Why do Organizations and people fail to sustain their business and health? The cases for Conway's law, the Shirky Principle, and Rational Entrepreneurial Thinking

Some organizations and people adapt to change, and thrive, whereas other organizations and people do not. In a similar fashion, individuals fail to sustain their health, and in too many cases, the consequence is lethal. Why does this happen? Just like business organizations, people may fail their health because of Conway's law or the Shirky Principle, which I believe are similar to mental fallacies. As a research psychologist, I focus on the executive functions, and have developed a model to improve epistemic and instrumental rational thinking: Rational Entrepreneurial Thinking. And for more than 10 years, I've been investigating nutrition and health. Conclusion. Failed business operations, and health, may recover with Rational Entrepreneurial Thinking and nutrition psychology. 5 pages.

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Some organizations and people adapt to change, and thrive, whereas other organizations and people do not.

One of the famous examples is Swedish Facit, a company that produced pin-wheel calculators based on the Odhner mechanism. When Japanese pocket-calculators entered the market, Facit failed to adapt and eventually went out of business.

Finnish Nokia demonstrated a similar behavior; during the 1990s, Nokia dominated the cell phone market. But, after two mathematicians had launched a search engine, followed by an operative system for smart phones, Nokia failed to adapt. They didn't go out of business, but had to sell its mobile phone division.

A third example is KODAK, the American company which for a century dominated the market for analog photography. Already in the 1970s they rejected a proposition from one of their engineers for a digital camera. In the 1970s, that made sense. But eventually, digital photos outperformed analogous photography. They avoided Facit's destiny. Instead their saga was similar to Nokia's. In 2012, KODAK filed for Chapter 11 bankruptcy protection, and successfully emerged from it in September 2013.

In a similar fashion, individuals fail to sustain their health, and in too many cases, the consequence is lethal.

Why does this happen?

I'm a research psychologist specializing in executive functions, e.g. leadership, work climate, entrepreneurial thinking, and social creativity for problem-solving and innovation. I also have a background as a performance and executive coach. Adding to that, I also deal with nutrition psychology – how people think about food and how food influences how we think.

In organizational development and psychology, thick handbooks are published on a regular basis, demonstrating how complex the field is. That means that no single factor explains why things happen but rather shows how a factor can explain a part of the variance (the model).

Here I present two such factors which can serve to enhance people's understanding of failure: Conway's law and the Shirky Principle, influenced by The Peter Principle.

Paraphrasing Melwin Conway, organizations imitate organizational structure when they produce something. The implication is that the products or services act as windows into the organizational structure. If the product or service doesn't work, then the organizational structure doesn't work either.

“institutions will try to preserve the problem to which they are the solution.”

Adding to that is the Shirky Principle, which states that institutions will try to preserve the problem to which they are the solution. In simple terms, it doesn't work, and you want to keep it that way by:

• Self-Preservation: When an organization's funding, jobs, or status depend on solving a specific problem, completely fixing that problem threatens the organization's existence.Incentive
  
  
• Misalignment: Instead of acting with pure malice, groups naturally gravitate toward protecting their livelihood. Their survival depends on the continued existence of the issue.
  
  
• Resistance to Innovation: New, streamlined methods that make old processes obsolete are often fought tooth and nail by the incumbents who benefit from the old, complex way.

One current example is the University of Helsingfors. In August 2023, Finnish media reported that the research had collapsed (Bäckgren, Helsingin Sanomat, August, 2023).

Bäckgren, Helsingin Sanomat, August, 2023

Conway's law and the Shirky Principle resonate with what psychologists call mental fallacies, and I use to mention of few of them:

• Negativity bias – a cognitive bias that human cognition is relatively more affected by a negative affect than an equally potent positive affect (Baumeister et al. 2001). Adding to that, our species has a tendency to fall victim to other mental fallacies. For example:
  
  
• Confirmation bias, the tendency to apply the same theory on all situations, or search for information which fits the conviction (Nickerson, 1998; Wason, 1960, 1966; 1968; Wason och Shapiro, 1971).
  
  
• Natural stupidity – our species propensity to rely on information which are either prototypical (Kahneman och Tversky, 1972), available (Tversky och Kahneman, 1973), or just easy to access (Kahneman and Tversky, 1977).
  
  
• Dysrationlia – the inability to think and behave [epistemic and instrumental] rationally despite adequate intelligence (Stanovich, 1993, 2011, 2016; Toplak, West, Stanovich, 2013).
  
  
• Continued Influence Effect – Misinformation continues to influence memory and reasoning about an event, despite the misinformation having been corrected (Cacciatore, 2021).

These biases interact in a reinforcing loop.

As an executive coach and leadership researcher, I have observed these phenomena for decades, and also kind of figured out some indicators which can be used to bypass these issues.

As a research psychologist, I believe that nutrition plays a role in this equation. and have therefore developed a model to improve epistemic and instrumental rational thinking: Rational Entrepreneurial Thinking, which is based on epistemic vigilance, numeracy, and disjunctive reasoning (Österberg, 2021).

And for more than 10 years, I've been investigating nutrition and health, and because of that I stumbled into a field called nutrition psychology. In parallel, I have encountered an army of people who suffer from welfare diseases.

Welfare diseases — also known as diseases of affluence — are chronic conditions linked to industrialization, wealth, and modern lifestyles, notably including type 2 diabetes, obesity, and heart disease. Some say obesity is a welfare disease, others say it's a marker.

If you suffer from any welfare disease, there is a high probability that you also suffer from non-alcoholic fatty liver disease (NAFLD; NASH).

NAFLD/NASH can cause mental health issues, so it makes sense to and mental health issues to the family of welfare diseases. I have written about that (Österberg, 2019 – 2024; 2026).

Conclusion. Failed business operations, and health may recover with Rational Entrepreneurial Thinking and nutrition psychology.

Also read: Österberg (2025). Finland's collapse is continuing, but no politician or public manager admits to having done anything wrong

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Executive coaching for CEOs/managers and workshops to facilitate Organizational Performance, Learning, and Creativity for Problem Solving | Lectures: Nutrition for physical and mental health | Course/lecture: children's emotional and social adjustment and cognitive development | Language training – Swedish | Academy Competency | CV | Teaching skills and experience | Summary of research project | Instagram | Linkedin | YouTube-channel | TikTok | X