07/30/2013 01:39 pm ET Updated Sep 29, 2013

Strangers in a Strange Land

Evolutionary psychology says we are strangers in a strange land -- and no country is more foreign to us than business. Most creatures that have survived are well suited to their environment. But modern people are not. Our genes are Stone Ages genes. We are like the Flintstones, stumbling around a modern city, bemused, bewildered and not a little unhappy to be there.

In 1972, two evolutionary biologists, Stephen Jay Gould of Harvard and Niles Eldredge of the American Museum of Natural History, proposed the idea of Punctuated Equilibrium. The theory says that evolution proceeds by long periods in which almost nothing happens, punctuated by short periods of rapid change.

The disappearance of the dinosaurs marks such a punctuation point. For 130 million years, they dominated the planet. Then zap! Nobody knows why they disappeared. Maybe a comet hit the earth and set off eruptions of sulfuric volcanoes; or perhaps the dinosaurs evolved into birds. Either way, it was a quite a change.

For humans, the theory goes like this. We emerged as hunter-gatherers, living in small clans, around 200,000 years ago, and evolved genes that suited such a life. A mere 7,000 years ago, agriculture took over, leading to a totally different society. Then 250 years ago, industry and commerce began to make their mark, leading in the last century or so to a totally different society, based on industry, trade, staggering scientific innovations, cities, and, after a titanic struggle, capitalism. The conditions of life were utterly transformed. Before the eighteenth century, almost everyone lived on the land, with malnutrition or starvation a constant threat. The main power sources were the horse, the cart, and human brawn. We forget the extremity and recent shift to an urban and generally prosperous society that harnesses machines and brain power, where most people work in organizations.

Our conditions of life have changed radically since the Stone Age. The evolutionary psychologists say we are still hardwired with the same circuits that were functional for clan-living hunter-gatherers. Seven thousand years, let alone 250, are just not long enough for human evolution to produce traits matching our new surroundings.

Four ways we don't suit business

First, our emotions are more powerful than our reasons. Emotions were and are the first reactions to everything seen or sensed. When pursued by a sabre-toothed tiger or a short-faced bear, sharp emotions and reactions saved lives. Today, we face different (and generally much reduced) threats, yet we have the same predisposition to rapid-fire emotional reactions. When we receive negative feedback, our natural reaction is not to think calmly about it. We react emotionally. That is why we are generally more influenced by whether we like someone than by whether they are useful to us and the organization; and why we exclude most negative feedback, even when it is crucial to our success.

Secondly, there is a whole cluster of predictably primitive behavior. On the one hand, we are geared for co-operation and specialization, which does suit our new environment. But other primitive behaviors do not. We stereotype on first impressions. Sitting around to analyze the data was not a life-enhancing strategy. We still beat our breasts, saying how wonderful we are, and hope to impress our mates -- when it generally has the opposite effect today. And we are suckers for hierarchy. Our reason may want to flatten hierarchy but our genes don't support this. Every revolution that tries to abolish hierarchy -- whether the American, French or Russian revolutions, or the modern single-status organization -- ends up replicating new forms of hierarchy, sometimes crass and obvious, sometimes more subtle but no less harmful. The twentieth century was both the 'century of the common man' but also the century of the psychopathic, millions-murdering leader, with more than 100,000,000 individuals killed by the top three lunatics: Stalin, Hitler, and Mao. Sometimes hierarchy is valuable in business. Most of the time, though, deference blindsides more than it builds -- and you certainly don't want to be on a plane where the third pilot hesitates to contradict the top one, even when a mountain is looming up fast. Conformism and hostility to out-groups are also clan traits that don't help us today.

Third, we avoid risk. A high degree of security is necessary before we take risks. Entrepreneurial society cannot flourish except in a secure and rich society, where there is a surplus to life's basic requirements. But today, we typically avoid risk, even when the odds are good. It is true, some people like taking risks, or can train their selves to do so. But they are a small minority. (This is also one reason why wealth continues to be so unequally divided.)

Finally, Stone Age people exhibited mad scrambling when under serious threat. This is why gamblers react to losses by quickly doubling up, even when the odds are stacked against them; and why untutored investors sell their best-performing shares to double up on the losers. Panic worked on the Savannah Plain. It doesn't work so well in the modern city.
So what can we do?

How to manage and mutate Stone Age man?

I think we can make some conscious changes:

• We should recognize ourselves and our colleagues as what we are: twenty-first century imposters driven by Neolithic genes, which harm our chances of success far more than they advance it.

• Let's start with ourselves. We have met the Flintstones and they are us. We should make continual and vigorous attempts to correct for our dysfunctional tendencies, such as the undue avoidance of risk, and the tendency to jump to conclusions on first impressions.

• If we wish to influence other people, we cannot just appeal to their reason. We need to engage their emotions too. This is a messy business, but one best not left to evangelists and politicians.

More easily, there are a number of structural remedies that help simulate the Stone Age clan. All other things being equal -- often masked by enormous economies of scale or accumulated experience in large organizations -- large, complex, and far-flung organizations will never work as well economically as simpler, smaller, and more compact ones:

• We should accept the evidence that the natural capacity of a cohesive unit us up to 150 people -- the size of the largest hunter-gatherer clans. When a unit holds fewer than 150 people, everyone can know everyone on first name terms. Percy Barnevik had great success at ABB by breaking up his massive empire into units of 50 people. Microsoft has gone further, with a proliferation of small units, each often having only five to ten people. Apple -- unlike Microsoft in so many ways -- has small and medium-sized project teams for its crucial innovations. And we tend to forget that, despite all the advantages of large firms with global reach, often living off their history, brands, technology and financial resources, more than half of all employees worldwide still work in small to mid-size businesses, often owned or run by a family. The trend is very much from very large to smaller organizations, a reversal of everything up to around 1965.

• The near-universal experience of managers is that it is harder to do business with sister clans in the same organization than with strangers freely chose by each clan. Stop fighting this. Stop the elusive and usually destructive search for 'synergy' -- except for cost synergy which means chopping heads. Make business units as autonomous as possible, unless there is an incredibly good reason not to.

• Finally, recognize that organizational size, complexity and remoteness lead to inefficiency because of the expectations and behavior of the people involved. Maybe you can do something about that. The wiser solution is often to cut size, complexity, and remoteness.

The more complex an organization -- the more things it does, the more customers and suppliers and products it has -- the harder it becomes to measure and reward individual contribution. Heterogeneity, too, goes against the grain, but has enormous benefits in other respects. The best solution is to have small, simple, and heterogeneous firms and business units.

So yes, we can manage and mutate Stone Age people. We manage by manipulating and correcting for our primitive instincts. We mutate by changing the business context, to capitalize on the good parts of our genetic heritage and to minimize the damage from the more harmful parts. Only by recognizing what we are up against can we raise our business game. We are strangers in a strange land, but we do not have to behave so strangely.