Cause and Effect The Need for Practical Logic and its …...2021/02/10 · Cause and effect that are not based on perfect logic Predictably Irrational is a popular book by Prof. Dan

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Cause and Effect – The

Need for Practical Logic and

its Boundaries

By Eli Schragenheim February 10, 2021


2021 TOCICO Webinar

The basic use of cause and effect

Suppose you’re confronted with the following effect:

We are short with material X, even though the IT system shows we have enough stock of X

There are two different actions that need to be taken: 1. Issuing a purchasing order ASAP 2. Analysis of how come this happened

The second action aims at understanding the cause for the observed effect or the objective

Here is another effect:

The government announced an immediate lockdown throughout the state

What are the short-term ramifications? What are the long term ramifications? Can we take actions to fix some of the expected damage?


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How valid is the following cause and

effect logic?

I’m charged with a crime! I’m innocent

I’m going to be acquitted!

Well maybe not. I should better employ the best defense attorney I can afford!

Will the addition of the attorney make me confident that I’ll be acquitted of a crime I didn’t commit?

What else I can do?

The state maintains a very good justice system


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Action 2 We price P1

the same as the competitors.

Objective Product P1 is sold significantly

better than its competitors.

Action 1 We develop and launch Product

P1 that includes superior features, which makes it more practical and convenient than

all its competitors.

Current State There is good demand for

the P product family.

Action 3 We radiate the

advantages of P1 to all the potential

clients in an effective way.

How confident are you that Actions 1-3 would cause the objective?

A key practical business question


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Cause and effect and TOC

Cause B

Effect C Effect A

Cause and effect was central to Goldratt even before TOC, and its Five Focusing Steps, was conceived

• Actually the basic structure was called Effect – Cause - Effect

The idea was that when we identify Effect A in reality, we could assume it is caused by Cause B, but we have to validate it by predicting the existence of Effect C

• This is based on the scientific approach that should be used in

management – according to Goldratt

• Goldratt later gave up the condition of having to validate every cause and effect relationship


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Duties of managers that might require

logical cause and effect analysis

• Two diagnostic efforts 1. Do I see signals for emerging threats?

• Both to the ongoing flows and to future initiatives

2. What to change?

• What to improve?

• Do we identify a longer term need or opportunity?

• Analyzing past mistakes and coming up with new insights for the future

• Planning and developing solutions – What to do in the short, medium and long terms

– Developing solutions / initiatives based on the diagnostic efforts

• What to change to?

• Execution / implementation – Managing the flow and dealing with all new urgent needs

– How to cause the change?


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How much cause-and-effect logic is used

for managing organizations?

• Suppose you like your company to be successful how are you going to achieve it?

• More than one way is commonly used:

– Watching other successful companies, preferably in the same business area, and copying what they do

• This actually means relying a lot on correlations

– Sensing what the market wants and using intuition to make it happen

• Some logic is used, in an inconsistent way, through intuition

– Developing a logical cause-and-effect map and follow it closely

– A free combination of the above


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More observations on the actual use of

cause and effect in organizations

• How many managers try to analyze failures and surprises?

– The usual analysis assumes the first explanation that comes to mind, without any validation

• This straight forward explanation leads to looking for who to blame

• Are there constant efforts to challenge current practices?

– Usually we find efforts to develop new products/services, and sometimes Lean and Six Sigma are used for local improvements

– But not much to challenge the logic behind current policies and practices

• The use of benchmarking and correlations between practice and success demonstrates the limited use of cause-and-effect

– Even artificial intelligence is based on identifying correlations

• While a correlation is an effect, the causality behind it is many time far from being trivial


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A riddle for us to solve

An effect in reality The use of logical cause and effect in managing

organizations is very limited!

• Key questions

1. How come not all successful people are great thinkers?

2. How can it be that the key principles of science, which is based on cause-and-effect, are not part of management?

3. Is it possible that cause-and-effect is too hard, or not truly effective, when applied to human-based organizations?


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What could go wrong when applying

logical cause and effect?

1. It could well be that there is a flaw in the logic

2. Every seemingly logical cause and effect statement could be sometimes invalid in the reality of managing organizations

– Due to uncertainty (VUCA) within the causality itself

• Behavior of people are predictable only up to a certain level

– Due to an external intervention that changes the impact

– Practically we are unable to consider everything that might disrupt achieving the objective effect

• We don’t have the time and the means to look for every possible variable

– It could be that while the causality is valid, the actual impact is smaller than expected

3. Some effects take time to cause the effect we like to have


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The categories of legitimate reservations

(CLR)

The eight categories of logical challenges to a stated logical claim:

1. Clarity

2. Entity existence

3. Causality existence

4. Predicted effect existence

5. Additional cause

6. House on fire (reverse causality)

7. Cause insufficiency

8. Tautology


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The power of the CLRs

• The objective of the CLRs is to lead us to check the validity of every claimed cause-and-effect

– It leads people to both check their own cause-and-effects rationale and also opens the door to be challenged by someone else

– Thus, it reduces the probability of having a flaw in the logic

– It protects, up to a point, from irrelevant emotions and beliefs, especially when a group analyzes a situation that seems “complex”

• It requires that all the participants are aware of the CLRs and use only these terms to challenge the proposed logic

• What the CLRs might miss is the impact of uncertainty, the amount of the impact and the timing when the resulting effect should be seen


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A special look on Insufficiency

• When applied practical logic with people with good-enough logical mind, insufficiency is the most frequent cause for failing logical claims

Goldratt has observes:

We can never prove sufficiency!

• This example is definitely insufficient:



The state maintains a very good justice system

I employ the best attorney

And we should still be aware that the objective might not be reached


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Cause and effect that are not based on

perfect logic

Predictably Irrational is a popular book by Prof. Dan Ariely outlining behaviors that seem to be irrational But, these behaviors can be predicted, and thus be used to manipulate people

Being predictable it is possible to draw cause-and-effect that are valid most times Being irrational logical people might not fully understand the causality, but they are able to note the correlation And they observe what is the cause and what is the effect as reflected in reality

This means we can, on the evidence of correlations, to accept the existence of cause-and-effect, even though we don’t understand,

or don’t accept, the explanation of the cause!


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Dealing with probable cause-and-

effect

• We have to internalize the fact that we live in uncertainty

• Using cause-and-effect for human-based systems cannot guaranty the expected outcome!

• This means that we have to strive for such an analysis that has high enough probability of being right!

– This is the best we can achieve

– We should actively look for any flaw in our logic using the CLRs

– We should do our best to estimate the potential impact of uncertainty

– We better realize that there is a certain chance of being wrong

• We should try to identify early signals pointing to increased probability that the predicted effects might not happen


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The amount of impact of a specific cause

on the resulting effect

• A big supermarket chain has, at any given point in time, availability on the shelf of 88-90%

– How confident are you that 95% availability would increase sales?

– How much more sales should the chain expect?

– Some points to consider:

• Not every time a customer doesn’t find the specific item the store has lost the sale

– There are replacing products

– and when the item is not urgent the customer might wait for next time

• Would customers move to another chain due to the poor availability of items?

– Are customers able to run statistics to prove that another chain maintains better availability?


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Long layers of cause-and-effect

• In order to detail the causality it is sometimes required to go through several layers

• When we consider the uncertainty that might affect several cause-effect levels – the impact of uncertainty might be bigger than what we’ve assumed

– Of course, not every layer has the same impact of uncertainty

– In the example, the success of the attorney is not certain, and even when it is valid the impact on the result is still uncertain



Conclusion: the evidence against me is either weak or based on lies

I have a very good attorney

My attorney exposes the lies and the weakness of the evidence

There is evidence against me


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Signals and quick corrections

• Having a logical map with the appropriate detail, allows managers to be prepared to any case where some cause-and-effect elements would fail in a specific situation

– It could be a diagnostic analysis, where an assumed cause is probably wrong

– Or a future plan based on the assumption that certain actions cause the predicted effect

– Being prepared opens the door to insert signals that warn that a specific assumption is invalid

– Coming back to the original logic and fixing it


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The obstacles of using cause-and-effect

logic

• The requirement to outline the full logic, exposing them to the CLRs, with a special emphasis of estimating the level of sufficiency, poses a key obstacle

– It is time consuming

• But, it could be shortened if we relax criticism that doesn’t truly point to a significant flaw in the logic – we have to focus on what truly matters

– We need to be certain the process brings benefits!

• Another major obstacle is ego – Hating to expose our own mistakes

– Hating ideas of other people

• The inherent uncertainty questions even more the benefits

– So we need good cause-and-effect logic to handle that obstacle


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Logic versus intuition

• Does intuition effectively represents “quick logic”?

• The advantage of making intuitive decisions are:

– Intuition is the natural way for a quick response to an urgent situation

– Intuition relies of information, imprecise but still partially valid, which is not available in other channels

• But, its logical connections cannot be checked, unless they are translated into clear cause-and-effect

– Intuition is very personal, exposed to biases, and is useless to criticize

• Logical cause-and-effect can incorporate intuitive-information, but put it within the cause-and-effect map

– and be exposed to CLRs criticism

• It is my view that intuition is mainly a key provider of information, which doesn’t exist elsewhere


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Emotions and logic

• Emotions determine the decisions we make

– Most notably, what we want cannot be determined by logic – it is based on our emotions

– But logic could and should be the key control mechanism, letting us understand the consequences

– When the decision is made by a group the role of logic becomes even more critical

• We should use cause-and-effect analysis to understand better the consequences of various emotions

– Including the emotions generated when we, or others, challenge an old paradigm that has been accepted for long time


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Understanding other people or

organizations

• Outlining the key cause-and-effect of others could be of enormous value

– Predicting their behavior, rational or irrational

– But, to do it right we have to understand the environment

– Good salespeople sense the emotions of people they try to sell to

• But, they many times lack the holistic view of the organization and the pressures their contact has to live with

Understanding the cause-and-effect of the business of the clients should yield major consequences


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The value of systematic use of cause-

and-effect

• In spite of the impact of uncertainty using systematic logic leads to the highest practical probability of success

• Same goes for efforts to understand the core cause(s) of current undesired effects

• We may need to upgrade the thinking tools to openly include and consider the impact of uncertainty

• At the very least assessing the impact of uncertainty

• Also adding the right buffers at the right places

• Learning from surprises leads to recognizing flawed paradigms and being able to update them

• And by that get a considerable advantage

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Eli Schragenheim Eli Schragenheim contact details:

[email protected]

Skype ID: elischragenheim

Mobile: +972 52 2446 423

Blog: www.elischragenheim.com

Feel free to approach me with any question, idea or wish for support

mailto:[email protected]

http://www.elischragenheim.com/

Documents

Cause and Effect The Need for Practical Logic and its …...2021/02/10 · Cause and effect that are not based on perfect logic Predictably Irrational is a popular book by Prof. Dan