You can believe too much

Wishful thinking in business can be dangerous. When we really want something to happen or not happen, we can start finding arguments for the outcome we want and shut our eyes to the rest of the world.

That thought came to me on a family holiday in February 2013. I was on a cruise and recorded the video at Labadee in Haiti. You need to recharge your batteries now and then, but a conversation about technology had got me thinking.

A conversation on the ship about the cloud and storage

My daughter had been playing with another girl on the ship. At some point, I got talking to her new friend’s parents. The father worked at HP in storage, which included solutions for storing data.

He said work was getting more difficult because more customers were using cloud-based solutions. Instead of buying a server, filling it with hard drives and keeping your website, data and email yourself, you could use services such as Gmail or have your website hosted elsewhere.

I mentioned Amazon as an example of a major provider. I asked how the development affected his business. As I retold it, he thought it was crap.

Even so, he was not that worried. He was sure cloud solutions would collapse under their own weight. He pointed to outages at Amazon and the fact that Gmail was sometimes down too. At some point, he thought, customers would get tired of it and return to individual solutions.

I saw economies of scale that did not disappear with an outage

I completely disagreed. My expectation in 2013 was that the vast majority of things would become cloud-based. I did not think you had to be particularly visionary to see that.

In my view, there were major benefits to sharing computing power and storage. Perhaps one business needed the most capacity between nine and ten in the morning, while another needed it when the first business’s customers were asleep.

There was also the value of an IT department specialising in keeping exactly those kinds of systems running. That was an important part of my argument, not just that everything was located somewhere else.

We do not all generate our own electricity either

I compared it with electricity. How many of us had a petrol generator at home and made our own power? Normally, we just flicked a switch and expected it to work.

Behind it were a power station and people specialising in running it. Of course the power could go out. A lot of people would then be screwed at once, but that did not make us all buy our own generators.

Likewise, Gmail could go down, leaving us without email for a while. I did not think that risk alone would make everyone go back to their own mail server.

I used very high figures for how often electricity worked as a spoken illustration. I was not presenting an uptime measurement. The point was the basic trust in a shared supply and the specialisation behind it.

In Florida, we actually had a generator

There could be good reasons to have a backup solution. When we lived in Florida, we had a petrol generator ourselves. As I described it, a tropical storm could leave an area without power for 14 days.

I remembered the generator costing DKK 3,000–4,000, and we had 100 litres of petrol stored. We never needed it, but it was nice to know we had it.

Two weeks without a fridge, cooker, freezer and air conditioning was different from a brief outage. I compared it with 14 days without heating in winter in Denmark. You might survive it, but the nights would not be pleasant.

I also mentioned that a hospital might have duplicate systems or its own solution as a precaution. So my argument was not that everyone’s needs were the same. I just did not think the exceptions would reverse the general trend.

Wishful thinking in business can keep us stuck

In my experience, the man on the ship would not entertain the idea that the cloud would become much bigger. My interpretation was that he had dug his heels in because the development could threaten his job.

I did not know all his considerations. That was how I experienced the conversation and used it as an example. If you first decide an unwelcome development cannot happen, you can also lose the chance to prepare. You can find more of my experiences of running a business in a changing world in Iværksætter til jeg dør.

If his industry was changing, further training or a move to another part of the industry might be a better response. That was a hypothetical example of adapting, not a decision I knew he needed to make.

I had seen the same thing in discussions about house prices

I remembered a business group I had belonged to around 2008. I recalled beginning to talk about an approaching crisis as early as 2007. I also said I had videos from back then. In the recording, I was referring to my own recollection of those discussions.

Some in the group thought house prices would not fall. My point was that it could be hard to accept the possibility when you had so much at stake.

If you had a house worth ten million kroner and it fell by 40 per cent, four million would be gone in that hypothetical example. If you had borrowed heavily, it could become an unpleasant reality. That was precisely why you might have a strong desire to explain why the fall would not happen.

But the fact that a development would hurt was not an argument that it could not happen. That was what I wanted to get across.

Plan for the possibility that the world changes

People could respond differently to a risk of falling house prices. Some might consider selling and renting somewhere to live if that was what they wanted. Others could accept that the property was primarily their home and its value could fall.

Those were historical examples of possible responses in my story. I was not presenting a single calculation of what everyone ought to do with their home.

I particularly criticised the expectation that you could keep borrowing more against your house for new kitchens, holidays or a BMW. I mentioned the years from around 2003–2004 to 2008, when I felt that thinking had been very widespread.

My advice was to factor in the possibility that you might have to live on the money you actually earned. If things went the other way, it would not help to keep planning for the most comfortable outcome.

So be careful when there is something you really want. The desire can be strong enough that you stop seeing the things pointing in another direction. For me, that was the dangerous part: believing so strongly in your desired reality that you lose touch with the world around you.