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Clarke Interviews Eli Goldratt

Clarke Interviews Eli Goldratt

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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 Page 1 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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 Page 3 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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 Page 4 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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 Page 9 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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 Page 10 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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. Page 16 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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. Page 18 of 19

Clarke Interviews Eli Goldratt about Isn’t It Obvious
(Transcribed by SAW1 11/30/2009) CC – Clarke Ching, EG– Eli Goldratt

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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