How Do You Know That? Funny You Should Ask.

During a recent market development planning exercise, my client recognized that his colleagues were making some rather dubious assumptions regarding the customers they were trying to address (i.e., acceptable price, adoption rate, lifecycle, market size, etc.), the costs of development, and costs of support. Although he frequently asked “How do you know that?”, he seemed to face irritation and mild belligerence in reaction from those he asked to justify their assumptions. So, together we devised a simple little routine to force the recognition that assumed facts might be shakier than previously thought.

After bringing the development team members together, we went around the room and asked for a list of statements that each believed to be true that must be true for the program to succeed. We wrote each down as a succinct, declarative statement. Then, after everyone had the opportunity to reflect on the statements, we converted each to a question simply by converting the periods to question marks.

Before Western explorers proved that the Earth is round, ships used to sail right off the assumed edges.

We then asked the team to supply a statement that answered each question in support of the original statement. Once this was completed, we then appended the dreaded question mark to each of these responses. We repeated this process until no declarative answers could be supplied in response to the questions. The cognitive dissonance among the team members became palpable as they all had to start facing the uncomfortable situation that what they once advocated as fact was largely unsupportable. Many open questions remained. More uncertainty reigned than was previously recognized. The remaining open questions then became the basis for uncertainties in our subsequent modeling efforts in which we examined value tradeoffs in decisions as a function of the quality of information we possessed. You probably won’t be surprised to learn that the team faced even more surprises as the implications of their tenuous assumptions came to light.

I am interested to know how frequently you find yourself participating in planning exercises at work in which key decisions are made on the basis of largely unsupported or untested assumptions. My belief is that such events happen much more often than we care to admit.

I would also be interested to know if the previously described routine works with your colleagues to force awareness of just how tenuous many preconceived notions really are. I outline the steps below for clarity.

1. Write down everything you believe to be true about the issue or subject at hand. 
2. Each statement should be a single declarative statement. 
3. Read each out loud, forcing ownership of the statement.
4. Convert each statement to a question by changing the period to a question mark.
5. Again, read each out loud as a question, opening the door to the tentative nature of the original statement.
6. Supply a statement that you believe to be true that answers each question.
7. Repeat the steps above until you reach a point with each line of statements-questions where you can no longer supply answers.

You might find that using a mind mapping tool such as MindNode or XMind are useful for documenting and displaying the assumptions and branching question/responses. The visual display may serve to help your team see connections among assumptions that were not previously recognized.

Let me know if you try this and how well it works.

Can Modeling a Business Work?

A friend on LinkedIn asks, “Can modeling a business work?” I respond:

For now, or at least until The Singularity occurs, the development of business ideas and plans is a uniquely human enterprise that springs from a combination of intuition, goals, and ambitions. That should not mean, however, that we cannot effectively supplement our intuition and planning with aids to management and decision making. While I think human intuition is a very powerful feature of our species, I’m also convinced it can be led astray or corrupted by biases very quickly, particularly amid the complexities that arise as plans turn into real life execution. This is not a modern realization. The origin of the principles of inventory management, civil engineering, and accounting date back to the antiquities. Think of the seagoing merchants of the Phoenicians and the public works building Babylonians and Egyptians. In fact, historians now believe that the actual founder of Arthur Andersen LLP was none other than the blind Venetian mathematician and priest, Luca Pacioli (ca. 1494). That's right - that musty odor that emanates from accounting books is due to their being more than 500 years old.

Luca Pacioli doodling circles out of sheer boredom after a day of accounting. I made up the part about his being blind.

Business modeling is a tool similar to accounting in that it aids our thinking in a world whose complexity seems often to exceed the grasp of our comprehension. I look at the value of modeling a business as a means to stress test both the business plan logic and the working assumptions that drive the business plan. In regard to the business plan logic, we're asking if the business has the potential ability to produce the value we think it can; and in regard to the working assumptions, we're testing how sensitively important metrics (i.e., payback time, break-even, required resources, shareholder value) of the business plan respond to conditions in the environment and controllable settings to which our business plan will be subjected.

Obtaining such insights from modeling a business, business leaders can modify business plans by changing policies about pricing, products/services offered, costs targeted for reduction or elimination, and contingency or risk mitigation plans that can be adopted, etc. 

However, I recommend awareness of at least three caveats with regard to business modeling:

1. Think of such models as "what-ifs" more so than precise forecasts. Use the "what if" mindset to make a business plan more robust against the things outside your direct control versus using it to justify a belief in guaranteed success. The latter is almost a sure fire approach to failure. 
2. Always compare more than one plan with a model to minimize opportunity costs. Often times, the best business plans derive from hybrids of two models that show how value can be created and retained for at least two different reasons. 
3. Avoid overly complex models as much as, maybe more so than, overly simplistic models. Building a requisite model from an influence diagram first is usually the best way to achieve this happy medium before writing the first formula in a spreadsheet or simulation tool. Richer, more complex models that correspond to the real world with the highest degree of precision are usually not useful for a number of reasons:
• they can be costly to build
• the value frontier of the insights derived decline relative to the cost to achieve them as the degree of complexity increases
• they are difficult to maintain and refactor for other purposes
• they are often used to justify delaying commitment to a decision
• few people will achieve a shared understanding that is useful for collaborating and execution

A requisite model, on the other hand, should deliver clarity and permit making new and interesting testable predictions or reveal insights about, say, uncertainties, that could be made to work in your favor. Admittedly, though, it takes a lot of practice to achieve this third recommendation, but it should be used as a guiding principle.

Getting the Lead Out - of Poor Thinking

New research finds Pb is the hidden villain behind violent crime, lower IQs, and even the ADHD epidemic. And fixing the problem is a lot cheaper than doing nothing.
-"America's Real Criminal Element: Lead"

I'm inclined to believe the recent news (critique, rebuttal) about lead poisoning being the primary culprit in the cause of the crime wave from the 1960s through the 1990s will prove out.

But I'm a spectator here. Notwithstanding the commitment to my current convictions, I do think more study should be pursued to find disconfirming evidence to determine just how strong this hypothesis really is. See, I do not want to believe something is true because I've been convinced it's true. I want to believe because all other alternative explanations have been excluded either by logic or evidence. I hope we're all properly skeptical in this way because the value of removing hypotheses that don't explain the data well might, as is indicated in "America's Real Criminal Element: Lead," prove immensely valuable.

However, I think there is something else for us all to learn here, not just about the pernicious effect of lead in the environment, but also about the toxic effects of bias in our thinking, planning, and policy making and the long term effects of them.

As you read the three linked articles above, ask yourself:

• How often do we insist that we know, know beyond a shadow of a doubt, the cause of some puzzling event because of our ideology, superstitions, or by confusing causation with correlation? 
• Similarly, how often do we consider just how ignorant we really are, completely unaware of hidden variables at work beneath the façade of preconceived notions? 
• How often do we take credit or assign credit to our heroes for desired outcomes on the heels of decisive action when good luck is probably just as good an explanation? 
• Or conversely, how often do we blame ourselves or others for undesirable outcomes when bad luck is also probably just as good an explanation?

...we all have a deep stake in affirming the power of deliberate human action.

There is power in knowing, but there is also power in being aware of just how little we know. And that might prove to be more valuable.

Got Correlation?

And now for your daily correlation versus causation alert.

Countries whose people drink more milk win more Nobel prizes, according to research published Tuesday in Practical Neurology, a serious British journal. It builds on research last year in the New England Journal of Medicine that found a nearly identical link between chocolate consumption and Nobel success.

This is good to know, because I drank chocolate milk every day for lunch from first grade through high school. Of course, it was government milk, so the benefits may not translate to me.

Hypothesis Driven vs. Data Driven Analytics

We're having an excellent discussion at the LinkedIn discussion group
Advanced Business Analytics, Data Mining and Predictive Modeling on the topic of
"Hypothesis Driven Vs. Data Driven Analysis - Which do you support? Throw it all in the black box (computational) and see what you get or lets define the problem and seek data to analyze (traditional)."

If you have thoughts or guidance on this, you ought to join us or comment here.

Dare to Disagree

I thought this TED talk by Margaret Heffernan was great and complementary to the blog post I wrote: Ain't I Got a Right to be Wrong?

Summer Reading Titles

I picked up my summer reading last night since summer begins this evening.

• A Universe from Nothing: Why There Is Something Rather than Nothing by Lawrence M. Krauss
• The Quantum Universe (And Why Anything That Can Happen, Does) by Brian Cox
• Design in Nature: How the Constructal Law Governs Evolution in Biology, Physics, Technology, and Social Organization by Adrian Bejan
• In Pursuit of the Unknown: 17 Equations That Changed the World by Ian Stewart

Yeah, I'm still a geek.

How Do You Know That? (or A Little Ambiguity on a Wednesday Afternoon)

I'm a crappy friend, and here's why.  When asked a question that a friend of mine deemed important, I turned his questions back to him in the form of additional questions.  Maybe I'm uncomfortable with familiar certitude, or else I'm just content to be a gad fly.

Maybe I'm too much of a coward to give a straight answer.  You can judge for yourself after you read the rest of this post. (You will, won't you?)

To set the context, here's the note (posted with permission).

"Hi Rob,

So, I read this [link from Wikipedia to my daughter] yesterday and asked if she believed it:

Joseph Smith Jr. said that when he was seventeen years of age an angel of God, named Moroni, appeared to him,[10] and said that a collection of ancient writings, engraved on golden plates by ancient prophets, was buried in a nearby hill in Wayne County, New York. The writings described a people whom God had led from Jerusalem to the Western Hemisphere 600 years before Jesus' birth. According to the narrative, Moroni was the last prophet among these people and had buried the record, which God had promised to bring forth in the latter days. Smith stated that he was instructed by Moroni to meet at the hill annually each September 22 to receive further instructions and that four years after the initial visit, in 1827, he was allowed to take the plates and was directed to translate them into English.
http://en.wikipedia.org/wiki/Book_of_Mormon

She said 'no,' so I asked her why she believed a man lived in the belly of a fish for three days and the story of an ark and a talking donkey, etc., but she didn't believe this story.  She thought for a second and said, 'because you didn't teach that to me' (which is a more honest answer than when I ask her why her room isn't clean).  So I asked her if we were sharing the story of Jesus with a non-believer or even someone in a country that was not familiar with the Bible what would make them believe one set of stories and not the other.  She didn't have an answer and I'm not sure I do either.

This has always been one of my sticking points (noted in the article):

For some followers of the Latter Day Saint movement, unresolved issues of the book's historical authenticity and the lack of conclusive archaeological evidence have led them to adopt a compromise position that the Book of Mormon may be the creation of Smith, but that it was nevertheless created through divine inspiration.[36] The position of most members of the Latter Day Saint movement and the official position of The Church of Jesus Christ of Latter-day Saints (LDS Church) is that the book is an actual and accurate historical record.

Thus, I'm asking if you have any thoughts on this."

No one is really questioning the Mormon church here.  My friend's question is related to his own unresolved issues, not those of you who wear the special undergarments.

My crappy response?  Here it is...

"First of all, I think you need to realize that you’re asking your daughter to do something very dangerous.  In the end, she may not believe what you believe.  Can you handle that, knowing that you started her on that road of inquiry and questioning?

Second, what do you hope to achieve by asking your daughter to take on this line of questioning?  Do you want her to have a more secure rationale of the stories she believes in by faith in you (which she more or less admitted to, and with honesty, as you point out)?  Or do you want your daughter to learn to live life on more courageous and rational terms; i.e., not driven by others’ forcible dictates or emotional manipulations against her own interests, or not driven by her own casual acceptance of poor thinking (which, in our own way, we all suffer from)?

Finally, I’m not going to answer your question directly. I’m going to turn the questions back on you. How do you establish that any belief is worthy of protracted attention and possibly worthy of bringing others to a similar level of attention? It seems to me that before you give your daughter some guidance in this regard, you ought to have given some measure of consideration to the following.

1. What are the criteria that you use to judge the veracity of a claim?
2. How do you determine that a belief should be significant to you?
3. How do you determine that a belief should be significant to others?
4. How do you determine that you have an obligation to communicate to others about it?
5. How do you determine that your beliefs are worthy enough to impose some obligation on others?

I hope you can live with some ambiguity on a Wednesday afternoon. :)

Best regards,
Rob"

I don't think I exactly gave a straight, supportive answer.

The romantic ideal I possess of a stalwart friend is one who would give reassuring answers.  Clear answers.  None of that ambiguous, oblique stuff that makes you lie awake at night staring at the ceiling.  Like I said, I'm a crappy friend.

So while I might want to be a good friend and fall short, above all I want to be an honest friend when it matters.  (Yeah, I qualify that.  I'll leave it up to you to ponder when a little dishonesty might be helpful.)  Looking back on it, I have to say that one of the most important lessons I gained from engineering school was to realize I have the moral authority to ask: "How do you know that?"

And so I ask, dear reader, how do YOU know that?

In the context of this thread, I don't care if you believe in Joseph Smith and the story of Maroni.  For that matter, I don't care if you believe in Scientology, Buddha, Jesus, or Mohammed. Global warming or not, evolution or special creation, secret societies that malevolently run the planet or that government is just always inept. I don't care.

I don't care if you believe in a gold standard, a bimetallic standard, or a fiat currency.

I don't care if you believe that you should never get involved in a land war in Asia or that you should never go in against a Sicilian when death in on the line.

I. Don't. Care.

What I do care about is this: If we believe that our beliefs are worthy enough to affect others, I want to know - how do we know that?  Let's start right there.