I am currently crunching through Steve Litt’s brilliant series of books on Troubleshooting. I am hugely into general problem solving frameworks and his Universal Troubleshooting Process (UTP) is one of my favourites.

Today, whilst clearing my backlog on Instapaper I came across this Wired.com piece on legendary design firm IDEO. They use a simply process called “Design Thinking” that they claim is at the heart of their stunning successes:

Practically speaking, the approach isn’t complicated. In stages, it goes like this: firstly, immersion, whereby the designers research the problem by plunging themselves into it – talking to the people they’re trying to help, working with them, interviewing experts. Secondly, synthesis – whereby they gather together their findings and look for patterns. Third, ideation – brainstorming solutions to the real problems identified by stage two. Then comes prototyping, making mock-ups of solutions to try out against the problem. After that comes the product. Only at the end, at the prototyping stage, are judgements made; until then, all ideas are given equal weight.

This methodology is radical in that it differs from traditional approaches to business strategy in two key ways. Whereas in many companies the concept for a new product may have already been based on, say, an idea from the marketing department with a designer later brought in to make it look pretty, design thinking places the designer at the heart of the innovation process. Secondly, the methodology gives a firm framework within which a wider team can work. It takes the cliché of the lone creative mind being struck with genius, and replaces it with a process that a whole team can follow. Creativity, therefore, isn’t a thing that magically appears, but a process you work through.

From: Reinventing British manners the Post-It way – Wired.co.uk

I can see similarities to Ken Watanabe’s simplified problem solving methodology as presented in his best-selling children’s “Problem Solving 101“

1. Understand the current situation current (Immersion)
2. Identify root cause (Sythesis)
3. Develop an effective action plan (Ideation)
4. Execute until solved, making modifications as necessary (Prototyping)

From: http://www.problemsolvingtoolbox.com/

You can also see similarities between IDEO’s framework and Dan Roam’s framework for proble  solving through visual thinking as outlined in “The Back of the Napkin: Solving Problems and Selling Ideas with Pictures“. In the book Roam explores a four stage process for solving any problem with visual thinking:

1. Look (Immerse/ Understand)
2. See (sythesis / Identify patters / root cause)
3. Imagine (Ideation / Plan)
4. Show (Prototype / Execute)

How do these map to the Universal Troubleshooting Process (UTP)?

The UTP shares the core troubleshooting steps with the other three (3, 4,6,7 and 8), but it has some seemingly anachronous and superfluous steps (1,2,5,9 and 10). I say “seemingly” because experience has taught me that the Universal Troubleshooting Process steps are all necessary and in the right order.

It is aimed more at professional, routine troubleshooters and as such addresses the important psychological factors and habits that contribute to long-term effectiveness.

I cannot do this process justice in a few lines, but here is summary:

1. Prepare - This is about having the right attitude and mindset for troubleshooting as well as the required tools, skills and information. For professional troubleshooters (like Technical Support agents) attitude is one of the most important elements in their professional quality and success.
2. Make damage control plan – This is iatrogenic prevention i.e. do not make things worse. If forces you to think of consequences before trying pot luck fixes.
3. Get a complete and accurate symptom description - Here the UTP shares a step with the first principle of the other three (i.e. Look / Immerse/ Understand). In the UTP thi9s is usually achieved by creating a simple block diagram off the problem system so as to understand elements and relationships.
4. Reproduce the symptom - This is part of fully understanding and verifying the current situation. You verify the symptoms and measure them.
5. Do the appropriate corrective maintenance - This step is again targeted at professional troubleshooters. So many problems are caused by bad maintenance and fixed by routine maintenance, that often it is worth running the standard best practice maintenance procedures over the system and seeing of that fixes the issue.
6. Narrow it down to the root cause - This is the core step. Often it is a process in itself as you look from problem patterns, isolate elements of the system and systematically disqualify them as candidates for root cause. Eventually you generate a most likely root cause hypothesis and proceed to step 7.
7. Repair or replace the defective component - Here you generate a plan to test the hypothesis by fixing, replacing or implementing a work-around for the root cause.
8. Test - You now apply your fix and test to ensure the problem is indeed solved. 
9. Take pride in your solution – This is another psychologically important steps to help prevent burn-out and boost morale.
10. Prevent future occurrence of this problem – This is simple operational best practice. You learn from your problems, document your solutions and new knowledge, you modify systems and procedures to ensure the problem does not reoccur, or you can respond quickly and effectively.

This universal troubleshooting procedure has been a vital tool for my team and I in beating some extremely tough problems, sometimes involving desperate customers begging us to fix badly broken massively complex undocumented systems and us successfully finding and fixing the root cause problems in 24 hours where the system designers could not succeed for months.

I also heartily recommend the Dan Roam and Ken Watanabe books referred to above. They are both brilliant and accessible.

These are some selections and notes from a brilliant essay by Dr Chester W Richards about OODA loops and the general application of military know how to business. From “What you really do with OODA loops” :

The key to the military notion of time lies in how practitioners of the art of war view strategy. Great commanders down through the years have used time-based strategy to cloud their opponents’ understanding and destroy their morale so that the battle, if it must be fought at all, is relatively quick and painless. In the language of conflict, we say that they move their opponents where they want them to be. Leaders in business and industry can do the same thing and with similar results. This paper explores this notion, first by looking at what today’s most avant-garde business theorists claim for the concept of time, and then comparing that to what the most successful generals and strategists aim to achieve. Finally, we will the translate the military goals and objectives back into the commercial world and look for examples where it actually worked.

…Building one new business after another, faster than the competition, is the only way to stay ahead.

…a real strategist doesn’t like words like “respond” and is dubious about “anticipate.” These are passive sorts of things…

Now it is true that fast reactions have their place – if your opponent catches you by surprise, for example. Competence in this tactic, such things as staying cool, using the other side’s momentum against them, and so on, form an essential part of any competitor’s tool kit. Problems arise when, as in the above paradigm, reaction becomes the goal of strategy. First, under such an arrangement, if we don’t see anything, we don’t do anything. So much for initiative.

If your mindset is to observe carefully and then respond, you will always incur a lag, and the focus of your efforts will be on finding ways to shrink it. But suppose there was a way to compete that didn’t generate a lag in the first place.

…Sun Tzu also took aim at Maginot Line strategies: “Preparedness everywhere means lack everywhere.”

…”It is generally advisable to be the one to initiate the attack and thereby put the opponent in the defensive position.” (63) Also: “In the path to victory in Heiho (his school) taking the initiative at all costs is the most important thing.”

…What if opponents act first? Let’s not be arrogant – your opponents are thinking human beings and can also employ the basic strategic tools of surprise, deception, and ambiguity. Then, advised Musashi, you have to stifle their plans immediately. The focus, however, is never on defending, but on regaining and using the initiative so that you can lead your opponents where you want them to be.

…Sun Tzu had proclaimed that the ability to think and act rapidly is the essence of war…Sun Tzu and his commentators also talked about sowing confusion by not giving opponents time to plan…In particular, one could manipulate time and rhythm to unhinge an opponent’s mental and moral composure: You use “an advantageous rhythm to arrest the powerful determination of the adversary’s motivation.”

This was, he insisted, an essential step before engaging in physical combat. It is a stunningly powerful observation, for demotivated opponents are defeated opponents, no matter what weapons remain in their hands. Warriors using Musashi’s techniques could create gaps, which the Japanese call “suki,” in their opponent’s attention, during which one could attack a fully armed samurai with a fencepost (as Musashi once did) and win. (Nihon 31)

In modern times, a corollary notion has been synthesized by the American strategist, the late Air Force Col. John R. Boyd. Like Musashi, Boyd got his initial ideas from one-on-one combat, in his case, jets over Korea. After pondering this experience, and studying the results of engagements from Sun Tzu to the present, Boyd derived the OODA loop, for Observe, Orient, Decide and Act. It has been described for business by Bower and Hout, Stalk and Hout, and Peters. Note 6 The ability to execute rapid OODA loops is called “agility,” and it now generally recognized that the more agile organization will build-up increasingly decisive advantages over its opponents.

It is worth repeating that this is not a theoretical construct, but a proven strategy for winning in armed conflict. It provides a framework much more powerful than merely reacting to opponents, but one might reasonably ask whether it applies to anybody but a soldier? More to the point, businesses don’t directly combat each other. Instead, they compete for the attention, and money, of customers. Can businesses employ OODA loops and the other tools of time-based competition to achieve anything like the effects of Sun Tzu, Musashi, and Boyd, and if so, how is this going to help them survive and grow?

Warfighters, as we have seen, use mind-and-morale destroying techniques to create and exploit opportunities for collapsing the enemy. In business, things are fundamentally different. War has opponents; business does have its analog of opponents – competitors – but they are of secondary importance next to a new god-like entity, the customer.

…What about the mind-destroying effects described by Sun Tzu, Musashi and Boyd? There is little in the business press on this question, probably because writers have been focusing on the remarkable, if passive, attributes noted in Section II. But anecdotes and circumstantial evidence abound to support what military strategists and practitioners have found. Anybody who has ever been on a losing team, or worked for a failing organization, knows Boyd is right. Here is a classic description from one of the founders of the modern quality movement, Joseph Juran:

Lacking victories over their competitors, and unable to defend themselves from their bosses, they lash out at each other, making unity of purpose even harder to achieve. (74)

Or this, from the former chairman of General Electric, Jack Welch:

This internal focus has wasted our time, wasted our energy, frustrated us, made us so mad some nights over some bureaucratic jackass boss that we’d punch a hole in the wall. (Sherman 46)

An organization falling victim to the Boyd Treatment will enter a tightening spiral of internal conflict. As it falls further behind in the marketplace, and its successful moves (as determined, of course, by the customer) become rarer and rarer, all the wonderful chaos and bickering beloved of military strategists follows. Interviews with members of such organizations will reveal witch hunts, strict adherence to directives and procedures (with a total lack of risk-taking), and so on. Inevitably, people split into camps and start apportioning blame, and the company turns ever more deeply inward (Welch’s “internal focus”, Boyd calls it “folding your adversary in on himself”). Usually, Stalk and Hout observe, traditional managers never understand what hit them. When attacked by a time-based competitor, cost-based managers rarely figure out why, despite what their spreadsheets are telling them, they are suddenly losing market share and why more robust cost-cutting isn’t restoring profitability.(264)

The key point is that for business, these effects are icing on the cake. They do not, in and of themselves, produce products that customers will buy. The primary active effect of time-based strategy in business is the symbiotic shaping of the marketplace that agile companies participate in.

“The company that can identify what technologies are needed, introduce them quickly, and commercialize them will succeed.” – Hiroshi Okuda, President, Toyota Motor Corporation (Business Week, June 15, 1998)

…Ask any CEO, “Is your business philosophy reactive?” It’s like asking if his marketing plan is to wait by the phone. Even the French of 1940, that wonderful source of what-to-avoid examples, liked to brag about how their élan would sweep away the Teutonic invaders. Of course, as they were soon to learn, talking a good fight was not the same thing as actually doing it. And so it is with the world of business. Policies are one thing, but companies that have the power to shape the market are structurally, as well as philosophically, different.

…Structure is so intimately bound up with strategy that it is difficult to imagine how one could make any lasting change in an organization’s behavior without first making equally profound changes in its systems.

…

meeting the needs of the customer should provide focus and direction to all activities of the company. Note 8 It is in this key area where we find perhaps the most visible differences between companies that claim to be proactive, and those that actually are. Reactive companies want to detect market opportunities. They engage in traditional market research, things like questionnaires, focus groups, and the like. Basic to their attitude is the idea that the customer is “out there” and we are “in here.” To bridge this gap, they will put a lot of effort into going out to Customer Land and “finding out what they want.”

One problem with this approach, of course, is that the customer often doesn’t know…the big question now is “What next?”  I don’t know – offer me something.

…whereas we all claim to put the customer first, the very structure of most companies limits how intimately involved with the customer they can become. One obvious example is a Marketing Department that jealously controls customer contact. Or a policy of basing sales and project people in a home office rather than with their customers. Or an accounting system that sees customer service as a cost, that is, an attractive candidate for cutbacks when times get tough.

…Most of today’s management systems and practices preclude the intensity of customer involvement that companies will need in order to survive.

…companies with rapid decision cycles are often good innovators. Partly this is because most innovations are actually incremental improvements on an original idea, what Hamel and Prahalad call “expeditionary marketing.” (“Imagination” 86-92) The more rapidly that a company can sense how the customer reacted to its last offering and make changes accordingly, the better job of innovation it will do.

…Companies take the initiative in the marketplace by offering a stream of new products and services. Where do new products and services come from? The only answer possible, discounting elves and gamma rays, is through the initiative of the people who work for and with the organization. A market creator uses the almost symbiotic relationship all of its people have with its customers to generate ideas for new features or capabilities or whatever. Stalk and Hout were dead on, when in the middle of describing how agile companies become entwined with their customers, they observed that “Sometimes it’s difficult to know who’s leading whom.”…Incidentally, this is the same principle underlying maneuver warfare, where an army puts out tens or hundreds of small “feelers,” then uses its fast OODA loop speed to identify and reinforce those that begin to penetrate.

…”lean production,” which is based on these same principles (and can therefore be considered as an implementation of the principles of maneuver warfare), has displaced mass production, which relies on synchronization and control, in every marketplace where the two compete.

Toyota, whose system is generally considered the foundation of lean production, expects initiative at all levels and in all processes…”The paperwork is minimal,” reads the official Toyota description of the system, “the efficiency is maximal.  And the employees themselves are completely in charge.”

…Far too many companies demonstrate the fatal flaw noted by Sybase co-founder Robert Epstein: An established company’s true major goal is to defend what it did last year….These are business versions of the Maginot Line.

The Maginot Line mentality is deadly and yet it is so appealing that it may not be recognized until it has sapped the company’s competitive strengths.

But while it is certainly true that at any given point in time a company has to do the best with what it has, this is the definition of “tactics,” not strategy.  Basing a company’s future on any particular resource is a business version of a stance, and so a false and fatal strategy.

Perhaps the most obvious objection to a core competencies strategy is that the market might not happen to be buying what you’re good at.

…It is worth keeping in mind that Wal-Mart is a market shaper and creator, not merely a market responder, and thus agility – rather than the specific products of it – is its “core competence.”

a belief that you have any type of unique capability is the siren song of complacency. In fact, a belief that you have some kind of difficult-to-emulate ability to know the customer is simply arrogance, which is even a faster-acting poison than mere complacency, and this tends to be true of all high-level business (as opposed to technical or physical) functions. You must assume that your competitors are just as good at the business basics as you are, and you would be better served to assume they are already ahead.

Former Intel CEO Andy Grove was right: Only the paranoid do survive. It is so tempting to believe that “we have these facilities” or “we have these great capabilities”, and therefore we are safe.  You are never safe, and the first hint of a belief that you are safe marks the start of your decline. Only a management that can constantly challenge comforting beliefs, even if they are unstated, will lead its company to survive and grow year after year.  Remember when Enron used to proclaim itself “The World’s Best Company”?

…

According to the ancient warriors of the Sun Tzu school, the real situation is even worse than complacency-invites-decline.  That, at least, is well within our own tradition.  Musashi proclaimed that any manifestation of the stance mentality, even if assumed with vigilance and paranoia, will always generate a defensive spirit and so will open vulnerabilities. One might do better to emulate the Zen warriors who knew that the only resource that will ensure victory is resourcefulness itself. (Cleary, Japanese Art of War, 77)

So the bottom line is yes, you can prosper by restructuring your operations to become a fast reactor to market trends. You may have to prune things some, which it’s probably time for anyway, but you won’t need to do great violence to your underlying systems and culture. And everything will probably work out OK, unless, of course, you meet up with a competitor who is determined to shape the market and who is structurally able to do so. Then 2,500 years of experience say that you are going to have a problem. And word is getting out. “Boldness,” writes Fortune‘s Rahul Jacob, “may very well be the preeminent competitive advantage in this slow growth decade.” (74) After all, whom would you bet on, a fast sheep or a fast tiger?

[Originally published at Limbicnutrition.com]

Alex Moskalyuk has distilled the entirely of the book “Yes!: 50 Scientifically Proven Ways to Be Persuasive” by Cialdini et al into a single blog post.

It really does get in the best of them, including tips I recognise from recent the persuasion best-seller “Nudge” by  Richard Thaler and Cass Sunstein.

Read on for this superb list:  Yes! 50 Scientifically Proven Ways to Be Persuasive « alex.moskalyuk

Originally posted to LimbicNutrition.

This little book is getting rave reviews, most notably from “Back of the Napkin” author Dan Roam who writes:

“A truly wonderful book has just hit the stands: Ken Watanabe’s Problem Solving 101. If you like The Back of the Napkin’s approach to looking at the world, you owe it to yourself to get this book.”

Problem Solving 101 – Official site

“Problem Solving 101″ by Ken Watanabe – Amazon.com

A new working paper from the Harvard Business School debunks the long-standing myth that setting goals promotes improved performance and employee motivation.

From the summary:

For decades, goal setting has been promoted as a halcyon pill for improving employee motivation and performance in organizations. Advocates of goal setting argue that for goals to be successful, they should be specific and challenging, and countless studies find that specific, challenging goals motivate performance far better than “do your best” exhortations. The authors of this article, however, argue that it is often these same characteristics of goals that cause them to “go wild.” Key concepts include:

• The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.
• Goal setting harms organizations in systematic and predictable ways.
• The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.
• In many situations, the damaging effects of goal setting outweigh its benefits.
• Managers should ask specific questions to ascertain whether the harmful effects of goal setting outweigh the potential benefits.

Read on here: http://hbswk.hbs.edu/item/6114.html

Do not be carried along by cowardly conventions and self-interested arse covering. The best operations teams consist of highly motivated free thinkers who are not afraid to admit to mistakes so they can be fixed systemically before they add up to anything serious.

[Update1: This was my submission to Executive Rockstar's Best Career Advice competition ]

[Update2: This book look promising "Know What You Don't Know: How Great Companies Fix Problems Before They Happen" By: Michael A. Roberto]

[Update3: Why Systems Fail and Problems Sprout Anew]

The best career advice that I ever received was from Steve O’Donnell, currently SVP IT Infrastructure & Operations at First Data International, celebrity blogger and former Global Head of Data Centre & Customer Experience Management at BT (where we worked together):

One day he said:

“Jonathan, I will never fire you for an honest mistake but if you lie to me, ever, you will be out the door in a minute. There is no mistake that you can make that I cannot figure out how to fix IF you tell me about it immediately. Be honest with me and you are safe, lie to me and you are gone.”

This is a golden rule in effective technical operations. It creates a culture of honesty and safety – not being afraid of reporting errors or lapses – that leads to true Kaizan:  genuine self-correction and organisational self-improvement because you are able to deal with errors systematically (i.e. by tweaking systems) and without the damage of the blame game and deferred responsibility.

His advice is particularly important in environments where errors are rare but extremely serious when they do occur – like executive boardrooms or aircraft maintenance hangers or hospitals.  The behaviour or practice of telling the truth about minor errors is central to the precursor-based error detection system (i.e. spotting the warning signs early)  which is in turn at the center of truly effective operations management (and every other system).

Kevin Kelly explains the issue in a  brilliant post about “Looking for Ugly“:

How do you prevent major errors in a system built to successfully keep major errors to a minimum?  You look for the ugly.

The safety of aircraft is so essential it is regulated in hopes that regulation can decrease errors. Error prevention enforced by legal penalties presents a problem, though: severe penalties discourages disclosure of problems early enough to be remedied.  To counter that human tendency, the US FAA has generally allowed airlines to admit errors they find without punishing them. These smaller infractions are the “ugly.” By themselves they aren’t significant, but they can compound with other small “uglies.” Often times they are so minimal — perhaps a worn valve, or discolored pipe — that one can hardly call them errors. They are just precursors to something breaking down the road.  Other times they are things that break without causing harm.

The general agreement in the industry is that a policy of unpunished infractions encourages quicker repairs and reduces the chances of major failures. Of course not punishing companies for safety violations rubs some people the wrong way. A recent Times article reports on the Congressional investigation into whether this policy of unpunished disclosure should continue, which issued the quote above. The Times says:

“We live in an era right now where we’re blessed with extremely safe systems,” said one panel member, William McCabe, a veteran of business aviation companies. “You can’t use forensics,” he said, because there are not enough accidents to analyze.

“You’re looking for ugly,” Mr. McCabe said. “You ask your people to look for ugly.” A successful safety system, he said, “acknowledges, recognizes and rewards people for coming forward and saying, ‘That might be one of your precursors.’ “

Looking for ugly is a great way to describe a precursor-based error detection system. You are not really searching for failure as much as signs failure will begin. These are less like errors and more like deviations. Offcenter in an unhealthy way.  For some very large systems — like airplanes, human health, ecosystems — detection of deviations is more art than science, more a matter of beauty or the lack of it.

Come to think of it, looking for ugly is how we assess our own health. I suspect looking for ugly is how we will be assessing complex systems like robots, AIs and virtual realities.

So, in short:  Create a professional environment that enables and encourages your team to detect, report and deal with the “ugly”.

[Update: I mailed Steve my submission and I was delighted to see he blogged about it on his Hot Aisle blog]

The faculty at Executive Rockstar have a great video introduction to Issue Decomposition, one of the most useful tools in the consultant’s toolkit.

Issue Decomposition is essentially a modified and structured Socratic interrogation (iterative interrogative loop)  that has its modern origins in Cold War strategic thinking and its resultant field of Game Theory.

It was developed to help with high stakes multilateral negotiations, like Nuclear Arms Reduction, by clarifying the core issues and elements of any problem or situation.

It has evolved into one of the best but least known about decision support systems.

It is both very simple and powerful tool that can liberate those bedevilled by a lack of clarity or confusion.

Check out Phil’s introduction over at the Executive Rockstar Secrets Blog:

Executive Rockstar Issue Decomposition Crystal Clear Thinking | Secrets Of Executive Rockstars

John Boyd was a USAF colonel, legendary military strategist and thinker.

He is perhaps best known for his OODA Loop (for Observation, Orientation, Decision, Action), a concept worth knowing about. Here is Wikipedia on the OODA Loop:

Boyd’s key concept was that of the decision cycle or OODA Loop, the process by which an entity (either an individual or an organization) reacts to an event. According to this idea, the key to victory is to be able to create situations wherein one can make appropriate decisions more quickly than one’s opponent.

Boyd hypothesized that all intelligent organisms and organizations undergo a continuous cycle of interaction with their environment. Boyd breaks this cycle down to four interrelated and overlapping processes through which one cycles continuously:

• Observation: the collection of data by means of the senses
• Orientation: the analysis and synthesis of data to form one’s current mental perspective
• Decision: the determination of a course of action based on one’s current mental perspective
• Action: the physical playing-out of decisions

This decision cycle is thus also known as the OODA loop. Boyd emphasized that this decision cycle is the central mechanism enabling adaptation (apart from natural selection) and is therefore critical to survival.

Boyd theorized that large organizations such as corporations, governments, or militaries possessed a hierarchy of OODA loops at tactical, grand-tactical (operational art), and strategic levels. In addition, he stated that most effective organizations have a highly decentralized chain of command that utilizes objective-driven orders, or directive control, rather than method-driven orders in order to harness the mental capacity and creative abilities of individual commanders at each level. In 2003, this power to the edge concept took the form of a DOD publication “Power to the Edge: Command…Control…in the Information Age” by Dr. David S. Alberts and Richard E. Hayes. Boyd argued that such a structure creates a flexible “organic whole” that is quicker to adapt to rapidly changing situations. He noted, however, that any such highly decentralized organization would necessitate a high degree of mutual trust and a common outlook that came from prior shared experiences. Headquarters needs to know that the troops are perfectly capable of forming a good plan for taking a specific objective, and the troops need to know that Headquarters does not direct them to achieve certain objectives without good reason.

In 2007, strategy writer Robert Greene discussed the loop in a post called OODA and You. He insisted that it was “deeply relevant to any kind of competitive environment: business, politics, sports, even the struggle of organisms to survive”, and claimed to have been initially “struck by its brilliance”.

http://en.wikipedia.org/wiki/John_Boyd_(military_strategist)

http://en.wikipedia.org/wiki/OODA_Loop

http://www.powerseductionandwar.com/archives/ooda_and_you.phtml

http://boyd2008.ning.com/video/video/show?id=2171602%3AVideo%3A23

Joe and Parse 2 has a brilliant post entitled “11 Things I Learned While Trying to Figure Out the Financial Crisis“.

I particularly like his last two:

1. Cognitive errors. Megan McCardle of The Atlantic has compiled a useful list of cognitive errors that seem to have played a role in the crisis – both in creating the conditions that led to it and in compounding it…
2. The Black Swan. Nassim Nicholas Taleb is my kind of economist. The basis of his philosophy is that, “The world we live in is vastly different from the world we think we live in.” He advocates “tinkering” as our best mean to change the world – and his theory of the markets take into account many of the previous points. While he was running his own hedge fund in the 1990s, he turned his own knowledge of his lack of knowledge – and others’ lack of knowledge – into enormous profits. It came at the expense of losing a little money 364 days of the year – but making enormous profits in that one remaining day. He would bet on market volatility – which he understood financial firms repeatedly underestimated. Taleb’s key insight is that we know very little of the world itself – and will be more often fundamentally wrong than right…

At the “Tinkering” link above, he explains Taleb’s idea by quoting from Brain Appleyard in The Times:

Taleb believes in tinkering – it was to be the title of his next book. Trial and error will save us from ourselves because they capture benign black swans. Look at the three big inventions of our time: lasers, computers and the internet. They were all produced by tinkering and none of them ended up doing what their inventors intended them to do. All were black swans. The big hope for the world is that, as we tinker, we have a capacity for choosing the best outcomes.

“We have the ability to identify our mistakes eventually better than average; that’s what saves us.” We choose the iPod over the Walkman. Medicine improved exponentially when the tinkering barber surgeons took over from the high theorists. They just went with what worked, irrespective of why it worked. Our sense of the good tinker is not infallible, but it might be just enough to turn away from the apocalypse that now threatens Extremistan.

If some of the words in the excerpt seem a bit odd, it is because Taleb is creating an entire new glossary for his ideas.

The brilliant Nassim Nicholas Taleb has a glossary to accompany his critical thinking masterpieces The Black Swan and Fooled By Randomness. Here are some samples:

Academic libertarian: someone (like myself) who considers that knowledge is subjected to strict rules, but not institutional authority as the interests of organized knowledge is self-perpetuation, not necessarily truth (as with governments). Some academic circles can suffer from an acute expert problem (q.v.) producing cosmetic but fake knowledge, particularly in narrative disciplines (q.v.), an can be a main source of Black Swans.

Bildungsphilister: a philistine with cosmetic, non-genuine culture, prone to be an imitator –Nietzsche meant the dogma-prone newspaper reader and opera lover with cosmetic exposure to culture and shallow depth. I extend it to the buzzword-using researcher in non-experimental fields, who lacks in imagination, curiosity, erudition and culture and is closely-centered on his ideas, on his “discipline”, not questioning the cultural map around him. This prevents him from seeing the conflicts between his ideas and the texture of the world.

Confirmation error –or Platonic confirmation: you look for instances that confirm your beliefs, your construction (or model) –and find them.

Empty suit problem (or “expert problem”): some members of professions have no differential abilities from the rest of the population, but, for some reason, and against their empirical record, are believed to be experts: clinical psychologists, academic economists, risk “experts”, statisticians, political analysts, financial “experts”, military analysts, CEOs. etc. They dress up their expertise in beautiful language, jargon, mathematics, and often wear expensive suits.

Epilogism: a theory free method of looking at history with minimal generalization and with consciousness of the side effect of making causal claims. The idea is not to go too much outside the observations, minimize claims about the unseen.

Epistemic arrogance: take a measure of the difference between what someone actually knows and how much he thinks he knows. An excess will imply arrogance, a deficit humility. An epistemocrat is someone of epistemic humility, one who holds his own knowledge in greatest suspicion.

Epistemic opacity: randomness is the result of incomplete information at some level. It is functionally indistinguishable from “true” or “physical” randomness.

Fallacy of silent evidence: looking at history, we do not see the full story, only the rosier parts of the process.

Fooled by Randomness: general confusion between luck and determinism, leading to a variety of superstitions, with practical consequences such as the belief that earnings in some profession are generated by skills when there is a significant component of luck in them.

Future blindness: our natural inability to take into account the properties of the future –like autism which prevents one from taking into account the existence of the minds of others.

Locke’s madman: someone who makes impeccable and rigorous reasoning from faulty premises –Samuelson, Robert Merton the minor,Gerard Debreu –thus producing phony models of uncertainty that make us vulnerable to Black Swans.

Mediocristan: province dominated by the mediocre, with few extreme successes or failures. No single observation can meaningfully affect the aggregate. The bell curve is grounded in Mediocristan. There is a qualitative difference between Gaussians and scalable laws, much like gas and water.

Narrative fallacy: our need to fit a story or pattern to a series of connected or disconnected facts. The statistical application is data mining.

Randomness as incomplete information: Is random, simply what I cannot guess because my knowledge about the causes is incomplete, not necessarily because the process has truly unpredictable properties.

Reverse Engineering Problem: It is easier to predict how an ince cube would melt into a puddle than, looking at a puddle, to guess the shape of the ice cube that may have caused it. This makes narrative disciplines and accounts (such as histories) suspicious.

Scandal of prediction: the poor prediction record in some forecasting entities (particularly narrative disciplines) mixed with verbose commentary and lack of awareness of their own dire past record.

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