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Here’s Robin Hanson on consulting (I blogged a bit of it here).

The upshot is that strategy consultants exist to help break up resistance to changes in strategy. Here’s an amusing caricature:

Fellow consultants and associates … [said] fifty percent of the job is nodding your head at whatever’s being said, thirty percent of it is just sort of looking good, and the other twenty percent is raising an objection but then if you meet resistance, then dropping it.

It’s easy for people to read things like this and think “oh, well if THAT’s all they’re doing, it’s clearly valueless work”

We are clearly programmed to politic in the shadows. The idea that a boss would be willing to direct large swaths of company resources to a consulting firm to bolster his political case for a certain course of action is ridiculous.

Yet I’m increasingly convinced that that’s what is going on. It happens in my business, too.

In fact, I think that the presence of consultants might actually be an incredibly macro-beneficial thing. Think about this quote from Daniel Kahneman’s latest book, which I’m still working through:

Because adherence to standard operating procedures is difficult to second-guess, decision makers who expect to have their decisions scrutinized with hindsight are driven to bureaucratic solutions -and to an extreme reluctance to take risks. As malpractice litigation became more common, physicians changed their procedures in multiple ways: ordered more tests, referred more cases to specialists, applied conventional treatments even when they were unlikely to help. These actions protected the physicians more than they benefited the patients, creating the potential for conflicts of interest. Increased accountability is a mixed blessing. (page 204 in hardcover version)

Now remember that real strategy is incredibly hard and so dependent on execution to make strategic planning nearly irrelevant. Giving executives excuses to take risks should improve overall performance.

The irony for the poor consultants is that they need to walk a very careful line. Being able to grant legitimacy to a view is an incredibly valuable ‘product’ but one that requires a reputation for not being a mercenary.

People need to believe the consultant is above such crass political maneuvering. The sponsoring executive him/herself probably self-deludes, thinking that his/her ideas are winning simply on the power of their own merits.

Such confidence is another hallmark of risk-taking. Which is good for the economy.

Better question: under what circumstances would you live in this apartment? More here.

There are periods in my life when I would have. Particularly when I was single, living alone and in a big city. You either have a home you want to spend time in or you don’t. If you’re happy to live your life ‘out’, you might as well spend as little money as possible on your place to sleep and store valuables. Living ‘out’ is expensive.

I’m working through Daniel Kahneman‘s latest book and I wondered: how might this apply to interior decorating? Who wouldn’t.

Consider two important concepts he discusses: priming* and cognitive strain. Priming is where you are influenced subconsciously by cues in your environment (looking at money makes you feel more individualistic, for example) and cognitive strain is simply when you have to think hard about things. We don’t like doing it.

So let’s use them to design a workplace. Most important is probably easing cognitive strain: keep the design simple and functional, almost invisible. Apple comes to mind when I think of low-cognitive strain design. No annoyances, no ugliness, nothing to distract you from your tasks. And remember that distractions can come from hideous art, to be sure, but also from beauty, from famous paintings or physically large things. Dial down the vanity displays.

Now think about priming. What thoughts or feelings does the design impress upon the mind?

In most businesses teamwork is probably the most important cultural value, as I believe it is in mine. Since starting this post I’ve tried to think about what kind of design additions might encourage teamwork. Steve Jobs designed the Pixar studio to encourage collaboration by forcing everyone to go to the same bathroom. That’s probably a good functional example.

I’m thinking maybe elements that evoke sport or martial themes are a good idea. Now, putting a giant print of the Iwo Jima flag raisers in your front hallway is perhaps going too far. You don’t want to be mocked.

To me priming is about subtlety; remember at best you’ll get a marginal effect, but aggregate it across a company and you can get impressive results. Another important point: don’t hide what you’re doing. Priming smacks of manipulation but it doesn’t need to be covert. According to Kahneman we can resist it only with deliberate effort and strong culture requires conscious buy-in anyway.

So prime carefully: maybe something as simple as images of people standing together. Or symbols of shared experience. Emphasize coordination.

How about the view from the boardroom? Think of what impressive views signal: opulence, wealth, status.

If you want your employees to feel rich and your visitors (clients?) to be in awe, it’s probably a good idea. Such conceit isn’t really my cup of tea, so I’d probably consider it a culture-sapping distraction. Others go for the shabby look to emphasize scrappy cheapness. Also, to me, a strain.

Now, there’s also an interesting tradeoff in pursuing cognitive ease: it makes you less analytical. From Kahneman:

[There is a] growing evidence that good mood, intuition, creativity [and] gullbility form a cluster. At the other pole, sadness, vigilance, suspicion, an analytic approach, and increased effort also go together… Cognitive ease is both a cause of an a consequence of a pleasant feeling.

In my business, brokering complex financial deals between insurance companies, we must balance a sales culture with analytical rigor. Kahneman suggests that environmental stimulus cannot boost these two mental faculties at once. Sales is a creative activity, analysis is not.

Why have just one place to do both then? Here I imagine an ‘analytics room’. Distraction-free and austere, cold surroundings. A bit uncomfortable. Perfect for a critical eye.

Being in this room is not the norm, even for analysts; your home is in the collaborative, creative zone. The reason is that pure analysis is probably never going to be any company’s competitive advantage. To paraphrase a business prof of mine: MBAs teach you a thousand reasons to say “no”, learn instead how to say “yes”. In opportunity lies success.

The next most important value after teamwork for us is having a strong sales culture. As I said above, this is creative work: advocating for a client, identifying new opportunities and relentlessly pursuing them. What design elements might help here?

The state of mind I most associate with successful sales is enthusiasm and excitement: a feeling that anything can be done. Perhaps symbols of extraordinary achievement? I’m not sure.

Of course, nothing can replace the hard part of building a strong culture: team member selection, training and tireless policing from leaders. Most of all, time.

But Kahneman teaches us that oft overlooked details can influence our minds in surprising ways. We should be mindful of this.

*Now, priming is a bit controversial. See this article and this earlier post. I think that the general point Kahneman is trying to make is a valid one, at least as I’m applying it.

For Celebrities Seeking Their Fortunes Working with Startup

1. Don’t.

2. If you are amazing at what you do (read: an A-Lister) then you will make far more money sticking to your day job. If you make $5 million per movie – trust me you are not guaranteed that kind of return in working with a startup. The reason I hate working on tech deals with celebs is that when things get hard (hint: startups always get hard) it is far easier for them to disappear and go make another: Movie, TV show, hit song, whatever than it is to figure out how to make the startup work.

3. You risk your personal brand for no reason. If the product you’re endorsing isn’t a home run (in a startup chances are it will be yesterday’s news faster than your sex-tape video) your personal brand will be associated with it and that could hurt your day job. Why risk it? Startups aren’t all that.

That’s Mark Suster in a very interesting/amusing post.

I was with my wife buying baby stuff in Target yesterday. Needless to say I was actually screwing around with my blackberry and found some notes from an aborted review of *Too Big To Fail* the 2009 book by Andrew Ross Sorkin.

– dealmakers are all the same. “To a man with a hammer, every problem is a nail”. Paulson did deals to fix the problems. In the end, he had to force the deals! Every dealmaker’s dream, being able to force an agreement. The problem is that disagreement isn’t always easy to understand; which was it?
1. One/both parties misunderstands a good deal (false negative)
2. One thinks it’s awesome for both, but doesn’t understand the whole situation (false positive)
3. Everyone gets that it sucks.
TBTF is Paulson falling into and out of and into #2s.
– Klingian [edit: that’s not Klingon, that’s Arnold Kling, see here for example] power vs knowledge is overarching theme. These guys didn’t (couldn’t) have anything like the right answers. Knowledge is too dispersed.
– maybe the financial system got too complicated? Knowledge became too dispersed within organizations.
– there are limits to what an individual can comprehend. TBTF is a symptom of this.

-=-

One idea that sticks in my head is Sorkin’s interpretation of Dick Fuld’s failure to ‘save’ Lehman by selling it to someone. He characterized Fuld as a trader, which he was by profession, and suggests that traders are horrible deal-makers. They are ‘take it or leave it’ negotiators who’d rather walk away than find a way to yes. He, his firm and his reputation all came up one deal short.

Hank Paulson is different: he’s a corporate finance guy, an intermediary. Doing deals is what they do. He took himself, his government and taxpayers one deal too far.

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That’s Tim Ferriss. And that’s not the maximum prize. He’s probably the most impressive self-promoter there is.

I dare you not to be inspired by this.

Every gram of brain uses up more energy than every gram of body. And bigger brains, which have more neurons, consume more fuel. On their typical diets of raw foods, great apes can’t afford to fuel more neurons than they already have. To do so, they would need to spend an implausible amount of time on foraging and feeding. An ape can’t evolve a brain as big as a human, while still eating like an ape. Their energy budget simply wouldn’t balance.

Our ancestors overcame this constraint when they learned how to cook. Cooked food offers more calories than raw food, and is easier to chew and digest. These early chefs could gain more energy from the same amount of eating time. That, in turn, fuelled more neurons and larger brains.

More here.

What prompted Minnesota to enforce this law on Coursera?

Coursera offers free, online courses to people around the world, but if you live in Minnesota, company officials are urging you to log off or head for the border.

The state’s Office of Higher Education has informed the popular provider of massive open online courses, or MOOC’s, that Coursera is unwelcome in the state because it never got permission to operate there. It’s unclear how the law could be enforced when the content is freely available on the Web, but Coursera updated its Terms of Service to include the following caution:

Notice for Minnesota Users:

Coursera has been informed by the Minnesota Office of Higher Education that under Minnesota Statutes (136A.61 to 136A.71), a university cannot offer online courses to Minnesota residents unless the university has received authorization from the State of Minnesota to do so. If you are a resident of Minnesota, you agree that either (1) you will not take courses on Coursera, or (2) for each class that you take, the majority of work you do for the class will be done from outside the State of Minnesota.

Welcome to Public Choice Economics.

Am I really going to buy another crisis book? Probably.

Second, to a remarkable degree, she sees everyone else in the process as filled with fault and herself as never at fault.  She has zero qualms about ceaselessly flinging mud out the rear view mirror, and does so for even the tiniest and pettiest of squabbles, including ones the readers never knew or cared about.  Geithner by the way is villain number one but no one else on the scene matches her virtue and common sense and scarcely a page flies by when we are allowed to forget this.

She is beloved of sentences such as “Maybe the boys didn’t want Sheila Bair playing in their sandbox.”  Who am I to say she is wrong?  Reading this book now I know why!

This is arguably the most _______ book I  have read, ever, and I am still looking for the right word to fill in that blank.  It is in any case stunning.

…This tract is a performance of terror, in good and bad ways.  Few books will teach you more about the politics of bureaucracy and regulation, though not exactly as the author intends.