The impact of the Past- Valutrics

In corporations, to prove something means to look at the past and apply one of two forms of logic—inductive or deductive—to produce a declaration that something is or is not true.

If, recently, General Motors marketing executives wanted to prove that the corporation should focus on producing and marketing full-size pickup trucks and SUVs, they could cite sales, margin, and cost and profit data from the previous ten years to inductively prove their case. Indeed, those vehicles had generated the company’s highest returns in the past. Alternatively, if executives at PepsiCo wanted to gain approval of a marketing plan, they would invoke a principle established by more than a century of continuous operation: increase market share and profits will follow as night follows day. That is deductive logic—application of a general rule derived from past experience—and Pepsi executives invoke it to prove that if their plan produces market-share growth, it will of necessity increase profits.

Both these forms of analytical logic draw on past experience to predict the future. It is no accident that the future predicted through analytical methods closely resembles the past, differing in degree but not in kind. If a system has produced a consistent result over time—either over such a long period and so universally that it becomes a deductive rule, or over enough repetitions to support a statistically significant induction—it is by definition reliable, and past data can be adduced to prove its reliability.

In an environment that relies primarily on analytical reasoning as a guide to action, past experience carries great argumentative weight. It nearly always prevails against proposals that can only be proven by future events. Because it is so well suited to satisfying the organizational demand for proof, reliability almost always trumps validity. But it is all too often a hollow victory. When the future takes a different course than the path the data predicted for it, all the proofs in the world are unavailing. Just ask the GM executives who invoked data from the recent past to make pickups and SUVs their production and marketing priority.