Autonomy, Mastery, Purpose

Listen to this presentation by Daniel Pink. The first 10 people to complete this task will get twice as much as I paid you last year.

More on the Flaw of Averages

The Flaw of Averages

Everyone in your company who makes decisions or supports decision-making needs to read
by Sam Savage. Why? Because together you are likely committing the flaw of averages, wasting time and exposing yourself to unnecessary risk. Savage shows you how to avoid this pitfall in a cleverly written, enlightening, and fun to read guide to making better decisions.

Most likely you have never heard of Jensen's Inequality, and most likely you don't care. However, you should care, and The Flaw of Averages introduces why this concept poses profound implications to the way we tend to think about making decisions. The problem is that in thinking about the issues or opportunities we face and the decisions we exercise to address them, we often go through a kind of accounting process in which we consider the best case, most likely case, and worst case scenarios (or any number of scenarios) and the corresponding conditions that have to exist for each scenario to be realized. We let ourselves believe that those assumed conditions are averages that we can use as proxies for the full range of uncertainty we face. Our final conclusion is that the outcome of our analysis closely corresponds to the average real-world outcome and the extent of possible variation (if we get that far). Understanding that, we commit to action, often disastrously so.

Savage reveals the flaw in the traditional way of thinking by explaining the implications of Jensen's Inequality. In short, Jensen's Inequality says that in situations where the output we care about varies in a non-linear way to inputs (which is much of life), the outcome as a function of average inputs (the flawed traditional analytic approach) is NOT equal to the average outcome as a function of the inputs treated as they naturally vary. [For those mathematically inclined, if E() is an operator that determines the average of a sample, and f(Xi) is a function of inputs, then E( f(Xi ) ) does not equal f( E(Xi) ). For those not so mathematically inclined, don't worry. The Flaw of Averages is not a math book; rather, it is a book about making decisions and how math can be used constructively to support that process.]

The way around this failure is to use Monte Carlo simulation to consider simultaneously the effects of the range of the assumptions as they naturally vary on the outcome we care about. Instead of thinking about the outcome as a single point or a constellation of points representing exhaustive guesses about the future, we see the full range of potential outcomes and their likelihood as a distribution. We see the implications of our decisions and corresponding uncertainties as a picture and not a point. As a result, not only do we avoid never ending analysis paralysis, we gain a deeper appreciation for the effect of typically unconsidered outcomes, both good and bad, and are able to plan accordingly with contingencies and options.

Counting Crows?

This explains what happens to the money in my wallet. Well, that's my story.

Where would we be if they had opposable thumbs?

Weighty Choices, in Patients’ Hands

Great article in the Wall Street Journal today: Weighty Choices, in Patients’ Hands.

Selecting and Confirming - A Fool's Errand

Read this story here.

Did you see the same pattern the author did? George P. Burdell, a man known for making significant patterns, didn't either. You are wise, too.

What you are witnessing in that article is a nationally distributed example of selection and confirmation bias, a fool's errand - looking for something that really is not there.

If you remove the outlier in each graph, the graphs pretty much no longer tell the story the columnist thought he was telling. This type of force-fit linear analysis does little for advancing critical insight. The first graph shows that there is no real favoritism being demonstrated. The columnist is just wrong. But so is Obama. No one (rich or poor) is really being helped significantly more than anyone else.

However, if you look at the last three graphs, the real story is that the stimulus is having little effect. There is virtually no response in unemployment and bankruptcy for stimulus dollars spent (at least up to the time this data is purported to represent); there is only a slight response to foreclosure rate.

So what happened? George and I can't judge the author's intention, but if I had to let my suspicions be made known, I would say the author went looking for a story, simplistically used linear analysis tools (which are highly sensitive to outliers), and found the story he wanted to tell. Unfortunately, he missed the real story that potentially demonstrates the greater policy implications.

We face a number of really important debates right now in this country. Obscuring clear thinking and true exploratory dialog will not be helped with this Fox correspondent's lack of rigor.

More Linear Thinking

I conducted a simple analysis about a week ago based on numbers published at Recovery.Gov. The site actually tells you how the Obama administration developed their forecast. (Editor's note: the links are apparently no longer available.) Essentially, they describe what amounts to a linear distribution based on the population of the states. I wanted to see if they were telling the truth and if there were any significant departures from it.

I scraped the jobs saved forecasts from the recovery website and divided them by state populations (rounded to nearest thousands) to develop the per capita forecast of jobs savings. Then I ordered the resultant per capita saving rate from lowest to highest.

The results show that, indeed, the stimulus money is being distributed (or at least, purported to be) proportionately to state population. The glaring exception is Washington DC, which is receiving funds at a rate 71% higher than the average and 76% higher than the median.


The thought behind the distribution of the stimulus funds is really no more sophisticated than a simple population pro rata.

The other interesting pattern that occurred is that the richest states are clustered among those receiving the higher rates of funds distribution, and the poorer states are clustered among those receiving the lowest (wealth being measured as reported at CNN). However, the clustering is not strong enough to warrant the claims of another recent article by Fox News that indeed richer states are being paid at a disproportionately higher rate.


Blue states are the poorest states, and red states are the richest.


This, combined with the USA Today article lead me to conclude the following. Except for DC, the Obama administration is following the pattern they described. (We might want to ask what kind of jobs are being saved or even created in DC. The answer is, of course, more bureaucrats.) Richer states are more industrialized states. Industrialized states are more urban. Urban populations disproportionately tend to vote for more interventionist/socialist policy makers. So what we’re seeing is not so much a direct nefarious attempt at political repayment as much as we’re see the self-selecting and compounding effects of interventionist policies securing interventionist representation. It represents the mechanism by which votes are bought on a large scale over time.

It also demonstrates that the poorer among us are not being lifted up at a higher rate by these direct interventionist activities. It has long been noted that interventionist/socialist programs do not benefit the people they claim to benefit. I wouldn’t use this analysis as proof to support that claim, but it does fit into the postulated pattern.

Finally, I have to say that I was really shocked at just how linear the distribution of funds is. I suspected that the description at Recovery for the rationale for disbursements was rough. I expected to see less correlation. Now, if the Obama administration had a econometric model that identified population as the key driving variable for stimulative effects related to employment, I could understand that. But they did not have any such empirically based model. Regardless, they forcefully asserted that their efforts would have the direct causal effects they sought. If we do believe that stimulus has causal effects, the effects were demonstrated to be embarrassingly strongly inverse, at least up this point; that is, if you believe the correlation is due to some underlying causal mechanism, even if it is the opposite of what the Obama administration postulated and forcefully advocated.

I don’t believe there is a causal relationship, direct or inverse, to the current stimulus efforts to recovery. I think the stimulus money has been absorbed more or less by state governments and dissipated in the oh so efficient way that governments work, and in parallel, the economic forces at work shed labor at a much higher rate than anyone anticipated would happen. In fact, the evidence is that the time rate at which the economy has produced unemployment is the fastest in this country’s recorded history.

Ultimately, the Recovery.Gov figures are less about jobs saved and more about the way money is redistributed (i.e., embarrassingly simplistic), nothing more.

Overcoming Barriers to Effective Decision-making

No one can ever eliminate mistakes or undesirable outcomes from the choices they make. But you can gain the skills necessary to help you and your colleagues consistently reduce the likelihood of being wrong with important decisions. "Overcoming Barriers to Effective Decision-making", reveals why decision-making in a business context is so difficult and what can be done about it, especially when it relates to Marketing & Business Development. It focuses on the aspects of human behavior and offers five practical steps to clarify ambiguous intentions, generate creative alternatives to achieve your goals, and create value by understanding risk and uncertainty.

Where: The Biltmore, 817 West Peachtree St. NW, Suite 915, Atlanta, Georgia 30308-1163
When: June 17th | 7:30-9:30 am
RSVP: by email mira@creativegrowthgroup.com no later than June 15th

We can go home now

I wonder if the same robots will discover metamath?

A pox on both their houses?

Black Swans Fly Again

Nassim Taleb provides some very interesting interviews with Russ Roberts. I'm still thinking through what he said. Some ideas I agree with. Some I disagree with. Others I'm surprised by.

#1 Taleb on Black Swans

#2 Taleb on the Financial Crisis

Inflation, the Silent Tax

Friend and fellow blogger, Rick at Economics for One, wrote this note on the taxing effects of inflation.

I note the following: The other interesting, if not chilling, effect of inflation is that inflation induces greater and greater dependence on government services and employment, which Rick alluded to by explaining the dilution of money as a function of distance from the government. Since people typically want more money rather than less (or more accurately, they want the benefits that more money can seemingly purchase as long as thy have more relative to the amount everyone else has), this dilution gradient likely steers people through this preference to less distance from government distributions of money. (In fact, in light of the Obama stimulus plan, numerous people have recently counseled me to seek government contract employment or seek ways to obtain stimulus money.) It seems to me that this then provides an opportunity for the political class to buy more power by linking access to money to votes for the political class that provides the money. The net effect is the strengthening of the power base of a political class…until the inflation get so unmanageable that the economic system collapses. The net effect of inflation, then, is not only a silent tax but an increase in power for the political class that induces the inflation.

A clarification on political class…Party affiliation may fluctuate as people obtain benefits or lose purchasing power as they perceive those effects being connected to a given party. But a class of people that seek political power will engage in these inflationary tactics regardless of party affiliation. As Friedman and Hayek pointed out, statism extends across political parties, leading to ambiguity and dilution in the real, pragmatic difference in the parties.

Sabotaged Minds

If you took your Father's Day to go trout fishing in the Chattahoochee River, and if you caught anything that you considered worth keeping and that won't make your toenails fall out once you have eaten it, you may have acquired a copy of the Sunday, June 15, 2008 edition of the Atlanta Journal Constitution to prepare your catch for the freezer. And if you paused long enough in the @issue section of the paper, you may have seen these two articles...

“Higher ed, lower bar”
(This article was reprinted from the June 2008 edition of The Atlantic under the title "In the Basement of the Ivory Tower".)

“You say sabotage, I say checklist for my job”

The first article seems to square with my experience of being a student in some post-baccalaureate classes I took from Georgia State University. I was taking a secondary education classes to obtain my professional educator's certification to teach in the state of Georgia (which I no longer do, by the way). One of my professors actually confided in me how depressed he was over the lack of ability of his students to engage in well structured thought. His complaints echoed in my mind as I read the editorial by Professor X. These students were heading out the door eventually to teach the students of the state of Georgia.

As I read the second article, I couldn’t help but think to myself that our culture has actually internalized these sabotage techniques as the way to business of any kind. And I finally realized the problem. It’s not that people don’t want to think, it’s that they CAN’T think. And we have taught them to be this way.

Dudes, we are toast.

Did they learn anything?

I noticed something funny in one of the latest issues (May 26, 2008) of Fortune magazine. It's an ad placed by the Air Force. I haven't seen it in other periodicals yet, but maybe I haven't been attentive enough. The ad begins on page 39. It shows a picture of some unseemly third world dictator waving his gun along with his entourage of other gun toters (by the way, I'm a gun toter, too, so my point is not to disparage the gun toting crowd). The caption on the picture says; "How do you discourage a rogue leader who wants to flex his muscles?" On the following page is a picture of a B-2 bomber with the caption: "Flex back."

The graphic answer provided by the Air Force to force initiated by rogue leaders is to respond with technological brute force. I wondered how John Boyd would respond to this. I can't speak for the Air Force as to what the organization's actual approach is to rogue leaders, but given Boyd's insistence on the priority of people over technology to solve the kind of complex problems posed by rogue leaders, I'd be inclined to think he would be disappointed with the ad. The reason rogue leaders are considered rogues is that they are, well, roguish, unpredictable, novelty generating agents. Those kinds of people eventually figure out how to subvert the best technology.

Don't misunderstand me...I'm not suggesting that Boyd was opposed to the use of technology nor am I suggesting that the Air Force should abandon its technology. But I think the ad might have reassured me more of the Air Force's capabilities if the ad featured people and intelligence over technology. But I guess the ad was designed to attract recruits, not reassure the citizenry.

We don't need no stinking spreadsheets

My review of the modeling application Analytica 4.1 was published in INFORMS's periodical, "ORMS Today", today.

I don't think it will get the Pulitzer, but it might cure insomnia.

I think that should be Strategic PlanTing Tool

Click on the image and see the lower left corner if you don't get what I mean in the title.

The Way of the Future in American Schooling

This is what I've been saying! Just avoid the voucher system. We need as little government intrusion in this as possible.

The Land of the Giants

On Saturday, April 5, 2008, I decided to drive north from Bakersfield, CA to visit Sequoia National Park. It was one of the best sightseeing trips I have ever made.

I took this photo while driving up to see the Sherman sequoia, the biggest tree in the world. I probably should have put my car in park as I took the photo.

The Black Swan Giveth, and the Black Swan Taketh Away

On the 1000th day of its life, Bertrand Russell's turkey felt fat and happy. The next day, Thanksgiving, he was stuffed with bread and eaten to the great satisfaction of the Russell family. Russell's turkey met a black swan.[1]

A black swan was an idea put forward by the Enlightenment philosopher, David Hume, to represent the unexpected, the stuff you know you don't know or don’t know that you don't know. It was a play on the popular idea in the 17th century that the only color of swan found in nature was white. Hume argued that although no one had ever seen a black swan, their existence was not logically ruled out by their lack of being observed, at least by Europeans, as Europeans would soon find out. In fact, black swans do exist, but they weren't recorded in natural histories until Europeans (also) discovered Australia. As native Australians already knew, black swans are quite numerous indeed.[2]

Russell’s turkey met a black swan. We’ve all met black swans. Two good friends of mine met a familiar black swan this past Christmas, the one few of us ever anticipate. Both friends had enjoyed decades long careers at a single employer. Suddenly, they were let go, seemingly out of the blue. Sometimes black swans bear teeth.

But black swans sometimes bear gifts, too. Another friend of mine experienced a virtuous swan just after the new year. He was waiting for his privately held company to go through it’s quarterly valuation and release its updated stock price. If one followed the price history of the company’s stock and believed that past performance indicated future performance, one would reasonable expect an increase of $1 to $5. Imagine his surprise when he opened his email to learn that the company’s stock had jumped $17 per share, an increase of 107%! The value of the ownership he held in the company doubled in one day.

This beautiful bird is about to wreak havoc on those who fail to comprehend its predatory ambitions, or it may deliver a golden egg.

Now both sets of friends face more potential black swans. Will my former example set of friends continue to believe that employment always means stability, or will they take more proactive steps to manage their careers? Will my latter friend be honest enough to understand that his company’s stock price can go back down just as dramatically as it went up?

These surprises are the most general grist for consideration in Nassim Nicholas Taleb’s most recent book, The Black Swan: The Impact of the Highly Improbable,

a more thorough and extensive consideration than his previous book, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.

Taleb, literary essayist, Dean’s Professor of Uncertainty at the University of Massachusetts, and mathematical options trader, lays out the foundation for his ideas from his experiences in the financial markets. These experiences lead him to discuss three interrelated themes that he ultimately broadens to an understanding of uncertainty in general.

1. The Ludic Fallacy: The word "ludic" comes from the Latin ludus, for “games.” Most of us were taught to think about systems that involve uncertainty and chance using structured, discrete symmetries like those found in games of chance, such as craps, card games, etc. Unfortunately, these analogies don’t frequently hold up into real world situations; but because it’s comfortable and expected to do so, we persist in their use. Use of binomial distributions are often a result of ludic framing, as is its continuous cousin, the bell curve (or Normal Gaussian for those more trained in quantitative analysis). These distributions have appropriate applications, but they do not apply to all cases of uncertainty.
   
2. Mediocristan/Extremistan: Most of us live in Mediocristan, a land not governed so much by mediocrity, but by a persistent belief in the applicability of a characteristic median to all types of uncertainty. When most of us think of uncertainty in some domain, we have been taught to think about that in terms of the bell curve. Taleb demonstrates that many types of uncertainty can be thought of in this way (Class I uncertainty), but not all of them. One characteristic of uncertainties described by a bell curve is that they do not scale, that is, the probability of occurrence of outcomes far from the mean (and median) fall exponentially fast. In this world, no one event outweighs the significance of all the other events. Many physical processes with natural physical constraints are accurately described by such distributions. Black swans can show up here, but they are extremely rare. Unfortunately, most black swans live in Extremistan, the land where uncertainty scales according to a power law (Class II uncertainty), where it is possible for a single event in a domain to outweigh the significance of all the others. Extremistan exists beyond the Platonic fold, where our typical representations of reality fail to apply. The processes that govern such distributions tend to be social, emergent, financial, maybe not entirely physical. This will have an important bearing on seeing the applicability to maneuver conflict.
   
3. Confirmation Bias: Oftentimes we become inebriated with hope, that outcomes will go the way we wish and hope. To convince ourselves that such is the case, we develop narratives from cherry-picked data and information that confirm our bias. Using these narratives as a guide to decision making, we are disabused of our fallacious reasoning in sometimes spectacular ways. Yet we still fail to learn if we are still alive to face the next black swan. “Beware the scalable,” Taleb enjoins.
   

The scandalous malpractice, as Taleb shouts, is that the rules that apply to Mediocristan are too often misappropriated to understand and manage systems that don’t obey such laws, often at the expense of lives and immense fortunes. The most pointed cases involve applications of options and modern portfolio theory in which billions of dollars of investors’ fortunes are lost by the malpractice of Nobel “intellectuals” who should know better (anyone remember the tragedy of the Amaranth fund or the trading company Long-Term Capital Management?); the poignant disaster of the unsinkable Titanic; the current woes of Bear Stearns and the sub-prime lending industry; and, in Taleb’s case, the decade and a half long civil war in his centuries-long peaceful Lebanon, a war that he and all too many others sadly believed would end soon after it started.

How does understanding the black swan inform our understanding of maneuver conflict? Consider the martial arts version of the Ludic Fallacy offered by Mark Spitznagel.

Organized competitive fighting trains the athlete to focus on the game and, in order not to dissipate his concentration, to ignore the possibility of what is not specifically allowed by the rules, such as kicks to the groin, a surprise knife, et cetera. So those who win the gold medal might be precisely those who will be most vulnerable in real life. (Black Swan, pg. 127)

John Boyd leads us to understand that conflict is often a non-cooperative contest for limited resources by novelty generating agents. Novelty is the black swan of conflict. When we become convinced that our side will win on the basis of strength or numbers, when we believe that the other side will follow our rules of engagement, we will be exposed to cruel novelty. This is precisely what Chet Richards describes as a disease of orientation called fixation: “...attachments to appearances, conclusions, institutional positions, dogmas, ideologies — pretty much anything that keeps the people inside the organization from recognizing that the world is changing or being changed by competitors.”

How do we escape the tyranny of the black swan? We have to learn to do at least two things. First, we have to learn how to really learn, always looking for disconfirming evidence to the self-justifying narratives we generate from the first cousins of confirmation & my-side bias, availability bias, and anchoring that keep us from considering a wide range of possible outcomes, their appropriate degrees of likelihood, and their consequences. We have to learn that images in the mirror tell us scant little about the road ahead. To do this, next, we have to learn how to properly discern systems governed by the laws of Mediocristan from those governed by the laws of Extremistan, and act accordingly.

Nassim Nicholas Taleb delivers what may be the only book on epistemology that I would describe as both a blustery and a rollicking good read. If only all the other text books in philosophy of knowledge I read in school had been so fun. If only all the others had been so honest. In that sense, Taleb's book is its own black swan.

[1] The reader should almost immediately recognize that Bertrand Russell was English and did not observe Thanksgiving. In fact, as Russell himself tells this story, he uses a chicken as the example of the doomed bird. Taleb acknowledges this, but adapts the story to an American audience. [back]

[2] I am reminded of an event in my 9th grade year in which my algebra teacher convinced a sizable portion of our class that the state of Nevada did not exist, that it was a ruse invented by the US Air Force to deter investigation into super secret military programs. His “proof” was a simple question: “Have you ever seen a car tag from Nevada?” For kids in rural mid-Georgia, his scam was based on a rather safe bet that Nevadans rarely drove to our sleepy little town. [back]

Spring is here, and we're a little Boyd crazy

George P. Burdell recently called my attention to this article, about how John Boyd's theories of maneuver conflict could be employed in the management of a library. "Wow! Who knew the Dewey Decimal System could be so fun," I exclaimed.

George P. Burdell (a man known by many for his agility and maneuverability) and I have been reading about and participating in discussions about the ideas of the late Col John Boyd since the publication of Boyd: The Fighter Pilot Who Changed the Art of War by Robert Coram in 2004. We're relative newbies to this stuff, so we're still learning.

"You know, George, as I was reading this article, I recalled that you said that the author didn't quite get the OODA Loop, even though he discusses its use quite well."

George closed his eyes and nodded. "Yes, you should check out his resources. he actually points back to an article by Fred Thompson on our friend's, Chet Richards, website as the source for his understanding. The discussion is good, but the depiction of the OODA loop is what bothers me.

As I read the article by Fred Thompson, I had to admit, with George P. Burdell's guidance, that he didn't seem quite to capture graphically the essence of the Boyd Cycle either.

"Maybe Chet needs to provide some gentle counseling to them."

I continued. "So, as I've been thinking about the OODA loop and reading Chet's Neither Shall the Sword, it occurs to me that possibly the best way to describe the OODA loop is not a process loop but as a feedback loop, a type of cybernetic control function."

"In a very simplistic way, I can think of my thermostat-heating system as a kind of OODA loop. The slowest possible configuration I can imagine might involve my running up and down the stairs from my bedroom to my basement to turn my heater off and on in response to temperature measurements I take. In this case, exhaustion and the elements are likely to win since they are always on and relentless. However, if I create an electric feedback loop (as opposed to my running kind) from a thermometer in my bedroom to the switch on my heater in the basement, my heater will respond to the variance in measured temperature to desired temperature faster than before and respond accordingly. In other words, there isn't really a process cycle taking place in the thermostat-heater system in which some agent steps through various commands, that is

1. Measure temp
   
2. Compare to desired temp
   
3. Turn on heater for x minutes
   
4. Return to 1
   

The electric thermostat-heater system is actually always on (This is certainly true for analog systems in which measurement is continuous. Digital systems do step through a measure-test process, but so fast that it is essentially continuous. Regardless, the benefit is derived from how fast information is transferred.) The benefit of this configuration is not really related to how fast it goes through process steps, but how fast information (measurements, observations) can be reconciled with the environment and acted upon. Since the transfer of electric signals are faster than heat diffusion, my system 'wins' in that it effectively manages the variance from a desired set point of temperature."

George seemed to go into a trance at this point, and he began to channel the disembodied spirit of Chet Richards, which is odd not so much because Chet is still very much active right here in Atlanta, but because George totally disavows such voodoo-like stuff. "This is a very important observation - it's a dynamic process (for lack of a better word) - like a whirlpool.  It's always 'on.'  Boyd was strongly influenced by the ideas of the late Ilya Prigogine, who used the phrase 'dissipative structures,' of which a whirlpool is a classic example. Absent the continual flow of energy provided by moving water, it can't exist at all. It's either 'on' or it isn't there. Similar thing in biology.  As I understand it, even at rest, nerve cells are firing at a basal rate of around 60 Hz.  To send a signal, that rate shoots up.  So orientation is continuously sending 'signals' to / controlling action via the implicit guidance and control link."

"Your feedback loop analogy is interesting.  To work, the system must not only transmit signals faster than the room heats or cools (decide / act), but the thermostat must register changes much faster than the temperature in the room is actually changing (observe / orient).  This is, of course, the classic control problem:  Make it too sensitive and the pilot will skitter around all over the sky.  If it isn't sensitive enough, or if there are significant lags between input and effect, the pilot can induce uncontrollable oscillations."

I continued with my own thoughts, staring curiously at George, who was now levitating in a rigid prone position above the floor. "In more complex and dramatic human contests, the winner is the one who can process measured information (which metrology tells us is always less than absolutely certain) about the environment, interpret the observation, and reconcile the interpretation with reality in such a way that allows transition from one state to another faster than the opponent who is also doing the same thing. Again, it's not that the winner went through process steps faster, but that the winner was able to measure and interpret information faster to allow for faster, more unpredictable transitions from one state space to another such that its measured state space by an opponent is increasingly variant from reality. In other words, it's not speed along a given dimension that makes me a more effective contender, but the ability to accelerate between dimensions unpredictably."

"Hold on a minute! I think we can describe this mathematically. If we think of a state space as a vector of dimensions of concern of an agent X, representing it as {X}, we can represent the measure (observation) of X's state space by another agent as {X*}. The absolute variance could be given by Vx= |{X-X*}| . X's opponent Y has a state space {Y}, and X's measure of Y's state space is {Y*}. Then X is most likely to win over Y if Vx'' > Vy''. In words, X is most likely to win over Y if the second order time rate of change of the variance between the actual state of X and its measured state space (as observed by Y) is greater than the second order time rate of change of the variance between the actual state of Y and its measured state space (as observed by X). In conflict, you're more likely to win over me if you are able to switch position faster than I can accurately measure and respond to."

Suddenly, the phone rang. George floated over to the phone and answered it. "It's for you. It's Col Chet Richards." Now I really felt like I was in the Twilight Zone. George rotated around his waist-line axis into a head-down position now, arms outstretched, feet pointing to the sky, suspended, unattached to any of his acrobatic wires, four feet above the floor.

"That's a very perceptive observation, Rob, and I think you've penetrated to the heart of the concept - 'broken the code,' as Boyd would say.  Using airplanes, which was the original inspiration, define the state vector to be its altitude, airspeed, and direction.  'Maneuverability' is the ability to change the state vector relative to time, that is to climb/descend, accelerate/decelerate, or turn in any combination.  'Agility' is the ability to change maneuver state, which is the second derivative of the state vector function.  Boyd said that the most agile aircraft wins." Chet's voice was nonchalant.

"And that's true, IF (big 'if') the pilot of the more agile aircraft knows how to use this agility advantage to end the engagement on favorable terms (i.e., shoot the other guy down).  That's really the problem Boyd addresses in his Discourse on Winning and Losing."

"So it's as you said, change your position - or 'state' however defined - more rapidly than the other side can comprehend.  And keep doing this until you create some type of advantage that you can exploit to end the situation on favorable terms.  And you can be sure that you will reach such a position because by operating inside the opponent's OODA loop, you're degrading the ability of your opponent to function as an organic whole. Very shortly, he's going to start fracturing into 'many non-cooperative centers of gravity' that begin to pull and push in different directions (e.g., split into cliques that bicker among themselves).  You'll sense that he's having ever more problems responding effectively - in the business world, products are late and seem outdated when they do arrive (Vista, anyone?), proposals don't correspond to what the client wants, huge amounts of time and money are written off time and again (GM / Fiat) and so on."

"It's knowing what to do...which sounds so simple, doesn't it? AND being able to do it, more rapidly than your opponent can understand.  So that by the time he does kind of understand, you're already doing something else.  It won't take too long before he starts coming physically, mentally, and morally unglued."

"One point - it's not 'more likely to win.'  If one can keep this flow going, one will win.  Hence the title of my book -- Certain To Win: The Strategy Of John Boyd, Applied To Business."

At that point, Chet unceremoniously hung up the phone. George maneuvered his way to the floor, rotating as he did into a supine position.

"Whoa. What just happened?" George mumbled, still groggy from the trans-corporeal channeling.

"I think it's spring, and you've gone a little Boyd crazy."

Global Alarming

The theory of evolution has an interesting relationship to the concept of “global warming.” There is very little public policy debate about evolution these days that has the potential to affect all of us the way the debate about global warming does. In fact, regardless of whether the theory of evolution is true or not (I tend to believe it's mostly true, but that's another discussion for another time), we mitigate against the mechanism. The most strident form of public policy debate regarding evolution is whether it ought to be taught in public schools. I’m sure it does creep into other discussions. But the point is, no one is running around saying that if we don’t do something about evolution soon, we as a species are going to be wiped out. If evolution is true, we ARE going to be wiped out. Our species will evolve into something different over time. We don’t know whether it will be something better or worse. Interestingly enough, attempts to control disease and predation may slow the rate at which our evolution occurs. But the reason that occurs is secondary to the belief in the reality of evolution itself. We just simply don’t like to be eaten and we like to live with as few privations as possible. We attempt to control those things to our immediate preferences.

The theory of global warming is different. The people who are pushing for its acceptance are also saying without much equivocation that it is all bad, that we are doomed because of it. Global warming is not just viewed as a part of the phenomenon of nature, like evolution. It’s all man-made, and worse, it’s all made by evil, greedy capitalist European-descendent men of the West. This is not something that nurturing women like Oprah Winfrey contribute to. The driving political agenda behind this almost deters us from actual serious inquiry because it focuses more on the assignment of blame as opposed to the assignment of cause. We might be able to learn something of importance and respond responsibly if it weren’t for the Chicken Little and Boy Who Cried Wolf nature of the rhetoric employed by the current driving forces of the political agenda.

Personally, I’ve never had to deal with the emotionally traumatic idea that global warming might be true like some people who come to the conclusion that evolution might be true in contrast to specific Biblical interpretations or in contrast to right-leaning platforms. It just seems evident to me that the earth goes through cycles of warming and cooling. It happened before. It will reverse itself again. It will happen yet again. I believe that global warming is occurring. The questions that remain to be answered are:

• What (or in the current up-cycle, who) is causing global warming? 
  
• Is global warming bad for everyone? 
  
• Do we understand why it is occurring?
  
• Is CO2 the actual physical substance that drives the mechanism?
  
• If CO2 does, does that make CO2 a pollutant, even though a significant portion of life breathes it and relies on it for life?
  
• If CO2 is not the culprit at the chemical layer, and water vapor is, will we declare water vapor to be a pollutant? Should we outlaw clouds?
  
• How long will global warming last (...again. This isn’t the first time it’s happened.)? 
  
• If we observe the phenomena but can’t accurately explain the mechanism, will attempts to control it produce even worse unforeseen effects? 
  
• How long will it take us to observe the effects of our efforts? 
  
• Who specifically should pay for the mitigation? 
  
• How much should they pay?
  

Here’s an interesting op-ed written by a guy who claims he was an atmospheric scientist. I think he might have been. So he might be qualified to make some publicly distributed informed opinion about the issue. In other words, he’s not a second rate politician using this as a platform to advance a comeback in his career. He has some actual training in interpreting the data. Admittedly, I don’t think he is currently conducting primary research.

It’s long, so if you don’t want to read the whole thing, just scroll down to the bottom third entitled “Summary - ...” and read from there. Down near the bottom is another addendum entitled “You’re going to love this.” It’s a picture of skin-layer (top 1 mm) thermal activity surrounding the Antarctic ice shelf. In today’s news at National Geographic there is an ominous story about the ice shelf breaking off with this opening statement: “New satellite images reveal what scientists call the ‘runaway’ collapse of an enormous ice shelf in Antarctica as the result of global warming.” I guess National Geographic forgot to compare their hypotheses against this data set from NASA. If you look at the NASA photographs, you can see that the warming occurs most intensely around the peninsula only and that the interior cooling occurs all the way out to the edges of the continent. There may also be some contributing effects caused by increased local geothermal activity. National Geographic didn’t inform you of that information, though. It’s “...the result of global warming.”

Of course we can all go to our cherished links of editorials and data that prove our position without regard to the disconfirming rationale and data of other sites, much like second rate Bible students do to support some special theological position supported by isolated verses. Of course I want to avoid that. But National Geographic's conclusions compared against the NASA data seems specious. Consider this:

• The most intense warming trend is around the peninsula, where the ice shelf broke off this morning.
  
• The right side of the continent experiences gentle warming.
  
• The majority of the continent is cooling or unchanged.
  
• The middle is cooling as rapidly as the left peninsula is warming.
  
• The left side of the peninsula doesn’t even warm up gradually to the intense area. It’s unchanged! The heat is not accumulating from remote locations.
  
• In other words, the intense warming is almost entirely due to something local, not global.
  

So I’m all for serious debate and inquiry about the cause of global warming as a climatic phenomenon. I think it’s a good thing to know how and why our earth behaves the way it does. But I am totally put out with hysterical rants and false assignment of every significant phenomenon to global warming, especially when those who make the loudest rants and obvious non-sequiturs are the people who have been revealed over and over to have a political/economic agenda that potentially will hurt you and me much sooner than we know with any certainty that the effects of global warming ever will.

That’s the deal, man.

Arthur C. Clarke goes on a new adventure

Arthur C. Clarke inspired me to dream.

Genius

I just started reading Genius: The Life and Science of Richard Feynman By James Gleick.

This is just a fun book. It reminds me so much of when I was kid and didn't yet know that there were "limits" to what I could learn and discover.

I think I'm going to have new little wrist bands made that say, "WWFD?" Yep, that's right: "What Would Feynman Do?"

Five Models of Business

Some time ago, a friend of mine suggested that all businesses could be boiled down to 5 types associated with certain illicit activities:

1. drugs - processing raw material into a refined, usable form


2. pornography - content created once and distributed through low margin media


3. prostitution - hourly labor


4. pimping - providing access to aggregated valued services or products


5. religion - selling promises about something the purveyor cannot actually deliver

It puts a new spin on business, doesn't it?

I wonder, though, if this "catalog" is complete. Are there other categories that could be added? What about moving things from one place to another? Waste disposal?

Definitions of words to be employed for the study of stupidity

There are a lot of books out there that help one attempt to be successful in a number of endeavors. But I think understanding how not to succeed may be as important as understanding how to succeed. Because stupidity sometimes seems to be a contributing factor to failure (although success sometimes seems to occur in spite of it), I propose that we invent a science of stupidity. To that end, I begin here a lexicon of useful terms. I will update this list from time to time as I learn more.

constigration: (constipation + confligration) failure to allow to pass through one's mind (recognize or admit) the contribution of one's own stupidity to the disastrous consequences that are unfolding around one in a consuming inferno.

epistemiology: (epistemology + epidemiology) the study of the population mechanisms by which stupidity propagates.

Godwin's inversion: The probability that once an analogous reference to Hitler or Nazis is made in an argument, the remaining comments by all contributors will be stupid.

jedi mind trick: the mistakenly optimistic belief that one's stupidity won't be observed in public.

ridiculocity: (ridiculous + velocity) the rate and direction at which stupidity propagates.

spidey sense: the mistakenly optimisitic belief that one's own level of good sense and special insight are always good enough.

If you blink, you just might get it

I entered the office today feeling rather blue, after all, rainy days and Mondays always get me down. But today was a little different. I was maybe feeling a tad bit more deflated than is typical for a rainy Monday morning.

"You look depressed," observed George P. Burdell, a man known for his instinctive awareness. "What's got you down?"

"Well, I just read a book review of by Malcolm Gladwell, and I think we may be out of business. I mean, who's going to call us experts when all people have to do is simply trust their immediate intuition, you know, blink and not think?"

"Hmmm. You may have misunderstood Gladwell's book. My observation is that a number of reviewers are doing this, and the one you read this morning may be among that group that has grasped incorrectly on the message of Blink."

Intrigued now that all may not be lost for us, I lifted my left eyebrow and cocked my head to Burdell. "Please continue," I implored with an unblinking stare.

"Well, let me begin with a comment that might be more like a footnote. If you really want to dig into the science of decision making as dealt with by Gladwell, I recommend the precursor work that Gladwell mentioned in the early pages (2007 paperback version, pp 8-11) of Blink, that is, the work by Gerd Gigerenzer published in his book, . Don't be deceived by the concept of 'simple.' It means neither 'simplistic' nor 'uneducated.' That is a key to understanding Blink."

George continued on for a while, and I studiously took notes. The following is what I took away.

Blink addresses two large themes: the power of making snap decisions, and the capability to achieve this power through "thin slicing." Gladwell weaves compelling anecdotes from such diverse sources as family counseling, art history, trauma care, food tasting, police work, and war to demonstrate how people often make accurate judgments and consequential decisions within a very short time frame through a mental process that appears to slice information from the environment into sparse, manageable chunks. If you have not yet read the book and have only read reviews, you are probably most familiar with this high level synopsis. Furthermore, you may have also received the implication from these reviews, as I seem to, that this snap decision making process is more powerful than thinking through problems systematically and critically. If this is the case, I think it is a mistake on the reviewers' part and fails to bring the reader to an appropriate understanding of Gladwell's message in Blink.

It is George P. Burdell's opinion that Blink DOES NOT actually promote the idea that snap decisions are always the best decisions. To this point, Gladwell spends a great amount of time discussing how snap decisions can go terribly awry. There exists, in fact, a large body of evidence that suggests that gut-level decision making (the unfortunately popular way of thinking about snap decisions) alone is fraught with failure and difficulties. A large part of this is due to the internal biases we develop over time, both cognitive and motivational. The representative work of Amos Tversky and Daniel Khaneman (Memorial Nobel Prize winning work) demonstrate this quite effectively. Other recent books, and (each by Nassim Taleb), eloquently discuss the effects of biases on investors who often make snap decisions as well as well thought out decisions. It is very difficult to overcome the effects of our biases, especially those related to the species of expert overconfidence. The worst part is that they are most pernicious when we think they are not present at all, that we have overcome them with sheer reason and special gifted insight. Gladwell actually reveals this point on pg 233: ” ‘When we make split-second decisions,’ Payne says, ‘We are really vulnerable to being guided by our stereotypes and prejudices, even ones we may not necessarily endorse or believe.’ ” And on pg 252: “…we are often careless with our powers of rapid cognition. We don’t know where our first impressions come from or precisely what they mean, so we don’t always appreciate their fragility. Taking our powers of rapid cognitions seriously means we have to acknowledge the subtle influences that can alter or undermine or bias the products of our unconscious.” Overcoming these influencing biases, though, requires a certain degree of informed effort.

“Thin slicing,” the idea that sparse information helps experts focus on what is important rather than become distracted by informational spam, is another idea promoted within Blink that I have heard mangled by readers. I recently heard one person insist that as little information as possible was always preferable. O course, one can see that if that idea is taken to the limit of zero information or what we might call “negative” information (i.e., lies), decision making becomes an act of random behavior. While this might work for the species, for individuals it can be disastrous. It is true (i.e., confirmed by repeated experiments and mathematics) that a little information is oftentimes much better than more information. For example, there is an idea in decision science called value of information (VOI) that deals, in part, with just this issue. VOI is the rational upper bound one should be willing to pay for additional information on an uncertainty that could cause one to experience regret on making a given decision. Unfortunately, most people do not know how to evaluate VOI, and so they spend increasing levels of resources trying to get more and more information on issues that would not have a great likelihood of causing them to change their decision anyway. The effect is to get mired into analysis paralysis such that no decisions get made in a timely and economically efficient manner. VOI tells a decision maker how to limit the search for information. The point is that more and more information is not the answer to achieve better outcomes, but neither is less and less information. Each extreme leads to diminishing returns. Rather, the point behind thin slicing is that there is an optimal amount of information required by the neural structures of an expert decision maker that regresses data from the environment into inferences on which the decision maker acts (Gerd Gigerenzer describes these simple efficient heuristics as fast and frugal). This thin slicing is not related to novices facing novel situations, but ones in which an “expert” has numerous of hours of experience.

And this gets us to the point of Blink. Blink is not about gut decision making by lay practitioners or novices. Rather it is about how properly unbiased experts have developed the ability to make judgments at a near instinctual level. Experts in this case are people who have spent countless hours studying, thinking, and practicing in their particular area of concern. A normal Joe off the street CANNOT use snap judgment to determine the longevity of a marriage after spending only a few minutes with a couple, nor can he determine the veracity of the claims of authenticity of ancient artifacts unless, perchance, he has been given the clues that experts have learned through intense experience. “Blink”-thinking doesn’t work for just anyone on a moment's notice. It does, however, apply to people who spend obsessive amounts of time immersing themselves in a field of concern, who, in crucial moments when they are called upon to use their expertise, respond instinctively without wasting time using their executive cognitive processes.

Unfortunately, many people who have reviewed Blink seem to miss this point. They focus instead on the idea that expertise doesn’t matter. Maybe realizing this, Gladwell wrote an Afterword to Blink (2007) this shortcoming. He sums it all up on pg 260: “...when it comes to fast-moving, high-stakes situations like battlefields (or emergency rooms, or auditions, or late-night shoot outs in the Bronx), …formal conventional analysis doesn’t help that much. Chancellorsville came down to some ineffable, magical decision-making ability that Lee possessed and Hooker did not. What was that magical thing?…It’s the kind of wisdom that someone acquires after a lifetime of learning and watching and doing.”

But he doesn’t throw the baby out with the bath water, either: “I think the task of figuring out how to combine the best of CONSCIOUS DELIBERATION (emphasis added) and instinctive judgment is one of the greatest challenges of our time.” (pg 269)

It seems, then, that Gladwell is pointing to the route for decision makers that all good artists know they must follow to get to Carnegie Hall: practice, practice, practice. ...And be humble enough to know that bias is a terrible and frequently uninvited companion on that route.

Riki Tiki Tavi Returns

The next door neighbor boy just came over and asked if he could play with the rubber snake on my front walk way. When I looked out the door, I realized that he was referring to a baby copper head. Since I appreciated the boy’s courtesy, I said, “Sure, go ahead. But let me know when you’re done.”

If you ever want to catch a copper head, just gently stroke it behind its head. This places the snake in a near trance-like state. Then, when it gently attaches itself to your finger with its mouth hooks, you can, with reciprocal gentility, transfer it to a bottle like the one pictured here. Under no circumstances should you try to sprinkle salt on its tail. This only makes it angry, and it might slither away. No fun with that.

Here are some pictures of me having fun with the snake.




If you can’t make out the details of the snake in my pictures, here is a link to a picture of a juvenile copper head with its tell-tale yellow tail.

PS. If anyone has a home remedy for the spontaneous swelling of one’s hand, please let me know. Mine is bigger than a softball and turning blue. Hmmm.

When Green Means "What does that mean?"

My friend George P. Burdell, a man of profound insight, recently pointed me to Dr. Bissantz's article, "Can we steer banks like cars?", at Bissantz's blog: Me, myself, and BI.

After reading the article, I called my friend, George, and exclaimed, "Wow! I didn't even know banks had to obey traffic signals."

There was a long pause, and then a sigh.

George said, "Here's what I thought was the key take away: 'People who deliver green lights instead of the underlying numbers have made a decision instead of supporting the decision-making process.' You ought to think about that. That's worth generalizing into a decision support visualization principle, something like: 'Your data visualization should inform and support the decision process; it should not make the decision.'"

So I thought about it for a awhile. I called George back the next day.

"It seems to me that the problem decision support systems are trying to solve is this: How do you support a decision without forcing the decision maker to understand too deeply the model used to support the decision making? 'Green light' is obviously too high level… at the same time, we can’t expect someone to be an expert in quantitative analysis to use the models we develop for them, or our services won’t be useful in the first place. So, I’m curious, how do we decide where to draw the line between providing raw data and digesting it for the user?"

George responded, "Actually, green light/red light dash boards simply communicate a state of affairs against a predetermined preferential threshold. They are not just data digestions but interpretations as well. Unfortunately, the way most of them work, a system could run just under the line of a threshold and indicate 'good' when it is actually very close to a 'bad' situation. This is why Dr. Bissantz says the machine is doing the deciding. You might could argue that another light could be added (i.e., yellow) that suggested that one was approaching the threshold. However, I would say that the machine is still being given the role of human interpreter against a predetermined bias."

"So what should we do?" I asked George. "Don't managers want simple, quick answers so they can run their business on autopilot and go play golf?"

"Oh heavens! I hope not. The way around this is to provide analyses that do digest the raw data without imposing judgments through such icons such as green light or red light, go or no go, good or bad. We should simply report the digested form in such a way that quick, yet deep, insight can be gained and lead one to more questions. An example of such data digestion might be a risk profile or a tornado plot. They don’t make judgments about the state of things, they merely inform with data digested from the models."

And that seems smart to me.

The next time your dashboards indicate "green," you might want to ask what that really means.

I can vouch for that

When I mentioned my failing approbation for a school voucher system, my friendly free market pedagogue, George P. Burdell, said, "Have you gone all commie on me? I thought the voucher system was free market?" Unfortunately, I think it still lets Uncle Karl in the back door.

Now, lest anyone doubt it, I am all for free market education and an end to the government monopoly of our educational system. So, in general, I agree with the author's contention for less government intrusion in the lives of parents and their children. But before you get all supercilious on me, too, read this article: Are you smarter than a homeschooler?

Then read the linked article again: School voucher system has its benefits

I found this comment in the second article a little troubling: "Home-schoolers may not receive full funding, but instead a tax credit. Still, with more choice, there may be less need for home-schooling."

The assumption seems to be that parents chose home-schooling simply because of lack of quality and choice in government schools. But the mounting evidence is that home-schooling actually provides a superior education, not to mention the many other familial benefits. Why would anyone want to curtail the obvious successes of that? A voucher system may actually contribute more to the disintegration of the family by promoting less time with one's children.

Furthermore, if a voucher system went into place, and home-schoolers received a tax credit within that system, who's to say that the credit wouldn't be dependent on the home-schooling family conforming to the imposed government standards of education? The standards still represent the imposition of government regulation and the attendant propaganda, which will be present in any voucher supported school system. The voucher system simply makes the transmission of government propaganda more efficient.

Finally, until the financing of a voucher system is based entirely on the level of consumption of educational resources used by each family (i.e., each family pays for each of it's children and only its children) instead of the current method of taxing wealth, the voucher system will still represent a wealth redistribution program. Free education for all regulated by the government is still the 10th Plank of Communism [II -- PROLETARIANS AND COMMUNISTS].

Let's just get government out of education all together. Now I can vouch for that.

Machismo when the party gets loud

Now this was fascinating: "Subjects who made incorrect decisions under "noisy" conditions tended to have extremely high confidence that their decisions were right. They were far more confident than the subjects dealing with a noncluttered image."

Hmmm...so, the "louder" and more confusing it gets, visually speaking, the more machismo shows up at the party.

The original article, "Visual Clutter Causes High-Magnitude Errors," can be found here.

Why I am a Libertarian

Admittedly, I am borrowing someone else's words here, but this idea captured so succinctly why I am a libertarian: I am just naïve enough to believe that the Constitution of the United States was supposed to guarantee and secure the rights of the individual endowed by the Creator, rather than beat into submission any individual who disagrees with the democratic will of the majority.

George P. Burdell's Recommended Reading List

Here’s a short excerpt of my recommended reading list that I frequently suggest to clients and other professionals. Some of the texts don’t necessarily speak directly to day-to-day business, but the applications of them to business are profound in many ways. This list represents some of the most helpful books to my own professional growth as well as the most enjoyable to read. An asterisk marks those I regard most remarkable. I will update this list from time to time.

Biographies
By far, some of the best business books are biographies about the successes and failures of people in diverse arenas.

Theodore Rex
by Edmund Morris

John Adams *
by David McCullough

The Education of Henry Adams *
By Henry Addams

MY BRAIN IS OPEN: The Mathematical Journeys of Paul Erdos
by Bruce Schechter

A Beautiful Mind
By Sylvia Nasar

Incompleteness: The Proof and Paradox of Kurt Godel*
by Rebecca Goldstein

The Autobiography of Benjamin Franklin *
by Benjamin Franklin

Benjamin Franklin: An American Life
by Walter Isaacson

Boyd: The Fighter Pilot Who Changed the Art of War *
by Robert Coram

Decisionmaking
Few people understand that there is a well understood science behind effective decision making. If you learn this methodology, you will always make a good decision. Over time you will increase the likelihood of experiencing desirable outcomes, too.

Decision Traps *
by Dr. J. Edward Russo and Dr. Paul J. H. Schoemaker
Few people have the training they need to make good decisions consistently. Becoming a good decision-maker is like training to be a top athlete: Just as the best coaches use training methods to help athletes develop proper techniques and avoid mistakes, Dr. J. Edward Russo and Dr. Paul J. H. Schoemaker have developed a program that can help you avoid "decision traps" -- the ten common decision-making errors that most people make over and over again. It is extremely well written and simple, yet it is very powerful. The basic concept of the book is: if you want to mess things up, then think this way.

Smart Choices : A Practical Guide to Making Better Decisions*
by John S. Hammond, Ralph L. Keeney, Howard Raiffa
Combining solid research with common sense and practical experience, this user-friendly guide shows readers how to assess deep-seated objectives, create a comprehensive set of alternatives, determine likely consequences, make tradeoffs, and grapple with uncertainty. Not only will readers learn how to make decisions, they will learn how to make the smartest decisions. For anyone caught at a confusing crossroad–whether you’re choosing between mutual funds or deciding where to retire–the Smart Choices program will improve your decision-making abilities immediately, and make your life more rewarding and fulfilling. Look for other works by the authors. They are some of the thought leaders in DA. This book is DA 101, but I use it as a reference all the time. I also use it as a primer with people making personal decisions. Introduces a little math, but nothing complex.

Value-Focused Thinking: A Path to Creative Decisionmaking*
by Ralph L. Keeney
This book is a little more in-depth than Smart Choices. It’s basic idea is that every decision should be framed in part by goals and values of the stakeholders involved. Everything by this guy is worth reading. The material is important and profound, but his writing is clear, lucid, and free of jargon. Keeney gets into some mathematics that may scare some people off, but it is no more than algebra. For the most part, you can even skip the chapters that deal with math.

Making Hard Decisions: An Introduction to Decision Analysis (2nd Ed.)
by Robert T. Clemen
This best-selling and up-to-date survey of decision analysis concepts and techniques is accessible to a wide range of backgrounds. This is the Pentateuch of decision analysis. You must read this before you can enter the Temple.

Introduction to Decision Analysis (2nd Edition)
by David C. Skinner
David Skinner shares the wealth of his experience and expertise about decision making in a clear, practical way. This book is an excellent resource for managers, technical professionals, and decision analysts, regardless of your experience level with decision analysis. It tells you how you make the theory practical in collaborative decision-making environments.

Why Can't You Just Give Me The Number? An Executive's Guide to Using Probabilistic Thinking to Manage Risk and to Make Better Decisions
by Patrick Leach
An excellent book to give to your boss to explain why probabilistic reasoning is so important and powerful for generating deep insights and creative solutions.

Organizational Learning and Management
How to learn and lead within any organization is one of the keys to personal and professional success.

Overcoming Organizational Defenses: Facilitating Organizational Learning
by Chris Argyris

Flawed Advice and the Management Trap: How Managers Can Know When They're Getting Good Advice and When They're Not
by Chris Argyris

Reasons and Rationalizations: The Limits to Organizational Knowledge
by Chris Argyris

The Trusted Advisor
By David Maister

Economics & Economic History
We live in an economic universe: unlimited demands on limited supply. It’s good to think about how best to allocate resources to achieve one’s goals. It’s also good to know how people can destroy good economic practice, especially through good intentions.

The Wealth of Nations
Adam Smith

Capitalism, Socialism and Democracy
by Joseph A. Schumpeter

The Road to Serfdom (Fiftieth Anniversary Edition) *
by F. A. Hayek and Milton Friedman

Free to Choose *
by Milton Friedman and Rose Friedman

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
by Steven D. Levitt and Stephen J. Dubner

Guns, Germs, and Steel: The Fates of Human Societies, New Edition
by Jared Diamond

Against the Gods: The Remarkable Story of Risk
by Peter L. Bernstein

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets *
by Nassim Nicholas Taleb

Armchair Economist: Economics And Everyday Experience
by Steven E. Landsburg

Hidden Order: The Economics of Everyday Life
by David D. Friedman

Basic Economics: A Citizens Guide to the Economy, Revised and Expanded *
by Thomas Sowell

Applied Economics: Thinking Beyond Stage One *
by Thomas Sowell

The Spirit of Democratic Capitalism *
By Michael Novak

The Long Tail
by Chris Anderson

Analysis for Financial Management
by Robert C. Higgins

Strategy Theory
If you don’t know where you want to go, how, and why, you probably won’t get there.

Competitive Strategy
by Michael E. Porter
THE Bible on strategy. No other substitute.

Certain To Win: The Strategy Of John Boyd, Applied To Business
by Chet Richards

Ender’s Game *
By Orson Scott Card
This is a science fiction novel, but Card accurately demonstrates in a compelling narrative how maneuver theory works.

Psychology
Understanding how people think and perceive their environment and how this differs among individuals (even in abnormal and pathological ways) is critical to understanding how to work with people in organizations.

An Anthropologist On Mars: Seven Paradoxical Tales
by Oliver Sacks

The Man Who Mistook His Wife For A Hat: And Other Clinical Tales
by Oliver Sacks

Thinking In Pictures: and Other Reports from My Life with Autism
by Temple Grandin

Animals in Translation: Using the Mysteries of Autism to Decode Animal Behavior
by Temple Grandin, Catherine Johnson

The Boids and the Bees

I really thought this was an interesting article.

One thing that struck me about swarm theory is the lack of management hierarchy as an element of the system. That's probably the point. But why have humans derived management by command-and-control and management hierarchy rather than swarm approaches? Conversely, why doesn't a swarm include such a method? What are the benefits of either? The risks and costs? Could it be that dumb humans aren't as smart as ants, bees, and wildebeasts? Are there good reasons that we have developed command hierarchies in our organizations? Or does such a practice represent foolish consistency and social inertia? Might there be some conditions where one approach is more beneficial than the other, but we've failed to be flexible enough to recognize the differences in conditions that would prescribe one approach to prevail over another?

Part of the reason for such a lack of management hierarchy may be that the swarm focuses on relatively few well-defined activities: gathering food, securing and maintaining shelter, protecting the hive, and reproducing. So it’s not that hard to insure that each individual “knows” exactly what its task is. Secondly, the task assignments are probably hardwired in some way (whether determined by genetics or assigned during the development phases of the young. Alligators predetermine the gender of their offspring by controlling the temperature of their eggs, so it wouldn’t surprise me that bees and ants can determine the task assignment of their offspring by controlling temp, food content, etc.), so there is very little ambiguity about the nature and purpose of each task and the vital reason it needs to be done. Since humans largely join companies primarily to earn a living, the goals of their organization are largely secondary to them. Most people aren’t genetically predisposed to work in a given company. They may even switch frequently among employers. In the minds of the individuals, the survival of the firm or human species isn’t dependent on the actions of the individual, and individuals often overlay their agenda with the agenda of their employing organization, confusing the two. Hardwiring the agenda goes a long way to avoid this ambiguity of purpose.

My initial reaction to the truck-to-ant analogy was that such an analogy is a false one. It seemed to me that the trucking company really just identified the right objective function (minimize cost, not minimize distance traveled) and acted accordingly. Maybe there is more to the swarm theory employed by the trucking company than revealed (or even understood) by the writer. In more general terms, an ant is an unsophisticated automaton, following a simple rule. The cases described in this article are frequently cases where the simple heuristic of following local price signals works well. This has nothing to do with pheromones, and it is nothing new. It is free (rational) enterprise, and its philosophical basis and empirical success are well established in the literature. I'm more inclined to see the telecommunications analogy.

It was the bees’ heuristics I more thought about as related to my own work in decision analysis. In fact, I wrote back to the friend of mine who alerted me to the article and noted that the odd thing about the bees was that they weren’t simple automatons, that they formed an “opinion.” What I found analogous to decision analysis in the example given by the bees was that the bees seek a diversity of options, allow the options to compete against some objective function, and then use some mechanism to narrow the choices. I don't think that the history of decision analysis includes consideration of swarm behavior as its inspiration. Rather, I think rational human intelligence discovered a means for solving uncertain, resource constrained problems through rational thought and experimentation, and nature converged on a similar solution through evolutionary means.

Of course, what is missing from the swarm approach is the means by which the diverse options are "considered." Unless bees are more sentient than I think they are (...which very well may be the case, but no bees have disclosed the level of their sentience to me yet. Many have indicated that I should leave their nest alone.), it seems that bees find their candidate solutions via trial and error, stimulus and response. But it seems to me that human creativity is a special kind of intelligence that may obviate swarm intelligence. Human creativity seems to be driven in virtual reality; that is, humans seem to create alternate realities for consideration. We can visualize a desired or undesired future, and then derive the mechanisms that facilitate or mitigate that conceived future state, and we can hybridize our original set of considered alternatives. In other words, human intelligence and creativity seem suited for strategic thinking. Swarm "thinking", on the other hand, seems to be the biological analogue to such mathematical processes as Metropolis and genetic algorithms, a means to solve well-defined yet mathematically intractable and computationally huge problems. If the situation is more ambiguous, such an approach may be quite brittle.

The closest example I know of a company that implements a hybrid of both approaches to solving problems is Oticon, a Danish company that makes hearing aids. The management team takes pride in its minimal interference with the actions of the work force. Teams are self-forming and self-dissolving. If a technical employee has an idea that he thinks is worth pursuing, it’s up to him to convince his co-workers to join the effort. If he can, the team is formed. If he can’t, then the consensus is that the idea isn’t currently a good one. At any given moment, a typical employee will be on several different teams, each at a different stage of the overall development process. The management team also takes pride in maintaining a certain level of chaos in the office. No one has an assigned office, employees keep nearly all of their information electronically on laptops, and most furniture is on wheels – all to encourage dynamic grouping and re-grouping. Getting back to my original questions, this is more than slightly different from the typical command-and-control attitude of many American management teams. The real questions in my mind are:

• does such a "swarm" approach to management actually provide higher returns than the alternatives


• under which conditions does one approach work better than others?


• in what ways might aspects of command-and-control hybridize with "swarm" approaches to produce even better results?
  

It looks like I have more reading to do here

Oticon: unorthodox project-based management and careers in a "spaghetti organization"

and here

Swarm Intelligence: A Whole New Way to Think About Business.

The one last thing that I thought was interesting about the article was that the author tried to attach swarm theory to altruism in the end rather than the obvious: free market capitalism. I wonder why? The Wealth of Nations describes how capitalism benefits everyone in almost the same language as that used to describe swarm theory many years before swarm theory was ever conceived; i.e., individuals acting in their own local self-interests ultimately provide what the global market wants, increasing the value experienced by everyone.