Clarke Interviews Eli Goldratt about Isn’t It Obvious

(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

CC: Hi Eli, it’s Clarke Ching here, I’ve just clicked record, and we’re all go now. Can I just
check: you’re in Amsterdam today, is that right?

EG: Yes.

CC: Do you live in Amsterdam?

EG: No. First of all, it’s not Amsterdam. It’s Roelofarendsveen. It’s a small village near
Schiphol. And no, I’m not living here, but this is my main office. I live in Israel.

CC: Ah, right, right. You do live in Israel. I must say, I love Amsterdam but I’ve not been to
Israel… yet!

EG: You’ve missed something!

CC: I know. I was talking to Eli Schragenheim at one stage, and I zoomed in on Google Earth to
where he was living. It looked like a very nice place. Anyway, let’s get straight to what
everyone wants to hear about, which is your new book. I read it about two or three weeks
ago, but, just this morning, the actual paper version arrived with the post. It’s called ‘Isn’t
It Obvious?’, it’s by yourself and you have two co-authors – which I might come back to
later. But I wonder if you could perhaps just tell us a bit, or as much as you like, about the
book. Why you wrote it.

EG: Why I wrote it? You know, sometimes you don’t have a choice. A book is coming, and
grabs you in the throat, and says “Write me!”.

CC: Fair enough! I noticed that you touched a little bit on the topic of this: the retail solution in
‘The Choice’. ‘Isn’t It Obvious’ is an elaboration of what was in ‘The Choice’, and it looks
to me, the way I read it, it’s the distribution solution that you’ve been writing and talking
about for a long time now, but you’ve written this book from the retailer’s point of view.

EG: Correct. As a matter of fact, I do expect, that, if we wrote the book appropriately, every
reader, on the first reading, will be able to distil three main messages, which I hope are
quite clear in the book. But, first of all, let’s talk about the title of the book. ‘Isn’t It
Obvious?’ is the criterion that every scientist is using in order to know whether or not he
reached a good solution. You are working on a problem, you can work on it for years, and
then, one morning, you wake up and say to yourself “Oh, it’s right in front of my nose!
How didn’t I pay attention to it. Isn’t it obvious!”. And only then you know that you have
found a good solution. If you don’t have this sensation, suspect that your solution is not
good enough. This is not to be confused with: it was obvious to find it. As a matter of fact,
these solutions are the most difficult ones to find, but, once you find them, you know that
they are there. So, basically, the message is: if you agree that it’s obvious, then you know it
will work. At the same time, the real message is: keep on thinking about the solution until
you reach this level. Only then you know that you reached a good solution.

And, as you pointed out, what I’m using in this book is solutions that I’ve been talking
about for years, and have tried, and I know to what extent it’s working, and this is a

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solution for retail. I’m flabbergasted by the fact that retail still believes that the key is to
find a better way to forecast! And they are spending an enormous amount of money on
these– I’ll call them crystal balls, though today they are disguised as computer programs –
to get a better forecast. And this is a huge industry! And nobody is doing even the most
obvious check before they buy another module of forecasting. Let’s just take the past data
of, let’s say, two years ago, load it in the computer, and see what the computer’s
forecasting module will tell you about what should have happened a year ago, and check it
with what really happened, just to find out that all these new forecasting modules are as
bad as the previous ones. And it’s about time to realize there is no way to accurately
forecast consumption on an SKU level. It’s theoretically impossible. So the only way out is
to reduce dramatically our dependency on forecast. And this is the solution that I have been
talking about for so long in distribution. So what I’ve tried to portray in this book is almost
obvious. How clear is this solution, how well it works, and, more than that, that the results
that are coming when you implement this solution is not a small improvement and it’s not a
10 per cent improvement. It’s really propelling the performance of retail to a new level.

The way that I wrote it is a little bit different than what I’ve done in ‘The Goal’, which is,
in this book there is no Jonah. In other words, people are learning it from their own
experiences. There is no smart, wise man who gives a solution. You’re learning the
solution directly from experience, and that’s why I believe that if ‘The Goal’ had the
impact on manufacturing as it was, this book will have an even bigger impact on retailing.
An even bigger impact, hopefully. So, one message of the book is a retail solution. A
solution for retail in a way that I hope that people cannot ignore anymore.

CC: Actually, if I can just say that I read it and it was one of the clearest, quickest reads I’ve
ever read. I think you’ve succeeded there brilliantly.

EG: No, no, no, no! I will not take the credit here. Here the credit must go to the two co-authors
that I had.

CC: Ilan and Joe? Ilan Eshkoli and Joe LeerBrown

EG: Ilan and Joe, yes. You see, ‘The Goal’ was so readable not because of me, but because of
Jeff Cox. The only problem was that it was – how shall I say it – painful to write it. You’re
writing with a gifted writer, like Jeff Cox is, and after he writes, let’s say, two drafts and he
writes it a third time, and he’s happy with what he has. And then to come and say, “No, it’s
not good enough. Here and here it’s not portraying it accurately enough, and here it is not
precisely logical, and write it again, and write it again.” And what is happening is you start
to fight! And, after we finished writing ‘The Goal’, I said “Never again!”.

CC: Really?

EG: Oh yes. Never again. It was about 13 months that it took us. The first few months were
nice. After that, we were fighting about the problem of rewrite and rewrite. Maybe I’m a
perfectionist, but that’s what I am. So I said “I’m not going to work anymore with writers!”
So I wrote on my own, but then my problem is that I’m cramming much too much in each
chapter, and that’s why it’s not as readable. So, this time, I decided “Let me try again.”.

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But, I tried something new. Rather than working with professional writers of books, I
decided to try to write with profession writers of TV and movies. That’s what Ilan and Joe
are. You see, my assumption was that, in movies, the one who writes the script has to
change it and change it even on the day of the shooting.

CC: Yes, Yes of course.

EG: So they would have, I hoped, much less inertia to re-write all the time and to polish, and
that’s exactly what happened.

CC: And that’s probably why the book reads so quickly as well, because that kind of format is
much quicker by nature, isn’t it?

EG: Correct. And, if you notice, for example, there are no pages where anybody is thinking to
himself. Because, if a person thinks for half a page, the camera doesn’t know how to work
the shoot. Or, when there is a dialogue, the heroes are moving, so the camera will have to
move!

CC: Yes, Actually that does explain something for me, because, when I read this book, I read it
just so quickly. I just raced through it, and I was actually at the end of it going, “Wow I got
so much information out of it!” I almost feel robbed that I wasn’t reading it a day or two
later! So they did a very good job in that respect.

EG: Very good job. But, at the same time, you have to realize there isn’t a single chapter there
that was not re-written at least five times! There is one chapter that was re-written sixteen
times! There were also chapters that went to the basket, even though they were very good,
just because they interrupted the smooth rhythm of the book.

CC: Yes, yes. I can understand it totally.

EG: And here I am really grateful for these two people who were so accommodating, and didn’t
have any inertia to re-write it, and re-write it until all three of us felt very good with the
outcome. So the fact that it’s so readable, I would say that all the credit should go to them.

CC: Very good. So, you were saying that the retail solution was the first of three points.

EG: Yes, correct.

CC: And then I interrupted!

EG: The other two points are a little bit more subtle. One point that I wanted to bring across –
and I think that I’ve already started to do it in ‘The Goal’ and in all my books, but in this
book we put so much more emphasis on it – is that in the formal text books, and certainly
in the universities, I think that there is not enough emphasis on the role of the informal
system. And to what extent the informal system is not just an integral part of running a
business, but to what extent it is important in running a business. And I’m talking about the
fact that there are relationships between people that allow them to not follow the formula
system and, because of it, to improve the performance so much. I’m talking about family

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relationships and I’m talking about friendship, and to what extent this is key in running a
business.

CC: Like the relationship between Paul and Roger?

EG: Roger, for example. Without that, it wouldn’t have happened.

CC: No, it couldn’t have.

EG: And such things do exist in reality, in every company. Why don’t we pay enough attention
to it? Why don’t we understand how important it is to encourage it, to support it. So that
was the other thing that I put throughout the book; I wanted to show that the informal
system is almost as important as the formal system.

CC: Okay, I can see that, actually. You’re right, it is subtle. I hadn’t realized, but, throughout
the entire book, everything gets done apart from one bit where Paul goes to his boss. Is his
name Martin, I think?

EG: Yes.

CC: And he actually starts working the formal system at that stage. Did you start writing the
book with that intention of putting him in such a…?

EG: Absolutely, absolutely. Otherwise I could not write it. Absolutely. And the third message,
which I hope that everyone that reads it will get, is to what extent, if you are implementing
a good solution and it works and you get now much better results, to what extent your mind
should be not on continuing to polish it – because then you will reach diminishing returns –
but to realize that this solution that you’ve implemented is really elevating the company
into a new level. It gives a much bigger and better platform to do the next jump, which, by
definition, since the platform is bigger, the next jump is bigger than the previous one. And
not to fall into the trap of saying “We’re already the best in the industry. We are number
one, so we’ve reached it.” No! The opposite is true. Which is: the better you become, the
bigger the next jump can be, if you just allow yourself not to be trapped in the box that you
put yourself in. So what I’ve done in this book is: I’ve done three such jumps. Every time
you think “That’s it!”; no, no, no, no, it’s just the beginning, And that’s why the last
sentence of the book is ‘Even the sky is not the limit’. And the reader understands that
that’s correct.

CC: It is, too. Yes, I’m just looking at that page now.

EG: The idea is, my idea is to write six such books. As a matter of fact, those who know TOC
know very well that what I’ve done here is nothing but taking one of the standard S&T
trees and to turn it into a novel. Now, there are six S&T trees for the various segments of
the industry. So this one is for retail. But there are five more, which my intention now is to
find excellent writers and to write them one at a time. So the next book will be called, most
probably, ‘Isn’t It Obvious 2?’ and then ‘Isn’t It Obvious 3?’ Each one covering a totally
different section of the industry, but with the same ideas, which are every huge step, that
really changes and really elevates the company to another level of performance is just the

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platform for another jump, for another jump which never ends. And that’s what I want
people to realize.

CC: Okay, that’s interesting. One of the things that I noticed in it, which I thought might have
been another theme – actually I suspect it might have been one of the three – was to do
with the current economical situation. How by reducing the amount of inventory and the
amount of cash they needed, that was (it just seems very relevant now) the less cash you
need to run you business.

EG: It’s not just the less cash. As a matter of fact, if you are talking about the current situation,
this financial crisis that’s after this super sophistication that was so stupid and created the
financial meltdown, it turned into an economical crisis only because there were too many
inventories in retail. If there were not these mountains of inventories in retail, we would
have passed through it without any trace of economical crisis. But no, this was not my
intention, because, when I’m writing such a book, I’m not writing it for this year.

CC: This is an evergreen, isn’t it?

EG: Yes, correct. Correct.

CC: And here I was, I thought I was clever, because I just…

EG: Yes, it’s more relevant now than ever, but this wasn’t the intention.

CC: Okay, that’s good. So you’re here with three points. Now I’m familiar, passingly, I suppose
– if that’s actually a word – with the S&T trees. I know that project management is one of
them. Is that right?

EG: Right.

CC: So, would you intend doing a rewrite effectively of ‘Critical Chain’ with the new
knowledge that’s out now, in ‘Isn’t It Obvious 5’ say, or…?

EG: Yes, correct. As a matter of fact, the book that we’ve started to work on right now – and we
are really well advanced into it – is not a critical chain, but the ‘make to order’
environment. In other words, we are going back to the environment that is described in
‘The Goal’ in order to put all the new knowledge in. And, if you notice, ‘The Goal’ is
finishing much too early. In ‘The Goal’ there isn’t a clear way to show that the sky is not
the limit. In other words, I have to take it through three jumps, where what ‘The Goal’ has
shown is just half of the first one.

CC: Aha. Actually, here you did write; he’s got to the point where he’s rescued his factory.
They’ve found new capabilities, but they’ve not really exploited them beyond the one
factory.

EG: Not at all. Even that factory was not really capitalized. Anyhow, the real thing is the three
other messages that I’m afraid that people will not distil after the first reading. And then,

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maybe, if you highlight it, people will get it, even in the first reading. Are you interested in
hearing about them?

CC: I suspect I probably am, Eli, yes!

EG: The first one is: how do you invent? Invent powerful solutions to your real problems, to
your environment. And most people think that, maybe, you have to be born with this ability
to invent. What I’ve tried to show here is that every good manager is a fantastic inventor.
But you don’t pay attention to it, and you waste all the inventions. Let me explain a little
bit what I mean, okay? Every manager faces emergencies. And he reacts to emergencies.
What can he do? As a matter of fact, a good manager will react quite well to emergencies,
and he solves the problem. And what we have to realize is: whenever we react to an
emergency we actually deviate from the standard rules. Always! What people do not pay
attention to is that you don’t just deviate from the standard rules, you are actually following
a different set of rules. And the point is: after the emergency is over, why won’t you take
the time to verbalize the new set of rules that you just followed? Then think on the
following; if I would have used this set of rules not just in emergencies, but in the normal
day to day, what damages will happen? What undesirable effects will result, and how can I
prevent them? Because, if you will now augment this new set of rules with what should be
happening, in order that, when I’m using them in day to day life at the normal time they do
not lead to anything negative, what you are ending up with is a set of rules that is so much
better than your current rules. So much better, that even emergencies are handled as if there
is no emergency. And that’s what I’ve shown in this book, if you notice. Okay, a pipe is
broken. Emergency. Fine, you react to it. But then what is even Paul saying? He’s dying to
go back to normal! Wait a minute, pay attention. Look at how much the situation is better
now. Think, how can you use it on a daily basis, because then you get this huge
improvement. And that’s what’s happening in this book.

CC: It sounds like you’ve done it deliberately in the book.

EG: Absolutely.

CC: As a plot device, I thought that the emergency with the pipes at the beginning was
ingenious, and I thought your co-authors had done a fantastic job of coming up with that,
because it just works so well. But, of course, that was planned, is what you’re saying here.

EG: Absolutely! But what I’m saying is: this is always the case. For example, take ‘The Goal’.
In the first chapter, he faces an emergency. As a matter of fact, the emergency is so big that
the head of the division comes to say, “There is an order which you are late on. You must
expedite it!” So they expedite it. And he’s bitching and moaning about it. At the end of the
book he’s doing exactly the same for the big order that saves his bottom line. If he would
have just stopped after the first chapter and said, “I’ve deviated from the rules of how we
are running a plant. It did work, I did send the order earlier. What are the new rules that I’m
following?”, he would have saved the whole book, and he would have invented it rather
than Jonah. Because, let’s face it, the way that he handled his big order at the end is exactly
the same concept that he handled the emergency in the first chapter. It’s always the case.
So, if people would just pay attention to it, everyone becomes an inventor.

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CC: That’s intriguing. We have the same problem. My specialty is software development, and
we have the same pattern. It goes on and on, over and over again in projects. They get to
the end, they realize they can’t finish on time, and then they do what they should have done
to start with.

EG: Yes. But there, distil the new rules that you are actually following in the emergency. Trim
the negative ramifications of them, and then you have the new system. This always works.

CC: Yes, yes. And it’s just amazing, though. Your advice is very good, but very, very few
people do it.

EG: Almost nobody! Almost nobody. Everybody will just want to go back to normal.

CC: Yup. I had a medical emergency three years ago where I ended up in hospital and nearly
died, but I was very, very healthy for six months afterwards! And then, of course, slowly
reverted back to the old ways. And I guess it’s the same.

EG: Yes, it’s the same. Well, this is the second message which I’ve tried to show: that, even if
you do it once and as long as you don’t fall into the box, the sky is not the limit, because
there is only one emergency in the whole book! **

CC: Yes, yes there is. Everything flowed very elegantly after that.

EG: Correct.

CC: Can I ask, with this book, was it based on – I know you’ve done the solution which is
embedded in the real world – but was this based on any particular company when you were
writing it?

EG: No, no, no, no. Let’s put it this way, okay? We have tried this idea in dozens of companies,
so the knowledge, the detailed knowledge of exactly how to do it and so on, was evolving
through the years. So this book is just the accumulation of this knowledge.

CC: Right.

EG: But it’s not any particular company. It’s not like in ‘The Goal’, where I based it on three
companies that I’ve dealt with at that time. So I see these three companies; here it’s dozens.
The experience here is enormous. And, by the way, the numbers in the book are accurate,
but conservative relative to reality.

CC: Okay.

EG: Those are the minimum numbers that we ever got.

CC: Right, right. Why is that? Is it that you didn’t want to sound too crazy?

EG: Anyhow, nobody will believe the numbers!

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CC: That makes good sense, okay. I understand that. Can I come back; you said there were
three points.

EG: Yes.

CC: That the first one was, how do you invent.

EG: How do you invent, yes.

CC: The second one, i.e. …

EG: The second one is much, much different. It’s different, but in many senses it’s broader,
which is the whole subject of resistance to change.

CC: Now we’re cookin’.

EG: You know that I was adamant against ‘People resist change!’ and all this mumbo jumbo.
Yes, of course people resist change when they have to resist it. And people embrace change
when they have to embrace it. As a matter of fact, look at the usual thing like, people want
to get married even though they know that this change will change all their life, they still
want it. So they are not born resisting change. As a matter of fact, what people are doing is
looking on the proposed change, and they evaluate for themselves if it’s good or bad. And,
remember, a major part of the good or bad is the risk involved, the unknown involved. This
influences the decision dramatically. But, when they come to the conclusion that it is good,
they embrace it, and when they come to the conclusion that it’s bad, they resist it! What is
important to realize is that, when we come to judge any suggestion if it’s good or bad, we
are judging it according to some patterns that we have in our minds. Patterns that came
from our own experience. These patterns, many times, are not correct. And if you notice, in
the book, what I’m trying to show is some very important things like: the first one to resist
change is the inventor himself. Paul is resisting his own change. He just wants to go back to
normal. And, if you read very carefully why, there are patterns in his head that say “Ah!
All the good results that I’m seeing are just a fluke.”

CC: Yes, yes.

EG: Now, where is it coming from? And, as a matter of fact, our own patterns are coming from
two different things. One is that, when we have a major problem that really hurts us and
we’ve tried and we’ve tried, and we cannot rectify it, protective mechanisms are coming
into the game. And these protective mechanisms are actually that we’ve become blind to
the problem. We accept it as part of life, it’s not a problem anymore. These are very wrong
patterns. Now, if you notice, the first one that I’m talking about is: how much sales are lost
due to shortages? Paul knows very well that about 25 per cent of the SKUs that were
supposed to be in his shop are missing. But how many sales are lost? And, if you notice,
he’s totally convinced that it’s only two or three per cent. And this is not just Paul, this is
almost every retailer that I’ve talked to. Now, when you start to analyze, it’s crazy to think
that it’s only two or three per cent. Because: why are these items missing? Because they are
not selling? Or because they are selling more than the average that are missing? So if 20

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per cent of the better running items are missing, how can you say that sales were impacted
only 2 per cent.

CC: Yes!

EG: That’s the defensive mechanism patterns that exist in people’s heads, which block them
from judging the value of the change. This is one type of pattern. The other type of pattern
is that, when you are used to some environment, you will draw patterns from it. And you
will not pay attention to the fact that there are other environments. For example, the second
pattern that blocks Paul is that he says “If sales are going up by so much, how much did the
profit go up? I know that I’m making six per cent profit and this means that, if sales went
up by X, my profit went up by this X times the profitability that I have, which is only six
per cent of it.” What is it based on? It’s based on the fact that usually, when sales go up, all
the expenses that are associated are going up at the same rate.

CC: Right.

EG: What happens when sales go up and expenses stay exactly the same? Then the impact on
profit is huge.

CC: Enormous, yes.

EG: But he doesn’t see it anymore, because the pattern is there.

CC: And he can’t see it, because he doesn’t have the lens. He just doesn’t have the experience.

EG: “He can’t think.”, “If he would think about it.”, and so on. Or, somebody will highlight it to
him. We are not stupid. Nobody is stupid, so, when the fallacy of the pattern is highlighted,
then he has a base to evaluate his own invention and then he becomes almost zealous about
it.

CC: Right. Right. Yes.

EG: But this is not just Paul. This is every person. What is important to realize, and that’s what
I’m showing in the book: that when you go below, to people below you, they are blocked
by patterns as well. But different patterns. And, as long as you don’t address it, they will
fight you to the hilt. If you identify these patterns and show the fallacy of them, then
immediately they are in favor of the change. Look at the people who are working for Paul.
There is the pattern: if inventory goes down and we don’t bring more inventory, this means
the shop is about to be closed.

CC: Yes. Yes.

EG: This is a pattern. As long as this pattern exists, they will resist the change and they will
even take actions that will kill you. You have to identify it, you have to take the action to
show them that the pattern is false, and then they are all for it. Likewise, after that, when
Paul talked to his peers, they are blocked by the same patterns that he was blocked with.
But there is a huge difference. Paul went through an experience that enabled him to be

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more open to evaluate the change. They had not. Which means that the amount of work
which is needed in order to verbalize these erroneous patterns much better, and how to
prove that they are false, is much bigger. You do it, everybody is with you. You don’t do it,
you will never change people. How to identify the patterns and how to go about exposing
their fallacies; if you look, there are two chapters devoted to it. One is a chapter where they
are preparing the presentation and the other one is the chapter where they give the
presentation. Follow this chapter, this is a recipe, a generic recipe of how do you identify
the wrong patterns and how do you overcome them. And then everybody’s with you.

CC: I’m just making a note to re-read those two chapters right now!

EG: Then you have to realize that, above you, the people are blocked by different patterns. It’s
not the patterns that blocked you and your peers, it’s not the patterns that have blocked
your people – there are different patterns that block the top management. And, again, the
same thing: you have to identify them and to show that they are false, and then everybody
is with you. And that’s the real message throughout the book. I’m showing that the only
resistance to change is coming from erroneous patterns that cause people to judge the
change as not good, as too risky, and so on. And, when you identify the patterns and you
show the fallacy, how quickly people change their attitude! To the extent that the whole
change has happened in nine months. And everybody’s for it. This is generic. This is what
I’ve seen again and again in reality. My problem is to what extent we don’t understand it,
and then we are trying to use force or incentives and all of that, rather than addressing the
real thing! And that’s the real message of the book.

CC: Right. I do remember those two chapters. They did change pace slightly, and that’s
interesting. I hadn’t realized what was going on there, but you did talk about that, so I’m
going to go back to them. But can I ask, you’ve overcome your own inertia, your own
patterns, you’ve figured out something. You’ve then got to get into the world of the people,
that say, work for you, and the people you work for, above you, or even in the case of the
book, the vendors – getting them to work differently. How do you get to understand the
world that other people’s patterns have. How do you go about that? That was a very poorly
articulated question!

EG: No, no. It’s a very good question. But, for that, you have to read another book, which is
‘The Choice’. In ‘The Choice’ I’ve shown exactly how it is done. And what are the
obstacles that prevent you from doing it, and how to go about overcoming them. That’s the
whole message of ‘The Choice’. My problem is that most people who have read ‘The
Choice’ did not fully understand it. And then what I’ve done is: I went back to complain, or
to cry on my daughter’s shoulders, saying, “Nobody understands it.” And she said to me,
“Father, I told you so!” And I said, “What do you mean?” She said “Look, when you have
asked me to work, and to give you my input” – which has changed the book dramatically;
‘The Choice’ started as a fictional book, basically a documentary almost on the discussions
that I had with my daughter – she said, “From time to time, I’ve asked you what is the
whole logic of this thing? And I gave you a logical map with, you know, entities and
arrows, and, in the beginning, you said “Ah! That’s not the case!” and you scribbled for me
the logical map.” She said, “I worked on it so hard. I understood these maps. I wrote the
notes on it: it was the only way that I could understand what you were talking about.” And

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then I said, “Can I see again these logical maps and your notes?” And we worked a little bit
more on them, and the next version will contain, for each chapter in ‘The Choice, an
Appendix which is maps and notes, so people could really understand it.

CC: Ah, fantastic, fantastic. I must say, I liked ‘The Choice’. I read the early version, the draft
that you sent out. I can’t remember what it was called, but the early version. I haven’t read
the latest version.

EG: So, if you want and you don’t want to wait until the new edition is published, Wendy will
be delighted to provide you with the Appendices. Of course, in the next version I have to
acknowledge fully the contribution of my daughter so she becomes a formal co-author
because, first of all, all the Appendices were written by her. The second thing is: her editing
or her talking to me in the book has change the book totally, so it became almost a real
description of the dialogues that we had.

CC: Ah, right, right. I really enjoyed ‘The Choice’ as it came out. It was harder to read than the
other books, because it made me think so much more, and it was one I’ve set aside to take
away for Christmas so I have something to read!

EG: If that’s the case, I will highly recommend that you get the logical maps and the notes of
Efrat. This will make it so much easier to read.

CC: Very good. My favorite book of yours is probably ‘The Essays’ book. [Essays On The
Theory Of Constraints]. It probably says a lot about me; I mean, I love ‘The Goal’, and I’ve
read every single one of your books at least three times, apart from the last two, which I’ve
only read once each so far, but ‘The Essays’ book I sort of keep dipping into that at
random. Actually I don’t think I’ve read it the whole way through since the very first time,
but I really enjoyed that. And I think ‘The Choice’ would be another one of those ones
where the ideas will take a long time to percolate.

EG: I hope it will take a shorter time now, because in my eyes ‘The Choice’ is by far the most
important book that I have ever written.

CC: Actually, you know, when I read that, it was like – I remember reading it and trying to
explain it to someone – it was like “ah, ah, ah....”. I suppose it’s been 10, 12 years since I
first read ‘The Goal’ and I’m quite convinced that I think very differently now than I did 10
years ago, and largely that – I would say, if I summed it up – it is probably the simplicity
and the win-win. And I read those ideas, I got them, but it’s only, probably, in the last five
or six years that… I almost think in terms of clouds at times now, which…

EG: Lovely, lovely. And once you think not just in terms of clouds, but in terms of trees, then
you will see how clear the world around you will start to become. And, more than that, how
good the people are that are surrounding you.

CC: That was the other thing, that people are good.

EG: Yes.

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CC: That’s one of the ‘isn’t it obvious’. I have a friend with whom I often argue, and he will say
people are stupid, and I’ll say they’re not stupid. They start out, they’ve got good
intentions…

EG: They are so far from stupid. The problem is that the wrong patterns are causing their
conclusions to look stupid sometimes. They are not stupid at all! Which brings me to the
last message of the book, which is: if you recognize that the resistance is coming from
patterns and you learn to overcome them, then, actually, you can change a company from
anywhere that you are in within the company. You don’t have to go from top down, you
can go from bottom us as well. And almost at the same speed. If you notice the whole
change in this book is starting from bottom up.

CC: Yes, yes, yes it is. Because Paul’s in the store manager position.

EG: Yes! And what I’m trying to show people is that it doesn’t matter where you are in the
organization. It doesn’t matter how big the organization is. If you just approach it in this
way, you can change the whole organization.

CC: Okay. That’s quite remarkable, actually. You’re right. These last three points, they’re
subtle, but they’re, they’re all through the ...

EG: They’re there all through the book, and, if you are keeping them in mind and you read the
book again, you will see how clearly they are coming out, and to what extent in this book.
It’s not just about retail, it’s a recipe about all these comments.

CC: Mm, mm. I’m not going to call you a liar here, but how do you – when I write, I’m always
amazed at what comes out the other end. Yet you sound like you write very clearly to me.
Thoughts that are already very, very clear in your mind. I write to learn, and that takes me a
long time!

EG: But still, don’t forget, this book, even though Ilan and Joe were so helpful, it took one and a
half years.

CC: Really! Really.

EG: Mm hmm. It’s what it takes to write such a book.

CC: Of course it does. My version of ‘The Goal’, I’m currently in the re-write of that at the
moment. I’ve been going for five years, sort of dipping in and out of it, and I can
completely understand one and a half years, but I’m awed by that. Anyway. So, when did
you finish this?

EG: ‘The Choice’?

CC: ‘Isn’t It Obvious?’

EG: ‘Isn’t It Obvious?’. I think that I finished it in May.

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CC: Right, right. And so it’s taken you about six months or so?

EG: That’s what it takes until the proof reading and the publishers and all of that. And, more
than that, who cares? It took so long for the book to be written, it can take another two
months, that’s not the problem. Especially when I was not standing idle waiting for the
book to come out, as a matter of fact, I immediately moved to the next book.

CC: That was going to be my question. So this is the ‘Make To Order.’ Is that right?

EG: Yes. Yes.

CC: And you have another year, roughly, to go on that?

EG: Hopefully. Look, what I’ve learned is that I’m too old to have deadlines, and the pressure
of deadlines! I am doing what – let’s do a very good job in how much it takes and, as much
time as it takes.

CC: I like that. I’m going to get a cup made up of that, ‘I’m too old for deadlines’.

EG: Absolutely. I’m too old for deadlines.

CC: Do you enjoy the writing?

EG: Er, sometimes. Sometimes I hate it.

CC: Right.

EG: Sometimes it’s painful, but always rewarding.

CC: Yes. Yes. What’s your favorite book? Apart from ‘The Choice’. I know people pick out
‘The Goal’.

EG: The book that I enjoyed writing, and I still think that it’s a very important book, is ‘The
Haystack Syndrome’.

CC: Ah!

EG: I’ve tried to say – with this book, I’ve tried to say the whole very important subject, which
is artificial intelligence. Do you remember the time that everybody was talking about
artificial intelligence?

CC: I do. I was at university studying computer science, at the time.

EG: How lovely. And then, what I find out is, that they start to deviate into what they called
‘expert systems’.

CC: Yes.

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EG: And I knew that that was the end of artificial intelligence. So I wrote ‘The Haystack
Syndrome’ in order to save artificial intelligence. To show how an artificial intelligence
should be developed. The three main steps, and so on. Unfortunately, nobody paid
attention, and artificial intelligence is almost sunk.

CC: Right.

EG: So I failed.

CC: That’s intriguing. I’m just looking, and I can’t see ‘The Haystack Syndrome’ on one of my
bookshelves here. I’m going to have to read it again now, aren’t I? When you frame it like
that, it was such a big leap away from what you had been doing beforehand. I suppose it
would have been hard for your – I’m not sure that followers is the right word – your
audience to move and probably pick up on that message, was it?

EG: Er, let’s put it this way. I didn’t do a good enough job in describing – how shall I say it –
people did not distil from it. That I’m not talking here about just computer programming
and how to schedule a plant. That I’m really talking about: how do you go about inventing
and writing effective artificial intelligence? And, if you notice, the first section – there’s
three parts to the book – the first one is: how do you go about formulating the decision
rules?

CC: Yes.

EG: Without it you will never have artificial intelligence. The second one is: once you have the
decision rules, how do you verbalize and formulate the applications of them?

CC: Aha, yes.

EG: And the third one is: how do now take all this body of knowledge and convert it into
specifications for a computer.

CC: Right!

EG: And what I tried to show is a generic way to do them. When the ERP, or the scheduling
problem, was just an example.

CC: Yes, yes. Of course, because that was your example.

EG: Yup. And people pay attention to the example and not to the…

CC: Rather the concrete... rather than the lessons that surround it. Ah! That’s intriguing. It’s
been so long since I looked at that. Probably ten years, I’m guessing.

EG: if you go back to it and look on it, you’ll see to what extent I was so meticulous in
describing the process that you are using, you know, to do it.

CC: Yes. I remember the information; the answer to the question you asked…

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EG: Mm hmm. What is information?

CC: It was the answer to the question you ask, is that right?

EG: Basically, whenever you have confusion, go and find out the word that has more than one
definition, that causes the confusion. That’s the starting point of the book.

CC: Right! I’m going to be busy reading over Christmas, I think! Okay, well that’s very
interesting. Do you mind if I ask you a little bit about Japan? You’ve just been over there
for the conference.

EG: Yes.

CC: I’ve not actually attended any TOC conferences, but I’ve seen the videos of a few of them,
the DVDs.

EG: Yeah.

CC: Was there anything special come out of this particular conference that you’d like to talk
about? I’m hoping there is, when I put it that way!

EG: For me, this conference was quite different from the previous conferences but, in one
aspect, which is: I was talking – like in every other conference – on the new developments
that I’ve done since the last conference, in other words, the new developments of the last
12 months.

CC: Right.

EG: And I was talking and giving just the highlights of it for two days. Now, in the past,
whenever I came with new knowledge, the experts – and remember, this conference is for
the professionals – I had mixed emotions. I couldn’t but feel that, from one side the
happiness was in the new information – new inventions, if you want to call them this – but
at the same time they are reluctant. It’s as if the new information somehow diminishes the
importance of what they know already, or criticizes what they know already. And this
always gave me a hard time. Because, for example, when you are a physicist and you are
going to a conference, what are you expecting to hear? Why are you going at all? Only for
the new things.

CC: The new stuff. Of course, yes.

EG: So you take it for granted there will be new stuff. More than that, every new stuff is totally
taken for granted that it’s built on the previous stuff, and that it’s adding another layer, an
important layer, not that it’s criticizing the previous one. And, somehow, in the most social
subject of management, this is not the attitude. The attitude is that if there is a new thing, it
is replacing or criticizing the previous thing, which shouldn’t be the case.

CC: Right.

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EG: This year, at least my impression was that the community at large greeted the new
developments in the right way. Even though, I think, that there was, in the year before, that
I’ve presented so many breakthroughs, important breakthroughs, the whole attitude was:
“Give more, give more, we do realize how important it is. We do realize that it’s built on
the previous. We are not taking it as criticism of what we know already, but the opposite.”

CC: Why do you think it was different?

EG: Maybe because the community is more mature.

CC: I presume it was a large Japanese, or…?

EG: No, not so much. I would say that about one third were from the area of Korea, Japan and
so on, and the other was from the rest of the world.

CC: Okay, okay.

EG: So it was a real international conference. Maybe the TOC community are starting to
understand that TOC is much more physics, than it is economics.

CC: Right!

EG: That it’s a real science and that its evolution is an evolution of real science.

CC: Right, right.

EG: So in this sense, it was beautiful.

CC: I was just going to say…

EG: Yes. The other things were the things that I expected. You know, many more testimonials
of companies which are further along the line, so we are hearing more and more about
companies that have already reached ‘ever flourishing’.

CC: Right.

EG: And what is the meaning of ‘ever flourishing’? Maybe this year it was more clear, because
2009 was supposed to be a big recession year. And to see these companies’ performances
on the background of the recession, shows to what extent the claim that, if a company does
know what they are doing, the world around them can go through whatever turmoil, they
will continue to flourish without any dent in their growth.

CC: Right.

EG: And to get such cases, for example, a company that shows growth year after year, and then
they have to put an arrow to show ‘here is a recession’. And if they wouldn’t put the arrow,
you wouldn’t have known that there was a recession. And to get these kind of testimonials,
and the companies are not talking anymore about DBR, or about CCRP or about the T, I
and OE.... They’re talking about the gestalt of the whole way of running a business.

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CC: Right.

EG: And that’s what is starting to be more and more testimonials because more and more
companies are reaching this stage – remember it takes years to reach this stage – and this is,
let’s say, so reassuring. It gives you so much confidence on how many people are good,
and are able to use it. And each one of these companies have brought all the management
team, and you see how the relationship and how – these people in terms of team, of
collaboration – these are a different type of companies now. And to see it with your own
eyes and to talk with them is such a delight.

CC: I can imagine. This is probably going to sound like a silly question, but I believe you
turned 60 a couple of years ago?

EG: Yes, I’m old!

CC: I don’t want to rub it in!

EG: I’m old, yes.

CC: Well I just turned 40, and I’m reeling from the shock! I’m rolling back, I can remember 20
years ago, when I was 20, I couldn’t have imagined, then, doing what I’m doing now. I was
a programmer, and that was me for life, and I was sorted. Forty-ish years ago, you were a
physics student.

EG: Mm hmm.

CC: Could you have possibly imagined that you would be having this conversation, or going to
conferences and hearing these stories, 40 years later. Did you ever have that as a goal of
where you were going? Put it this way; has life turned out remotely like you expected it to?

EG: I will answer it, but, please, don’t take it as arrogance! When I was 20 years old, on my
birthday, I committed to my goal in life, so yes, in a way, it was all planned. My goal in life
at that time was – and still is – to teach the world to think. And that’s why I went to learn
physics, I wanted to teach myself to think, not in order to learn physics. So in a way, yes,
I’ve seen it. But, at the same time, I can tell you without any hesitation, I never believed
that I would live long enough to see what I’m seeing now. It’s beyond all my expectations.

CC: Really, really?

EG: Yes, You know, some people are saying, “Why are things still moving so slowly, and why
is not everybody adopting it?” This is a huge collection of paradigm shifts. If you would
look on everything that involves a paradigm shift, you will look and see how many years it
took until the paradigm shift was accepted as a norm.

CC: Yes.

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EG: And, if you are really comparing the speed in which TOC is accepted by business, I don’t
see anything in parallel. TOC is moving much, much faster than anything that I’ve seen.
Let me give you an example, okay?

CC: Mm hmm.

EG: The first article on critical path was written in 1906.

CC: Oh, really? Wow.

EG: Yes. Now, this is a real paradigm shift. Here you have a PERT of, let’s say, 3000 tasks, and
here comes a person who says “Forget it, just look at the critical path that is composed of
maybe 30 tasks. That’s the key, on that you have to focus; everything else is just
supporting.”

CC: Right.

EG: Huge paradigm shift. Now, the first real articles that start to refer to it are – you have to
wait until 1936. PERT implementations you have to wait until 1950. Only in the 70s it
started to become the norm, and everybody is taking critical path as the norm.

CC: Yes.

EG: This is 60 years. Now look at Critical Chain, which is a bigger paradigm shift. Along the
same lines, but much bigger.

CC: Yes.

EG: That book was published in 1997. It’s only 12 years! And look to what extent it’s used
now, in so many of the largest companies in the world, by ministries, by everybody. 12
years only! So can we complain on this slow adoption? That’s why it’s still flabbergasting
to me. To what extent TOC is accepted! And I’m very grateful, to tell you the truth.

CC: That makes good sense, actually, when you look at it like that. I hadn’t realized that critical
path was that old, but then we often look back on the great buildings, the pyramids, and so
on and so on, and I wonder how they planned them.

EG: Oh! By intuition, they have used critical path for it, for sure. By intuition. But I’m talking
about the verbalization of it.

CC: Right.

EG: And even then, how much time it takes.

CC: And they were maybe too old for deadlines as well! I’d venture they built things in
decades.

EG: They had a very, very strict deadline. Don’t forget, the pyramids were the tombs, and they
had to be ready for when the pharaoh is dead.

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CC: Yes, yes. It’s a shame they didn’t have a way of lifting up each layer so that they would
always start with it this tall, and then as they go on and on and on, jack it up another level.
It would have actually always finished precisely on time.

EG: These were huge inventions.

CC: I’m conscious of your time here. We’ve just been talking for an hour now, so. Is there
anything you would like to add? I’m going to pop this out…

EG: Not really. I think that your questions were very nice in guiding me to really express
what…, so I don’t have anything to add.

CC: Very good, and thank you very much. I will just click pause now, just hang on for just one
moment after this. This will go up on my website and all of the various TOC groups on the
internet.

EG: Excellent.

CC: Thank you very much for your time. I’m just going to press pause now, and that’s us.

EG: Thank you for your time.

[End of interview]

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