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- this one mistake cost AT&T $12.6 billion...
this one mistake cost AT&T $12.6 billion...
And you've probably done it too.
558 Words | 2 min 12 Sec Read
It's called “Assumed Constraints”
Ever seen elephants in a safari/zoo?
Have you noticed how they're restrained?
It's often nothing more than a metal chain bound to a peg in the ground.
Nothing for a 12,000-pound beast who wants to break loose, right?
But here's the thing:
When that elephant was a baby, the same chain & peg were used to hold it in place.
Back then, that was sufficient to restrain it.
When the baby elephant would try and break away, the metal would cut into its skin, wounding it...
As it grows, it never forgets the pain of the chain (elephants never forget...)
So it thinks it's impossible to break away.
These are "assumed constraints" – irrational, limiting beliefs.
But if you're not an elephant, what does this matter?
Let's look at some biz examples...
1. McKinsey-AT&T's $12.6 Billion Misstep
In the 1980s, leading consultancy firm McKinsey advised AT&T against diving into the cellular market, predicting a mere 900,000 users by 2000.
Come 2000, 100 times that number were using cellphones, leaving AT&T to play catch-up by acquiring McCaw Cellular for a staggering $12.6 billion.
The error? Failing to anticipate the rate of technological adoption and its potential impact.
Lesson: Avoid anchoring decisions based on past or present states. The future often holds exponential growth curves that defy current understanding.
2. Underestimating Uber’s Potential
Professor Aswath Damodaran, a valuation expert, once priced Uber at $5.9 billion, pigeonholing it within the taxi market's boundaries.
Today, Uber’s influence stretches beyond taxis, reshaping urban mobility and delivery services.
The error? Limiting the potential of a disruptive model to the constraints of an existing one.
Lesson: A disruptor often creates a new market or redefines an existing one. Don't evaluate them using legacy market standards.
3. The Evolution of Computers
IBM's Thomas Watson couldn't fathom a world with more than five computers.
Fast forward, Bill Gates believed 640Kb of memory would suffice for everyone.
Both were monumental misjudgments in the rapidly advancing tech sector.
The error? Underestimating the power and trajectory of technological progress.
Lesson: In dynamic sectors, always prepare for unforeseen innovations and adaptabilities.
Avoiding The Pitfalls of Assumed Constraints
Challenge Assumptions Regularly: Regularly review and question the foundational beliefs underpinning your business or project. Be especially wary of "this is how it's always been done" thinking.
Break Down The Problem: Segment the problem into smaller pieces. By examining each part, you can isolate and question individual assumptions, leading to a more comprehensive solution.
Think Exponentially, Not Linearly: Rapid technological and societal shifts mean that growth and change often don't follow linear trajectories. Be open to exponential possibilities.
Final Thought:
In a rapidly evolving world, businesses and individuals must remain agile, continuously questioning and updating their beliefs and assumptions.
This adaptability not only ensures survival but also paves the way for unprecedented growth and success.
Remember: assumptions, if unchecked, can be costly.
Always strive to see beyond the chain.
I'll leave you with this quote…
“Making assumptions simply means believing things are a certain way with little or no evidence that shows you are correct, and you can see at once how this can lead to terrible trouble”
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