Antifragility – Idea and Book review

Antifragile – by Nassim Nicholas Taleb

Thriving in uncertainty, blossoming in volatility, enjoying noise – that is being anti-fragile.
Taleb has written yet another peculiar book about randomness and nonlinearity. He invented a new word to describe the phenomenon that sometimes occurs – when there is a limited downside and a great upside to variation.
When there is a convex nonlinear effect – or a limit to losses – then the output will be better with more variability.

One (loathed) example is that of a corporate manager. The basic salary is good, whether the company makes money or loses money, but profit-sharing bonus can only be positive. If the company makes a small profit year-on-year, there is almost no bonus. However, a great profit one year followed by a loss-making year will give at least one year’s full bonus payment. Much better for the individual corporate manager. He/she benefits from variability and noise. The more, the better – at least on short term.

Taleb shows that the banking industry as a whole operates in a similar way. When there are “good years”, profits are distributed to the owners. When the banks collapse, the tax-payers take the bill. Therefore, the banking sector as a whole enjoys variability and encourages this chaos.

The problem is of course that these patterns destroy other areas in society.

Top picture – antifragile – variations have more upside than downside.

In my view, Taleb’s main contribution is to make the patterns visible and to give names to the phenomena. He builds a simplified nonlinear dynamic framework in which we can discuss these systemic patterns. We need to understand the structures to make good decisions in designing new and better systems.
Dynamic phenomena are difficult to understand, and this book is an important contribution. I also recommend “Limits to Growth” and “The 5th Discipline”.

Nassim Nicholas Taleb – good ideas and strong opinions

The two examples above are win-lose systems, but that is not necessary. We can design win-win structures that benefit from the natural disorder of things. We can challenge the established organizational patterns using the concept of anti-fragility and re-invent the way we work together.

One way of increasing robustness and aiming for anti-fragility is to ensure that all players in a structure have a personal stake – skin in the game. To quote Fat Tony, one of the colorful characters of the book, “Only get on a plane if the pilot is on the plane”.

Book review: The 100 Dollar Startup

The 100 Dollar Startup – Chris Gillebeau

This is an interesting book about micro-entrepreneurship, based on organic growth and patience instead of venture capital and IPOs. It describes the reality of a new group of entrepreneurs, many of whom started by surprise and coincidence. It is also about finding a sustainable size and not focussing blindly on growth.

Gillebeau writes with humour and self-depreciation, illustrating many points through examples of his own successes and failures. His account of joyful exhiliration from a 1.63$ sale is contagious. The significance of the first sale is repeated again and again in the book.

Many passages in the book are strong and authentic, with real-life examples and insights from breakthrough and adversity. However, some parts of the book feel more like recipes, where a certain method or tool is getting all the attention. The introduction to the book is peppered with adversity towards all forms of employment, which feels unbalanced. Maybe the American work situation is more hostile than my European experience? I have had a couple of good managers over the years and many warm and generous colleagues…

The book was a gift to my wife, who is now in a career switch, but I took the opportunity to read it and I like the message alot. The thinking is valuable both as an independent entrepreneur, but also for an “intrapreneur”, starting something new inside an existing organization: Start small, grow organically and always, always keep in mind what customer value you deliver.

It is similar in my job, where we started a product development department from scratch two years ago. Get started, try something and get feedback from (internal) customers and adapt. I will get a copy of the book for my team.

Book and Idea Review – Power of Habits, Charles Duhigg

There is something elusive with the word habit. We all know Bad Habits, but I have never heard of Good Habits. Only descriptions of virtue or discipline or willpower or character.
Aristotle is supposed to have said: “Quality is not an act, it is a habit.” (At least according to the Lean trainers I met this summer.)

Duhigg gives an entertaining overview of what we know about habits, scientifically and from experiences. He describes the neurological point of view as well as the social and legal aspects of our “auto-pilot”. He shares stories about people with neurological damages which gives surprising, insightful and sometimes tragic consequences in everyday life. Duhigg explores the bad habits of drinking and gambling, even though it is not clear to me that these are habits in the same sense of the word as a habit to have cereals with yoghurt instead of milk.

He points at the strength of habits to help us do good and looks at ways to create habits that lead us in the right direction. It is also really interesting to see that moral decision-making is a finite resource, and that most people have really bad judgement at the end of a stressful day. (Yet another reason for not having political negotiations to go on deep into the night.) If the auto-pilot is not tuned for good behaviour, we are bound for trouble.
Is this character?
Or the result of having character to practice the “right thing to do” into an automatic behaviour?

I look at my own behaviour and clearly see areas where I could do better, if I just had enough energy at the right moment. I would (if I could) snack less at the office and drink less coffee. And by looking at the neurological background for the reward system, I could develop more positive habits. It is in a sense exerting energy beforehand to build the good habit, and earn the reward later, when the auto-pilot helps me to grab a bottle of water instead of a Coke. Despite the neurophysiological explanations, the book does not really help me to get there.

An other interesting aspect of habits is the connection to personal responsibility and individual freedom. However, this is a weak part of the story, probably due to the very American context of the book, set in a litigous society and with ill-fitting cultural bias for “Freedom”.

The book did shed a sliver of light onto what Science knows about why we do what we do, which is one of life’s greatest mysteries.
The quest for understanding continues…

Drive – Book and Idea Review

http://coursecreators.com/wp-content/uploads/2010/01/Dan-Pink-Surprise1.jpg

Motivation – what do we really know about the drive to do things?
Why do I write this? Why do you read this blog?
Is it to please your boss/earn brownie points/get higher salary or out of fear?

I do not think so. I think curiosity and the joy of exploring the slightly unknown are far superior explanations for why we do most of what we do. In his book “Drive”, Dan Pink explores what we know about work-related motivation, and how far away most company/school reward systems are from the reality of today. In his own words “There is a mismatch between what Science knows and what Business does”.

Since the TED presentation a couple of years ago, I wanted to read more from Pink, and now I finally got the book to dig deeper into the sea of positive forces that is just waiting to be explored. Most of the elements I recognize from my own experiences, but it helps to use the words to describe these semi-subconscious forces.

I have always felt oddly de-motivated when being sent on a training course, for instance, but eagerly energized whenever I get to choose myself. In the same way, great satisfaction has come from strenous efforts of learning Chinese, trying to master a new magic illusion or plowing away in electromagnetic field theory. I also feel energized and alive when working on wind-turbine technology and establishing the first sprouts of a permaculture food forest in our suburbian backyard. Pink distils these three Dimensions of Drive into: Autonomy, Mastery and Purpose.

In the past two years, I have been trying to establish an environment of trust and autonomy in my department. I strive to challenge-and-grow the engineers, to encourage their pursuit of mastery. However, the purpose is maybe slightly muddled in a corporate setting. We have China-for-China nationalism mixed with a technical support need and profitability concerns. I say that we focus on Railway and Wind, but in reality we work just as much on Diesel engines and steel mills.

There is a lot of convincing evidence that these factors drive us to perform better, but I have the feeling that the social aspects of work are equally important. Maybe this is stronger in Europe and in China than in Pink’s American setting? I guess that the culture of individualism reduces the value of the group. My hypothesis is that the group value of inclusion will come back, as I believe it is a fundamental part of being human. We are social animals and the energy that comes out of belonging to a clan or a team is magnificent. I wonder if there has been any research on this drive? (If you could point out some reference in this direction, please leave a message!)

What is very clear is that my own manager allows me to thrive with a great deal of independence, challenging tasks that stretch my capabilities and I sincerely feel that we are building something really important. I have autonomy, (building) mastery and purpose. I am a lucky man.

Cash from Bricks

How to turn clay into cash – an introduction to monetization.
 – or why there are forests of empty apartment blocks around every city in China…

One fantastic part of the China Story today is the way the liquidity was created. According to the legend, Deng Xiaoping sent out a group of economy whiz kids on a Journey to the West to figure out where all the cash was coming from. They returned with the surprising observation that alot of it came from houses. On average, houses and other real estate in the West had a hypothecary loan to half of the property value. This is considered a low-risk loan, so the interest rate is low, close to zero, when compensating for inflation. This money was available to the house owners as “free cash” to buy cars and televison sets. Remember, this was in the end of the eighties.

Unfortunately, there were two obstacles from duplicating this in the China setting:
1. All property was owned by the state, who would not have any benefit from the liquidity.
2. The valuation of the houses was very, very low.

Therefore, the China government set out on a plan to eliminate these obstacles, and introduced a right-of-use ownership-light for real estate in the city areas. Formally, the right-of-use is temporary for 70 years, but most observers think that it will be extended into real ownership. But anyway, who knows what the world will look like in 2060?

The next move was to increase the valuation of the houses. This was done in a way that is not well reflected in the press coverage in the West, by eviction compensation. Whenever a motorway was built, or a Hutong was razed to give space for a shopping mall, the previous residents were paid a generous compensation. The logic was that the government only needs to pay one house-owner a good compensation, and then automatically all the houses in the neigbourhood would be worth the same or more. A driver of a friend in Beijing cashed out a million RMB for a shed, and used the money to move up the value chain and started a transportation company.

It has worked wonders. Real estate prices have soared with 15-20% increase year after year for decades, and a deluge of cash has resulted in a flood of iPhones and Audi cars.

Unfortunately, it has now gone too far, as clever entrepreneurs have found ways to abuse the system. What we see now is that you can build a house for a million, and get it “valued” to 10 millions. Then you take a 5 million RMB hypotecary credit with low interest rate, as the amount is only 50% of the house value. For the money, you can pay back your first inserted million, and you have four millions for consumption. Or for repeating the trick and building four more houses. Cash is generated, even if nobody lives there! Around every Chinese city, there are thousands and thousands of houses standing empty, in some areas whole cities without inhabitants. It has been a terrific boom for everybody selling bricks, glass, construction machines and door handles.

Two cornerstones of the scam are the shortsighted valuation process and the lack of transparency at the banks. Both these processes are completely opaque and there is really nobody who has a short term interest in slowing down the dance. This year it is slowing down a bit, as the government is trying to reduce the craze, without killing consumption. Good luck!
– afterthought –
I think that this scheme leads to a huge waste for the society, especially since many of the houses are poorly built and will have to be torn down, maybe even before somebody has ever lived there. On the other hand, ten million people move in every year from the countryside to the cities, and as most of the statistics are secret, it is hard to predict how long time it will take to fill up the houses with migrant workers.

True North – Book and idea review

Authentic Leadership is the thing. The last few years have seen an explosion in publications claiming the virtues of Authentic Leadership, especially since the publication of True North by Bill George in 2007. I just read this book and it got me to think quite a lot about this.

It is a very well-written book that reads smoothly and gives a very positive picture about honest and hard working Americans who lead their companies to a better future by being open and fair. However, there are a few things in in the background that dissonate.

First of all, authentic leadership is not really a description of a certain leadership style or any observable facts, but it a moralistic value judgement of the person in question. It is also implicitly assumed that it is automatically better for the company to have an authentic leader. Both these concepts are not obvious.

True North is based on interviews with a hundred successful people who are regarded as “authentic”. We get to hear the leaders’ own stories and explanations for their success. The book is written as stories around different topics, with examples from the lives of the people interviewed, with their names included.

Therefore, every leader shares a story he/she wants us to hear, a story where he/she is the hero. We accept and acclaim that the heroes of our time get the power and perks associated with top-positions in the corporate world and the state administration. Therefore, almost all of the leaders interviewed claim that they have fairly struggled against improbable odds and made innumerable sacrifices to get where they are.
The stories all sound like the script of a classic Hollywood movie:
1. Show the hero in a sympathetic scene, e.g. playing football with his son.
2. Show the hero in a difficult situation, e.g. kidnap the son and put the police force to hunt the hero.
3. Let the hero kill all the villains, rescue the son and celebrate with the President. He is now worth a big house and a big car and the most beautiful lady.
All stories follow the same pattern.

True North is written as a handbook, how to “discover” your own authentic leadership, and how to communicate it. There is even a chapter in this book on how to frame your “life story” to fit the hero-pattern. Maybe it works for the people who work for you, if they think of you as a hero, but I am not convinced.

Therefore, I regard this book a collection of inspiring stories, not at all as a guideline for operation. There is a big contrast to e.g. “Good to Great” by Jim Collins, where objective criteria are defined first, and the examples come out. In addition, in “Good to Great”, most of the descriptions of the leaders are done by observers, not by the subjects themselves. I never trust someone who tells me that they have been winning everything against all odds.

Book: Permaculture according to Sepp Holtzer

Permaculture is a way of farming or gardening, where diversity is the driver to improve the soils and create sustainable symbioses, where pesticides and synthetic fertilizers are unnecessary. In many ways it is a step back to the pre-industrialized agriculture that dominated worldwide until the introduction of the tractor.

Sepp Holtzer is a remarkable farmer in Landau, Austria, who has created a lush fruit & vegetable farm in a most untypical environment, at 1000m altitude. In this book he describes his way of working, observing and experimenting with every element of the habitat – ponds, stones, mushrooms, plants and various livestock species. He describes using raised beds for creating suitable micro-climates for vegetable production and how to utilize pigs and earthworms to aeriate and enrich the soil.

In many ways he has simplifed the work in the vegetable garden, by utilizing natural processes. No digging to prepare the land, but a layer of mulch or hay. Many of the plants he uses are perennial, which means that the plant will grow on next year without any human intervention.

Holzer shares his experiences with such a positive energy, that I get all inspired to plant sunflowers and beans, and to get non-hybrid seeds. He also shares his experiences with failed experiments, which is a consolation already for the inevitable failures and misses.

Holtzer describes it as if it is easy.

I think that the most important difference with his neighbour’s monoculture of spruce is that Holtzer is farming with knowledge. It requires much more knowledge and observation to work with a hundred different plants, compared with working only with one tree type.

Knowledge and understanding of Nature is the way of the future.

The Omnivores Dilemma – Book and Idea Review

Another excellent book by food-loving health-garden-journalist Michael Pollan.

“What shall we have for dinner tonight?” is the key question that is asked in this book, and partially answered. At least we know more where the dinner alternatives come from, and can make better informed choices about what we put on the plate.

Pollan writes in a very personal style about his explorations of the American food industry and how the produce is produced; grain-fed beef, organic lettuce, permaculture and corn, corn, corn… It seems like whole US is a giant standing in a quicksand of corn grains.

One of the most intriguing parts of the book describe a “permaculture” farm, where grass is the main species – on which cows, chicken and sheep graze to produce manure for the grass and plenty of meat for us. By rotating crops and cattle in a dance over the lands, the soil gets richer from the use, not poorer. It is a very compelling idea, quite different from the vast monocultures of highly specialized mechanization, like wheat fields stretching to the horizon. The goal of permaculture is to enrich the soil, not extract the nutrients as if the field is a flat surface mine.

I recognize that the Chinese family farm was very similar to what now is called a “permaculture design”, with fruit trees prividing shadow and water retention and a host of species growing and roaming below. And it has proved sustainable, at least for five thousand years.

I got very inspired to grow some more vegetables and fruit myself, even considering an animal extension of the family, albeit an edible one. We will see how much of the inspiration lasts after reading more about the permaculture alternatives and compressing the dreams into the limited timeslots of a challenging work-home-life-balance equilibrium.

The Long Tail – book and idea review

Cover of the Dutch version of the book

I just finished reading Chris Anderson’s classic “The Long Tail” from 2006. (also blogged at http://www.thelongtail.com).

The main idea is that different people actually like different things. Not so controversial, perhaps, but the clue is that internet helps buyers to find producers in a better way. Interest (and money) will move away from the Top Ten Blockbusters and away in all different directions.

I recognize this clearly from my experiences in the Magic arts community. In the end of the nineties, I was part of the Gothenburg magic scene as an upcoming young part-time magician. I was devouring all books, VHS tapes and bundles about new magic tricks. But they were really hard to find.
Once a year, on the congress in Lund, the Dealers showed up with meters of books from mainly American magicians. Once a year, I had the opportunity to browse through the material and select a handful of quite expensive works. Unfortunately, most of the books dealt with aspects of magic that were not very interesting to me.
Most of the books on Magic, I had never seen. Until I came to Dresden in 1997 for the FISM World Congress on Magic. I was overwhelmed by the width and depth of the genre.

Tommy Wonder's classic. Now available at Amazon.com.

Now there are online catalogs and an unparalleled availability which will help passionate wannabe customers to find what they look for, even at Amazon.com. (And not just buy the book that happened to be available.) The niche is thriving!

I think that the Magic community is similar to other kinds of subcultures. I am convinced that there are harmonica players, pole dancers and macramé knitters who now get connected to hitherto unknown suppliers and can purchase/license what they need at much less effort than previously.

The book has a funny side in a sense that I did not expect, and that is the short half-time of the Internet examples. It was written only five years ago, but that was before Bit-Torrent, PirateBay and Facebook hit hard, and Bing was not launched. Google Maps was really new and yet to become as useful as it is today. Therefore, the book seems oddly outdated, even though it tells of a revolution still in unfolding.

Recommendation – read it right away!