Saturday, December 28, 2013

Scarcity by Sendhil Mullainathan & Eldar Shafir

The Title reads “Scarcity: why having too little means so much?”, It is amazing so much can be written about one single word!. I would say it is moderately researched since it is a new domain. The episodes are carefully chosen. A few new terms like bandwidth scarcity, focus dividend are introduced to drive certain concepts. There are some inevitable repetitions, but I surmise, it would have to happen when you try to explain a new frontier.

Let me summarize the points that strike me well: It may sound far too obvious, not even in retrospect but right away – yet, the value comes from understanding them all over again from Scarcity standpoint with poignant examples they give along the way with some empirical data.

Before embarking on the task,let me cite one case study (not from this book). APSRTC (Andhra Pradesh State Road Transport Corporation) had some of the highest fatal accidents. APSRTC at the time of case study had 23000 buses, 12 million Passengers, and 820Kms/day average. They did one simple thing that resulted in the accident rate dropping from 0.13/Km to 0.09/Km – not a small improvement for such a scale. All they did was to mandate the driver to place the photograph of the driver’s family above the dash board. Come to think of it - It is not that driver is completely oblivious of his/her family. Yet, a gentle reminder at the right time seems to instill a much better and safer driving habit. Authors’ examples would be on similar lines – obvious after it has been told.  I liked all of them!
Now on to some specific points.

1.When a deadline approaches, you concentrate so much at the expense of other priorities and get it done/accomplished. This is called focus dividend. Of course, there is a perverse outcome too – you tend to ignore something that matters to you over the long run.

2.  Carefully crafted incentives can yield disproportionate returns. They cite rural poor who were willing to show up for vaccinations just for free lentils, where absenteeism otherwise was very high.

3. Bad news: You cannot fake scarcity. So if you have lot of time before the deadline, you tend to waste a lot of time before you hit the red button and make it happen. Early abundance encourages waste. 

4. Buffers are extremely critical be it time or money or any other resource. Lack of buffers almost always results in less than optimal and even rational behavior. Buffers are the bulwarks against such risks.

5. Except poverty of real poor, most of the scarcity can be well managed. It is because one cannot simply wish away or take vacation from poverty.

6. Scarcity reduces the bandwidth which in turn can affect the quality of decisions and hence the outcomes

  Note:Point 3 and 4 may seem like a contradiction, but when you read the book fully you can appreciate the contexts better.

Now on to some examples in a very short version - hopefully it has not drained the magic.

1.   St John Hospital was perpetually running over time in operation theaters. Staff were over worked and frequent rescheduling of non-emergency operations owing to sudden inflow of emergencies created havoc. It caused a lot of heart burn and disappointments.When an Operations Research specialist analyzed the problem, he recommended a simple solution. Leave one operating room always free for emergencies.This may fly in face of the apparent load, But it worked very well. Emergencies are broadly predictable and having a buffer to accommodate made improving efficiency very easy.

2.  US military was troubled by “Wheels up” crashes. After landing, pilots would retreat the wheels instead of flaps! To solve this problem, Lt Alfonse, Psychologist by training was brought in. Thankfully, he decided to look inside cockpits before looking inside pilots’ heads. Firstly, this problem was confined only to B-17 and B-25 bombers where the wheel controls and flap controls that are identical were side by side. Hence, it was too easy to make that mistake. Once the design flaw was detected it was easily resolved.

3.  MARS Orbiter Project: Well, it was not meant to make  major discoveries  but was designed to be a spearhead to collect data about MARS at a cost of $125 Million. It was designed to enter the stable orbit of MARS and collect data. Entering the orbit is an intricate business – you have to do it with extremely precise speed and angle. Enter too slow, gravity catches up and there would be a crash. Enter too fast, you will skate away from the orbit forever. Orbiter did not make it to the stable orbitL. Aftermath, scrutiny followed and it turned out the subcontractor for the module assumed the British system of units whereas rest of the system was in SI units. Owing to the last minute rush (time scarcity because you cannot change any celestial schedules!)  and so testing was overlooked), the whole project failed.

There are other good business examples related to Benihana Hotel Chains, Chevy’s restaurants and about FORD’s insight on productivity. My favorite is “Poor bees and rich wasps ”.

American Philosopher, Eric Hoffer observed, “The most gifted are at their creative best where they cannot have their way”. Not necessarily only the gifted. When pushed to the corner, most of us also can become creative provided scarcity is transient (poverty not included). Sometimes one has to evaluate by being resourceful rather than full of resources.

Thanks for reading this far…..


Friday, November 1, 2013

The Borderless World by Kenichi Ohmae


If you were to watch a tennis match where wooden rackets are used, you will find it amusing , classical, slow, interesting and so on. But the basic concepts will be the same. I got a feeling similar to that when I read this classic. Basic concepts have remain unchanged – and it is without standard words like “internet” or “social media” etc – It was refreshing.
Author was a seasoned McKinsey consultant and was heading Japan geography. He was consulting with many leading companies and hence the breath of exposure is truly wide. Let me mention two interesting stories among many.

Five Finger Exercise: 
Yamaha became world leader in Pianos with about 40% market share. Alas, by that time, Piano market started declining at the rate of 10% annually. So, what do you do? What can you do? Piano hasn’t changed much since Mozart days. Making better pianos will not help and market for new pianos has a very limited absorbing capacity. Low end of the market is already taken up by South Korea.
Piano these days is more often an expensive piece of furniture that sits idle, collects dust and almost always un-tuned. Many don’t have time to learn piano. It takes a lot of effort and time to master it. Yamaha reasoned the only way to create value to the customer is to add value to the pianos that are already out there. There are already about 40 Million pianos in the field. Yamaha worked incredibly hard and developed an advanced product that can be added on to the current ones at a cost of $2500. It was a very sophisticated, advanced combination of optical and digital technologies that can distinguish between 92 different degrees of strength and speed of key touch from pianissimo to fortissimo. Since the recording is digital each key stroke can be reproduced and they can be stored in 3.5 inch floppy (remember it?).  With just one retrofit like this, you invite your friends and show case latest home entertainment. When Yamaha started selling it in 1989, sales rocketed.

Brewing Wisdom:
 One of the clients was trying to develop Coffee percolator. They started off bench marking against the current incumbent GE. Should it be larger, faster, Etc. Author urged them to ask “Why do people drink coffee at all?” Answer came: “Good taste!” Author would then pose a challenge asking what are the factors that drive good taste?Answers started pouring back - Beans Quality, Grain sizes, Water Quality and a host of other minor drivers. Among them water quality made the most difference and most of the designers assumed customers would use tap water. Hence, they went on to build an in-built de-chlorinating function which greatly added to the taste of Coffee.

This book deals with the then dominant markets, what author refers as triad – Western Europe, USA and Japan. Things have changed quite a bit since then. There are more additions to the triad. Author talks about globalization and other Forex aspects in detail  that make a nice read. When I read books that have extensive forecasts or some kind of “futuristic reports”, just for fun I try to track how much has happened. It turns out that, even the best & acclaimed folks have made forecast way off the mark. Author has studiously avoided any such strong forecasts.

Mark Twain once quipped, “A classic is something that everybody wants to have read and nobody wants to read”. I wanted to say it is a classic but since it risks not being read at all, I would say good old book that ought to be read. Before taking this book, I was wondering if I should pick such old one but I am glad I did.

Thanks for reading this far.


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Thursday, August 1, 2013

Euclid’s Window by Leonard Mlodinow

From causes which appear similar we expect similar effects. This is the sum of all our experimental conclusions”. Thus spoke Scottish philosopher David Hume. Profound stuff or a prosaic observation depending on your view, but in the domain of Math is it tenable? Where is the cause and where is effect to be observed in Math? It is abstracted as equations and concepts all over - Math is one domain (or discipline) rest of sciences use all the time as a base and in some cases engulfed by it.

This book is very narrowly but well positioned – not a coffee table book but also not meant for an expert in Math either. Surprisingly, it cannot fit into the popular science category since the topics covered are way too deep and one can only simplify so much without losing the main theme.  For example, 5th dimension or ten dimensions is very difficult to articulate in words and even with figures: explaining such concepts is more like climbing a very greasy pole. For sure, author has worked with some of the finest minds and has done a comprehensive job of going through old records to cite stories or episodes to make them more authentic.

Author takes us on a nice tour all the way from Plato to Euclid to Gauss, Newton, Descartes, Einstein, to the latest string theory experts like Witten.

Let me cite some nuggets.

1: The theorem of logic states that, if any false theorem is allowed into logical system, irrespective of what it pertains to, you will be able to prove 1 equals 2. He quotes a legend, where one skeptic asked Bertrand Russell, “If I allow one is equal to two, then prove that you are the pope”. Russell gave a quick response thus: “The Pope and I are two; therefore Pope and I are one”.

2:  Science in the past was a deadly mix of ancient knowledge, religion, and superstition and hence belief in miracles and astrology are common. Funding of science was based on the ruler’s whim. Frederick II founded University of Naples way back 1224 and for his love science he indulged in some weird experiments – for example, he fed two prisoners the same huge lavish meal. He sent one happy man to bed and another to a grueling hunt. Afterwards, he cut them both open to see who has digested the meal better (couch potatoes will be pleased to learn that it was the man who slept).

3: Story of Rene Descartes was really fascinating. Circa 1618, in the small town of Breda in Holland he a saw a crowd trying to figure out a public notice that had a math challenge - in those days it was common. Descartes considered the problem and remarked offhand that is was easy. His translator, one of the greatest Dutch Mathematician of his time, Isaac Beckman, was irked and called stranger’s bluff challenging him to solve it. Descartes did solve it and they became very good friends. Later, Beckman became his mentor and helped him a lot.

Towards the end the book it deals with string theory that obviously flirts with extra dimensions.  As if it is not complicated enough, it introduces an idea that, at a fundamental level, space and time may not even exist.

What really grabs your attention is the extent to which chance events result in major breakthroughs eventually.

In the end, this book is all about mankind’s quest for truth and concomitant attempts to understand the world – it is through the eyes of some selected set geniuses (surely, far from exhaustive) who experienced the joy of discovery and for the rest of us it is the joy of partial (or for a rare few, full) understanding!

Thanks for reading this far.


Wednesday, May 1, 2013

Talent is overrated by Geoff Colvin

“Ambitious Parents who are currently playing baby Mozart video for their kids would be disappointed to learn that Mozart became Mozart by working furiously hard” says Geoff.  He is off to a dramatic start by taking Mozart and Tiger Woods as examples. 

In fact, if you have a convincing self explanation as to why you didn't make it to the world class in a given area, don’t ever come near this book – it simply destroys all such explanations. There is no question between “nature” versus “nurture” – it is nurture all the way. The case for innate talent is weak if such a thing exists at all avers author. I found it hard to swallow because it deprives all the comfortable explanations you can have otherwise. He also talks about 10,000 hours rule and deliberate practice.  If you have learnt stories during childhood that are firmly implanted in memory like for example,  Archimedes running out bath tub after his “displacement of water insight” or extempore lecture of Abraham Lincoln - his Gettysburg’s address – you better be ready to re-format them. They are far from truth – I don’t mean the insight or message respectively but the zero-time preparation part of the story.  In short,whatever your volition is, all you need to have is the rage to master by means of “deliberate practice”.

Let me summarize some of the key points of Geoff as I have understood (not exhaustive).

1.   One need not have to have an IQ that is off the charts!
Geoff observes, “Some chess grand masters have less than average IQ and some of the top notch scrabble players score average or below average in verbal ability tests”. This kind of information gives an uneasy satisfaction especially if you are a lousy scrabble player like me. Point is that you can excel only in a narrow field – and to excel you have no choice but to exert for a very long time. 

2.   One does not require XXXL level memory
He debunks this view also. Memory capabilities are very specific and can be acquired. I will grudgingly agree but then, it takes one beautiful explanation out of your hands – too bad. He quotes one of the chess masters who would play blindfolded and win many of such games but will forget his suitcase in the conference room. He talks about “memory chunk” theory which is gaining traction anyway.

3.    More knowledge is a friend – not an enemy.
This is a little unfair but seems right. The more knowledge you acquire and more specialized you become, if anything, it only adds to your advantage. It will never become a burden. He makes an emphatic point about that. It is because there is a school of thought that believes in order to be creative more knowledge could become a bane rather than a boon. 
He quotes Jeffrey R. Immelt of GE who observes that GE division where the business heads did not move around too much, they did very well and wherever it was a revolving door the division did poorly. The reason is that, when they stayed long they acquired deep expertise which made a huge difference in the quality of decisions.

4.    Most of the key principles of systematic practice are available to every one: Just look at Benjamin Franklin’s autobiography
I have read that during my childhood but little did I know that it had a great self-improvement process embedded in it. Bottom line is that process for improvement in the chosen area of work is very much in one’s control and we need an external coach or mentor or guru to scale to the next level.

5.    Motivation that is required has to be self-generated (intrinsic) otherwise there is no chance one can endure for such a long time.
It reminds me of Drucker’ s quip “We know nothing about motivation – all we can do is write books about it”. One can almost viscerally comprehend why it has to be intrinsic, but how do you get there is not clear.

6.    Start as early as possible:
This is the most common sense stuff. Early start gives a feeble advantage (if at all). But, any sort of encouragement motivates that person to pull in more efforts. This marginal difference, because of sustained practice morphs into a monstrous difference over a period. Question is “How early?” As early as you can like Tiger Woods at golf course at the age of two? Then, this advice flies in face of current youth (or is it every generation?) where they would like to choose almost everything by themselves. By then, I am afraid it is far too late. So, in effect, you have to choose for the kid and make sure they believe they would have chosen that anyway - given their innate strengths!. 

7.   Self-Regulation:
Self-regulation – it seems like a nuanced concept. You don’t set a goal related to an outcome but the process to get there. He gives some examples: Instead of winning a sales order, goal may be discern the customer’s unstated needs. Or a pianist may focus on improving a particular portion of a passage. Per author, it is one of the key differences between mediocre and world class folks.

World class performance comes with a huge price tag also. It may cost all other key things which are valuable by themselves (e.g. family life). The end note from author is very sober – in fact, so sober that I felt mediocrity may not be that bad after all.

It also reminds me of the Oscar winning movie Amadeus: In the last scene, Mozart’s contemporary Antonio Salieri (played by Murray Abraham who won an Oscar for that role), says “mediocrity is everywhere – I am the champion”.  The way he says during the movie’s conclusion would leave an indelible imprint in your memory – the thesis or contents of the book may also come that close.

Thanks for reading this far……