RM needs “unity (and purity) of purpose”:: [re]building the Tower of Babel


If you are wondering what I am babbling about (I understand the word is derived from the bible story) and aren’t familiar with the story here is a brief re-cap:

Genesis 11:1-9, The Tower of Babel – Story Summary:

Up until this point in the Bible, the whole world had one language – one common speech for all people. The people of the earth became skilled in construction and decided to build a city with a tower that would reach to heaven. By building the tower they wanted to make a name for themselves and also prevent their city from being scattered.

God came to see their city and the tower they were building. He perceived their intentions, and in His infinite wisdom, He knew this “stairway to heaven” would only lead the people away from God. He noted the powerful force within their unity of purpose. As a result, God confused their language, causing them to speak different languages so they would not understand each other. By doing this, God thwarted their plans. He also scattered the people of the city all over the face of the earth.

The pace of globalisation may have faltered as a result of the financial crisis but consumer appetites and technology have provided the common language and tools to ensure that we become, if not more connected, then more aware of the “invisible” networks that determine (whether we like it or not) that the future is OUR, SHARED, FUTURE.

Problem is, rather than (co)operate as interdependent components of [non-linear] systems, sub-systems and networks, that transcend borders, sectors, domains and scales, we STILL think in linear terms: within man-made “boundaries”, whether real, imagined or enforced.

We understand competition and are (all too) familiar with quotes, such as, “it’s a dog eat dog world” and “survival of the fittest”, that are trotted out by pop-philosophers intent upon corrupting the wisdom of others, for their own purposes…”greed ISN’T good!”

Greed brought us to where we are today and until people start to question and challenge the business-people who purvey these cancerous clichés as “motivational” WE will fail to grasp the critical nature of the mission we MUST undertake. The exchanges I highlighted in this recent article should serve to illustrate the extent of the dis-harmony amongst some serious heavyweights in an industry that, patently, understands competition more readily than it does, obsolescence!

The nature, and scale, of the problems are such that there should be little room for ambiguity of PURPOSE. But, instead of UNITY and progress, we find the type of undignified hair-splitting and in-fighting surrounding the LANGUAGE of one or other “code” or set of rules! Ironically, NEITHER “solution” possesses the requisite variety to begin to fully understand, let alone address, the problems.

Unsurprisingly, God’s work has stood the test of time and, for us mere mortals, there is a great deal more understanding, humility and co-operation required, just to close the gates of hell

Dogbert does Financial Planning:: applying myth or math?


Dogbert (flaw of large numbers)

Regulators want big, complex banks to hold larger buffers of capital to protect the financial system.

Big banks argue this is unnecessary because risk is diversified across their larger balance sheets.

Who is right? Natural sciences – especially epidemiology, ecology and genetics – provide clues…

 Complex systems: The FLAW of large numbers.

A “law of large numbers” is one of several theorems expressing the idea that as the number of trials of a random process increases, the percentage difference between the expected and actual values goes to zero.

If you REALLY want to get a deeper understanding of probability – and why it is wrong to assume too much from independent events (e.g. the roll of a dice) and apply that knowledge to the real world of inter-connected, non-linear systems – PLEASE check out the “Physics Envy…” presentation by Andrew Lo (link below).

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Risk: If we already “know” what we can’t but…


Rodin's The Thinker at the Musée Rodin.

Image via Wikipedia

…can, no longer, be sure of what we think we know, what do we actually know that is of any use to anyone relying upon our expertise?

No this isn’t an introduction from Donald Rumsfeld as a guest blogger but part of a serious question that, if isn’t answered correctly poses hard questions for the future of our industry.

Perhaps some explanation would help: we “know”, (well, understand) that we cannot predict the future – which could be pretty worrying for an industry whose success or failure relies upon the frequency and impact of a variety of events that haven’t yet and may never happen. But, in the absence of “special powers”, we have relied upon what we know i.e. what we can learn from the occurrence of similar events, in the past. We now have vast quantities of data, accumulated over many years by a wide variety of sources. The type of information with which Statisticians, Actuaries, Economists, Carol Vorderman can have hours and hours of fun with, aided by tried and tested techniques and the most sophisticated technology in our history.

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Connecting the dissident dots…”Tipping Points”


Mark Mobius is one of the most influential voices in Global investments and he is talking about when and what, NOT “if”, in terms of “tipping point” for the next global financial crisis. He’s right..

The foundations of the world economic system are so decayed and so corrupted that even a stiff breeze could potentially topple the entire structure over. Over the past couple of months a constant parade of bad economic news has come streaming in from Europe, Asia and the United States. Signs of an impending economic slowdown are everywhere. So what “tipping point” will trigger the next global economic downturn? Nobody knows for sure, but potential tipping points are all around us. Read more of this post

Good Decisions. Bad Outcomes revisited


We can’t entirely avoid outcome-based decisions. Still, we can reduce our reliance on stochastic outcomes. Here are four ways companies can create more-sound reward systems.

1. Change the mind-set. Publicly recognize that rewarding outcomes is a bad idea, particularly for companies that deal in complex and unpredictable environments.

2. Document crucial assumptions. Analyse a manager’s assumptions at the time when the decision takes place. If they are valid but circumstances change, don’t punish her, but don’t reward her, either.

3. Create a standard for good decision making. Making sound assumptions and being explicit about them should be the basic condition for getting a reward. Good decisions are forward-looking, take available information into account, consider all available options, and do not create conflicts of interests.

4. Reward good decisions at the time they’re made. Reinforce smart habits by breaking the link between rewards and outcomes.

The article below is of particular interest to me and my colleagues at Ontonix because it reinforces the approach that we advocate and that is supported by our unique technology.   Business is no longer about linear relationships or processes with the post-industrial resilience suggested by terms like “supply chain”. As was highlighted in this recent blog (video) Eric Berlow: How complexity leads to simplicity, when dealing with the modern [ … Read More

via Get “fit for randomness” [with Ontonix UK]

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