As author and investor Morgan Housel writes in a Collaborative Fund blog post
, a good rule of thumb is that everything will eventually break.
And if you have a system in which a lot depends on just one element, what he calls a single point of failure, then “you’re counting the days to catastrophe.”
Housel points out that there are some who do a good job of avoiding single points of failure: “Virtually every critical system on airplanes has backups, and the backups often have backups.”
In business, the biggest and most obvious single points of failure are debt and reputation.
But you also need to be aware of the less obvious ones. For example, when only one person in a company knows the password to some critical program, or is the only point of contact for a key vendor.
Here’s the trick to avoiding single points of failure: “Find them preemptively, in a controlled way.”
One way to do this is a practice Housel and his colleagues used at his former company, the Motley Fool: each month, an employee’s name was drawn out of a hat, and the winner had to take 10 days off without any work communication.
Housel admits they did this partly to ensure that people used their vacation days, but also to test for single points of failure.
“You only know how reliant you are on a single employee when that person leaves unexpectedly, with no communication.”
Note: We wrote about a similar idea, Neil Postman’s suggestion that teachers would be more effective by becoming experts in stupidity, in a previous issue.