Even in creative processes:
Analysis of over half a million patented inventions supports these arguments: individuals working alone, especially those without affiliation to organizations, are less likely to achieve breakthroughs and more likely to invent particularly poor outcomes.
more here.
Cringely is fast becoming one of my favorite writers:
One question I am frequently asked because of my background is if this is a good time to be an entrepreneur — a good time to start a company? Understand people have been asking me this question for 30 years — a period of time that encompasses some major booms as well as two of our deepest recessions. And the funny thing is that my answer to this question never changes: it is always a great time to be an entrepreneur and start a business. And with the passage of time I tend to think it has only gotten better, even today.
More here.
Better companies outperform worse ones in recessions and booms. If you can satisfy your customer, you should start a company and do so.
My landlord is offering me a 12% rent increase to renew. A laughable deal and I will be moving, I expect.
Why? Margins are thin and increasing revenue is virtually impossible in the short term.
Unlike a government, I have the advantage of just choosing a cheaper apartment. If markets are efficient and I need to accept a lower standard of living, I can take that.
What politician gets re-elected after choosing a lower standard of living, no matter how justified? Doesn’t work in Greece.
Consider the news today. Revenue isn’t going up on its own any time soon and we can’t all just move to a cheaper apartment.
Ugly.
Here is Horace Dediu:
RIM is an engineering led company. Many successful companies rightly develop their engineering skills first because that is what allows them to create new products more quickly. This is true of Nokia and also of Apple and Microsoft in their early years.
What is difficult is to allow marketing people to define products after that early phase. This is partly due to the fact that there is less respect for “Marketing” among engineers. Many see it as a “soft” discipline where there is little rigor.
Engineering is about implementation. To the extent that the first paragraph is true, it is so because these companies already HAD a proven idea. After all, they had to give the engineers something to do and sell something to pay for them.
Once you need to start looking for the next idea, it requires something other than engineering skill, not that someone can’t have both abilities, of course.
As for the second paragraph, of course marketing is a soft discipline. And that is exactly why it’s so hard to get right. The difference between an 80th and a 99th percentile engineering idea isn’t going to be a big deal. Indeed, perfect is often the enemy of good.
Go with 80th percentile marketing ideas, though, and you’re dead meat.
A few weeks ago I had lunch with a cat bond manager who was crowing about buying and selling a particular bond at a solid profit in a single day.
The bond was Mariah Re, which is at risk of being triggered by tornado losses this past quarter in the US. It hasn’t triggered yet, but it’s close.
My bond manager friend figured that, since Tornado Season is over, the fact that the bond was trading at a steep discount at the time meant it was a steal. And it was. He sold half of his position for a tidy little profit and figures he’ll ride the rest out at the great yield he’s secured.
He’s looking a bit less smart today.
He’s actually probably ok, but this made me once again appreciate the power of IBNR.
IBNR is a classic Rumsfeldian phenomenon:
[T]here are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.
Claims happen with uncertain cost. Ok, that’s the set of unkowns.
Some claims get reported reasonably promptly, even if the ultimate cost is still uncertain. These are the known unknowns.
The unknown unknowns is the IBNR. It can be estimated, but you need lots of good data. Anyone who hasn’t looked at a lot of portfolios over a long period of time will struggle with this.
Even then, it’s a horribly difficult concept to keep in your mind. People appear to be hard-wired to think that things in the past are in the past and can’t hurt us in the future.
Not so.
There’s a great discussion of the costs of Air Conditioning for soldiers on MR. Here’s the original story.
Here’s the boogeyman soundbite:
The amount the U.S. military spends annually on air conditioning in Iraq and Afghanistan: $20.2 billion.
That’s more than NASA’s budget. It’s more than BP has paid so far for damage during the Gulf oil spill. It’s what the G-8 has pledged to help foster new democracies in Egypt and Tunisia.
What is a cost? I am reminded of an accounting prof of mine who once said: “give me some public accounts and I can turn a $5m profit into a $5m loss for a company and get every accountant in Canada to agree with me”.
So that’s an interesting bit.
Another interesting story is how people argue.
In the comments on MR (best around), there are a few analytical folks (“let’s look at the seasonal variation in running costs and adjust for stuff”), some hierarchical brown-nosers (“it’s a super-high ranking dude who said this so it HAS to be right”), and die-hard cynics (“I expect the number 20 billion comes under the category of “too good to check.”).
The number is probably BS, sure. But that doesn’t mean it’s “wrong” in a technical sense.
And none of that is going to stop a heated Internet discussion from swiping employers’ time all across the nation.
I was walking into the elevator at work today and noticed a newsbite referring to this article.
Natural Gas companies are “bowing to pressure” from “environmentalist groups” and disclosing the chemicals used in the hydrofracking process.
“Good”, public-minded folks might perhaps think, “‘those bastards were hiding the recipe because they KNEW they were destroying the environment (*spits*). Evil [bleep]ing corporations”
Don’t worry, the article is designed to foster this kind of response (or perhaps an equally ferocious primal scream of “I HATE ENVIRONMENTALISTS”).
Try to think of a narrative that doesn’t pit one group against another. Why would a natural gas company be so cagey with this information?
Here’s a clue:
In a significant break from past practice, Range says it will begin submitting a detailed list of all chemicals and additives, and the volumes, used to fracture each of its gas wells to the state.
Two bits in that are interesting: “significant break from past practice” and “detailed list [etc…]. I’ll translate: “we’ve never done this before” and “it’s a really effing complicated list, possibly involving several departments in the company that probably don’t talk to each other much.”
I’d bet it’s something of a project to accumulate all this information, check it twice, publish it and deal with all the press and scrutiny that results. That’s going to cost lots of money and time for this organization.
If this was a person, not a company, the process is simple. The person just says “oh, I use these chemicals”.
Companies are giant networks of people. Different rules.
My wife’s looking for a job and got the tip off of a job fair going down in midtown today. She didn’t want to go alone, so I took the afternoon off and tagged along.
Little did I know that I’d run into a gigantic tech startup community. There were probably 50-75 companies all boothed-up with some pretty snappy professionally branded t-shirts, displays, food, etc. Impressive.
It was nirvana for software developers of all stripes. Now THAT is a skill in demand. For people in marketing, like my wife, it was less thrilling, but still solid and well worth the trip.
They call the tech startup community here Silicon Alley and if it is a representative example of what all tech startups are, then it is clear that the most exciting part of our economy is in finding ways of producing and processing information using networking technology.
Witness the beginning of the beginning.
PC360 gives us this. It’s so sticky with jargon to be barely readable.
Let me summarize the (2,300 word) article:
Claims data can teach underwriters about where claims come from and expose new drivers of claims cost. Analyzing claims databases is a good way of testing new hypotheses but, for organizational reasons, most companies aren’t great at this.
Yawn. Could have been written at any point in the last 300 years.
Next is a big discussion about how automated computer programs can correlate variables without the burden of actually ‘understanding’ the data.
[shields up! BS ALERT!]
My old man once spent some time learning about a stock picking technique which, to be perfectly honest, looked like garbage to me. But sometimes it worked!
I’d argue it’s complete luck. As they say, “even a broken watch is right twice a day”.
Narrative validation a powerful test for statistical conclusions: correlation is useless without a deep understanding for the causal mechanism. Unexplained, ‘dumb’ empirical relationships (describes all too much of medical research, imo) are too unreliable for me to back with cash.
If you don’t know how it works, how on earth do you know when it breaks?
Making things tougher for surviving banks “was not the idea” when they allowed a state guarantee of bank liabilities to lapse two years after it was introduced – like in the rest of Europe – to contain fallout of the Lehman bankruptcy.
What is the upside to credibly removing the TBTF guarantee? Easy, no bailouts.
What’s the downside? Hm.
Well, what do you think happens when risk goes up?
Costs go up, silly.
For EVERYONE.
Not Unreasonable 