After 61 days of dropping the ball on this blog, I’m (kinda) back. Given the amount of work on at the moment in both Geneva and Oxford this may be another fly-by-night affair with the narciss-o-sphere, but my pride demands that I at least try to record some random thoughts every now and again on the topic of scenarios, uncertainty and other vaguely interesting topics. For my future self as much as you, to be honest.

So today, as I prepare to jump off to a phone conference, I offer the following question that has been bugging me of late:

• Are scenarios a useful way to explore an organizational fitness landscape?
  • Is it possible to theoretically show how scenarios might map out both a perceived and real morphology of competitive advantage, given both contextual (wholly external, macro-environmental) and transactional (closer, influence-able) shifts?
  • Can this be systematized, and can one correct for bias in the way the scenario process is performed to get as close to what people might think of as “reality” as possible?
  • Is it possible to link this to any existing or future empirical work in terms of the usefulness of this approach?

Thanks to the wonderful people here at the Said Business School, I have a massive pile of reading that might help me answer these questions, but if you happen to have some insights into complexity theory and could offer some thoughts or ideas, that would be most helpful.

Today is the first day in a long time that there hasn’t been anything specific planned beyond my usual to-do list and household tasks – and so the first time in almost a month that I’ve been able to just walk, sit, read and think about life without any pending appointments or urgent work to distract me. It’s been an amazing day in Geneva, by the way.

This is also therefore a good time for me to dump some of the random ideas for blog posts that I’ve had over the last few weeks but been unable to commit to the series of tubes (a lot of these ideas I send to my gmail account for safe keeping). Keeping in mind my extreme susceptibility to availability bias, here we go:

• On entropy, or how we know that time runs in one direction only and why plates don’t spontaneously clean themselves (with thanks to Eric Beinhocker).
• On the tension between the benefits of writing in plain, clear language and pressure to adopt specialized vocabularies to seem an “expert” (hat tip to Gary Becker).
• On the acquisition of a new ipod touch filled with my father’s music and how that has proved the most relaxing thing to happen to me in the last few weeks, despite initial fears that more stuff brings more stress (thanks Dad!).
• On stress-levels in general and dealing with what I’ve been calling “high base-level stress” (you know you’re in trouble when the thought of owning a new MacBook Pro causes anxiety instead of pleasure).
• On the role of trust in financial services (one of my current work projects, on which I will be producing a draft hopefully by tomorrow night, fingers crossed).
• On turning the issue of sustainability from a burden into an opportunity via a beautiful vision for the future (thanks to Helio Mattar).
• Related, on viewing population growth as a blessing for the world rather than a threat to resources and quality of life (thanks to McDonough and Braungart).
• On meditation, and my seeming inability to find time to do it.
• On the evolutionary implications of the “Anthropocene“, arguably the current era in earth’s history marked by the human race’s ability to massively shape its environment, both intentionally and inadvertently. I’m wondering if the “fitness landscape” for which we evolved dictated a relatively short-term and localized focus on acquiring the resources and status for reproduction, and our collaborative sensibilities are geared to that scale of cooperation; now that we have, thanks to technology, the ability seriously to impact our environment, are we evolutionarily unfit to actually manage it for the common good? (Thanks to Gideon Henderson and all the people in the ‘Metastrategy’ session at the ALR last weekend).
• On the tension between “truth”, “precision” and “usefulness” – how can we be more approximately right than precisely wrong?
• Related, on defining a “problem”. With thanks to Gareth Morgan and the contributors to Beyond Method.
• Using scenarios to combat cognitive and psychological biases. Seriously this time.
• On the crazy dream I had a while ago about two cloned triplets looking for their missing self. One day I’m going to be a bad sci-fi writer, I swear.

There are a probably a few more topics running around my subconscious, but tonight I don’t have anything to do except combat the entropy that has filled the apartment with kind-of-useful pieces of paper, unidentified electronic cables and single socks. So hopefully either they’ll emerge or I’ll gather the willpower to pick one of these topics and add some more structured thoughts to the oversupply of opinion and random thought that is the web.

• Sean-like: Men beware: your steak dinner is a load of bull (SMH, but really from the somewhat neurotic brain of Sean Kelly)
• Applicable to the GFC?: Scientists Find Universal Rules For Food-web Stability (ScienceDaily) (h/t Infectious Greed)
• Galling, given recent post-rate here: Surely not the *least* interesting man in the world!? (xkcd.xom)
• Challenging: Wicked problems (Swedish Morphological Society)
• Counter-intuitive: Medical prevention actually raises costs (CBO) (h/t Greg Mankiw)
• More a tool than a reading: WikiMindMap (WikiMindMap) (h/t Lifehacker)
• Sustainable?: Lunch with Jared Diamond (FT) (h/t Infectious Greed)

It’s official: in October I’m going to be heading back to Oxford for a spell of PhD-ing (or DPhil-ing, as they call it there). My plan is to link scenarios, uncertainty and complexity in a fiendishly clever way using very convincing research, but first I face a series of courses in research methods to convince the business school that I am a fit social scientist.

I’m actually quite excited about being trained in this way (I have this crazy idea that it might be both interesting and useful outside of academia), but at the same time I realize that the next year is going to be a hectic one. Hence my decision last night to review study methods so that I’m efficient as possible in juggling the various spheres of work, study and skiing.

The result was the discovery of the stealth studying method, which looks promising. Based on the quiz-and-recall strategy of reviewing material, the idea is to gather the “big ideas” of each encounter with material (a lecture, book etc), consolidate key questions and answers around the ideas immediately into portable notes, then fit a few 10-min “detours” each day during which you read and recite (lecture style) the material.

I guess as a graduate student you’re meant to be a little weird…

Apologies for the hiatus in posts – life outside the series of tubes has kept me away from wordpress for the last 6 weeks!

• Hilarious: Bashing Goldman Sachs Is Simply a Game for Fools: Michael Lewis (Bloomberg) (h/t Infectious Greed)
• Fat-burning: Use NEAT Activities to Burn More Calories (Lifehacker)
• Hot: Wildfires in Sardinia Kill Two; Temperature Tops 100 (Bloomberg)
• Not that funny: Speechless: Dilbert Creator’s Struggle to Regain His Voice (Wired)
• Long-term: 650 Million Years In 1:20 Min (Numaga) (h/t LongNow Blog)
  

• Ballsy: Tennis Serves and New Balls (Infectious Greed)
• A leading indicator of financial regionalism?: Wall Street and the Third World (Vanity Fair) h/t Infectious Greed
• Absolving: Can we afford to eat ethically? (Salon) h/t Lifehacker
• Medically forthright: Getter better information from your doctor by setting the agenda (Lifehacker)
• Academically ranked: The Genius Index (Wired)
• Encouraging (only for Americans): U.S. Better off than Europe (NYTimes) h/t Calculated Risk – as predicted by Niall Ferguson…

Loved this story from Econbrowser, following a WSJ article:

“It appears from the WSJ account as if little Amherst Holdings of Austin, Texas was happy to sell the big guys like J.P. Morgan Chase, Royal Bank of Scotland, and Bank of America something like $130 million notional CDS on a $27 million credit event, used the proceeds to buy off and make good the underlying subprime loans, and pocketed $70 million or so for their troubles. The big guys, on the other hand, paid perhaps a hundred million and got back zip.”

Great stuff. On one hand, notional CDS values exceeding actual is a recipe for systemic risk. On the other hand, it makes for a great strategy if you can find enough fools to buy insurance against an asset you can own and control with the proceeds…

A friend of mine who moved directly from an undergrad to a grad programme at Oxford a few years back told me that she found the transition really hard – it just wasn’t the same vibe, people or experience as it had been just a few months earlier, and the contrast was distressing. Another way of putting this is, as my mum is prone to repeat, “you can’t go back”.

Which begs the question why I’m currently writing this from the Said Business School bar, with one eye on the cricket, just having spent an entire day working in various nooks and crannies around Oxford. Should I be wary of going back?

Perhaps it depends exactly what contributes to negative emotions when you’re revisiting a previous life. Part of the problem is expectations, as usual, often heightened by selective memory which paints student days in a rosy, dappled light that no doubt dramatically distorts the experience at the time. Another issue is simply ageing – being a “mature student” at college is quite different from being a “normal” one. Another is the difference in seriousness of the workload – the further you go, the more intense it gets. And finally there’s reversion to the mean – if you had a phenomenally successful social AND academic experience the last time, it’s more likely than not that you’ll find things a little harder this time around.

But the big problem I guess is the assumption that you are, in fact, trying to live a previous life. At a different time, in a different degree, it’s a different life, even if the architecture, personality types and college food all remain comfortingly/distressingly similar.

Which begs the question. What life are we trying to lead when we go back to school: an old one or a new one? Because you can’t go back, not really.

A combination of recent decisions and events, both professional and personal, has meant that I’ve kicked off a research piece on the role of “values” just at a time when I’m examining closely what I hold as my core operating values and principles in life. While I’m at the very early stages in trying to make explicit sense of both, I wanted to share a few obvious but under-discussed ideas that I’m intuiting (is that a real word?) and want to explore for actual evidence:

• “Incentives” are not adequate replacements for “values”, for a couple of reasons:
  • They are super hard to design well so that you can’t game them (especially incentives you design for yourself!)
  • They lead to trade-off and net-benefit thinking on restricted terms, at the expense of more holistic or higher-level considerations, often distorting the system by focusing attention on a part
  • They are more often than not short-term (and therefore suboptimal in terms of enduring benefits)
  • They are too readily changed and weighted by biases such as recency, saliency etc (which is why advertising works)
• The precise content and formulation of what is regarded as a “good” value or principle is less important than the fact that it is firmly internalized and used to drive behaviour. We should spend far less time debating and choosing values, and far more time making them useful as guard-rails for behaviour or filters for decision-making.
• Principles and values should be super, super open, to maximise cooperation and collaboration. Everyone should know where your guard-rails are and respect that, hopefully minimizing misunderstanding, second-guessing and mis-communication. But these values and principles must be credible – hence realistic values are also required!

Now, I appreciate that “values” is a really amorphous concept in a way, that values are apt to be superceded by emotions and that there might be inefficiency in not being adaptative to changing circumstances. But having seen the danger of indistinct values at a range of levels recently, I want to understand more about what can be practically done to embed positive values at the personal, institutional and macro levels. And I’m not sermonizing here – it would benefit me as much, if not more, than anyone else I know! But if I’m right, there are long-term, higher-level incentives to have strong, clear values. How do we get there?

Lately I’ve noticed that there’s a significant, negative value judgment attached to being “reactive”, with the preferred mode of behaviour being “proactive” as a matter of course. In this discourse, those who act reactively seem to suffer from a lack of attention, confidence, system understanding, and foresight. And no doubt there ARE many situations where being proactive rather than reactive is a good thing – preventing problems before they arise in well-understood systems is likely to be less costly than waiting for corrective actions after the fact. But is this universally the case?

There’s a danger in generalising from this intuition and arguing that being proactive is ALWAYS the best approach. As with everything in life, we need to carefully examine our assumptions and not let ideology and dominant discourse lead us to take approaches that could, in reality, be ineffective or even exacerbate the problem.

George Cooper in his excellent book “The Origins of Financial Crisis“, pointed out one example of the dangers of proactivity in terms of macro-economic management.

The primary example here is in the demand management function of central banks. It has been widely argued that the Fed’s self-confessed “proactive” management of economic demand through interest rate manipulation contributed to the recent financial crisis. Cooper points out that the US Federal Reserve aimed to prevent recessions in the aftermath of LTCM and the dot-com crash, so “proactively” lowered interest rates to try and keep the effects of what were sector-specific bubbles from impacting demand in the broader economy. In this case, the Fed was proactive in that they weren’t responding a drop in demand in the economy after it occurred, but instead anticipating such a drop and acting before the data displayed the trend.

Unfortunately, like almost all system interventions, this produced a range of unintented consequences, most notably by continuing to encourage the expansion of private debt and thereby contributing to the US housing bubble and widening current account deficit.

The lesson here is that being proactive in systems which we don’t fully understand can dangerous – and in some circumstances more dangerous than letting the system run and reacting accordingly.

People will argue that the issue here wasn’t with proactivity per se, but with the core assumptions that guided the Fed’s actions – namely, that if inflation was low, maintaining low interests rates posed little or no danger to the economy. We now know that inflation-targeting in a world of global imbalances and low-cost exports from the emerging economies produced a blind-spot for systemic fragility associated with asset-price bubbles.

But this proves my point – when the system is misunderstood, proactivity (much like regulation) is dangerous, for it provides a false sense of security and can do real damage while failing to achieve its broader goal.

An interesting, although slightly different example of the same idea was given by Spyros Makridakis from INSEAD at the World Economic Forum on the Middle East last week in relation to healthcare. Spyros argued that research shows that it is counterproductive for men to proactively check for prostate abnormality and then routinely undergo treatment in the form of surgery or chemotherapy.

The counterintuitive point here comes from statistics that show that a very large percentage of men who die from other causes also are found to have abnormal prostates – implying that there is very little benefit from undergoing painful (and possibly impotence-producing) interventions when the statistics say you will very likely die from something completely unrelated in any event. A contentious argument, I know, but it goes to the point that focusing on proactive management of one part of a larger system (the human body) could actually undermine the broader goal (long-term health and happiness in a holistic sense).

Perhaps, as my expert partner suggested, we should drop the “proactive v reactive” dichotomy in favour being “responsive”. This is a concept that is more thoughtful and considered than being “reactive”, but yet doesn’t imply that the best approach is to pre-emptively intervene in complex systems. Among other things, this is a lesson that the US should have learned from the global financial crisis and, now I think about it, the Iraq war.