Category: complexity

How Most of Our Decisions Are Bets

Following on the previous post ‘How We Should Differentiate Decision and Outcome‘, Annie Duke (professional poker player turned business speaker and author) in her excellent book ‘Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts‘ affirms that actually most decisions are bets. This was quite striking for me at first, but after some thoughts I now see the rationale.

Most of the decisions we take in life are fraught with uncertainty. We almost never have full information, and we are at the mercy of wildly unexpected events (also called ‘luck’). Of course the degree of uncertainty differs from decision to decision, but for most of our life-changing decisions, uncertainty is quite high.

“World – class poker players taught me to understand what a bet really is : a decision about an uncertain future. The implications of treating decisions as bets made it possible for me to find learning opportunities in uncertain environments. Treating decisions as bets , I discovered , helped me avoid common decision traps , learn from results in a more rational way , and keep emotions out of the process as much as possible.”

“Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out : the quality of our decisions and luck . Learning to recognize the difference between the two is what thinking in bets is all about.”

Looking at business or life decisions as bets gives quite an interesting edge to the process, which I find very worthwhile.

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How Irrational Decisions Are Made Based on Single Indicators – Stop the Madness!

Performance Indicators are great inventions. They allow to assess quickly how we are doing. But of course, they need to be well chosen, accurately measured, and relevant. I observe so many instances of irrational decisions taken on a basis on a single unquestioned performance indicator that it almost becomes a pattern of modern life!

GDP is obviously one of the greatest culprits although it starts being questioned (see previous post ‘How Difficult It Is To Replace GDP by an Appropriate Wealth Creation Measurement‘). It informs the decision of governments and international institutions although its basis is shaky to say the least.

The Shanghai University Ranking is another one. This ranking is based on certain criteria which are not necessarily correlated to education quality (e.g. it is based on research publications etc.). However it is now been used as a reference worldwide and irrational decisions are being taken in many educational institutions with a view to increase their ranking in this particular list.

In today’s complex world, taking decision on the basis of a single indicator is inappropriate, moreover if this indicator is not reliable or representative. Multiple indicator decision-making should be enforced, if possible that show what kind of compromise is actually being decided.

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How to Use Stories To Create Change

Valeria Maltoni reminds us in her post ‘The Commercial Power of Story‘ how stories can be powerful agents of change. She applies it in the field of marketing, advertising and commercial success – however, this is of course quite applicable to change management in general.

I find that people do really underestimate the power of stories.

“The language of story connects our identity, what we value, with our goals, where we want to go.

This connection between who we are and what we want explains why we pay attention to stories with emotional appeal.”

The key here is the emotional content of the story, how we can related to certain characters or situations.

When implementing change, think about storytelling as a powerful change tool. It really works.

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How Obsolete is Capitalism Really? Can it Really not Address Complexity?

As per his usual perspective, Umair Haque explains ‘Why Capitalism is Obsolete (And Why Humanity’s Future Depends on What’s Next)‘. His view is generally that capitalism is obsolete because it can’t resolve the major issues facing humanity now such as climate change, energy supply etc. And more generally, capitalism would not be able to solve complex issues.

There is some irony in this paper as he takes ITER as an example of why capitalism is obsolete. But ITER is on the contrary quite an example of a centrally planned organisation gone wrong and struggling to deliver.

Anyway, I do not agree with his point on complexity. Capitalism as a way to force change on the economy through innovation still works, and it has easily made centrally planned economies obsolete. There is power in decentralisation and letting innovation compete. And actually capitalism is the best system we have found so far to address the increasing complexity of our world, through its self-regulation loops on some aspects.

It is true that capitalism does not solve the tragedy of the commons or longer term infrastructure issues, because everyone tries to exploit as much as possible of the common resources; and this is why strong regulation on top of capitalism is needed, as well as subsidization of long term commitments. Regulation is also needed to find some balance in society.

We have to find the right balance of regulation and market forces. There will always be some balancing act and the optimised point will need some searching, but I am still confident that regulated capitalism will find solutions to complex issues much faster than any other available system.

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How People Constantly Take Decisions Based on Opinions

In my consulting work I am permanently astonished how much people tend to take decisions based on opinions without even taking a few hours to establish some quick facts about the situation.

Of course we all know that at the end we tend to take decisions based on our feelings, and that over-analysis is not good. However in the professional field it is astonishing to see how many substantial decisions impacting many people are taken with limited analysis or basic fact checking about orders of magnitude. A common example in my speciality is project scheduling, and scheduling forecast. It is quite easy to establish the current slippage of a schedule and the current productivity level compared to the expectations. Decision-makers do not even take a few minutes to establish those facts.

As a consultant a substantial part of my job is to establish some of those facts to question the worldview of decision-makers. And by doing that I am often disturbing because I often invalidate well established opinions. Up to the point that I often need backing by top management for those exercises.

Please take a few minutes to gather some basic facts and orders of magnitude before taking decisions. It would so greatly improve a number of situations. It is astonishing how many bad decisions are taken without basic fact-checking.

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How Society Needs More Troublemakers

This excellent Quartz article ‘A Berkeley professor explains why society needs more troublemakers‘ touches a nerve as I consider myself to be sometimes moderately in that category – in a constructive manner.

The interesting part is of course that troublemarkers improve team thinking and avoid “groupthink“: “research in social psychology and cognition has shown that disagreement improves group thinking. “It’s a benefit regardless of whether or not [dissenters] hold the truth,” she argues. “Most people are afraid and they don’t speak up. Companies have that problem all the time. And the research really shows us that that even if it’s wrong, the fact that the majority or the consensus is challenged actually stimulates thinking.”

Of course being a dissenter does not make you popular immediately, as Marshall McLuhan reminds us (“Every Society honours its live conformists and its dead troublemakers“), still it is quite needed, and in particular when tackling complex problems.

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How Our Endeavors Require Time and Patience to Develop

Seth Godin’s post ‘Low & Slow (vs. fear)‘ touched me because of his comparison with many of our creative endeavours with bread-making: it requires ferment and lots of time. Entrepreneurship requires time and can’t be rushed through.

“Much of the work we do as creators, as leaders, as people seeking to make change–it needs to ferment, to create character and tension and impact. And if we rush it, we get nothing worth very much.”

But the interesting part of the post is also about the flipside, related to procrastination: “Sometimes, we mistakenly believe that we’re building something that takes time, but what we’re actually doing is hiding. We stall and digress and cause distractions, not because the work needs us to, but because we’re afraid to ship”

He concludes: “Impatience can be a virtue if it causes us to leap through the fear that holds us back.” And at the same time we should be patient and let our endeavors ferment to deliver the best quality. That may be the most difficult contradiction of entrepreneurship.

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How Ego Kills Creativity and Talent

Quoted in the excellent book ‘Ego is the Enemy‘ by Ryan Holiday: “The performance artist Marina Abramovi? puts it directly : “ If you start believing in your greatness , it is the death of your creativity ””

Ego kills creativity and talent. It’s a well known fact however we still witness too many situations that demonstrate the truth of this assertion.

It is difficult to stay cold headed when one finds success. We tend to believe we are special, and this is the beginning of the end.

Maybe it is worth remembering that success is as much the result of luck than the result of talent and creativity. And talent can be improved through sheer work; luck can be improved too in a certain measure, but it takes other skills. Ego will kill luck that is often based on good relationships with people; and it will also kill talent because one will not put any more the work in. So, let’s try to avoid ego even when we are successful!

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How to Overcome the Challenger Syndrome

In my consulting work I am mainly working to help market challengers become better, or tackle more complex and larger contracts by applying best practice approaches. Some of my clients aspire to become leaders in their market. But often they can’t break through the psychological ceiling they put on themselves: behaving like a leader is very different from behaving like a challenger.

As a market challenger, you promote your reactiveness, your flexibility to accommodate client wishes, the ability to respond to tricky out-of-the-normal situations. You show you deliver under the most challenging circumstances.

As a market leader, you promote that you deliver the golden standard, and you promote volume gains that are acquired through standardisation of ways of working or of products.

It is extremely difficult for a challenger that has promoted adaptability and flexibility for years to change behavior and enforce standardisation on its clients. This is a difficult psychological barrier. Only by changing behavior can one become a leader in its market. It takes vision and guts to behave like a market leader when one is still small with a limited market share. But that is what it takes to eventually become a market leader.

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How to Leverage Randomness for Effectiveness

Amazon warehouses – the backbone of its effectiveness – have from an early stage been built completely random: stuff is stored wherever there is space. The computer system tracks everything and the company has found that it is more effective that way – less time to find where to put things, and more change to have a set closer when picking it up. It also saves space and makes space utilisation more efficient.

This Quartz post explains it all: ‘Amazon: This company built one of the world’s most efficient warehouses by embracing chaos‘.

This story is quite similar to what happened with emails: while in the past I used to sort painstakingly my emails in various folders, I just leave them in a dump nowadays and use powerful search features to find what I need. Email sits there in a random order, and I use another way to access the information I need.

With the increased power of mobile computation and networks, more and more applications will pop up for intelligent randomness. There are still a lot of areas where we do take the effort to sort things by categories; it is useful to consider whether this still makes sense nowadays.

It is amazing how randomness can be leveraged for increased efficiency and effectiveness!

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How to Deal with Both Luck- and Skill-Driven Situations

In this excellent post ‘The Difference Between Luck and Skill’, Valeria Maltoni explains how there are situations that are driven by skill, and other by luck; and that it is important to understand what is driving the situation to take the right behavior.

First, our brain is not geared to distinguish luck from skill. “Our nature throws a wrench in our ability to distinguish luck from skill. The problem is that we naturally embrace stories and shy away from statistics.” We need some analysis to understand what is at stake and it may not be easy. As a result, we overestimate the importance of skill and underestimate the situations that depend on luck.

Then, “In The Success Equation, Michael Mauboussin says that when skill is predominant in a field, the best course of action is to engage in deliberate practice with feedback and coaching; while when luck is predominant, he advises not to worry over results, because we have little or no control over them. Instead we should just focus on getting our process right to succeed long term.” (which means, get ready for the opportunity that will present itself one day or the other). Thus we need to behave markedly differently whether skill or luck drives what we are trying to achieve.

It gets complicated, of course, by “The paradox of skill — In fields where skill is more important to the outcome, luck’s role in determining the ultimate outcome increases. While in fields where luck plays a larger role in the outcome, skill is also very important but difficult to ascertain without a large enough sample set.”

So, is your project luck or skill-driven? Adapt your behavior in consequence!

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How We Need to Audit the Key Algorithms That Drive our Lives

As an example of our previous post ‘How Algorithms Can Become Weapons of Math Destruction‘, New York City has decided to audit the key algorithms used by the city to decide on their resource allocation.

The issue is described in detail in the post ‘New York City Wants to Audit the Powerful Algorithms That Control Our Lives‘. A task force will be created that “will audit the city’s algorithms for disproportionate impacts on different communities and come up with ways to inform the public on the role of automation“.

The issue of accountability is central; as algorithms take decisions that have huge impact on people’s lives (school admission, access to social services, whether to be kept in jail), we need to come up with a way to reinstate a sufficient dose of accountability in the decisions and how the codes are being developed.

This is a first globally and this initiative will certainly spread rapidly.

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