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
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.