flawless?” The Economist warned, albeit reluctantly, that Enron’s “hubris can lead to nemesis.”

While The Economist took a qualitative view of Enron’s business and its executives, Jonathan Weil of Texas Wall Street Journal looked at the data. A source tipped him off in July 2000, asking him to look closely at Enron and its rival Dynegy. The result of his research was a September 2000 piece, cautiously titled ‘Energy Traders Cite Gains, But Some Math Is Missing.’

Weil took a tone that was surprisingly prescient and refreshingly divergent, given the hoopla surrounding Enron. He cautioned that investors expecting gains from “high-voltage growth earnings growth at some companies with large energy-trading units” could be in for a nasty surprise.

Citing accounting experts, he questioned the accounting techniques used by Enron and others, thus casting doubts on the quality of these companies’ earnings —

[...] what many investors may not realize is that much of these companies' recent profits constitute unrealized, noncash gains. Frequently, these profits depend on assumptions and estimates about future market factors, the details of which the companies do not provide, and which time may prove wrong.


Weil’s piece would have fallen through the cracks but for a hedge fund owner from Dallas, Texas, who faxed it to the famed short-seller Jim Chanos.

Quick refresher, short-sellers are traders who profit from stock prices going down. By the very nature of their punts, they scrutinize the markets for weaknesses, looking for overvalued assets, and bet against them using investment instruments — like this guy. So if one were to give the job description of short-sellers in one word, it would be Skeptic.

Buoyed by Weil’s reporting, Jim Chanos started his investigation into Enron. Within a month, he had found enough red flags in the company’s financial statements and filings to set up a short position against Enron. He did so in November 2000.

In February 2001, he tipped off a columnist at FortuneBethany McLean. She had joined the magazine in 1995 after a brief stint with Goldman Sachs as an investment analyst. She did her due diligence on Enron, and in a fatefully redemptive turn for her employer, she asked a simple question on February 19, 2001 — Is Enron Overpriced?

This piece is one reason why Enron only traded above $60 until March 2001. The other reason is the ‘as*hole.’ Read on.

In April 2001, in Enron’s Q1 earnings call, Richard Grubman, another short-seller and one of the two founding Managing Partners of the hedge fund Highfields Capital decided to ask ‘Why?’.

He asked Skilling, then Enron’s CEO, why “you’re the only financial institution that can’t come up with balance sheet or cash flow statement after earnings.” Skilling’s response — “Well uh … Thank you very much, we appreciate it … Asshole.”

This angry deflection was a red flag.

Peter Eavis at The Street (May 2001), and Rebecca Smith and John Emshwiller at the Wall Street Journal (August 2001) took over from here. The rest, as the charts in the previous section say, is history.


An Ode To The Skeptic


The Enron saga is just one of the many incidents that make me feel that Tommy Dewar was quite drunk on his own Scotch when he said, “Minds are like parachutes; they work only (or best) when open.”

Either that or the quote is so far removed from its original context that it has become easy for commentators like me to take a piss on it. Regardless, my point is simple — take nifty-sounding analogies with a grain of salt (or the entire salt shaker). That, and you do NOT always have to be open-minded to create value. Sometimes, it pays to be a skeptic.

Don’t believe me on Dewar’s soundbite and think Enron’s a one-off?

When Wall Street was stumbling naked, high on the subprime ganja in the late 2000s, at least five skeptics warned against the housing bubble — Steve Eisman, John Paulson, Michael Burry, Greg Lippman, and Gene Park. All, except Park (who worked for AIG, itself knee-deep in the subprime market), bet against the bubble and made a bunch of dough. Something similar happened with Harry Markopolos when he exposed Bernie Madoff.

Think there is a bias associated with stocks and markets?

You have already read here on The Strategist about how Lou Gerstner went against the conventional wisdom of breaking up IBM in the 1990s. He was a skeptic in that situation. Every turnaround story that brings a company back from the brink features a skeptic.

You can also look for examples outside of business. After all, skepticism has its origins in philosophy and science.

Read about John Snow. Not the ‘you know nothing’ Jon Snow, but the famed British anesthesiologist John Snow who investigated the origins of the disease Cholera between 1849 and 1854. Or, read about Cuban physician Carlos Finlay and US Army physician Walter Reed, who discovered how mosquitoes spread Yellow Fever.

These skeptics dispelled myriad hokey beliefs that pervaded the medical community of that time regarding these diseases. They ushered in a brand new era of Public Sanitation in the west.

Then there are a thousand and one other examples of how skeptics discarded putative scientific (or unscientific) beliefs of their times and found better explanations for several phenomena.

Better yet, think about that one time when everybody and their brother thought something was right and therefore wanted you to subscribe to their beliefs. Instead, you gave them the bird and embarked on your path, enlightened by some evidence or an insight — something more than just raw gut. And then you succeeded.

You may argue that in that case, you were the one with an open mind. Believe it or not, you were the Skeptic, and thankfully, you didn’t have a parachute for a mind.

Here’s why.


A Messenger From Afar


A skeptic isn’t a contrarian for the sake of it. They ask valid questions, poke holes in your theories and beliefs, cast doubt, and allow for a possibility, however small, that the truth might be different. They aren’t for sentimental contradictions. A true skeptic would look for evidence to support their view. A true skeptic will also accept a different perspective when confronted with the proper evidence.

To be clear, the Skeptic is the one who faces off against the beliefs of the many. I will illustrate this using the example of Avi Loeb — the Harvard Astrophysicist who thinks Aliens have visited us.

Artists’ concept of ‘Omuamua — Interstellar object 1I/2017 U1 | European Southern Observatory / M. Kornmesser


In October 2017, we witnessed the first known interstellar object to visit the solar system — ‘Omuamua, Hawaiian for ‘a messenger from afar.’ ‘Omuamua was a strange celestial body. For one, it was ten times as long as it was wide — like a well-rolled Malawi Gold reefer or a Cuban Cigar.

When it moved away from Sun, it accelerated — as comets do. But it left no trail of gases behind it — quite unlike most comets. What’s more, its acceleration as it moved past the Sun was relatively smooth instead of the jerky acceleration that one might expect due to Sun’s gravity.

‘Omuamua’s Trajectory | Source


Loeb and Shmuel Bialy (his postdoctoral student) posited that quite likely ‘Omuamua was a piece of Alien technology — a ‘light sail’ accelerated by solar radiation (i.e., the photons hit this ultra-thin sail and propel it forward).

Let that sink in for a minute. Now you, like me, may be a believer. I don’t necessarily mean a believer of Alien abductions and Mulder’s other obsessions, but open to the possibility that there may be intelligent life elsewhere in the Universe.

The popular mainstream likely has many casual believers, some fanatics, and a few absolute crackpots. From that vantage point, Loeb is someone who you would call open-minded. He is no crackpot, mind you. By all accounts, he is a prolific astrophysicist.

But within the scientific community, which widely believes that there are other plausible non-Alien explanations for ‘Omuamua’s unique behavior, Loeb is the skeptic. That is because he is the one going against the mainstream — advocating his viewpoint with evidence and disproving other theories by pointing out fallacies.

The ‘Omuamua Affair is an evolving topic. We may find out in some time from now that Loeb was entirely off base, if not off his rocker. Or, he may turn out to be true. This author is certainly rooting for some truth in his theory (I mean, come on! Universe can’t be as dull as it seems!). But such debate is immaterial for our purposes here. My intent here was to give you a sense of what it means to be a skeptic and leave no doubt in the definition.

When you are a skeptic, you are going against the existing mainstream beliefs in a particular discipline, armed with contrarian evidence.


Let’s see what else is true when you are a skeptic. Pro Tip: You can use the next section and the one after as The Skeptic’s Playbook.


You, The Skeptic: A Biography


Here you are, The Skeptic. First, the vitals

  1. You may be an insight machine. That means you often see something no one else sees, even when presented with the same information. Often, these things are contradictions
  2. You have an eye for detail, a penchant for a painstaking investigation
  3. You ask questions. Why? How? What if?
  4. You distinguish yourself from the crackpots and plain vanilla naysayers through objective evidence


Your prior professional reputation might not help you in the aftermath of skepticism. Like Loeb and other skeptics before him, you may be ignored, ridiculed, or ostracized. In the dark ages, skeptics were also blinded, maimed, or killed.

Ask John Snow of the Cholera fame. The Queen of England had thanked him for administering chloroform to her during the birth of her last two children. That standing with the Royals and his other medical accomplishments didn’t shield him from ridicule.

Your skepticism is situational. You can, and must, strike a balance between open-mindedness and skepticism, matching the weapon to the war. Easier said than done.

Sometimes your skepticism is deliberate. You play the Devil’s Advocate to find the final kinks in your work before that important presentation.

My own experience here stems from years of working with Jost Pohlmann, Unilever’s Director of Supply Chain Strategy. He would deliberately play the Devil’s Advocate when presented with a new idea. It did three things —

  1. when he was opposed to the idea, it softened the blow on the person who brought it forth instead of meting out outright rejection and risk sending the open minds into their shells;
  2. when he didn’t understand an idea, it helped him understand better;
  3. when he liked an idea, it helped him ground himself and prepare the team for others who may not be kind to new thinking


You welcome skepticism. Everyone loves their ideas. Everyone is wont to protect them. You deliberately involve that tough-but-fair stakeholder to crash test your work.

When I built Unilever’s Center for Network Excellence, getting the Chief Supply Chain Officer’s endorsement was critical for success. The route to him went through the Supply Chain Executive — Unilever’s supply chain leadership composed of global and regional VPs and EVPs. Think of them and the Chief Supply Chain Officer together as the Guardians to our Green Lantern Corps.

I essentially had three paths —

  • follow the path of least resistance within the Executive and build a critical mass of support
  • seek out the skeptics, the naysayers, the tricky stakeholders — understand their concerns
  • combine the above two paths — hold consultations with nearly everyone


I deliberately took that third path and connected, sometimes multiple times, with our leaders in one-on-one sessions. By the time my Director and I met our ‘Guardians’ for a final ‘vote,’ three things had happened —

  1. I had already walked a mile in every guardian’s shoes — we knew the feedback and concerns and had effectively killed surprises
  2. I was several miles ahead — we had solved for many concerns raised to us — some on our own, some together with the guardians; we also made sure to retain and highlight what they had liked about the original proposal
  3. I had their shoes — I acknowledged the concerns, where we didn’t have solutions, upfront before someone far above my pay grade could raise them; I also acknowledged their contribution to the proposal


As a result, our solution was a balanced mix of what we thought the need was and what the VPs wanted. And we knew the areas of development. Unlike Enron, we didn’t pretend to be flawless. The result — our proposals went through like a hot knife through butter.

You are the first to cast doubt on your ideas, but not to the point of paralysis. That is so you can protect yourself against flawed beliefs and accept overwhelming contrarian evidence, if present, against your views.

To understand what can happen if you don’t do this, read the history of the Israeli Intelligence Failure in the days before the Yom Kippur War of 1973. I urge you to read it dispassionately, regardless of what side of the Palestine conflict you are on.

Eli Zeira, then the head of Israel’s Military Intelligence, stuck to his flawed belief that an Arab Coalition led by Egypt won’t attack Israel until they had air superiority. He did that despite overwhelming evidence to the contrary. He ignored his junior analysts and his spy high up in the Egyptian establishment.

Zeira had escalated his commitment to the extent that even two hours before the war started, his assessment assigned a low probability to that event. The result — Israel was ill-prepared from an intelligence perspective. Egypt surprised Israel on October 6, 1973, by sending 100,000 troops. Though Israel eventually won the war, the intelligence failure could have made things far worse for them. Indeed the element of surprise had some role in Egypt scoring certain political victories by the time the war ended.

Your skepticism is impersonal. Once again, easier said than done. Ultimately, you serve the objective evidence — NOT the illusions of your infallibility or a commitment to a vendetta.

You, the skeptic, are essential, and you know it. Whether your organization recognizes it or not, you have a role to play, however unenviable. The Enron example and others I cited should give you a hint. There are other reasons why you are essential. Here are some of them —

  1. More and more information is bombarding us every day, competing for our attention
  2. Sources are multiplying, and we can’t always ascertain the quality of said information
  3. Fake news is abundant
  4. Polarization is on the rise, and so is suppression of the truth
  5. Taking a stand (or a knee, for that matter) is increasingly important
  6. Marketing is easier (and cheaper) than action — e.g., cue in greenwashing
  7. Most things are purported to be the next big thing


In a world characterized as above, it is pertinent that you critically review what you are using to arrive at decisions before taking action. Where should you or your organization devote precious resources? How can your company become a Game Changer or a Lead Checker instead of a Fad Chaser? You are custom built to help answer these questions.

And if you are not, you can use this biography to identify the people in your organization who are. Then, you can use the tools in the next section to help the skeptics (and yourself) cultivate the skill.


Your Hairy Green Balls: The Toolkit


Much of what’s there to learn about skepticism is borne out of the scientific method. I could wax eloquent about what it is. However, here’s a clear and crisp explanation.

Feynman on the Scientific Method


The person in the video above is Richard Feynman, a science educator, a storyteller, a bongo player, a safecracker, and a practical joker. In his spare time, he was also a physicist. He won the 1965 Nobel Prize in the field.

He used a technique to understand the ideas that were new to him and to gauge if they made sense. Once again, the whole scheme is better understood in his own words, verbatim. I reproduce them from a semi-autobiographical book Feynman wrote called Surely You Are Joking Mr. Feynman.

I keep making up examples. 

For instance, the mathematicians would come in with a terrific theorem, and they're all excited. As they're telling me the conditions of the theorem, I construct something which fits all the conditions. 

You know, you have a set (one ball) ­­ disjoint (two balls). Then the balls turn colors, grow hairs, or whatever, in my head as they put more conditions on. 

Finally they state the theorem, which is some dumb thing about the ball which isn't true for my hairy green ball thing, so I say, "False!"


If you look at this scheme from the perspective of Feynman’s description of the scientific method, the ball is the experiment.

The balls can take the form of examples (physical or otherwise) or thought experiments. They can also be analogies so long as they better connect ideas than, say, the Tommy Dewar quote that instigated this whole post.

The balls can also be guardrails that allow for a critical examination of the assertions (see the Baloney Detection Kits below). Overall, the balls need to be a construct that does not lead to a debilitating loss of fidelity (or information) in describing the situation at hand.

Now, you may not be a physicist trying to understand mathematical theorems. So the balls you think up would take a form very different from someone else’s. The important thing is that they need to be your balls, and you should think them up. In this regard, practice makes perfect.

That’s what you need to do, my dear friends, to find a cure for bullshit — find your hairy green balls.

I will wrap up this section by presenting the guardrail avatar of the balls for your viewing and reading pleasure. They appear in their original form — meaning you may have to adapt them to your context. Let’s begin!

Carl Sagan’s Baloney Detection Kit
— Dr. Sagan was one of the most excellent science communicators of the 20th century. He was also an astronomer. In his book, The Demon-Haunted World, Sagan wrote a chapter called The Fine Art of Baloney Detection. It is a masterclass in skepticism and talks about what to do and what not to do. Here’s a good video on the kit.

Carl Sagan’s Baloney Detection Toolkit


Michael Shermer’s Baloney Detection Kit
Shermer is a historian of science and the founder of The Skeptics Society. He has built on Dr. Sagan’s toolkit. Watch him explain the additions below.

Michael Shermer’s Baloney Detection Toolkit


The Skeptic’s Toolbox — This is a collection of resources and events curated/organized by The Center for Inquiry, a charity “dedicated to defending science and critical thinking in examining religion.”

The resources they have collected are robust and include Wikipedia’s Interactive Cognitive Bias Codex. You may recall cognitive biases from The Future Ain’t What It Used To Be. Click the button below for the toolbox.


We wrap up this section with financial forensics resources, seeing as how the Enron Scandal served as our cold open. Welcome to the tip of the iceberg.

A compilation of investment wisdom from various sources. The opening quote, attributed to Charlie Munger, is instructive.

From Marianne Jennings‘ Seven Signs of Ethical Collapse. Jim Chanos cited this as his short-seller’s checklist

A prescient July 2020 piece on Greensill by Stephen Clapham (Behind the Balance Sheet) and Marc Rubinstein (Net Interest). Click the links.


There you have it — the tools at your disposal. NOT silver bullets. Make them your own. Build on top of them. Let us know the tools you think are effective in the comments or feedback.


What’s It Mean?


Time to wrap things up. Or is it?

If you have been following The Strategist, you have realized by now that most of our concluding remarks are Anti-Conclusions. We believe that the topics we are addressing are too important to relegate to a one-off treatment.

Since we have set lofty standards for our frameworks, it is folly to think a single case study should prove the effectiveness of a particular way of working. To that extent, we would like to apply the scientific method and see if we can code more business history to our theories. Or does it expose a need for us to offer corrections or tweaks?

Hence, most of our conclusions are breadcrumbs to the next stage of discovery to put our thinking into the crucible of critical thinking. Here’s to your support for this line of action.

As always, here are the takeaways —

  • You Don’t Always Have To Be Open-Minded To Create Value — we cite Enron, Subprime Bubble, and IBM as cases when skeptics changed the game
  • Find Your Hairy Green Balls As A Cure Against Bullshit — create mental models that help you test whether an idea or information make sense
  • Crash Test Your Ideas — play the Devil’s Advocate, recruit skeptics or involve tough-but-fair stakeholders to critique your ideas


Apply these ideas and the toolkit in your work, and let us know what you think. On our part, we will keep refining these resources to suit a business context, and also address the matter of achieving a balance between open minds/free-thinking and skepticism.

Stay tuned!