Mapping Strategy

Economic Stress Index Interactive Graphic

This is very cool... until one contemplates the human pain it chronicles.
(Brown is worse; blue is better. The original on the AP site, has much, much more).

'Getting Inside the Heads' of Valued Employees

This is intriguing [emphasis added]...

[Google] recently began crunching data from employee reviews and promotion and pay histories in a mathematical formula Google says can identify which of its 20,000 employees are most likely to quit...

The move is one of a series Google has made to prevent its most promising engineers, designers and sales executives from leaving at a time when its once-powerful draws -- a start-up atmosphere and soaring stock price -- have been diluted by its growing size.

I liked this bit the best:

The data crunching supplements more traditional measures like employee training and leadership meetings to evaluate talent. Google's algorithm helps the company "get inside people's heads even before they know they might leave," said Laszlo Bock, who runs human resources for the company. [emphasis added]

I'm just imagining the conversation...

Knock, knock

Valued Employee: "Come in."

Nervous Boss: "You may not know it yet, but you're about to leave Google. We don't want that."

Valued Employee, looking around for bugs and hidden cameras: "Nooo... I don't think so..."

Nervous Boss: "Never mind all that. We're giving you a pay raise, more stock options, a corner office, a personal assistant and a reserved parking spot."

Valued Employee: "But, but..."

Nervous Boss: "Let me finish. You're going to get extra vacation time, free membership in the executive gym, free lunch coupons at the company cafeteria..."

Valued Employee: "But I don't..."

Nervous Boss: "Hang on. There's more. We're putting you on this new fun project and giving the old, tedious one to one of the new guys and..."

Valued Employee: "OK, enough. I haven't been straight with you. You're right. I am planning on leaving. Did the algorithm tell you why?"

Nervous Boss: "Uh, no."

Valued Employee: "I'm leaving because you don't listen to me. I'm leaving because all this material wealth isn't going to bring me happiness. I've been accepted to seminary. I'm planning to go preach the gospel in the jungles in Papua New Guinea."

Nervous Boss, consulting print-out from the trusty Google personnel algorithm: "Oh. I see... Do they have search engines there"?

Predicting and Dealing With the Sun and Space Environment

Because scientific understanding of solar phenomena is far from comprehensive, the wide range of predictions and methods used to inform this visually delightful graphic isn't all that surprising.

I wonder though, whether a prediction market on the same topic would come up looking prescient... or foolish? This attempt from 2007 looks like the answer to the question, "What if they declared a prediction market and nobody came?" Maybe I missed something, but I don't think so.

The almost unprecedented state of solar phenomena at the moment, the increasing dependency of the world on various kinds of satellites and the wide range of predictions would suggest it might be worth giving prediction markets another try. (I can find no other prediction markets on this, either active or defunct.)

Interestingly, this hefty pdf document, from 1996, pegged the market for space environment predictions at $100M and expected it to double in size by 1999 (see p. 29, aka 189 according to the document footers). Anyone have any idea how big it is now? Even 1% of that would be fine.  :)

This scary piece on the same subject  might lead some to wisely consider scenario thinking for business continuity and resilience as useful complments. Sometimes the unprecedented simply... happens, at which point the question quickly turns from prediction to how to cope and thrive in the messy, uncharted aftermath.

'Planning' in Fog at High Speed

I've had a chance, the last few days (which, here in Boston are getting longer, if not any warmer) to work down a pile of reading I've meant to do for some time. Midway through that two-month stack, I found this ('Managing in the Fog'), from the February 26th, 2009 issue of The Economist. Dateline -- the fog-prone city of San Francisco:

...2009 budgets... have already been consigned to the shredder, as the economic crisis has blown away the assumptions on which they were based.

Faced with exceptionally volatile business conditions, senior executives are finding it harder than ever to gauge how their companies are likely to fare in the months ahead...

With even short-term horizons as obscure as the San Francisco skyline during a summer fog, companies are finding their standard budgeting and forecasting of little use. The usual trick of plugging figures from operating units into spreadsheets appeals to number-crunchers, but can often generate misleading targets, especially when conditions change fast. [link and emphasis added]

I used the metaphor of fog this time last year. It's useful, to a point.

...the first guy hits a fog bank and can't see squat. He taps his brakes. The second guy sees red lights and fog coming up fast and taps his brakes just a little bit harder, and so on. In just a few seconds, hundreds of cars end up in a tangled heap and people die.

The issue is not the fog itself. Sitting inside watching it with a warm cup of tea connotes a sense of calm introspection amidst muffled sounds and soft light. Rather, the issue is moving through it, i.e., a mismatch between conditions, terrain and speed.

As I've told each of my teenage daughters: speed-limit signs, lateness, adrenaline and energetic music are poor indicators of what will work to get them from point A to point B as fast as possible in a snowstorm at night.

The risk of serious mishap must play a part in gauging what "as fast as possible" means (as the teenage son of a friend learned on St. Patrick's Day when a drunk driver hit him -- thankfully all are OK, it seems). Speed must be matched to what is actually going on, not to some idealized, wishful, outdated view of what should be.

So am I wagging a fatherly finger at managers, advising them to curtail expectations, slow down and wait for the fog to lift? Not necessarily. Here's the big thought to chew on:

Instead of turning up the headlights of forecasting (counter-intuitively deadly in fog), the most important adaptation executives and strategic planners can make to such conditions is to increase collective responsiveness.

How does one do that under conditions analogous to heavy fog when landing the plane or pulling over aren't viable options? And what does that metaphor mean in practice? Several things.

First, decide what kinds of things make sense to look out for in the fog. (E.g., iceberg? mountain? brake lights? deer? It depends on the vehicle, the terrain and the map.)

Second, identify the specific tenets of management's conventional wisdom (often different from official assumptions) and ventilate them with truly distinct, 'orthogonal' views of potential futures.

Third, examine specific hypothetical examples as archetypes, not fixating on truly catastrophic 'act of God' events at the expense of ones that can be influenced. A rough analogy here would be to pop-up shooting ranges for law enforcement officers with an emphasis on rapid recognition and the ability to appropriately slot such 'surprises' into specific response categories.

Fourth, rehearse key events, scenarios and potential responses together. A management team can no more outsource scenario thinking than my daughters can outsource Drivers' Ed or a World Cup soccer team can train alone and expect to win.

Easy? No. Formulaic? Not at all. In fact, the process is highly creative. Effective? In the current environment, conventional 'steady-state' planning alternatives are actively misleading (i.e., more of the same will only get you in trouble faster). Turn up the headlights and you'll be blinded. Slow to a crawl and you'll be passed or hit.

Threats in the Age of Obama

I'm excited to report that our new book, 'Threats in the Age of Obama' is now available for purchase -- from Amazon, as well as directly from our publisher, Nimble Books (same price; take your pick). Here's the cover:

I contributed a chapter entitled "Preparing One's Mind to See" expanding on this post last fall by about an order of magnitude (writing for publication is far more exacting than blogging!) Here's the brief blurb on Amazon:

If you are on a mission to change the way government works, particularly in the national security arena, this is one place where some independent and intellectually diverse thinking is to be found. In these essays, we offer our view of some of the more pressing threats the Obama administration will have to deal with in these early days of the 21st century.

The title should not be taken as implying that this is a political book or that its insights are for the short term. Just the opposite. My esteemed co-authors make up a fascinating and insightful bunch of long-term thinkers who come at this from a wide array of perspectives.

Whatever you may have thought the next decade may bring before reading this, I guarantee you will be challenged to think about it differently, more holistically and in more depth afterward.

My co-authors are: Dan tdaxp, Christopher Albon, Matt Armstrong, Matthew Burton, Molly Cernicek, Christopher Corpora, Shane Deichman, Adam Elkus, Matt Devost, Bob Gourley, Tom Karako, Carolyn Leddy, Samuel Liles, Adrian Martin, Gunnar Peterson, Cheryl Rofer, Mark Safranski, Steve Schippert, Tim Stevens, and Shlok Vaidya. And last, but really first, editor, contributor and chief cat-herder, Michael Tanji.

But before you get distracted reading everyone's bio or blog... BUY THE BOOK!    :)

Side note: It's been quite a thrill just to get this far. The team is spread across eight different time zones. Most of us know one another's writings but only some of us have ever spoken live,  much less met face-to-face. Welcome to the future of publishing.

Telephony Crossover Achieved: U.S. Mobile $ Exceed Residential

Not exactly surprising, but it's interesting to see this validated with governmental authority:

These are the kinds of crossover points we look for when developing a set of future hypothetical 'events' for modular scenario-building exercises.

H/T: Right Mind

The Key To Innovation? Flipper? ...or His Sister?

Are females better at innovation than males (and/or, perhaps, at transferring, extending and preserving it within social groups)? Do dolphins know something about innovation that humans don't? Is it even fair to compare the two species? Or to call what they're doing 'innovation' (elevating it above the notion of simple behavioral adaptation)?

Interesting questions in the Christmas Day edition of the WSJ...

In the first in-depth analysis of this natural [and innovative] dolphin behavior, published in the online journal PloS One, marine biologist and psychologist Janet Mann at Georgetown University and her colleagues found that the dolphins of Shark Bay use their makeshift hunting masks more often than any other species uses tools, save human beings. "Tool use among this population is striking," says Dr. Mann, who has studied these marine mammals in the wild since 1989. "Spongers use tools more than any nonhuman animal."

... So far, almost all of the dolphin spongers have proved to be female. "The sex difference is really striking," Dr. Mann says. "I don't know of another species where it is so dramatic."

Of the spongers' offspring, only the daughters could be seen still sponging once they reached maturity. The sons tried it but almost always abandoned it...

For Dr. Mann, the discovery that dolphins too are tool users adds an unexpected dimension to the history of innovation, shedding new light on animal intelligence. Clever mimics and fast learners, dolphins have unusually large brains -- four times the size of a chimpanzee's and second only to humans in relative size. Dolphins even show evidence of self-awareness, by being able to recognize themselves in a mirror, some scientists argue.

Not to fuel further gender wars, but this note on the mid-sixties television series, 'Flipper' seemed interesting:

Flipper was played mainly by a female dolphin named Suzy, and occasionally by other females named Patty, Kathy, Scotty and Squirt. Female dolphins were chosen because they are less aggressive than males and their skins (unlike the skins of male dolphins) are usually free from scars and other disfigurations acquired in altercations with other dolphins. The five dolphins performed all of Flipper's thespian chores except the famous tail walk, a trick they were unable to master completely.

Here Be Dragons: Mapping the Land of the Unknown Unknowns

Some may be infuriated, others amused, that I begin this post on domains of uncertainty and scenario thinking with a six-year-old clip from Donald Rumsfeld. I trust sober readers will get past any emotional reactions to the messenger and hear the message itself.

Ironically, his point is one of humility. (My mouse finger is hovering over the 'comment spam' button; don't even think of going there. This is not that kind of blog.)

It is simply true: there are things that cannot be known no matter how hard we try because we don't even know they exist to be known. We can surmise, but that may not be enough. We may be highly selective and discerning in our surmising and yet... there will always be something beyond our ken -- beyond our ability to conceive, much less persuade others. (If you think that statement is false, consider whether your certainty is not, itself, a blind spot!)

Interestingly, Northrop-Grumman has applied for a patent on a computer system to identify unknown unknowns. (H/T: New Scientist). That invites a whole separate post.

There are many ways in which this idea can be applied. I want to focus on one in particular -- complex adaptive systems (though that term covers a great deal) -- and to exclude for the time being those applications pertaining solely to physical phenomena (e.g., weather forecasting, protein folding, etc.) I want to focus exclusively on human systems.

By virtue of free will, almost anything involving two or more human beings is adaptive. By virtue of consciousness and cognition it is also complex (think marriage; think commerce; think geopolitics). Such systems may behave in stable ways for long periods of time, however observed de facto stability does not prove their inherent or permanent stability. They always harbor the potential to behave in ways that are not only unpredictable, but difficult to credit in advance; perhaps even difficult to imagine.

Oh sure, a handful of well-studied, creatively inclined, or simply prolific individuals (often at the margins of a domain) can usually be identified in hindsight as having imagined some new state of things with a degree of accuracy that seems almost prescient. Backwards-looking identification of the best predictors isn't terribly useful though -- unless it also validates a hidden capability likely to be of value in the future. That is, unless it uncovers hidden forecasting talent.

Often, the apparent Cassandras or Jeremiahs (or their Pollyanna opposites) are not prophetically accurate at all. They're one-hit wonders. Backwards identification of faux-forecasting ability is the more common paradigm. It can be actively misleading if an individual was simply lucky. Not all fund managers who make a few good picks go on to become Warren Buffet or Peter Lynch. Individuals like them (or like Jules Verne and Michelangelo) are the exceptions that prove the rule: most science fiction and fantasy is doomed to remain fictional and fantastic.

All of this is as wind-up to my pointing y'all to a magnificently insightful (if poorly edited) essay from Nassim Nicholas Taleb ("The Fourth Quadrant: A Map of the Limits of Statistics") which I missed when it came out in September. I'm told it draws heavily from his book 'The Black Swan...', which I have not read but feel like I have because so many people have told me about it. He takes those concepts forward to cover the recent mortgage/banking/financial/economic/societal crisis and point out something we scenario planners live and breathe: forecasting based on history only gets you so far. I'll leave it there for now. Go check it out and let me know what you think.

Thinking the Unthinkable... Before It's Thinkable

In an article entitled, "Citi Weighs Its Options, Including Firm's Sale", on the front page of today's Wall Street Journal, this line stood out [emphasis added]:

Citigroup officials have decided they need to reckon with a range of scenarios that were unthinkable only weeks ago.

It neatly captures the essence of why it is vital for scenario thinking to be cultivated as a natural part of an organization's analytical culture, and to become an accepted aspect of ongoing corporate dialogue, and why the term 'scenario' is often maligned and misused.

Two simple ideas: 1) It's hard to think as clearly or creatively when an 18-wheeler is bearing down on you as when it's not, and 2) calling something unthinkable is... unthoughtful.  I'll deal with the first point here and second point more extensively in another post.

Studies of cops under stress bear out the fact that fear and adrenaline reduce or even shut down one's ability to access key higher brain functions, including one's peripheral vision and other sensory input. They don't do much for collaboration or listening skills either. A group's thinking may appear to get more expansive under such circumstances; that's typically an illusion.

Ideas long held close to the vest (because others would have thought them crazy) are suddenly poured out on the table in a torrent of collective logorrhea. By definition they are not pro-active, nor have they had time to ripen. It's an environment conducive to the green and rotten ideas becoming indiscriminately co-mingled with the good and timely ones.

Some might be tempted to reply with Boswell's reporting of Samuel Johnson's famous quip, "Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." (September 19, 1777, p. 351, Volume III of 'The Life of Samuel Johnson"; often misquoted as 'being hanged in the morning'.) It's a quote I love and have used often.

Yet the frame for that quote involves a man already devoid of attractive options (other than prayer, perhaps). He's done. The only mystery is what kind of scene he will make as he leaves the picture and what lessons others will draw from it. The value of having thought steadily, wisely and creatively about a broad array of alternatives years in advance of one's crime, trial, conviction and sentencing doesn't even enter the picture.

Laser-like tactical concentration under extreme stress is very different from the calm, disciplined thoughtfulness and habituated creative behaviors (either corporate or individual) that can help steer clear of circumstances that might lead to one staring death in the face. They make so-called 'unthinkable' futures far less surprising and lead to better responses.

Better choice: create an environment in which 'unthinkable' futures and strategic options for addressing them are systematically thought-out by groups of key managers and executives and carefully positioned in relation to one another (and to the present state) within a detailed, event-based hypothetical cartography. Such scenario maps make it far easier to avoid being surprised by the kinds of dire circumstances Citi and others face today -- or that Johnson spoke about 231 years ago.

How does one reduce the chances of an 18-wheeler bearing down with little room to maneuver? Use a map to figure out where the sidewalks are. Don't walk on exit ramps after dark with your back to traffic. Don't make a desperate, instinctive lunge for the bushes and call the choice of thorns or poison ivy 'scenarios'.

Prediction Markets and the Election

Four years ago, I grabbed some numbers off Intrade in the days leading up to the U.S. presidential election, ran some smoothing functions on them, and discovered a strong correlation with the vote in each of the fifty states (R-squared value of 0.77, and every state 'called' perfectly hours, even days before the actual voting).

This year several things were different, including no incumbent candidate, larger margin -- and expected margin -- of victory, new dimensions around polling and voting blocks that seemed hard to predict, tumultuous external events, etc.). Nonetheless, the state-by-state markets on Intrade coughed up predictions that were almost as good as 2004. Using my extremely unscientific sampling method, the state-by-state markets produced an R-squared value of 0.72 for data taken around Monday Noon).

In 2004, the markets were (as I recall) run as mirror images of one another. If you were going long on Bush, you were, by definition shorting Kerry, buying (at least in theory) from someone who'd lost confidence in or perhaps wanted to take profits and reduce losses in the Kerry contract at the market price (even if, perhaps, said trader still hadn't lost confidence in the candidate himself -- an entirely separate question we're not even going to approach).

This year, by contrast, Intrade ran separate markets for each state (plus DC) in: McCain (i.e., to win a particular state), Obama, and 'Other', or 153 markets in all. That's a lot on which to maintain liquidity, but on the swing states (e.g., Missouri, Indiana, North Carolina, Virginia, etc.) the markets appeared to be quite deep indeed.

Now, here''s the interesting part...

As the chart below depicts, the McCain and Obama markets as of Monday Noon (12:45PM EST, actually) -- roughly 18 hours before the polls opened -- were both trading at what ended up being an R-squared value of 0.72* (the square of the correlation coefficient, shaking out poor correlations from good ones) relative to the near-final results I took off CNN yesterday (Thursday). *Actually, they differed by two one-thousandths -- hardly significant.

As of Tuesday (Election Day) morning however, the correlation on the Obama market had dropped significantly (to 0.59). It dropped further through Noon on Tuesday then bottomed out. By contrast, the correlation of the McCain markets to the final results (again, state-by-state, not overall) maintained a relatively high correlation throughout the day.

Did Obama market participants lose interest? Were some of them trading on a non-rational basis for other (perhaps partisan, utilitarian or sentimental) reasons? I'm at a loss to explain the difference, since nothing of any note happened to the 'Other' markets (all except Wyoming). They traded -- if they trade at all -- with paper-think liquidity at values of $0.10 on a contract that paid $100.00. (The contract for a Wyoming third party victory was trading at $1.00)