Ideas, Opinions & Speculation

Oil dreams

2012-01-28T17:15:00.001-05:00

A recent article (1) seems to restate what many people have been talking about for over a century – the world is slowly running out of oil and the prices are slowly approaching infinity, with disastrous consequences on the economy. They cite the continual decrease in production from established fields and the high cost of reaching oil in yet to be discovered areas. They note that shale gas is not a solution as such production techniques deplete the resources faster. Finally they conclude the obvious, "Historically, there has been a tight link between oil production and global economic growth - If oil production can't grow, the implication is that the economy can't grow either."

These observations are fair enough. Since the authors like historical data, they may want to extend the study a little further into the past. They may want to ask how economies grew before black gold was gushing out of the wells, world over. More importantly, history may also tell them that findings similar to theirs have been around for over hundred years. Ever since the “tight link,” between economic growth and oil production was discovered, people have been worried about running out of it.

However, such analysis is not giving due credit to the spirit of innovation and the already fast developing world of alternative energy sources. Oil has always been a transitional energy source – something that gave tactical benefits in production and storage but with long term costs. Increasing cost of oil will act as a significant boost to alternatives already fast approaching parity. The two engineering challenges – production and storage of electricity from renewables – need to be solved and we are well on our way to do that. With little help from increasing oil prices, we will likely reach there faster.

Panicking is never a good answer to solving any problem – especially if you find that such panic has been present for over a century. Most generations were afraid of the “tipping point,” just like ours. Those who need something to panic about, the most obvious choice is a meteor hit that will vaporize the earth - oil and all.

(1) Commentary in Nature: Can economy bear what oil prices have in store?Published: Friday, January 27, 2012 - 14:35 in Mathematics & Economics. Source: University of Washington

Bigger data

2012-01-28T09:40:00.001-05:00

The next sustainable fad has arrived – it is called “big data.” Ever since computers and the internet arrived a few decades ago, the collection, analysis and storage of data has been an allure to almost everyone. In the 80s, Artificial Intelligence threatened to solve all problems faced by humans. Two decades long irrational exuberance in Enterprise Resource Planning systems and business analytics continue to burn holes in the budgets of companies who can afford it. Giants of the internet, googled their way to stardom with algorithms that understand who you are and what you are made off. The influx of jobless Physicists into Wall street, where data is cooked and served every microsecond, created yet another class of hedgers who got wedged by volatility, later.

Now, big data has arrived. This is good news for both hardware vendors and software makers. The former can now focus on making bigger storage bins and faster processors and the later can create code that will create music from randomness. Such sustainable fads are actually good for the economy – they will likely create stimulus faster than just showering money from the clouds. In this case, they are indeed making clouds that can rain data at a moment’s notice to anywhere. Just as in previous sustained fads, “big data,” is also process oriented – in which the first step is to lay out how to collect and grow the data. The focus is on designing processes and constructs that can consume the big beast. How such a process will add value will be dealt with later. For now, consultants and the IT gurus cannot afford to think about that, for lack of time.

Data – the lifeblood of business – will grow again – uncontrollably, migrating into clouds and underground warehouses. One has to brace for the arrival of the next fad, when knowledge may finally migrate to the clouds as well – completing the process of making intelligence, truly artificial.

Ref: Flexibility : Flexible Companies for the Uncertain World

http://www.routledge.com/books/details/9781439816325/

The hangover

2012-01-27T22:42:00.001-05:00

The boomers of today lived a significantly different life growing up than what is available in the modern world. Their senses are finely tuned to an era when certain archaic constructs such as the war and drugs, reigned supreme. They had abundant opportunities in a world that was growing. They participated in two fundamental step function changes in the economy – the computer and the internet – that provided them with plenty of opportunity. Their outlook of life is shaped by what they have been endowed and what they know.

In the modern world, however, this is akin to a hangover. This hangover is killing companies and countries led by people who do not have any connection to the present. They look to the X and Y generation and find them lazy and they see the Z generation as utterly dumb. This perception cannot be any further from the truth. The hangover that prevents the next generation from taking control of their lives, companies and countries is the biggest threat to humanity today. To make matters worse, the boomers are in firm control of most of the productive assets of the world and they are getting more powerful.

The boomers are out of touch with the current realities. It is a different world – the next generation do not want segmentation and their faces are in a singular book across the world. They use networks and not bombs to unseat autocrats and they are constantly in touch using always-on technologies. Boomers simply do not have the competence or the knowledge to lead in today’s world. It is time for them to retire and usher in a much more productive world led by innovation and not bureaucratic friction.

Getting closer

2012-01-24T07:53:00.001-05:00

Solar – the most elegant method of producing electricity – has not been viable in comparison to other alternatives. Comparing the total cost – considering construction, operation and decommissioning, it has been twice as expensive as the nearest alternative – natural gas and three times as much as hydro and nuclear. However, hydro is location specific and nuclear has significant tail risk in the storage of spent fuel that is not fully considered.

Ref: Comparing Energy Costs of Nuclear, Coal, Gas, Wind and Solar, By Jason Morgan | Published April 2, 2010

Solar, albeit being the cleanest production method, has been priced out of the market, thus far. The only reason, solar plants are seen around the world is subsidy – both for the manufacturing of solar panels in countries such as China and for the construction of solar plants in countries such as Germany and the US. Developing countries have recently initiated subsidy schemes similar to what exist elsewhere.

Subsidies, for the manufacture of solar panels using traditional methods and for the construction of plants that destroy economic value, are not a way to solve this problem. More R&D is needed for process innovation that will reduce the cost of manufacturing and improve efficiency of plants. Recent research (1) has made the prevailing idea of embedding quantum dots into the solar panel more practical, extracting an additional 50% efficiency in production. Another 50% in manufacturing process efficiency, will bring solar to be in direct contention with natural gas. With societal costs fully considered, solar will then become the natural and uncontested option.

Energy policy is complex and it requires the consideration of available resources, portfolio of production assets and consumption patterns and emerging trends in technology. Policies that dole out blind subsidies are never good. Production and manufacturing subsidies are tactical band aids. What is needed are policies that strategically and holistically solve the energy problem by R&D, making solar an economically viable option.

(1) In solar cells, tweaking the tiniest of parts yields big jump in efficiency. Published: Saturday, January 21, 2012 - 00:35 in Physics & Chemistry. Source: University at Buffalo

The beautiful

2012-01-21T19:58:00.001-05:00

Turn of last century witnessed a copy of a human, who defied all odds to become the most beautiful. 10,000 years of modern human history eventually produced a mind of significance when perhaps for the only time, the heavens may have smiled, albeit briefly. There may have been leaps of equal importance in the past, but not in the time span modern humans can track. He battled autocracy but he conquered science through imagination when such pursuits were considered inferior. He visualized the meaning of heavens and translated that into comprehension by paper and pencil. He raised the human spirit to levels that meaningless religions of the past could not imagine. He instituted science as the pursuit of happiness and knowledge and he drove generations to be thankful for their minds. They cut and diced his brain, but they found nothing unusual.

He was human, for he showed weakness when a few decades later, humans of similar competence but less passion demonstrably showed he was completely wrong. He has been wrong for over a century and mortal humans of incompetence have been measuring every possible thing they can find to prove him right. They constructed eyes on the hill, arrays in the valley, peep-holes in space and heavy metal in the heart of Europe to prove him right – but he was wrong. Gravity has eluded men of steel and those who measure noise in deep holes under ground. Gravity shall elude men again, in spite of the toys they build for insights do not emanate from experiments. Insights only come from imagination – an ability to visualize God and her tricks and an ability to laugh at the constraints that will prevent humans from finding the truth.

Beauty is fleeting. It is likely that humans will drive themselves to obscurity by experimentation and data. Some yearn for the appearance of beauty, one more time, for without it, life remains to be meaningless.

Improved plumbing

2012-01-21T09:26:00.001-05:00

Recent revelation that the side benefits seen in the common Diabetes drug, Metformin (1), to reduce the risk of cancer was due to its ability to affect the mutation rate in somatic cells beneficially by slowing DNA damage, is instructive at many levels. It further reinforces the fact that most modern diseases can be attributed to the wear and tear of the hardware – something that was never designed to hold up for such a long time. Although medicine’s battles have largely been against external attacks on the human body with unanticipated non-linear biological effects, we are now entering a regime in which engineering may have to solve medical problems, that are largely endemic and possibly more predictable.

If disease is a hardware issue - mainly wear and tear from use and the crumbling of the plumbing infrastructure, unable to remove waste from the system at a sustainable rate, then, perhaps we should approach problems with an engineering mindset. Thus far, engineers have been largely focused on the delivery of agents to more specific targets in an efficient and convenient way but it may be time to focus on the repair of systems and the removal of waste by mechanistic means. God’s delicate design has been beyond comprehension for humans to manipulate deterministically and they have succumbed to a game of probability and serendipity to solve medical problems. However, if problems are endemic, then they are likely more forecastable and the solutions to them, more systemizable. In this area, humans have been brilliant as they have been making tools for millions of years and mechanical plumbing systems, bit more recently.

Diseases of the body and the solutions to them may be sought by well established engineering techniques, ushering in a regime of mechanistic preventative maintenance at predictable time intervals.

(1) Solving the mystery of an old diabetes drug that may reduce cancer risk. Published: Wednesday, January 18, 2012 - 17:39 in Health & Medicine. Source: McGill University

Tick tock, early death

2012-01-12T20:51:00.001-05:00

Research from Oregon State University (1) shows that the flaws and the failure in the circadian rhythms can be attributed to neurodegeneration and early death. Impaired biological clocks seem to unleash a series of events with negative effects on the brain and health in general. Although the study does not address this, one has to wonder the possible negative effects on the human psyche from lack of sleep, international travel and overworking.

Humans arrived on the earth, a few thousands years ago, when it served up an environment of predictable cycles. They acclimatized with it and grew in tune with the sun – their bodies expecting highly predictable rhythms. They hunted when there was light and hid from predators at night. They slept when it was safe to sleep and did not when it was not so. The whole human system is built up on highly predictable rhythms, driven by the sun and the moon. Modern human, changed all of these – ushering in a series of diseases – that are generally called auto-immune diseases. They won the battle against the bugs but they lost the war against themselves.

At the present rate, it is likely that most humans will face a form of auto-immune disease before their death. In the future, it is most likely a disease of the brain will be the cause of death as most others can be solved mechanistically. The brain still remains beyond the grasp of the mighty human.

(1) Loss of circadian clock accelerates aging in neurodegeneration-prone mutants. Authors: Krishnan, Natraj,Rakshit, Kuntol,Chow, Eileen S.,Wentzell, Jill S.,Kretzschmar, Doris,Giebultowicz, Jadwiga M.

Citation URL: http://hdl.handle.net/1957/26511

Pricing whales

2012-01-11T17:04:00.001-05:00

In the recent edition of Nature, researchers suggest a creative way to reduce whaling - by a market based cap and trade system (1,2). Although some may object to this idea as insensitive, it makes good sense. The optimal societal outcome is the maintenance of the number of whales that will keep the possibility of extinction of them to close to zero. The researchers point out that environmental groups spend close to $25 Mil per year campaigning against the whaling industry that makes a profit of $31 Mil. In effect, the whole problem can be solved if the environmentalists hand over $25 Mil to the whalers every year. This will assuredly stop all whaling. However, this is unlikely to happen. Also, it may not be an optimal outcome as the stoppage of whaling and a sudden rise in their population can have unanticipated impacts on the whole system.

Setting a price for the bad (in this case, whaling) and designing a cap and trade system is the next best solution. The number of whales that can be captured per year may be capped based on the current population of the different types of whales. Such a cap then will force a market based price and a flow of the right to capture whales to the most efficient whaling organization. It also allows flexible policy that can assure healthy numbers of all types of whales and the possible elimination of the system when the numbers are above a calculated threshold.

Policy makers have to think creatively to solve problems. The amount of resources expended to defend or attack binary policy choices is a lot higher than what is needed to implement market based solutions in most areas.

(1) comment in Nature entitled "Conversation Science: A market approach to saving the whales," Christopher Costello and Steven Gaines of the University of California, Santa Barbara, and Leah Gerber of Arizona State University, Tempe

(2) Science Insider, by Erik Stokstad on 11 January 2012, 4:08 PM

Privacy protection

2012-01-10T19:36:00.001-05:00

A recent article (1) describes how an individual's privacy can be assured in a database with a restriction on aggregate queries that are allowed. In a database allowing aggregate cross-sectional queries, information at the element level can be revealed by sub segmentation. The suggested solution provides bounds on queries that return subsets with individual information revelation.

Research in this area has been lagging. Most of the effort is currently expended in the collection, aggregation and reporting of information without sufficient concern for the privacy of such information. There are two fundamental avenues of research in this general area. First, one has to create a mathematical foundation for the determination of the minimum amount of data at the individual level (to be stored) that is necessary and sufficient to complete the task at hand and second, one has to determine decision quality or the ability to use all available information in the decision process as a function of stored data. There have been two weaknesses in this process. There is a tendency to collect whatever data are available first and ask questions later as the cost of collection and storage decline fast (2) and most of the stored information is never used in the decision process. This has created problems not only for reaching better decisions but also in the protection afforded. This is because, highly segmented datasets provide less protection against accidental revelation of information as well as planned ones.

Better designs are needed in the definition of necessary and sufficient data, decision processes that operate on such data to improve decision quality and databases that automatically prevent information revelation.

(1) Protecting confidential data with math. Published: Friday, December 16, 2011 - 12:37 in Mathematics & Economics. Source: Society for Industrial and Applied Mathematics

(2) Flexibility: Flexible Companies for the Uncertain World. http://www.routledge.com/books/details/9781439816325/

The church of pharmaceuticals

2012-01-06T17:45:00.001-05:00

A recent study in the Journal of Consumer Research from the University of Chicago Press (1) demonstrates that people hold management policies of churches and pharmaceutical companies to a higher standard. For example, outsourcing of priestly activities by the church to become more efficient or actions to maximize shareholder value by pharmaceutical companies such as hiking the price of well known drugs meet with sharp disapproval of the public, even though such actions are routinely taken by companies in most other industries without any objections or fanfare. So, public, in general, will vote to control the prices of drugs without knowing that such actions will slowly erode the ability of the industry to bring new products to market.

This shows that perceptions and biases are important factors that generate public opinion. Democratic outcomes, thus, are not objective – they are but a reflection of the existing belief systems. Challenging such belief systems, generally, is not a winning formula as humans have shown little ability to change their biases in the presence of data that conflict with belief systems. In many cases, conflicting data reinforces false beliefs. Equally important is the need and desire to conform. If an individual knows that a higher share of the society believes in something, it is more likely that she will conform rather than object.

Education systems around the world has to reform significantly. The best part of education is learning to challenge status-quo and to use logic to study belief systems. Without such skills, the next generation will remain prisoners to arbitrary beliefs perpetuated by the generations before them.

1. From the Commercial to the Communal: Reframing Taboo Trade-offs in Religious and Pharmaceutical Marketing. A. Peter McGraw, Janet A. Schwartz, Philip E. Tetlock

Hyperactive Fed

2012-01-03T19:01:00.001-05:00

The recent revelation that the Fed is now going to broadcast anticipated future interest rate policies has invigorated the economists in the street and elsewhere as they wasted no time “predicting” the impact of the change. One has to say it is a welcome change from the previous regime when rock star monetary policy makers lived to shock and awe the market at every available opportunity. The biggest of them all, had argued that to get the “right effect,” one has to make a policy change that is completely unexpected. And, he certainly got the effects, but not the ones he expected and the regime led a whole generation into despair.

Now, a more intelligent and educated policy maker has initiated a regime of transparency – the exact opposite of what was practiced before. This brilliant insight has been with us for over 50 years now – the idea that reducing uncertainty about future interest rates has the highest value for the economy. As universities around the world shower PhDs on every conceivable empirical work, they miss one important idea – insights are more important than eating data for breakfast, lunch and dinner. The policy makers of yesteryear have indeed been very proud of their empiricism – as they regressed and analyzed every piece of noise that was unearthed from the guts of the economy.

Having a stable interest rate regime and broadcasting it to the market is a good policy. However, there is even a better policy – just let the market know what your money targets are, shut the doors behind you and go home. Spend time with your children as we already know the enigmatic tweaking that goes on behind the walls in Washington and a whole industry that makes their living forecasting and predicting what the Fed will do as they scavenge the streets littered with corpses of small businesses, unable to cope with the uncertainty, destroy significant economic value.

It is time to return to simplicity. Markets are more efficient at setting interest rates. The likelihood of a dozen bureaucrats knowing more is unlikely – if they did , they would not be in their jobs.

The certain event

2012-01-01T08:49:00.001-05:00

Most of Physics is littered with events that can only be imputed a probability of happening. However, there is an event in contemporary Physics that is almost certain to happen – one of those rare things with a probability of 1.0. It is called the discovery of the Higgs boson particle at CERN – the large hadron collider. It has been shown that scientists have a bias toward proving the hypothesis, once it is stated. As the world waits, a trillion experiments are performed and an inexplicable amount of data is already collected. If the illusive particle is not hiding in the data already extracted, a trillion more collisions can be performed again, ever diminishing the probability of not finding it.

Humans have shown a weakness all through history – they seem to always find what they are looking for. When they stood up in the African savannah, they heard noises from the heaven. The village elder predicted the arrival of further noises, and the followers heard them. Later, religious leaders will predict the arrival of extraterrestrial entities and like clockwork they arrived. Much later, scientists, who shun such nonsense will state hypotheses and then find experimental noise to prove them. Although they hate to admit it, this is also in the grand tradition of the past. They smash things around to show themselves off. They write incomprehensible equations, create inexplicable hypotheses and set out to prove them in grand experiments. And, experiments always confirm the hypotheses.

Some say it is more exciting if they did not find what they set out to find. They will be disappointed – careers are already made and Nobel prizes are awaiting for those who are certain to confirm that the needle does exist in the abundant haystack of noise.

Decision ego

2011-12-30T18:23:00.001-05:00

A recent study (1) claims that people use logic in making decisions, even though in many cases it may appear that they are going with the gut. The article argues that if the information available is not clear, they may make a gut based call but they are aware of the fact. The study may have to extend further into who makes the decision and how the decisions may impact the decision-maker to fully appreciate the drivers of the decision.

For example, certain decision-makers are paid large sums of money because either the shareholders or the owners of the capital believe that they are good decision-makers. If the results of the decision are not going to be measured for a long period of time or if the results cannot be directly attributed to the decision made, such decision-makers have an incentive to make only gut based decisions. Since their compensation is directly proportional to the untestable belief that they are good decision-makers, it is important for them to shun logic and demonstrate that the decisions they make are private and proprietary.

The decision ego, the need to make gut based decisions, is slowly killing companies and whole industries. Archaic compensation systems and misguided perceptions have created a class of decision-makers, largely driven by ego. In many cases, such repeated experiments make them believe they are in fact good at making gut based decisions and logic does not play much of a role. In most cases, they have to only demonstrate that their decisions are fully private and not that such decisions are good ones. For example, in the venture capital industry, portfolio managers make gut based calls based on what they believe. This is crucial as they have also trained the capital providers to believe that only they can make such decisions.

Decision ego – the propensity to make gut based decisions without analysis or logic – is now prevalent in most industries. Most of this is driven by compensation systems that do not reflect value and perceptions that are perpetuated without logic or analysis (2).

(1) People don't just think with their guts; logic plays a role too. Published: Thursday, December 29, 2011 - 14:32 in Psychology & Sociology

(2) Decision Options: The Art and Science of Making Decisions. http://www.crcpress.com/product/isbn/9781420086829

Impersonal tests

2011-12-29T17:02:00.001-05:00

Personality tests – nearly a billion $ industry – have been used routinely by employers and universities. They are supposed to reveal the true orientation of an individual – extrovert v/s introvert, perceiving v/s judging and many other such concocted dimensions of personality. Humans always liked characterizing things neatly into buckets. Initially, they used observable characteristics such as color of skin and eyes, weight and height and body odor. As they became more “sophisticated,” more intangible but measurable attributes were used for the same – including ethnicity, nationality, religion, political affiliation and blood type. Later, this urge to characterize, took them to invent horoscopes and personality tests.

The personality test, thus, is yet another segmentation scheme invented by humans, with a robust and rich history of segmentation ever since they arrived on earth. Every human from inception had to endure rigid segmentations in many dimensions – each put down with elaborate definition and color. They divided people into the clergy and the warriors, financiers and farmers, the rich and the poor and the religious and the not so religious. They labeled people according to where they chose to live – some in Wall street, others in Main street and yet others simply street less, some in the cities, others in the suburbs and yet others in the farms, some in the East, others in the West and those in the middle. Segmentation has been the only enduring core competence of humans and they are getting ever better at it with every passing day.

The personality test, a more advanced segmentation scheme, are well liked by those who use it. Companies like “leaders,” and some personality tests show clearly whether the next impending brick in the wall can be marked as such or sent back to the crusher. Universities like “thinkers,” as they set out to groom the next crop of Nobel laureates from the raw and uncut inputs they are given and the personality test is an invaluable tool to select the most likely. Nuclear power plants and aircraft control towers seek those who can remain calm under stress and those who are balanced. Venture capitalists seek the creative types, who can not only create but also ride the bus to the next exit before the ink in the investment check dries. Investment bankers seek the “money types,” who can simply make money without any consideration for humanity and personality tests reveal this as well. Personality tests have become an important tool in many areas of selection, design and management. However, there is little evidence that the labels invented by these arbitrary tests have any correlation to what they are used for. What may be missing in them is the person, herself, who is rendered incompetent by the tests administered on her.

Humanity should celebrate the complexity of the individual and not their ability to stuff everybody into a 4 x 4 matrix.

Descale, now!

2011-12-20T21:17:00.001-05:00

Management gurus and consulting moguls have always been high on scale. Scale, they argue, reduces costs and increases efficiency. Venture capitalists, thought to be the third rail of the economy, mumble the two magic words - “scale” and “exit” in deep sleep, for without it, they cannot be interested in investing. Business schools teach every budding manager and entrepreneur, the magic of scale – how profits can increase exponentially and how wealth can be maximized under the spell of scale.

Scale is a misguided notion from the industrial revolution, when it was indeed valid. Modern companies are unable to break the shackles of the past – as their managers are educated in the same ideas and their financiers are still left with limited brain cells. The analysts of the street, with wisdom that cannot be measured with any modern techniques, analyze and reanalyze how scale is helping their fledgling companies as they stuff supply chains to dress up next quarter’s earnings. Accountants jump up in sheer joy as they witness numbers add up horizontally and vertically in spreadsheets and they are driven to orgasm when they actually tie everything together for everybody to see and enjoy. Scale, still, is the driving notion of business success.

It is time companies seriously considered descaling as a strategic need (1). Contrary to popular opinion, size does not really matter in the information economy.

1. Flexibility : Flexible Companies for the Uncertain World

http://www.crcpress.com/product/isbn/9781439816325

True permanence

2011-12-19T21:08:00.001-05:00

A recent study (1) casts doubts on the idea that has been universally accepted – babies, less than a year old, have difficulty with object permanence. When an object is shown to a baby and then hidden, babies below certain age, have shown an inability to assume that the object actually exists. The study shows that such a conclusion is premature and not necessarily true. Using an experiment in which the object’s shape was changed when it appeared again from behind a screen and measuring the time the babies spent glancing at it, the study demonstrates that babies actually have pointers in their brain for object permanence.

This is interesting. It can lead to a broader conclusion that most of the conceptual competence of the human brain is in place at birth. The operating system, itself is capable of most of the complex tasks the brain will perform as the baby ages. The results are different later only in that the brain has acquired knowledge and there may not be any improvement in its innate capabilities. Conceptually, such a finding, may also have implications for answering the question of when life begins. If the brain is delivered to the world, with a fully functioning operating system, then it means that such capabilities are inherent at a time before birth. The question will be how far before birth the baby possesses a conceptually capable brain.

Policy in this area has been controversial. Those who dismiss such policy questions either because of ignorance or for convenience may be taking it too lightly.

(1) Babies remember even as they seem to forget, Published: Monday, December 19, 2011 - 15:26 in Psychology & Sociology

The need for ignorance

2011-12-16T18:34:00.001-05:00

A recent study shows that some percentage of uninformed (ignorant) individuals promote democratic consensus in animal groups. This is a very interesting finding as the same appears to be true in complex human societies as well. Through theory and experiments, the article demonstrates that the presence of uninformed individuals inhibit the process of domination by a strongly opinionated minority. If the strongly opinionated minority is pushing toward an optimal outcome for the system, ignorant participants will slow them down.

These findings have a variety of societal and policy implications. At the limit, in a system with fully informed individuals, strongly opinionated minority is more able to push the outcomes in their desired direction better. On the other side, a system with complete ignorance will assure democratized outcomes, regardless of the optimality of such outcomes. Most systems, fall in between and it is unclear what may be the best level of ignorance that should be maintained to push the system to the best outcome.

A proxy for informed systems may be large and complex companies, where an opinionated minority drives the agenda. An example of uninformed systems may be large democracies that generally assure democratic outcomes. Since neither democratic outcomes nor agendas driven by the opinionated minority can be shown to be optimal, it is difficult to determine the best level of ignorance. However, it is likely that both a complete ignorance or a lack of it, result in inefficient outcomes.

1. Uninformed Individuals Promote Democratic Consensus in Animal Groups

Science 16 December 2011: Vol. 334 no. 6062 pp. 1578-1580 DOI: 10.1126/science.1210280

Iain D. Couzin 1,*, Christos C. Ioannou 1,†, Güven Demirel 2, Thilo Gross 2,‡, Colin J. Torney 1, Andrew Hartnett 1, Larissa Conradt 3,§, Simon A. Levin 1,
Naomi E. Leonard 4

old wine, older bottle

2011-12-15T17:02:00.001-05:00

Innovation has been in the air – consulting firms who help companies become more “innovative,” have been springing up like mushrooms after a heavy rain. Many have devised “new processes,” to jump start innovation. The managers of aging and antiquated firms have been turning to innovation experts to “move” their companies again. Even academics have been writing about how innovation can be jump started and the venerable “business review” and “management review” magazines can’t stop talking about it.

This is misguided. Innovation is not a process, it is a culture. It cannot be jump started by shock treatment. There is a reason the generation Z is more creative than the generations before them. They do not have the baggage of the 80s and early 90s. They did not live in companies with pyramidal structures and disheartening politics. They understand the value of innovation and care little about next quarters’ earning per share. The latter takes a measurable GDP of the country in measuring, tracking and reporting. I am sure the pyramid makers had similar efficiency metrics – perhaps, how many people were needed to move a block of rock a few yards and it is likely that they employed many to measure, track and report it. In the process, nobody asked if the pyramid was really needed (1).

Jump starting innovation by the application of older business processes is a myth. It is time that the kings of the metro jungle and the brains of the ivy campuses understood the reality.

1. Flexibility : Flexible Companies for the Uncertain World.

http://www.crcpress.com/product/isbn/9781439816325

Evolving from a two party system

2011-12-12T17:44:00.001-05:00

A political system that allows only two rational choices works in a regime that provides only binary choices. Even in such a case, it substantially constraints the voters with overlapping considerations. In the US, for example, this inflexibility has created an apathetic middle – nearly half the country – who do not vote. In the past, most dealt with this rigid constraint by projecting their desired outcome on the characteristics of the individual who ran for office. It appears that the country is entering a period in which the individual choices are unlikely to map across the policy landscape.

It is time to think differently. The other extreme – such as the French and Indian systems – where anybody with more than one supporter can create a party and run for office – is highly inefficient. Confusion leads to fragmented representation, followed by horse trading and unstable coalitions with no policy teeth. A happy middle in the offing in the US, where the populace seems to map into four distinct categories – Republicans, Democrats, Libertarians and Socialists. Such a categorization, with equal powers to raise money and get on the ballot in every state will substantially increase the voting participation. More importantly, this will lead to representation that a high percentage of the country believes in.

Industrial revolution is over and we are in an information economy. The younger generation has substantially improved abilities to gather information, analyze it and make choices. Systems based on assumptions from the past are unlikely to be optimal. It is time for the US to move into a four party system with a higher level of choices that also avoids the problems from fragmentation.

Fortune tellers’ misfortune

2011-12-08T17:49:00.001-05:00

Last decade has been good to fortune tellers. Smart ones stuck with doomsday forecasts consistently – running out of oil, terrorists taking over the world, financial meltdown, infinite prices for gold and many others. Many fortune tellers also provide financial advice and the pessimistic ones have been calling for selling everything during that time. Just as Nostradamus, many of these modern doomsayers have been riding a wave of luck and coincidences.

Last two years have been tough. The shine on the gold bugs has faded and the ones that boldly drove their unsuspecting investors into net short positions, have suffered. Accounting oriented analysts who are great at counting every drop of oil in the ground, every bushel of wheat in storage and every penny in the quarterly income statements, have not only wasted time and money but also led unsuspecting public into rabbit holes.

Doomsayers have a tangible negative effect on the economy, that is not driven by oil and gold but by innovation and ideas. Policymakers have to seriously consider a tax on those doling out advice when all empirical evidence is clear that there is no information content in these forecasts. More importantly, they hurt not only those who blindly follow them but also the general psyche and this may delay the economy achieving its true potential.

Limiting smartness

2011-12-07T21:37:00.001-05:00

A recent study (1) argues that there is a limit to human smartness by sighting examples such as the correlation between IQ and diseases and the performance loss seen with cognition enhancing drugs in those with good baseline abilities. These observations have nothing to do with the hypothesis that there is a limit to human smartness. The article also seems to suggest that the ability to memorize is part of smartness. Those who made ground breaking contributions to Science have never shown great abilities to memorize. From an evolutionary perspective, the ability to memorize should have had survival advantages. However, in the modern context, the ability to conceptualize is an order of magnitude more important than the ability to remember. Crude metrics such as the size of the head and the size of the human pelvis were sighted as limiting constraints on smartness as if size has a pronounced effect on smartness. It is true that a bigger brain to body ratio proxies higher IQ among animals but this is more related to operating system effects. It is unclear that those humans with bigger heads are actually smarter.

However, the question whether there is an inherent limit to human smartness, with any definition, is an interesting one. This may have to be studied in the context of the system and the society, the human is part off. If a human is significantly smarter than the society that envelopes her, it is likely that the society will shun (or terminate) her. Thus an increase in smartness in a random person will not be passed on and the society will assure a reversion to the mean in terms of average IQ. Thus the limit to human smartness may not be related to any inherent hardware limitation but rather a property of the complex societies that will not tolerate random increases in intelligence in small subsets within it.

(1) Why aren't we smarter already? Evolutionary limits on cognition. Published: Wednesday, December 7, 2011 - 14:37 in Psychology & Sociology

In your face

2011-12-04T21:25:00.001-05:00

A recent study (1) demonstrates that people who are adept at remembering faces, are holistic processers of information. They also show proclivity to Composite Face Effect (CFE) and Whole-part effect (WPE), traits that further illustrate holistic processing. It has been noted that those who can remember names and segmented technical details are generally less able to remember faces and vice versa. This study provides a clear framework to differentiate between those who process information holistically and those who do not.

Holistic processing may be less costly and more effective in reaching decisions quickly and this may have had survival benefits. However, it does appear that such a process also disadvantages the individual from more precise tactics, as these abilities appear mutually exclusive. It will be interesting to correlate traits such as innovation and curiosity against holistic processing. If a correlation exists, it may provide valuable insights into organization and societal structures that may be optimal.

As most people have suspected, there appears to be a divide between those who could describe the specific details of the components of a face and those who can only recognize the face in whole. Both of these skills may be useful and there may be an optimal combination of them for successful organizations.

(1) Why Do Some People Never Forget A Face? Liu Ruosi Wang, Jingguang Li, Huizhen Fang, and Moqian Tian. Psychological Science. For more information about this study, please contact: Jia Liu at liujia@bnu.edu.cn.

Flexible replication

2011-12-01T18:29:00.001-05:00

A recent study (1) highlights the difficulty in replicating scientific experiments to prove the initial conclusions in the presence of large amounts of data, changing environments and technologies. This is fair enough but these conditions also point to the flexibility afforded to scientists in experiments. Industries with high information content created by experiments in the presence of uncertainty, such as pharmaceuticals, show significant bias toward confirmation of earlier results in repeated experiments. Replication, thus, has become easier and not harder with large amounts of data and improving technologies to collect and store data. In systems with high uncertainty and non-linearity, where conclusions are reached by statistical testing, the growth of data in repeated experiments have allowed a higher flexibility in replication.

Thus, replication is not necessarily challenging when data grow and conditions change. In many cases, these make replication easier. At the limit, then, one has to question if experimentation is a good way to reach conclusions. As has been shown many times in the past, statisticians, given sufficient time, can prove anything. Experiment designers, given sufficient time and money, can also replicate anything. This is a significant problem for the advancement of science and knowledge. Most educational systems around the world are training the next generation of scientists on how to collect and analyze data according to traditional principles. It is, however, unclear, that traditional principles are good enough to reach conclusions and to create insights.

It is not the difficulty in replicating scientific experiments we have to worry about. It is the flexibility afforded by data and technology to prove anything that is more troublesome.

(1) Again, and Again, and Again …

Science 2 December 2011: Vol. 334 no. 6060 p. 1225
DOI: 10.1126/science.334.6060.1225 Barbara R. Jasny, Gilbert Chin, Lisa Chong, Sacha Vignieri

Sleep, and then weep

2011-11-25T18:31:00.001-05:00

A recent study (1) that demonstrates that sleeping has significant therapeutic benefits in erasing and mending difficult emotions is not new. However, it further reinforces the idea that sleeping has been fundamentally important to the human psyche all through history. Most biological systems, humans included, deal mostly with pain most of their life. As the painful memories have no beneficial effect on the system, the optimal action is to get rid off it. Akin to a computer, “the garbage,” need to be collected and disposed off.

Reduction in sleep can be considered a leading indicator for pain build-up. Such an outcome has catastrophic effects not only on the individual but also on the society as a whole. Since pain is unambiguously bad, any process that slows down discharging it is suboptimal. Humans, with large unused brains, are particularly vulnerable, as they seemingly have an infinite capacity to remember. There may be an an average optimal sleep time for a biological system as well as the society it is part off. If changes in technology and social structures are moving against this optimal target, it is a bit like winding up a spring – it will have to break some time with disastrous effects.

Sleep has to be a policy issue for the design of better societies. Those who lose sleep over the “consumption economy,” may be well served to sleep the black Friday out.

(1) Dreaming takes the sting out of painful memories. Justin Yao, Shubir Dutt, Vikram Rao and Jared Saletin.

http://esciencenews.com/articles/2011/11/23/dreaming.takes.sting.out.painful.memories

Economic loss from grumpiness

2011-11-20T19:09:00.001-05:00

Recent findings that young chimps develop very similar to human children by playing with siblings and friends, further illustrate the importance of lightheartedness in learning and creativity. The youth do not take themselves too seriously and thus have a higher capacity for learning. As they mature, it appears that they lose this playfulness and this erode their ability to learn and innovate.

More importantly, the loss to the economy from grumpy adults is significant. Those who take themselves too seriously have a negative effect not only on themselves but everybody around them. If adults can delay the onset of grumpiness and pretenses of seriousness, they may be able to improve their creative content. This has implications for policy both in education and organization structures.

In education, this implies that social development of children is as important as the technical content. More importantly, exposure to diverse cultures and experiences is dominant. In organization structures, this implies that companies should seek out those who inspire than the ones who can manage (2). Large contemporary companies are dominated by grumpy managers who are adept at counting but are unable to inspire the people around them.

Long time ago, the founders of Hewlett-Packard Company instituted the concept of management by walking around and created an inspiring company. Elimination of grumpiness has to be an important strategic intent of organizations who want to succeed in the future.

(1) Chimps Play Like Humans: Playful Behavior of Young Chimps Develops Like That of Children. Science Daily Nov 16. 2011 http://www.sciencedaily.com/releases/2011/11/111116174735.htm

(2) Flexibility : Flexible Companies for the Uncertain World. http://www.amazon.com/Flexibility-Flexible-Companies-Uncertain-World/dp/1439816328/ref=sr_1_1?ie=UTF8&qid=1321833816&sr=8-1