Posts Tagged ‘Taleb’

Taleb, Kahneman, and…Rajakovich?

April 4, 2013

Ok, so the headline might be a bit deceptive. I was not actually, physically present

Nassim Nicholas Taleb

when these two scholars met. But if we take the meta-universe as our context, then I could…oh, I’ll just move along.

Check out this discussion between Daniel Kahneman and Nassim Nicholas Taleb. Trying to summarize an 80-minute discussion would make me an even larger fool of randomness than I was before, so I’ll just subject you to some of it instead! Cha-ching.

A key point of the discussion centered around the following theme: Size means fragility. In percentage terms, the larger the project, the greater the overruns; the larger the organization, the more susceptible they are to risk of bankruptcy; generally, the greater the degree of centralization, the more susceptible we are to extreme negative outcomes.

Most people will understand this point at some level. Taleb used the example of government, the economy, and large banks. I’ll use the example of decision-making in just about any context. Where one person or a small group of people make decisions from on high without a very good knowledge of the details of a situation, they may make small gains in terms of continuity. They may also cause large problems.

The effect is even worse when the person or group is focused on things that will have little impact, instead of those that will have a large one.

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Procurement governance – not as painful as it sounds

February 28, 2013
HONDA CB750. 1969-2003. 750cc FOUR CYLINDER.

HONDA CB750. 1969-2003. 750cc FOUR CYLINDER. (Photo credit: ronsaunders47)

 

I have been thinking lately – yes, yes, the fire department has been notified – about procurement governance. It then follows that neither you nor I will have trouble sleeping tonight.

 

Since I won’t be writing a textbook on the subject, I’ll just pick two items that I think should be considered that, in many cases, are not.

 

  • The Decision-making process – Often, the process for making-decisions is an afterthought. The person or small group that makes decisions assumes that he/she/they accurately represent what is A). Right or B). The will of the group around them. However, ask Loewenstein, Surowiecki, Taleb, or J.S. Armstrong how that generally works out. Two words “Sub” + “Optimal”. Say them together now. Good.
  • Emergent Strategy – I love creating and building systems. It feels like we are being scientific, even though business can only uneasily borrow concepts from our more systematic brothers and sisters.  It feels like we can build a system that, if everyone just performs their role, will work brilliantly. And again, we’ll be….well, right! The problem is that reality has no particular interest in our feelings, and that some of the best strategies emerge from the ground up. Soichiro Honda, can you hear me? Giving people the skills and knowledge to think creatively, and then empowering them to take advantage of opportunities should be part of our approach to governance. My own tendency is to go all out on the rational planning thing, but knowledge and experience tells a different tale.

 

Go forth and do great things.

 

 

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