Category: Collaborative Age value production system

How to Overcome Bias in Project Estimates by Involving Generalists in Systemic Reviews

To finish our current series of posts on our exploration of the excellent book ‘Range: Why Generalists Triumph in a Specialized World‘ by David Epstein, I noted how the concepts developed about generalist vs specialist also applied in the field of project definition. It takes generalists and a diverse set of viewpoints to test the adequacy of a project definition file and associated estimate.

“Bent Flyvbjerg, chair of Major Programme Management at Oxford University’s business school, has shown that around 90 percent of major infrastructure projects worldwide go over budget (by an average of 28 percent) in part because managers focus on the details of their project and become overly optimistic. Project managers can become like Kahneman’s curriculum-building team, which decided that thanks to its roster of experts it would certainly not encounter the same delays as did other groups. Flyvbjerg studied a project to build a tram system in Scotland, in which an outside consulting team actually went through an analogy process akin to what the private equity investors were instructed to do. They ignored specifics of the project at hand and focused on others with structural similarities. The consulting team saw that the project group had made a rigorous analysis using all of the details of the work to be done. And yet, using analogies to separate projects, the consulting team concluded that the cost projection of £ 320 million (more than $ 400 million) was probably a massive underestimate“

“This is a widespread phenomenon. If you’re asked to predict […], the more internal details you learn about any particular scenario […] the more likely you are to say that the scenario you are investigating will occur.”

This is why we observe again and again the immense benefits of having independent reviews of projects by people having a generalist overview and not emotionally involved with the project to get an objective feedback. While this is what we promote, the fact that this review is systemic and performed by generalists is also an essential part of the value delivered. I will highlight it more in the future.

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How Humans Will Crush Machines in Open-Ended Real World Problems

Following our previous posts (‘How Learning Approaches Must Be Different in Complexity: Upending the 10,000 h Rule‘) let’s continue our exploration of the excellent book ‘Range: Why Generalists Triumph in a Specialized World‘ by David Epstein. Beyond putting in question traditional learning techniques, and more generally pointing out the limits of specialization, he makes the point that in an increasingly automated world, the generalists that have a broad integrating picture are the ones that will be in demand.

“The more a task shifts to an open world of big-picture strategy, the more humans have to add“. “The bigger the picture, the more unique the potential human contribution. Our greatest strength is the exact opposite of narrow specialization. It is the ability to integrate broadly.” Reference is made here to open-ended games or infinite games compared to closed or finite games that are won by specialists (refer to our post ‘How Important It Is to Distinguish Between Finite and Infinite Games‘)

Therefore, “in open ended real-world problems we’re still crushing the machines.” This distinction between simple and complex, open and closed problems is really essential in defining the approaches that are needed and the competencies required.

Human’s strength is the capability to decide in complex open-ended problems, and this is what we need now to put emphasis on in terms of education, career and recognition.

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How Generalists Are Necessary for the Collaborative Age

I recommend highly the book ‘Range: Why Generalists Triumph in a Specialized World‘ by David Epstein. It has provided quite a few interesting insights for me, which will be the subject of a few following posts.

For those that have been following this blog, I have expressed many times that the Collaborative Age calls for generalists, contrary to the specialists fostered by the Industrial Age (for example here and here). This book confirms this hint in a very convincing way and goes beyond to show that complex systems can only be dealt with by generalists. And that being a specialist can be quite dangerous in terms of decision-making beyond the bounds of specialization validity.

“Highly credentialed experts can become so narrow-minded that they actually get worse with experience, even while becoming more confident— a dangerous combination.”

And specialization can indeed lead to poor real-life outcomes. For example, “One revelation in the aftermath of the 2008 global financial crisis was the degree of segregation within big banks. Legions of specialized groups optimizing risk for their own tiny pieces of the big picture created a catastrophic whole. To make matters worse, responses to the crisis betrayed a dizzying degree of specialization-induced perversity.”

This realization is pervading more and more organisations and society when it comes to choosing someone to lead a complex endeavor. The best candidates are generalists, or at least people who have been exposed to many things beyond their main area of interest. “the most common [path to excellence] was a sampling period, often lightly structured with some lessons and a breadth of instruments and activities, followed only later by a narrowing of focus, increased structure, and an explosion of practice volume.”

I have always been convinced, and I am more and more convinced, that the rounded individual exposed to largely varied experiences and fields of knowledge is the new type of leader we will be looking for in an increasingly complex Collective Age. And this is probably the biggest challenge of our learning and academic institutions today.

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How the Collaborative Age Value Is In The Platform

In this post ‘Why newspapers fail‘, Frederic Filloux mentions a few reasons. The one which has struck me is that they concentrated on the wrong thing: diffusion rather than aggregation and development of a platform, to reap the value of user data.

“The news industry took the opposite stance. Deprived of customers’ data, it found itself blind to what kind of online services the audience was craving. As a result, publishers left numerous markets wide open, like free classified and auctions taken by Craigslist and eBay (before Schibsted set in), large news aggregators and the entire system that flourished thanks to RSS feeds. It is actually funny to see many news outlets now engaged in costly acquisitions to get back the services they should have developed in the first place.”

Today the value lies in customer data, and those platforms and links in the chain that have access generate the most value. And this explains the value of social network companies and other platforms like Google. All other services are doomed to be dependent from the platform-gods.

If you want to create value today, you need eventually to produce a platform that will concentrate user data; the real source of value in this early Collaborative Age!

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How Zero Interest Rates May Affect the Innovation Economy

This very interesting post ‘The Social Consequences of Zero Interest Rates‘ examines the possible long term impact of this situation on innovation and the economy, taking as a model Japan where this situation has been prevalent for a longer time than anywhere else.

The article shows that innovation has decreased significantly in Japan in the last decades, since the 1990s which mark the end of Japan post-war catch-up and development phase. “Innovation ultimately has a lot to do with time preference in economic terms. Real innovations often only pay off years later, which is why innovative companies have to be prepared for a long haul. Zero interest rates counteract the power of innovation, because they almost always go hand in hand with higher time preference.” At the same time, wages stagnate and part-time employment grows. According to the author, all this negative evolution could be associated with high public debt / low interest rates.

This approach is interesting, however I tend to observe on the contrary that faced with very low interest rates, clever money tends to look for other places with potential gains and innovative startups tend to be quite awash with money these days – raising funds has rarely been as easy. Money also tends to get invested in shares and other high risk investments (which explains the high levels of the share market). There are quite other factors at work in Japan that could explain decreased innovation, for example the rigidity of the labour market and the traditional industrial age employment approaches.

What is certain, is that low interest rates increase the price of assets and proportionately make it more difficult to acquire them on the basis of wages, decreasing the actual purchasing power of people and increasing inequality. However, the impact on innovation is not as obvious to me. What are your views?

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How Large Companies Have a Challenge in Personalizing Service

In this post ‘The Coronavirus Shows Why, if They are to Stay Healthy, Companies Need to Rethink Practices‘, Valeria Maltoni shares her experience with companies struggling to align their communication and practices in the midst of the Covid-19 crisis. She also shares an interesting little illustration which we reproduce here.

Beyond her particular experience, this post inspires me to consider how little companies have grown to develop personalized and responsive experiences, while technology would now allow this. The author gets an automated message from an airline about her oncoming trip while all flights have been cancelled. When events happen, industrial-age systems don’t bother and continue to plough away. They are not flexible and responsive to events. They don’t deliver personalized advice and information.

Large industrial organisations that will manage to develop this level of personalized services will take a lead as that is increasingly what customers expect. They get personalized advertisements and messages from internet platforms. Why do they continue to be treated as a uniform mass by service companies?

When technology changes exponentially and organizations change logarithmically, at some stage there will be a massive disruption. It is coming.

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How Remote Work Will Extend But Still Not Become the New Normal

The experience of remote working has dramatically spread this year with the pandemics. As soon as the worst was over however, many employers tried to revert back to the previous normal, but many employees actually enjoyed the experience. Cal Newport in this New Yorker column ‘Why Remote Work Is So Hard—and How It Can Be Fixed‘ provides interesting insights.

In this post we learn that the concept of ‘telecommuting’ was actually created in the 1970s to address congestion. But the concept struggled to spread, ““Flexible work” arrangements tend to be seen as a perk; a 2018 survey found that only around three per cent of American employees worked from home more than half of the time.”

“But there were other, entirely legitimate reasons for companies to retreat from [remote work], and they are just as relevant today as they were a decade ago [when Yahoo asked everybody to be back at the office.” The issue is about informal interaction, integration of newcomers into the community, the need for individuals to have interaction. “Face-to-face interactions help people communicate and bond, but that’s only part of their value. The knowledge work pursued in many modern offices—thinking, investigating, synthesizing, writing, planning, organizing, and so on—tends to be fuzzy and disorganized compared to the structured processes of, say, industrial manufacturing.”

Cal Newport continues by seeing the transformation into full remote work being a slow process, and offices – and office time – remaining an important part of everyone’s life in the next decades. Still, there will be more remote work. New personal discipline and habits will need to be introduced, and new collaborative tools and approaches will be perfected as well.

Aligned with Cal Newport views, I observe that during the pandemics some companies commented that remote work would become the new normal, only to relent as soon as restrictions were lifted, most companies seeing only maximum one or two remote days per week being the maximum allowable. Still it will provide knowledge workers with a new rhythm and possibly a new way of living.

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How Modern Learning is On-Demand, Bite-Sized

In this post ‘The Upcoming Journalism School Overhaul‘, Frederic Filloux expands about modern education and learning in the specific context of journalism. One of the aspects he highlights is how differently people acquire skills today, thanks to inline bit-size tutorials.

Before, one had to master extensively and widely all techniques associated with its trade before being considered competent (hence, the master and companions approach). Now, “Today’s generation has a completely different approach when it comes to acquiring technical knowledge: they will call for it on a need-to basis, in response to a specific project requirement. They will go on YouTube, which is also an unfathomable resource for skill-learning, to understand how to do a specific kind of shooting or mastering a particular editing technique. This is the way things are done now.“

Modern learning is on-demand, bite sized, and leverages on shared platforms, possibly with collective knowledge sharing. Industrial-age learning models, based on classrooms and large institutions, will get upended up to a certain point. And this is a good thought to have when developing new learning offers. It is important to fit with the new expectations of on-demand, bite-sized learning experiences.

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How the World is Having a Savings Glut and This Will Accelerate

We are currently in a situation of excess savings in developed countries and therefore unprecedented availability of private funds for all sorts of new ventures including the most risky innovations and fundamental research projects (for example see our post ‘How Fundamental Scientific and Technological Programs are Now Run in a Competitive Manner by Private Companies‘). This excellent post ‘The Global Savings Glut, a Modern Policy Failure‘ gives a useful explanation of this situation which pervades our economic system and has accelerated since the 2008 crisis.

“We are operating in a world where there is a massive excess of capital vs. productive places to put it. Which is why valuations on high quality assets able to absorb this savings is so high.” And thus, when there is some start-up that looks like it could become high quality, it instantly attracts capital.

The analysis is that while China became the manufacturing center of the world, it did not let its currency appreciate, and started generate high levels of local positives as well. With goods becoming ever cheaper, savings capability increased in developed countries. “Globalization ended in 2011 and no one adjusted. Export based policy and high savings rates reinforced each other even as globalization forces weakened starting in 2011.” And of course, the constant policy of very low interest rates. With “the amount of savings in Asia and Europe far bigger than the size of their domestic asset markets“, the money pours into the US markets, killing in the process all sorts of possible US monetary policy.

It seems that with the pandemics the current trend will rather accelerate with ever cheaper money being poured to the economy. This can only increase the savings glut, make valuable assets more expensive, but also continue to foster private capital being poured into all sorts of fundamental initiatives that were previously performed by governments.

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How Fundamental Scientific and Technological Programs are Now Run in a Competitive Manner by Private Companies

Following up on our previous post ‘How Private Initiatives to Reach the Graal of Nuclear Fusion Show a Tipping Point in the Financing of Fundamental Science‘ that expanded on TAE technologies (a US West Coast startup close to Stanford), another similar start-up – this time on the US East Coast close to the MIT – Commonwealth Fusion Systems, has also recently raised dozen million dollars for the same goal, using a different technology (see here the Wikipedia entry on Commonwealth Fusion Systems).

Commonwealth Fusion Systems Tokamak system

In the same year where the US is gone back to space thanks to private companies such as Space X, with an alliance of high technology and design, this really raises the question of the future role of governments in running fundamental scientific experiments and high technology programs by themselves. The aspect which I want to expand here is actual execution of advanced science and technology leveraging on competition.

Both the new space programme and the new fusion efforts appear to share the same principle of competition (Space X, Boeing and other ventures competing for the NASA contract, several companies competing for fusion) . Where in the past large science experiments were run in monopoly fashion (NASA space program, or ITER in fusion), the new world of abundance of private funding (and increased scarcity of public funding) allows to run these high-risk programs with several teams in competition. This is probably an excellent thing to reach the goal quicker and with better quality: a spirit of competition, the emergence of a variety of ideas and solutions, everything that innovative programs should seek (and have sought, as in the famous parallel development of uranium-based and plutonium-based solutions during the Manhattan nuclear project).

I believe this is a fundamental shift in how science is getting done, and not sufficiently noticed. Monolithic state research organisations need to get into this new world of competitive fundamental research, fostering initiatives instead of trying to capture them and run them by themselves.

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How Our Perception of Knowledge Is Shifting to Relative Knowledge

In this quite tedious post ‘Knowledge is crude: Far from being a touchstone of the truth, knowledge is a stone-age concept that harms our dealings with the modern world‘, some interesting concepts are developed how our view of knowledge needs to change as we move into the Collaborative Age.

My understanding of the thesis of the post is that basically, knowledge is increasingly relative – and more based on a statistical evidence. It is much less absolute and certain like we considered knowledge previously.

Specifically, knowledge being considered as something being shared between people becomes increasingly an alignment of opinions rather than a more certain knowledge independently vetted and settled.

I am quite convinced that we have realized in the few past decades how knowledge is temporary and can be put in question by new evidence. We now know that scientific knowledge and theories only wait for the next bit of evidence to contradict it and thus create the need for new, better theories.

In the Collaborative Age, we will increasingly see knowledge as relative and ready to be upended. Tools to support this are already there, such as online encyclopedia. The challenge of course is to ensure that knowledge remains grounded and does not become another set of conspiracy theories. We still have to invent the quality criteria of a relative knowledge. Let’s get to work.

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How The Most Valuable Start-Ups are Marketplaces

The focus of venture capitalists such as Andreessen Horowitz is on virtual marketplaces. They even follow the top 100 online marketplaces as the hottest ventures around. Those are the companies like Amazon, eBay, Airbnb, Uber and Lyft, Alibaba, Instacart…

A souk, one of the oldest marketplaces

That marketplaces or trading ventures are probably the most secure way to riches is well known for a long time (I use often the example of the Californian gold rush of 1849 or the Klondike gold rush – statistically the traders became richer, and in a far more reliable manner, than the prospectors). They are also the most easily scalable as they are not linked to production factors, only to logistics, therefore require relatively less capital to be setup and operated. They earn inter-mediation fees with relatively limited risk compared to the people that do the work.

No wonder marketplaces are hot for venture capitalists and investors. It is also probably one of the easiest kind of start-ups to get financed those days. However, the trader should not forget that at the end of the day it is relying on producers and they also need to find their benefit in the arrangement. Sustainable marketplaces need to maintain a fair treatment of producers. It is not quite yet the case in the virtual world with the gig workers, but will come soon.

If you want to launch a start-up, consider marketplaces. Easy to fund, less capitalistic, quicker to scale. Too bad I tend to prefer longer term, concrete innovative producers in my investments!

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