Month: August 2014 | The Fourth Revolution Blog

Why the Ultimate Weapon for Cutting Losses is Changing the Manager

Following our series of posts on the issue of the psychological avoidance of cutting losses when prospects are bleak, let us once again quote Daniel Kahneman in the bestseller “Thinking, Fast and Slow“: “[because of the psychological effect leading to desperate gambles in the face of a high probability failure], the escalation of commitment to failing endeavors is a mistake from the perspective of the firm but not necessarily from the perspective of the executive who “owns” a floundering project“. As a result, “Boards of directors are well aware of these conflicts and often replace a CEO who is encumbered by prior decisions and reluctant to cut losses.” That statement can naturally be extended to any situation down in the organization.

The ultimate response to the situation of the manager or the executive that continues a failing project and cannot exit this situation of desperate gambling is thus, from the organization point of view, the replacement of the manager in charge. Unencumbered by the issue of sunk costs and sunk emotional commitment, the new manager can cut losses (which, at the same time, allows him or her to highlight that the previous manager what incompetent – while that might just have been bad luck).

However there are obviously many drawbacks to that ultimate decision; in particular, the temporary lack of effectiveness which will be created in that part of the organization until the new manager is up to speed with the particulars of the company and the business. Often, it is preferable not to use that ultimate weapon but rather opt for softer solutions such as introducing as deputy someone that will allow a new course to be taken. This last solution also allows continuity and minimizes disruption.

When it comes to cutting losses on an endeavor and if the situation has already worsened significantly, changing the manager in charge can be the only solution to save what can still be saved. The emotional attachment to sunk actions is too strong to be overcome by the people in place, even if they show outstanding capabilities.

Why it is so Important to Know How to Cut Losses

Following on our discussion of prospect theory applied to project failures, there appear to be some ways to overcome this unconscious tendency to prefer desperate gambles to cutting losses when it appears that there is a high probability of significant losses.

An obviously desperate (and amateur) gambler

That seems to be what makes the difference between the professional and the amateur when it comes to gambling or to trade on markets: professionals know how to cut their losses, and it is in part because they are working on a very high number of attempts, and through repeated and frequent exposure to the situation. What is important for them is that overall, on a large portfolio of attempts, the wins slightly exceed the losses. So they learnt to cut and take their losses without too much emotion when it happens, before the losses become too overwhelmingly high. On the contrary, amateurs stick to their position and drown with it.

In other situations like project management it is less possible to play the game of having a large portfolio, although that it often possible at the company level. Here again, what is really important is to be able to cut losses before they become so big that they can sink the organization. Most organizational failure come from the avoidance of cutting losses while the situation was still manageable.

The solution is really to become a professional and recognize, either through repeated exposure or through reflection on one’s inner workings, that we tend to be risk-taking in certain situations, beyond what would be reasonable. And to be courageous enough to stop and take one’s losses even if that means losing one’s reputation of being able to deliver. That is always better than to lose its all.

How Psychology Explains Why Most Projects Fail Miserably

The statistics of project failure are abysmal (two-third of projects fail – either outright, or by not providing the expected benefits). In addition, what is remarkable is that when they fail, they generally fail miserably – it is not just some statistical distribution due to the world uncertainties.

Psychology might offer an explanation for that interesting phenomenon, which I have actually observed in action in real projects. The prospect theory, mentioned and explained by Daniel Kahneman in the bestseller “Thinking, Fast and Slow“, shows that we tend to have some biases when deciding in an uncertain context.

A summary of prospect theory showing those situations where we tend to be excessively risk-adverse or risk-seeking

What occupies us in this instance is the upper right corner: when there is a high risk of significant losses, we tend to take more risk than would be reasonable in the hope of being able to recoup our losses.

So, project managers, facing situations where the prospective outcome of their project is degrading fast, with a high probability of significant loss, would tend to take the risk of an (improbable) recovery rather than cut their losses. And in reality, it is a phenomenon I observe again and again in real project life.

As Daniel Kahneman observes, “This is where people who face very bad options take desperate gambles, accepting a high probability of making things worse in exchange for a small hope of avoiding a large loss. Risk taking of this kind often turns manageable failures into disasters.”

Make sure you can keep managing the situation. Learn to cut your losses instead of hoping for an uncertain recovery!

Why the Job Market Transformation Requires You to Develop Your Online Reputation

The value of inter-mediation for job search is moving towards reputation management. While before it was mainly making the job or the applicant visible and creating the connection, today’s platforms allow the potential employer to check the applicant’s reputation. This explains why once-major site posting players such as Monster.com etc are now being overtaken by sites that add reputation measurement.

Job postings board — Old-fashioned inter-mediation: a job posting board

That is one of the most interesting conclusions from Valeria Maltoni’s excellent post where she summarizes what is happening now on the front of job posting and job search, with different types of web-based sites and engines.

This reputation check happens in several ways:

on social-network based sites like LinkedIn, through the person’s network and reputation; and possibly on what the person published or linked as well.
On freelance hiring sites, reputation is acquired through the successive feedback from clients at the end of the jobs, which in effect rates the reputation of the person.

While providing the reputation data was once a service provided only by a few head-hunters for executives, this value of inter-mediation is now expected by most future employers and for most types of jobs.

Enhancing once’s reputation on the web is thus not any more an option, it is mandatory if you want to be successful in tomorrow’s marketplace – and even for conventional jobs!

How We Will Need Specialists to Make Sense of the Authenticity of Big Data Correlations

Here is a fine example of the spurious correlations that Big Data can create (ref. my post on “How Big Data Will not Help our Understanding of Complexity”).

This and many other great stupid examples are accessible on the spurious correlations page maintained by Tyler Vigen,

More data means the possibility of far more spurious correlations, and no doubt will it be difficult sometimes to figure out whether they are believable or not. More than ever, longer time scales will allow to distinguish spurious correlations or pure luck from real relationships. No doubt that in the Collaborative Age we will have data specialists that will track down these inadequate correlations like chemists were tracking charlatans selling proprietary “medicines” at the end of the 19th century!

I add another stupid (?) correlation to make your day between divorce rate and margarine consumption (note, it is a 99% correlation, no joke!):

How the Fourth Revolution Dramatically Accelerates Finding Community and Cure for Rare Diseases

This long but interesting article in the New Yorker, ‘One of a kind, what do you do if your child has a condition that is unknown to science‘ tells the intriguing story of how social media and our new communications capabilities have allowed the family of a baby who had an unknown condition to find a community of similar children.

They managed to figure out it was a rare genetic disorder (thanks to the latest progress in genetic sequencing). Through a post that went viral, they managed to find other children that had the same symptoms, showing to the world that it was not an exceptional condition – this would before have taken years as the other children would have been diagnosed differently and the medical community would have had a hard time figuring out the conditions of all these patients were similar. After a few months, a dozen cases of the similar condition had been identified worldwide.

This in turn created the conditions for unprecedented collaboration in the medical community, with a paper co-authored by 33 authors (where usually, medical teams tend to be competitive when they think they have identified a new sickness to keep the ownership of the discovery).

The final word comes from a medical researcher, the first who found the issue with the first patient: Vandana Shashi believes that such communities [of parents] represent a new paradigm for conducting medical research. “It’s kind of a shift in the scientific world that we have to recognize—that, in this day of social media, dedicated, educated, and well-informed families have the ability to make a huge impact”. “Gone are the days when we could just say, ‘We’re a cloistered community of researchers, and we alone know how to do this.’ ”

Hat tip to Quartz news for the link

Why We Would Have Smartphones Today Even Without Steve Jobs – and the Inevitability of the Fourth Revolution

We do hail Steve Jobs for inventing the smartphone in the shape of an iPhone (and other marvels of modern technology). Yet today we see that this technology is becoming mainstream and ubiquitous. So, would this invention have happened even without Steve Jobs’s genius? The answer is yes, and probably not too late after it happened thanks for Apple.

Steve Jobs with an iPhone — What has Steve Jobs really invented?

There are a lot of pointers in the form of past inventions occurring simultaneously (such as for example, the telephone, the theory of evolution etc) described for example in the excellent book ‘What Technology Wants‘ by Kevin Kelly. This shows that when the technological environment is mature, key inventions tend to happen naturally. If one does not invent it, so does another. Not everyone can bring a new technological invention to effective realization, but the world is big enough that several organizations can come simultaneously to similar results.

The great expansion of Android devices shows that the technological ecosytem was about ripe when Apple came out with the iPhone. The conversation about the convergence of cameras, phone and computer features was around already since the early 2000’s. The genius of Steve Jobs was to be the first to bring everything together in a well designed solution; but simultaneously many were not very far from a workable product with similar features. Technology was simply mature for the change. Steve Jobs brought its realization forward by a few months or years, but it would have happened eventually.

The same happens with the Fourth Revolution; as our long distance interactive communication capability has been created, the transformations of the Fourth Revolution are inevitable. We can’t predict who will be the first, where, but we know they will happen – and sometimes take shape simultaneously in several places.

Why Difficult Conversations are Key to Success in Change Initiatives

In the book ‘Difficult Conversations‘ written by members of the Harvard Negotiation Group, the authors state: “We believe a major reason change efforts so often fail is that successful implementation eventually requires people to have difficult conversations. The ability to manage difficult conversations effectively is foundational to achieving almost any significant change.”

It is quite true that real change – either personal or at the level of an organization always require to address existing issues in an open and straightforward manner, while making sure the people involved still listen. It is about holding the adequate tough conversations. And it is unfortunately rare to find people who have the skill and courage to hold these conversations.

The authors add: “With everyone taking for granted that their own view is right, and readily assuming that others’ opposition is self-interested, progress quickly grinds to a halt. Decisions are delayed, and when finally made they are often imposed without buy-in from those who have to implement them. Relationships sour. Eventually people give up in frustration, and those driving the effort get distracted by new challenges or the next next big thing.” Such is the recipe for failure of change efforts.

Don’t follow this recipe; instead, learn to hold difficult conversations in an effective and productive way. In a few minutes you can change people, one by one; or the entire world if needed.

How Scientific Publishing Gets Deeply Disrupted by the Fourth Revolution

Scientific Publishing – the system whereby scientific papers are peer reviewed and published by specialized publishers, is being deeply transformed by the Fourth Revolution. “Watch This Multi-Billion-Dollar Industry Evaporate Overnight” says Dylan Tweeney on a post, describing how open publishing and reviewing is profoundly revolutionizing the scientific paper publishing industry.

scientific paper and journals published by a handful of intermediaries - soon a thing of the past? — Scientific paper and journals published by a handful of intermediaries – soon a thing of the past?

One of the main issues for the interested dabbler in science is that it is almost never possible to access important scientific papers without paying significant fees. I am not a scientist, merely an interested member of the public, and this barrier is a barrier to spreading knowledge in the wider society. And more – why would a small number of publishers benefit when most writers and peer-reviewers do the work for free? Scientific publishing sometimes looks like an oligopoly held by a few entrenched publishers.

Sites like Academia.edu propose to change fundamentally the balance of power in this industry, and basically to wipe out the intermediaries – publishers – which added value is now squashed by the internet. In their latest blog post about reaching the bar of 10 million users, the founder states “It would be a great thing if we could get every science PDF ever written on the internet, available for free. There is a lot of work to do before we make that vision a reality, but this 10 million user milestone is a good start”. A good start – we can already predict that within a few years, the entire system for producing, reviewing and making science available will be transformed for the better of humankind!

How We Are At the Brink of the Effective Real Birth of Artificial Intelligence

“The technium contains 170 quadrillion computer chips wired up into one mega-scale computing platform. The total number of transistors in this global network is now approximately the same as the number of neurons in your brain. And the number of links among files in this network (think of all the links among all the web pages of the world) is about equal to the number of synapse links in your brain. Thus, this growing planetary electronic membrane is already comparable to the complexity of a human brain.” – explains Kevin Kelly in a great book, What Technology Wants (published 2010!).

This amazing statistics reminds us both that:

We are incredibly complex creatures
We have created with the internet a technological marvel that starts to equate the complexity of thinking people.

Now this just comes as Elon Musk the founder of Tesla and SpaceX, tweets that artificial intelligence is dangerous: “Hope we’re not just the biological boot loader for digital super-intelligence. Unfortunately, that is increasingly probable“.

It is quite frightening and exciting to anticipate what artificial intelligence will create. Because artificial intelligence will soon be a reality, there does not seem to be any doubt in the minds of specialists. The futurist Ray Kurzweil is quoted in the same article as declaring: “It will not be us versus the machines … but rather, we will enhance our own capacity by merging with our intelligent creations“. What will really happen? Terminator or enhancement of our capabilities? In any case, change is coming!

Why You Should Exercise to Regain Your Balance – and Not to Keep It!

From far, the lives of successful people seem highly balanced and straightforward. Not to from close – success breeds from unbalance and exploration beyond one’s comfort zone.

Sensei Aikido — O Sensei, the founder of Aikido, in action

After observing O Sensei, the founder of Aikido, sparring with an accomplished fighter, a young student said to the master, “You never lose your balance. What is your secret?” “You are wrong” O Sensei replied. “I am constantly losing my balance. My skill lies in my ability to regain it.”

Good lesson – We need to exercise our ability to regain our balance so as to stay healthy and continue to do what we need to do. But we should accept to be thrown off balance to thrive in action.

Related Posts

How Battery Technology is the Unrecognized Key Collaborative Age Enabler

We take for granted the small parts that power most of the devices we use – long lasting, rechargeable batteries. Still in some sort, battery technology is a key enabler of our modern way of life, and technology progress has been dramatic in that field. And more is to come as the total capacity of batteries increase and could change electrical power distribution overall.

Batteries power all our portable devices, giving us freedom of movement like never before. Our devices become increasingly long-lasting and powerful, allowing us to work, entertain ourselves, and communicate from wherever we are. In a way they enable the Fourth Revolution by removing the constraint of localization close to a wired network. In Africa they power mobile phones which are the only way to communicate effectively. Battery-powered cars also become increasingly a possible mainstream technology for moving around.

There is more: Industrial Age electricity generation technology did not involve storage of power which required to maintain at all times, equal production and consumption on power grids, leading to issues as daily consumption is highly variable depending on the time, weather and day of the week. This is today a limit to the development of ‘green’ power sources as wind and solar power is highly variable and somewhat unpredictable. Increasing their share on the grid leads to substantial issues for the grid managers – sometimes adding more windmills requires adding more fuel and coal power stations to have extra capacity to cater for peaks in demand and slumps in production!

tesla battery — Batteries in everything – the Tesla car battery

With ambitions to build megafactories for batteries, that may change as well. Elon Musk’s announced strategic move to build a ‘Gigafactory’ is controversial. But the fact that the idea to increase production capacity (one single factory to produce more battery capacity than the current total worldwide production!) to lower the cost of batteries is in the air – and, provided the availability of raw material follows, will change significantly the landscape of power generation as well.

Batteries – the small, discrete technology that is changing our world more than we would ever realize!

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