A Different Kind of Trifecta

Media274​In the July 5th, 2014 issue of The Economist, Buttonwood​ had an interesting column entitled, “Three’s a Crowd.”  It introduced​ me to the word (if not the concept) of a trilemma.

A trilemma is a triad of options, characteristic, or things in general which cannot all be had at once – the best you can do is choose two of the three.  Buttonwood gives a famous economic example which pertains to monetary regimes:  any country which controls its own currency can have a fixed exchange rate, free movement of capital, or an independent monetary policy – pick two out of three.  The gold standard allowed for freely flowing capital and fixed rates, but monetary policy was a slave to whatever it took to maintain a fixed price for gold in that currency.  The Bretton Woods agreement fixed rates and allowed independent monetary policy, but capital could not flow freely; controls had to be implemented.  These days, countries (and the EU) control their own monetary policies, and capital flows like water around the world, but exchange rates change from day to day or even minute to minute.

Another example:  one often hears that Israel can be a democracy, a Jewish state, or it can continue to occupy Palestinian territory – choose two out ofMedia325

three.  This is because of demographic trends; the Muslim population in the total territory currently controlled by Israel is growing much faster than the Jewish population.  Assuming that the Israelis want their country to be a democracy and a Jewish state, the only way to achieve this is a two-state solution.

Once you get the concept of the trilemma, you find that the world is full of them.  When Hugo Chavez was running Venezuela, a Venezuelan friend of mine told me that Venezuelans could be two out of three things:  intelligent, honest, or for Chavez.

A geo-political one:  Dani Rodrik of Harvard declares that countries can pursue democracy, maintain national self-determination, or promote economic globalization – pick two of three.  This is because accepting globalization means that some laws, policies, and rules must be set internationally; therefore, you can only have democracy and globalization if people are willing to give up the notion of an independent nation-state (at least to some degree).

In health care (according to Buttonwood), it’s the “three Cs”: cost, coverage, and choice.  Britain has universal coverage at a reasonable cost, but under the National Health, choice is limited.  In the U.S. choice is paramount, but only by enduring the highest costs (by far) in the world and leaving a significant portion of the population uncovered (so we’re only getting one out of three, not even two).

A trilemma of special interest to me is one concerning energy:  everyone wants cheap, widely available, environmentally friendly energy.  Well, pick two out of three.  Historically, we’ve gone for “cheap” and “widely available.”  I think people are going to have to get used to the idea of “widely available” and “environmentally friendly.”  We are going to have to start paying the true price of energy because costs don’t vanish via pollution – they just get transferred, either onto whomever is downwind/downstream of you, or onto future generations.  Thus, my arguments for a tax on carbon.

At their core, trilemmas are all about tradeoffs between objectives.  Sometimes it’s not so much “pick two and forego the third” as it is “how much of A and/or B are you willing to give up in order to get some minimally acceptable amount of C?”  Quite a large portion of strategy development consists of making tradeoff decisions such as these.  It’s not easy.  As often as not, if two partners or two divisions in a company – or even two people – are talking past each other, each claiming that the other is making no sense, it’s because they are focused on two different, competing objectives rather than the overall primary objective.  This is one reason we like to use the Objectives Hierarchy – it makes all objectives explicit and displays their messy, competitive, and even conflicting relationships to one another.  As a tool for gaining clarity around what is important to whom – and why – the Objectives Hierarchy is fantastic.  (In November of 2013, I wrote a blog post called, “Tradeoffs” in which I put forward the somewhat immodestly titled, “Humanity’s Objectives Hierarchy”)​.

But back to trilemmas in general.  Anyone who has ever worked on a project is familiar with the old adage, “you can have it done well, done fast, or done cheaply – pick two out of three.”  I have to admit, though, I’ve never understood how the combination of done well and done cheaply was supposed to work – by taking longer?  When was the last time that a project that took longer cost less?  Maybe this is a “two-legged” trilemma:  maybe you can choose “well” and “fast,” or you can choose “fast” and “cheap,” but you can’t choose “well” and “cheap?”

I would be interested to hear other examples of trilemmas, three-legged or two-legged (example:  I can be a couch potato, eat as much as I want, or maintain my current weight.  Two out of three).  Send them on in!

 

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