The Underappreciated Value of Experience and its Relevance Today

Adam Pilarski

The Underappreciated Value of Experience and its Relevance Today

Adam Pilarski

The Underappreciated Value of Experience and its Relevance Today

With a downturn on the horizon, a surfeit of new market players that have not been through one before is disconcerting,
writes Adam Pilarski, Senior Vice-President at AVITAS

Download the PDF Version – The underappreciated value of experience and its relevance today

December 26 was the anniversary of Chairman Mao’s birth. The Chinese government is pursuing a campaign of dismissing foreign influences on its population and going back to its own roots. People, especially Communist Party members, were urged not to observe Christmas but celebrate the “day after”, in memory of the “Great Leader”.

It is interesting that many people support such sentiment in China, some old and some quite young. Chairman Mao died more than 40 years ago and many people celebrating his birthday were not alive when he was born. They did not live through the “Great Leap Forward” and “Cultural Revolution” periods where, according to most estimates, between 18 million and 55 million people perished because of Mao’s policies. Their nostalgic reverence for the long-gone leader is not based on actual experiences but on some perception of what reality was back then – and a profound lack of historical knowledge.

Similarly, the Soviet Union’s longest ruling leader, Joseph Stalin, has been dead for almost 65 years and is generally blamed for at least 20 million to 25 million casualties because of his disastrous policies, including the famous “Great Purge” period. Again, a number of years ago, the population saw Stalin as an evil dictator but a sizeable number of Russians today long for “the good old days” of his reign. For people who lived through those tumultuous times, it is hard to fathom how anybody would want to return to such disastrous days.

Experience is one of the most underappreciated qualities. I remember a few decades ago lecturing in China on forecasting. The Chinese were just discovering the western business world and their analysts wanted to learn the secrets of accurate forecasting. That was how they phrased it: please give us your secret formulas for accurate forecasting. The obvious answer is that, in addition to the standard attributes (good data, quantitative skills, reasonable models, solid theoretical knowledge of how the world operates, and so on), a most important qualification is experience. Looking at developments, it is useful to learn from history and from one’s mistakes in trying to predict the future.

The unfortunate fact of life is that there are very few truly secret formulas. Experience can only come from years of doing something (read: from experience), and no shortcuts exist. Experience cannot be obtained by osmosis; it has to be learned by doing something for years and continuously improving.

The reality of life is that businesses in general do not value experience. Most big firms abolished in-house libraries and often do not collect historical data (“we are an engineering department, not a museum” is often heard). This goes along with an almost mythical belief that, with the vast proliferation of data sources and research methods on the internet, anybody can become an instant expert. Instead of utilising experience, a convenient approach is to rely on data available on the internet without realising all the pitfalls of such data.

How is this relevant to today’s world of aviation? The present situation is seen by most analysts and practitioners as very positive. The world economy is humming, the stock market is buzzing, airlines are enjoying record profits, backlogs of aircraft are at sky-high levels. What could possibly go wrong?
I have been quite outspoken for some time now about the possibility of us being in a bubble environment. I can even identify possible events that can cause the bubble to burst. What keeps me up at night, though, is the lack of experience of many of the important players in handling a possible downturn and avoiding the panic and costly mistakes that happened in the past. In the same way as the up cycle has its irrational elements, the down cycle will have potentially devastating consequences for the industry. Knowing how to handle the sudden plethora of returned aircraft contributing to an almost instantaneous drop in values is critical for survival.

There are two basic elements why this downturn may cause a lot of pain. One is the emergence of new players who have not had to face a downturn. The plethora of Chinese lessors is one example where their entire experience is only with the up cycle. The second is demographic: because we have not had a downturn for some time, the number of people still employed who are familiar with such a reality is getting smaller. Even more, there is a stubborn refusal by many players to learn from the past about what could go wrong. Not being prepared for events occurring during a downturn is a natural consequence of not accepting lessons that should have been gained from experience.

Hopefully, we will learn new lessons from the inevitable downturn which, eventually, we will be able to incorporate in the future to help the industry continue growing and prospering.

Download the PDF Version – The underappreciated value of experience and its relevance today

 

6 Comments

  1. Bob McAndrewJanuary 30, 2018

    Adam,
    Well said !!! …from an old friend with only 50 years of experience in Aviation. Trust you are well.
    Best regards,

    Bob.

    Reply

  2. Terry VieiraFebruary 05, 2018

    Adam,

    Thank you for sharing your wisdom gained from all the years of experience. I have a personal saying that goes: Within organizations, history repeats itself because those with experience (and memories) have exited the premises or are not heard.

    Best, Terry

    Reply

  3. Sean LancasterFebruary 06, 2018

    Adam,

    Thank you for publishing this. You are so right panic and fear are result of inexperience.

    Reply

  4. Ferenc KonczFebruary 06, 2018

    Dear Adam,

    As one who has witnessed the social and economic depravation of Romanian communism, I very much agree with and support your position and message and I applaud your writing.

    Unfortunately history repeats itself over and over again.

    These generational diabolic cycles start with social distress that raises charismatic, narcissistic leaders (Hitler was the representation of the majoritarian German collective subconscious) that using the pressure of collective sentiment slowly surrounds themselves with yeah-sayers, continues with the introduction of new fashions, new symbols, new gods, new ways of thinking, political correctness, that slowly pushes out the “old guard”.

    We love to talk about diversity, but that diversity should be “our way”.

    Every leadership needs to strengthen its position with symbolism. From symbolism to simplification, to oversimplification, to straight lies and trivial manipulation there are only small steps.

    It can even reach levels of political cleansing, like Stalin’s purging of the Red Army in 1937-38, the era of McCarthyism or the forthcoming purging of the FBI.

    Experience is personal and it starts with Year 1, over and over again with every generation.

    The experience of Auschwitz cannot be “transferred” to the 2nd generation, which will say “this can never happen to us”. So, after WWI (that was planned to end all wars) came WWII.

    This process goes on and on in many companies. Under various initiatives (quality, re-organization, M&A), cumulated knowledge and experience is wiped out and after a while the wheel needs to be reinvented again.

    If companies do not instate procedures to “preserve experience”, your and my expertise will get lost with time under the pressure of majoritarian beliefs (not facts).

    Business bubbles are known since the Dutch Tulip mania and are based on asymmetric information, knowledge and experience.

    It should be the regulators imposing controls for preventing systemic failures. But on the other side, businesses want to have deregulation for a “level playing field”.

    So what goes around, comes around.

    Reply

  5. John MorganFebruary 09, 2018

    Thank you Adam for highlighting a very real possibility in the market. I cannot agree more.

    Reply

  6. Stephen FortuneFebruary 15, 2018

    Adam, my first experience with a downturn was the aftermath of the First Gulf War in the early 90s where international travel came to a grinding halt. Many wide bodies lost more than 1/2 their market value in a few short years. Those who have lived through these market changes I am sure wholeheartedly. Experience will save a few of those impacted by next downturn, but the actions of the inexperienced will have wide ranging consequences that will impact all of us.

    Thanks for an insightful analysis.

    Reply

Leave a Reply