I realized that I had mistakenly hit F7 and reset all the workstations in the embassy. A team of translators and US diplomats had been readying the first report for President Reagan at the time I turned off the computer systems.
As this was a very early computer with limited backup capability, hours of work of dozens of experts had been lost when I inadvertently closed down the computer.
The reports that were being compiled in the US Embassy at the time of my error were meant to be shared with the South Korean government. As the team in Tokyo went back to rewriting the report—with clear evidence that the plane had been downed in the Sea of Japan—the South Korean government, working from flawed data, announced that the airliner had simply been forced to land in Russian territory and that all passengers and crew were safe.
That Korean announcement and the slow response by the US President—both caused by delayed real information—caused decades of conspiracy theories.
When I asked my managers what they needed, I unknowingly gamified the budgeting process. The game worked as follows: The objective was for each manager to build the largest organization possible and thereby expand the importance of his function. Through the transitive property of status, he could increase his own importance as well. Now you may be thinking, “That wouldn’t happen in my company. Most of my staff would never play that game.” Well, that’s the beauty of the game. It only takes one player to opt in, because once someone starts playing, everybody is going in — and they are going in hard.
Gameplay quickly becomes sophisticated as managers develop clever strategies and tactics to improve their chances for winning. One common game technique is to dramatically expand the scope of the goals: “When you said that you wanted to increase our market presence, I naturally assumed that you meant globally. Surely, you wouldn’t want me to take a U.S.-centric view.” To really motivate the CEO, another great technique involves claiming dire circumstances if the company fails to achieve its metrics: “If we don’t increase sales by 500% and our top competitor does, we will fall behind. If we fall behind, we will no longer be No. 1. If we’re not No. 1, then we won’t be able to hire the best people, command the best prices, or build the best product, and we will spin into a death spiral.” Never mind the fact that there is almost no chance that your competitor will grow 500% this year.
An excellent constraining principle when planning your budget is the preservation of cultural cohesion. The enemy of cultural cohesion is super-fast headcount growth. Companies that grow faster than doubling their headcount annually tend to have serious cultural drift, even if they do a great job of onboarding new employees and training them. Sometimes this kind of growth is necessary and manageable in certain functions like sales, but is usually counterproductive in other areas where internal communication is critical like engineering and marketing. If you quadruple your engineering headcount in a year, you will likely have less absolute throughput than if you doubled headcount. As an added bonus, you will burn way more cash. Even worse, you will lose cultural consistency as new people with little guidance will come in with their own way of doing things that doesn’t match your way of doing things. Note that this does not apply to you if you have very small numbers. It’s fine to grow engineering from one to four people or from two to eight. However, if you try to grow from 50 to 200, you will cause major issues if you are not extremely careful.