Nassim Taleb on the impact of debt in uncertain times and lessons from nature

Risk and robustness

The message is (and has been for some time) clear and consistent. It is a further rallying call for business systems to get “fit for randomness”.

In Nature systems do not survive and thrive by optimisation. The systems have limits, around which they are unpredictable and beyond which they fail.

A ringing endorsement for complexity management

This mirrors our approach to measuring and managing complexity within a given system!!!

The trailer for this video (from IBM) help to illustrate our approach. A system (human body) generates data which are the (outputs)measurements of the functions the body performs. Using conventional methods the data is measured independently BUT, as the functions require interdependent and co-ordinated operation to perform each function, this data measurement is incomplete. It tells you little of the current health and capacity of the system.

Our technology enables us to measure the system data interdependently thereby enabling us to assess the current state of health (robustness) of the system, its “distance” from upper and lower operating thresholds. Providing the ability to monitor – in real time – any tendency toward fragility in the system .

The beauty of a our approach and model-free technology is that we have the flexibility to tailor our measurements and management to fit the system whether that be a human body or the ecosystem of a Global Corporation

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Beware Self-Inflicted Complexity

Gulf of Mexico with ship

Image via Wikipedia

Here is an insightful piece from Harvard Business Review, by Ron Ashkenas, a managing partner of Robert H. Schaffer & Associates and a co-author of The GE Work-Out and The Boundaryless Organization. His latest book is Simply Effective.

If you’ve read the papers lately, it sounds like “complexity” is the explanation for many of the world’s problems. A feature story in the Sunday New York Times business section, titled “It’s Complicated,” suggested that too much complexity was behind the financial crisis, the difficulty in understanding health care reform, and the oil spill in the Gulf of Mexico. The author of the article, David Segal, summed it up this way: “Complexity used to signify progress…the riddle of some advance in technology. Now complexity lurks behind the most expensive and intractable issues of our age.”

Of course blaming complexity for various problems sounds good and may even feel good, but it doesn’t really accomplish anything unless we can do something about it. But in order to move into action, we first need to look at the difference between naturally occurring (and perhaps inevitable) complexity and complexity that is unnecessary and self-generated. With the former, the best we can do is to learn how to live with it; while the second type of complexity we can attack. Unfortunately, the two are often intertwined. And that’s where things really start to get complex.

Let’s look at the ecological disaster in the Gulf of Mexico. Many aspects of this drama are just plain complex. Trying to stop the flow of an oil gusher 5000 feet below the surface in extremely cold water is a complex engineering challenge — as was the original exploration, drilling, and construction of the oil rig in the first place. Similarly, trying to contain the oil and limit the environmental impact is also complex, involving multiple technologies, the coordination of public agencies and private sector firms, and the mobilization of huge amounts of equipment and people. This is “inevitable complexity” — the application of advanced technologies and human ingenuity to solve new problems in uncharted and unclear waters (excuse the metaphor).

What makes the Gulf situation so frustrating however is that a certain amount of unnecessary complexity may have contributed to the disaster in the first place, and since has made it harder to resolve. On the BP side it seems like operating pressures and quality assurance procedures were not properly balanced; and the accountability between BP and the operating company was unclear. From a safety perspective, the mixture of regulatory authority and industry support made it difficult to insist on compliance to disaster prevention standards. Then after the accident the confusion of responsibility between BP, the oil rig operator, and federal and local government slowed down the response and created disjointed and unclear communications.

It’s possible to argue that these complexity issues are also the inevitable result of having multiple organizations trying to work together. But that would be a cop out. If the leaders of BP and government agencies had a constant and consistent focus on clarifying accountability, sharpening regulatory authority, and making it easy to do things the right way, the Gulf spill might have been prevented. This type of complexity is self-created by the way we structure and manage our organizations. And when combined with the already-existing complexity of technology and business, disasters can occur.

Doomed magazine cover

But this isn’t just a problem for large-scale public issues. Every organization includes a mix of inevitable and preventable complexity. We have complex technologies and manufacturing procedures, multi-stream product discovery and development processes, intricate partnerships with suppliers and customers. All of these are complex. But when we amplify the complexity by adding unnecessary layers of management, confused accountability, slow and unclear decisions, garbled communications, and lack of focus, it’s our own fault. Maybe we don’t create ecological disasters, but we do create small ones in our own organizations every day.

It’s easy to bash complexity. But we need to also look in the mirror and ask ourselves whether we are adding to the complexity.

What’s your view?

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Manage complexity and add 5% to earnings! OK, so don’t take my word for it…

…80 year old Global Consultancy firm AT Kearney (ATK) say so. ATK appear to have a better understanding of complexity than most. So, I will happily let them tell you that, even by  using the methodology they outline below, they claim that managing complexity will add up to 5% to earnings.

I hope that’s got your attention!? Because it gets even better.


WE BELIEVE THEM but can’t help but wonder how much more could be achieved if their means of calculation didn’t sound like a question for contestants in a Mensa “Brain of the Year” IQ competition! The process sounds pretty daunting and has all the potential to be a source of complexity in itself.

What they need is a means to measure complexity utilising the type of data that any well-run corporation collate as a matter of course. So that the measurement and management of complexity is an ongoing process NOT one of the jobs that the CFO or his/her staff dread.

There is only one company that can deliver that type of capability.

If ATK have such confidence in adding (up to) 5% to earnings as a result of a protracted, consultative, (qualitative/subjective) process – where the “observer”, inevitably, affects outcomes – imagine what could be achieved by undertaking a 100% quantitative (objective) assessment,  using data currently generated by the enterprise!

“Risk Leaders” are those who recognise the competitive advantage to be gained by managing complexity: in existing operations (improving operational effectiveness); asset management; designing new processes; mapping & monitoring interdependencies; creating new products; internal risk and credit management; IT systems management; assessing Mergers & Acquisitions; managing supply chain risks, etc. Read more of this post

PwC 13th Annual Global CEO Survey 2010

I haven’t been slow with criticism of the insurance industry! I am not alone as both Citi & PwC have already flogged their concerns about the UK commercial market.
Having said that at least some of the Insurance CEO’s have recognised that their focus must switch back to terms, for so long thought to be unfashionable to many:


Having said that I was still stunned to see that there are those for whom, apparently, there is no hope! Those “cash rich reality poor”, circa 20%, of individuals in banking and insurance who think that public trust has actually increased as a result of the economic crisis.
And I thought that Ivory Towers dies out around the same time as the Dodo.

Seth asks: Do you have the right to be heard?

Do you have the right to be heard?

I’m not talking about the ability to be heard… we solved that problem a few years ago. It used to be logistically impossible to make it easy for the masses to speak up and to sort and respond to the feedback. Now, though, that part is easy.

I’m wondering whether marketers, politicians and leaders have an obligation to treat everyone’s input equally. Sure, you have the right to speak, but what does it take to be listened to?

Does the CEO of HP have the obligation to listen to a loony one-share shareholder with the same attention he focuses on a significant investor? Does a consulting firm have an obligation to study every RFP that comes along?

In most situations, I’d argue, you earn the right to be heard. If there’s a sick person on the plane, the doctor in 3b has the right to speak up, the hysterical person behind her does not.

So, here’s a quick list of a few ways to earn that right:

  • Be informed
  • Be rational
  • Pay your dues
  • Have a platform where a lot of people can hear you
  • Be an impacted constituent, not a gadfly
  • Represent a tribe of people with similar concerns
  • You’ve been right before
  • You’re not anonymous
  • You have a previous relationship and permission to interrupt
  • Listening to you earns something of value

On a tangential point for the recipients of this incoming flood of noise, you are not a punching bag. Some people will become your customer (or a prospect) merely because it gives them the power to complain. To be heard. To be paid attention to. I’m not sure you need customers like that.

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