Modex Day 2: the faceoff between hippos and geeks

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It can be a challenge for any speaker at a conference, talking about management strategies, to sound different than the ones that came before him or her.

Technology is going to disrupt you. The old ways are no good. Listen to your employees. Listen to your customers. If you don’t do this, you’re probably doomed.  And so on.

But Andrew McAfee found a way to pull the audience in at the second day of Modex. McAfee is the co-founder and co-director of the Initiative on the Digital Economy at MIT. The second day’s keynoter rolled out what he said is his new favorite business acronym: HIPPO. He didn’t invent it, but defined it as the “Highest Paid Person’s Opinion,” though you can find other references to it standing for “the Highest Paid Person in the Office.”

“It’s the way most things get done today,” McAfee said. “There is a Hippo. He got it by his education or his glittering resume, or he made a tough decision five years earlier and he’s never going to let you forget it.”

His philosophy–although it could be a woman, McAfee used the masculine pronoun–is that when confronted with a decision to make, the Hippo’s view is that “I will look at my Hippo gut and I will make a decision and we will execute on that.”

But the Hippo has a “mortal enemy,” according to McAfee: the “geek.” The geek’s approach is to look at the evidence, and if a decision is made and then isn’t supported by the data, the strategy is discarded. Hippos tend to cling to their original decision, McAfee said.

McAfee cited a study that was essentially a look at the Geek vs. Hippo approach and found that the latter contributed little, about half the time was neutral and lot of the time was a hindrance. “The conclusion is that we need to make Hippos an endangered species when it comes to getting work done,” McAfee said, noting that the study in question a few years old and would have based its conclusions on a period when companies made decisions on the basis of “small data” rather than the big data of today. Big data would favor geeks even more.

Meanwhile, the geek outlook is tied increasingly to artificial intelligence, which McAfee said has been around for 60 years, but has made leaps forward in the last five years. McAfee said he continually hears from people who have worked with AI–geeks, presumably–that when they run processes, they’ll often say afterward “I wasn’t expecting that,” surprised at how much it performed to the upside.

His discussion of AI took care of one of the three parts of the title of his latest book: Machine Platform Crowd. The growing ability of AI is challenging previous conventional wisdom that a company should focus on its core competencies and leave other activities to machines or other subcontractors who can do them better. The problem, McAfee said, is that AI is starting to muscle in on some core competencies.

So what’s the alternative to core? It’s the crowd, or as he described it, “the people you don’t know but who are interconnected and who you can tap into.” The crowd’s accumulated knowledge, because it can be tapped using technology, increasingly is outstripping the knowledge base of a company’s core. The investing success of many quants are essentially drawing on crowd wisdom for their success, McAfee said. “The crowd is often more capable than the core,” he said.

McAfee conceded that “there is no substitute” for expertise; “it is not worth nothing,” he said, in what sounded like an attempt to sooth any damaged feelings with a room full of experts who might have been wondering about their value. He then went into a discussion of what he said were three disparate industries: mobile phones, urban transit and group exercise classes. All very different, but with a common thread: platform.

Mobile phones are a product in which the vast majority of the profits in the business are earned by Apple, and McAfee ascribed a lot of that to the iTunes and App store, which McAfee said Steve Jobs, Apple founder and CEO, originally opposed. Platform drives the profits; other makers of mobile phones don’t have that platform that provides a huge benefit to Apple.

Uber has a highly damaging corporate culture, and yet has been able to succeed. As McAfee noted, it has a great platform.

Group exercise seems like an industry that would be difficult to be disrupted by technology but McAfee showered praise on the ClassPass app, which enables users to buy cheaply into a spot in an exercise class, even if the user isn’t a member. The idea is that the gym or studio would rather take some money for the empty slot than no money, so what drives its success is the platform.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.