I wanted to write something in recognition of International Women’s Day. It’s problematic. As more people get on board feminists have, I think rightly, called into question whether it’s become a sort of Mothers’ Day equivalent. My credentials are intact – I’ve been in this space as long as I’ve been in management. This time around I thought I would hark back to the golden days of Hollywood. Strange backward glance you may think given the excesses and underlying misogyny of Hollywood is only just now being called out. Well, maybe not, as Malcolm Gladwell might say.

With Weinstein now convicted there is a sense of relief, but no belief that such issues won’t emerge again or that others who have misused their power won’t now be brought to light. In Thus Spoke Zarathustra Nietzsche wrote “wherever I found man, I found the will to power”. The abuse of power is not the persevere of men, but is disproportionately prosecuted by them. In more recent times female actors have felt more empowered to come forward, despite the fear their careers may be impacted. But what of the days when the studios, headed by powerful men, reigned supreme? It’s often called the golden age of Hollywood and remembered through those stunning black and white photos of stars and starlets.

It’s easy to imagine, armed with the knowledge of what Weinstein perpetrated (and he was nowhere near as powerful as those studio bosses and elite directors), that female actors of that era were subjected to pretty significant harassment and abuse of power. To say that power relationships were asymmetric then would be an understatement. That is perhaps why two women, in particular, stand out for me. I want to spend a little time outlining why they have my utmost admiration and have done so for many years.

Olivia de Havilland photographed on 23 April 2018 by Laura Stevens for Variety Magazine at the Pavillon de la Reine in Paris, France

My first and favourite is Olivia De Havilland. I’ve mentioned her previously in other blogs. She is an amazing woman by any standards. Still alive at the grand old age of 103 and living in Paris, she was a Hollywood superstar. She is most famous for playing Melanie Hamilton in Gone With the Wind turning down, as legend has it, the lead that went to Vivien Leigh and along with it an Oscar. My first real encounter with her was in the early 1970s while staying at my grandparents and watching a movie one afternoon in black and white (no colour TV then but the movie was black and white anyway). We grew up, deliberately I’m told, without a TV so anything on the box fascinated me. This movie, in particular, held me spellbound with the gritty scenes and the challenging subject matter. It was Anatole Litvak’s (director) The Snake Pit. Cinema has never had an easy relationship with mental health and the scenes of a woman’s descent into insanity were harrowing. De Havilland played the part of Virginia Cunningham who finds herself in an insane asylum with no recollection of how she got there. The usual Hollywood fairy floss this was not. I was deeply impacted by it and perhaps explains why I am still to this day so interested in issues of mental health. De Havilland was mesmerising in the part. A true actor in the finest sense.

Earlier than that in 1939 de Havilland co-starred in Gone With the Wind. De Havilland thought that having starred in such a picture she would get improved billing and act in more serious work. You really were ‘owned’ by the studios in those days. Objecting to the lightweight movies that she was required to participate in following her critical and box-office success, she refused to act in several and received her first of many suspensions by the studio. De Havilland was tied to Warner Brothers for seven years. Glad to be out of their clutches at the end of that period she found that Warner Brothers had extended her contract by 6 months to make up for her suspensions. Others, most notably Bette Davis, had tried and failed to challenge this in the courts. That did not deter de Havilland. In November 1943 the Superior Court in California found in de Havilland’s favour when she decided to take on Warner Brothers. The ruling is considered one of the most significant and far-reaching legal rulings in Hollywood reducing the power of the studios and extending greater creative freedom to performers. The ruling is to this day known as the De Havilland law.

Warner Brothers, of course, did not take this lying down and a letter written by them to all the major studios meant de Havilland could not find work for the next two years. De Havilland had the last laugh in this battle when securing a two year deal with Paramount Pictures. Her amazing acting in Mitchell Leisen’s To Each His Own rightly secured her the best actress Oscar in 1946.

The Snake Pit was released in 1948 with de Havilland producing perhaps her most challenging movie performance. She deliberately lost weight to portray the gaunt appearance she felt necessary to do her character justice. Commonplace now, unheard off then. She consulted regularly with psychiatrists and visited Camarillo State Mental Hospital to research her role and observe patients. Her efforts were rewarded with an Oscar nomination and other international awards. In 1949 she starred in The Heiress which Paramount secured the rights to after de Havilland saw the play on Broadway and persuaded the studio she would be perfect in the role. Obviously she was, securing her second Oscar for best actress. She also turned down the role of Blanche in A Streetcar Named Desire…if only!

In the 1960s and beyond de Havilland was plagued by what remains an issue for many female actors today; securing good parts. She transferred to the small screen in her later career, a medium she was not enamored of, and retired in the late 1980s. I could go on about her awards from the US, UK and France and her political involvement including being called before the House Un-American Activities Committee (McCarthy) but I have to leave space for my next legend!

Next up is Hedy Lamarr, once known as the most beautiful woman in the world. Her face was the inspiration for Disney’s Snow White. Put the two together and the likeness is extraordinary. She was born in Austria and her early acting career was in Czechoslovakia where she made the controversial 1933 movie Ecstasy which is renowned for being the first non-pornographic movie to portray sexual intercourse and female orgasm. Of Jewish descent and married against the wishes of her parents to a fascist-leaning munitions manufacturer, she eventually fled from her extremely controlling husband.  Making her way to London via Paris, she happens upon Louis B Mayer, head of MGM, who offers her a movie contract in Hollywood. Thus begins her time in Tinseltown making a number of movies. Legend has it that in her first US-released film when her face first appeared on screen the audience gasped!

Quite possibly this ‘beauty’ limited her options and she was constantly offered parts that emphasised her physical attributes with few lines and little artistic stretch. The highlight of her acting career was Samson and Delilah in 1950 directed by Hollywood giant Cecil B DeMille. This was the highest grossing release of the year winning her critical acclaim as the leading lady. This aside she was not at ease with her celebrity status and found her acting parts boring. It was this reason that had her looking for other roles. She helped sell war bonds during WWII using her celebrity and beauty despite wanting to join he National Inventors Council which had been recently established to bring novel ideas forward to help hasten the end of the war. Unfulfilled she turned to hand to inventing!

On learning that naval radio-controlled torpedoes during the war could be jammed and set off course she put her mind to a solution. Engaging her friend composer and pianist George Antheil she created a frequency hopping system immune to jamming. Patented in 1942 it was ignored by the authorities as it came from outside the military. There’s more than a hint too that its shunning was because of the gender of the inventor. In 1962, staring down the barrel of the Cuban missile crisis, all US Navy ships had the device installed. Women’s liberation was kicking in!

Her legacy outside of her film career is still with us today. The streamlining on planes was her idea from observing birds in nature. Next time you are connecting via Bluetooth, or indeed communicating via secure wi-fi or other means you have Hedy Lamarr in significant measure to thanks for that. Next time you reach for GPS to find out how to get somewhere you should thank  Hedy Lamarr. While other starlets of her day were out socializing on their time off set, Hedy was in her trailer inventing things. In 1990, ten years before she passed, Hedy Lamarr, who lived the last portion of her life as a recluse, commented :

“The brains of people are more interesting than the looks I think.”

If this was the underlying preoccupation of Hollywood then the #metoo movement would have been redundant. It’s tempting nowadays to think of our current times as being much more complex, volatile and uncertain than days gone by. We live we are told in a VUCA age. Things seem more cut and dry back then, more straightforward, more monochrome. As this blog shows though, true colour lies beneath the outer veneer of black and white! Happy International Women’s Day everyone.

Kaufland, the German hypermarket juggernaut, recently pulled out of the Australian market to concentrate on other markets where it felt it would get a better return on its investment. They left without firing a shot. That is they never actually got around to selling anything. The money lost that they had already sunk? Estimates vary, but the costs sunk in Australia by Schwarz Gruppe, the Kaufland parent company, are thought to range between $435m and $550m. From a job loss perspective, it amounts to over 200.

You could hear the collective sigh of relief from Coles and Woolworths at the news and their share prices lifted considerably as a result. Aldi would have felt relief too. In the Kaufland stable is Lidl, which is Aldi by another name. Only difference? Special Buys Thursday and Sunday! Now that would have been real competition. Imagine the Board room in Germany making the decision to pull out. All that due diligence that said ‘let’s do it’, all the analysis around the non-competitive Australian supermarket market, the money already invested and an important but often overlooked aspect of such decision-making, the ego and reputations of those who originally pushed for the project. That’s why it’s such a fascinating case study of corporate decision making and the psychology of decision-making in general.

Let’s analyse the rationale for Kaufland making the decision to enter the Australian market in the first place. If you want to grow your business then ultimately you need new markets. FMCG has high barriers to entry and establishing supply chains and supplier arrangements is complex. Getting the quality and cost equation right is essential as this is what the customer is seeking. They will have looked around the world for markets ripe for some additional competition. Despite what they said about now ‘concentrating on growth opportunities in Europe’ (I don’t think there are many) there was real potential in Australia. Here’s why the Australian market is attractive despite the tyranny of distance issues around supply chains. There is a duopoly (Coles and Woolworths) meaning there is space for other competitors. As the ACCC noted in their objection to the TPG-Vodafone merger, adding a third like-for-like player into a duopoly does not change pricing or innovation they just split the market between them. Competition comes when the new player brings a different offering and doesn’t compete on a like basis. Kaufland would not have competed as a Cole or Woolworths doppelganger.

Kaufland was offering, probably for the first time, grocery shopping as an experience. Australians who happen to do grocery shopping outside of Australia (even in New Zealand) are amazed at how much better that experience is compared to our domestic offering. Because competition here is so weak there is no need to spend money on fit-out and ambience. Close shelving, unattractively displayed product with awful lighting is the Australian way. Let’s get you in there, your wallet opened and out again. It feels more like a 2 or 3 sitting cheap restaurant rather than high-end degustation which is more the Kaufland model. A model that we now won’t experience.

So what were the Board thinking pulling the rug from under our feet? Were they stupid in the first place? Maybe so… we’ll never know. What they did do was act fast. What they didn’t do was suffer from the sunk cost fallacy phenomenon. From a behavioural economics perspective this is defined as when an individual or company continues a behavior or endeavor as a result of previously invested resources. This fallacy, which is related to loss aversion based on past inputs can also be viewed as a bias resulting from ongoing commitment. It’s the old ‘we committed to this endeavor so let’s double down on our efforts to make it work’ thinking process. We have after all spent so much money on it already. It’s a human foible to be sure, but one that investors require highly remunerated board directors to avoid to protect long-term value. They don’t always get that right. In fact it’s probably the exception rather than the rule.

While the sunk cost fallacy creates a strong pull in favour of the status quo, it is often running parallel with other decision biases that when experienced together makes it very difficult to take the brave and decisive decision. The first of these is the confirmation bias. You made the decision to attack the Australian market so when this is questioned you look for information supporting this decision and reject the data that undermines it. This is reinforced by anchoring. When you made your mind up first time around you really committed to it like an anchor. It takes a lot to shift your position. We’re often told to trust our initial judgment and instincts. Now you’re getting data which said we should pull out and hell we haven’t even sold a single item…don’t think so! Not on my watch…we can turn it around…just a little more money in the marketing budget…improved supply chains…better suppliers. Next thing you know you’ve been in for five years and still no profit!

Let’s look at what would have been the competition for Kaufland; Coles and Woolworths. Would they have the board room nous and sophistication to see off the new rival? A good place to look for evidence either way is to determine whether they have had their own sunk costs fallacy pivot points and how they each reacted to those. And as it turns out both have had similar moments. So how did they fare? Well each mirrored the mistake of their rival (I’m saying rival rather than competition advisedly as two players in the market rarely compete in the truest sense). Let’s take Woolworths first up. They launched the Masters ‘big box’ hardware business to take on Bunnings,  part of the stable of rival Wesfarmers. It was pretty obvious to me and many others that it was doomed from the get-go but they plowed on anyway with the full energy and focus of a lemming heading for the cliff’s edge. Where Kaufland pulled out of the headlong surge and managed to walk away, Woolworths plunged over with vigor. Do you see a Masters around today? Well perhaps, as some of the abandoned retail warehouses may remain un-let. It’s a dead brand though with egg over the face of the directors and egg in the wallets of the investors. A better case of the sunk cost fallacy you’d be hard pressed to find….

…that is until you look at Wesfarmers who owned Coles outright at the time. Clearly buoyant from seeing off their rival Woolworths, they embarked on the crazy plan to compete with their lookalike in the UK, B&Q, by, and you cannot make this up, buying the UK equivalent of Masters (Homebase). What were they thinking? Well I don’t think they were, at least not uncluttered from bias. Here the Board clearly had, at some juncture, a sunk cost fallacy decision point and pushed on. I think their concurrent biases were the gamblers fallacy which is expecting past events to influence the future. They had been able to take Bunnings from the relative obscurity of Western Australia and crush its rivals in the east and become pretty much a monopoly. Surely they could do it again? They won once they surely will win again kind of thinking. They also probably suffered from over-confidence bias. They were placing a lot of faith in their own knowledge and opinions. They clearly had an unrealistic view of their own ability to make investment decisions on behalf of the shareholders. The rest is history. Wesfarmers pulled out of the UK, tail between its legs after dismal sales figures. Just like Woolworths they plouwed on even when the writing was on the wall.

That’s why what Kaufland did is so remarkable. It’s not easy to bail out when you have so much invested, financially, reputationally, personally and psychologically. Kauf in German means ‘purchase’ so Kaufland means ‘purchase land’. And boy did they in Australia; a mouth watering $20m buying the old Bunnings site in Burleigh on the Gold Coast in 2018 being just one example. Despite this, when they couldn’t make the business stack for whatever reasons (and there’s plenty of speculation about this), they put all bias aside and withdrew. It’s brave, canny and staggering in equal measure. Oh that our Australian companies, in whom we trust our retirement superannuation, had leadership metal like this!