Joseph Schumpeter’s birthday today. The coiner of the failure embracing oxymoron “Creative Destruction”. The volcano eruption that creates a new island. The typhoon that carves a new coastline. The river that gouges a canyon. The broken eggs that make the omelette.

Wired did a piece on his concepts a while back titled “The Father of Creative Destruction”…

• “Schumpeter argued that capitalism exists in the state of ferment he dubbed ‘creative destruction,’ with spurts of innovation destroying established enterprises and yielding new ones. This view seems far more current than Smith’s Newtonian notion of an ‘invisible hand’ generating stability in the marketplace. Smith was a conceptual breakthrough for Europe, but he didn’t say much about bone-jarring technological shifts or the crucial role of entrepreneurship.”

A more modern variant is “Disruptive Innovation” which is often the cornerstone of any breakthrough business or society changing advance.

The veil of authenticity in financial models is not just the by-product of hyper-active rocket-scientists’ spreadsheets. Instead, it extends right down to the most fundamental component of finance and our society…money itself.

One of the skills that sets humans apart from animals is our ability for abstraction.  To conceive of something as a model or principle outside of the physical world fuels our ability to create and invent.  But the animal in us (our ‘lizard brain’) still finds the physical world much, much easier to comprehend and fathom.  Understanding built on the senses and experience.  Perhaps the first thing ever ‘abstracted’ is ‘value’ or ‘money’. 

Virtualising value introduced massive economic benefits.  If you wanted to trade a chicken for a pig, you didn’t have to lug the chicken and pig around.  You could ‘store’ the value (more safely than the chicken or an apple with a limited shelf life).  But the trick to getting everyone’s head around this first step to virtualisation was the ‘money’ itself.  Coin of the realm.  Legal tender.  Physical tokens which made the mapping of the ‘value representation’ to the ‘value thing’ easier.  You might not have a chicken in your hands, but you had a piece of metal or paper which was still physical. 

And now even that value is becoming more ‘virtual’.  Less a physical token, than a balance on a card or credits in an account.  A number in a computer. This approach has great benefit in convenience and versatility…but it is also the coming of age of the Black Boxification of Money.

The lack of an appreciation for what money is and isn’t under the hood lends itself to abuse of this powerful tool. In a process not to dissimilar to snake-oil salespeople exploiting the power of science (the workings underneath that their marks don’t properly understand) to hawk their quack potions…

• “I think Greed and Wall Street have been bedfellows as long as Wall Street has existed. What, I think, is new is the way the ‘pathology’ is concealed. It is easy to cover up greed and its immorality by either deploying a metaphor – these are the way the capital ‘flows’ are going and we have to invest accordingly – or by creating a mathematical equation. In both cases the activity is pushed one step away from what it is – an activity between humans – and so decoupled from anything human such as morality, or ethics or what is good for society. By being denuded of its human element, scientised, as it were, the question of personal responsibility is removed. In other words, the greed is not new. It is the sophistication of the cover up that is new.”

The abstraction not only divorces the token from its inherent ‘value’, but it then ultimate starts to alienate it from ‘values’.

The simple corner shop has literally become a labyrinth of manipulative options designed to baffle to the customer until maximum wallet extraction can be achieved. And today’s Black Friday is not just the celebration of that merchandising, but also the pinnacle of retailer manipulation to confused and befuddle shoppers out of their money.

The Cassandra of complexity, Scott Adams, illustrated this marketplace mayhem in his post “I Want My Cheese” (it also puts into context one of the most misguided ecological initiatives of banning plastic shopping bags)…

• “Then I start looking for cheese, only to discover that some genius in Safeway’s marketing department thinks that cheese should be spread out over about seven different locations throughout the store. You have your cottage cheese here, your artisanal cheeses there, your shredded cheeses somewhere else, and so on. There is no logical order to any of it. Five minutes into my shopping, I am filled with rage and I feel manipulated. I assume someone at Safeway decided that inconveniencing me would somehow make me buy more shit because I end up walking down every frickin’ aisle in the store looking for my cheese. It’s not the inconvenience that bugs me so much as the feeling of manipulation… By the time I reach my car I feel frustrated, angry, guilty, stupid, incompetent, belittled, weak, humiliated, ripped off, and inconvenienced. The feeling lasts until I get home and my wife says, ‘That’s the wrong cheese.’ That feeling pretty much replaces all the other ones.”

The worst example is our local Nottcutts. They have contrived a quarter mile long one way system to force you to examine 90% of their shelves before you can get your birdseed and check out with it. They force you to walk a 100 yards from the parking lot to the entrance to starts this onslaught odyssey while prohibiting you form entering the shop at the big set of doors right by the lot.

Seth Godin has his own tirade on this commercial contrivances in his post “#BlackFriday = media trap”: “Retailers offer very little in the way of actual discounts, they expose human panic and greed, and it’s all sort of ridiculous if not soul-robbing.”

And for a comprehensive treatise on the Black (Box) Arts of shop front manipulation, check out Paco Underhill’s fine book ”Why We Buy”…

“You almost have to make an effort to avoid shopping today. Stay out of stores and museums and theme restaurants and you are still face-to-face with Internet shopping 24 hours a day, 7 days a week, along with its low-rent cousin, home shopping on TV, Have to steer clear of your own mailbox, too, if you are going to duck all those catalogs. As a result, every expert agrees, we are now dangerously over-retailed – too much is for sale, through to many outlets.”

Un-Happy Shopping everyone!

Today is supposed to be unlucky.

One of my other blogs, the smallest and most whimsical, is “70-20-10”. It stemmed from reflections on the “pareto optimal” concept, often known colloquially as the “80-20” rule. I thought that there were lots of diverse applications of pareto optimal, but I thought a more accurate model was “70-20-10” Over the years, I have identified and stumbled across a number of disciplines where this model applied. And recent reflections on ‘success’ and ‘failure’ has brought it to the fore again.

In short, I kept coming back to 3 major components of most any significant success.

1. Hard Work
2. Creativity/Insight
3. Luck

Malcolm Gladwell has popularised foremost with the ’10,000 Hour’ mystique which has been alternately reinforced and debunked. I think that the contrarians have a point. That it’s not JUST the 10k hours that makes the difference. There are plenty of counterfactuals around of people who have put in well over that threshold and are nowhere near world class. As well as plenty who have put in much less and yet find themselves at the top of their game.

The question is which is the “70”, the “20” and the “10”. I actually think that depends. It depends on the context. In “anti-fragile” situations, much of the volatility is engineered out giving “Hard Work” a much stronger role. Whereas in “Fragile” situations, “Luck” is a much bigger role. In “Fooled by Randomness”, Taleb seems to ascribe a “70%” majority share to basic “Luck” for professions as revered as trading. The important point is for people (especially Leaders and Managers who are responsible for the role of “Luck”) is to be cognizant of these ingredients and to consider how much each plays in every decision or initiative they undertake. All too many people will tend to ascribe their successes to the first two and their failures to the lattermost.

Good luck.

Merry Christmas and may all your failures be generous gifts of insight and resilience.

Both of the divisions that I manage employ Agile development methodology for their technology development. Practicing there what I preach here, at the heart of Agile development lies a steadfast embrace of failure as Paul Widel describes in this post “To Err is Human, to Accept That to Err is Human is Agile”…

• “Agility, and this is my definition, is accepting that mistakes will be made. The mistakes are then drivers that present an opportunity to change the way that a team works to accomplish their goals. To me that’s it. Take what you’re doing and regularly question and evaluate how it’s working and be willing to try alternatives. If something isn’t working, make a change and see if it works better. Iterations are conducive to agility because they embed a mechanism for reevaluation into the process. Having an iteration though doesn’t make the process agile if the process isn’t adaptable…As humans, I think we shun failure. We hate it. We hate to lose and we hate to fail. Fear of failure drives many of us to go through extraordinary efforts to perceive ourselves and to be perceived as successful. Instead of fearing failure I believe that we should embrace it. Failure can be a wonderful learning experience. The key to embracing failure is to make the failures uncostly and educational. Small failures can drive changes that add big value. Being agile is recognizing, embracing, and accepting small failures and using them as a waypoint for improvement. Celebrate your failures and use them to your advantage and you will be agile.”

Agile development is not just about adapting to changing in schedule, interdependencies and uncovered considerations. They can also be about resilience to the work environment around the development team. Yes, the development team will love to moan about everything that doesn’t work that way it “should” (I certainly did when I was a developer), but as Jeremy Zawodny points out in his piece “Expecting to Fail”, those shortcomings can result in some of the system’s greatest strengths…

“A few days ago, after the latest in a seemingly never ending string of problems that interrupted connectivity between two of our data centers, coworker #1 said something like ‘why can’t we have a network that just works?!’ The exasperation in his voice is something we all felt to some degree or another. Moments later coworker #2 piped up and said “if our network was perfect, the software you write wouldn’t be nearly as robust.’ There’s a lot of truth to that. I find myself writing software a bit differently now than I did seven or eight years ago, even though I was working on high-traffic web sites then and still am now. The single biggest difference is that I try to expect everything to fail. Everything.”

Zawodny goes onto provide a catalogue of tools and techniques for software technicians embracing failure…

• Redundancy
• Locality
• Caching
• Timeouts
• Logging
• Monitoring

I would add a seventh…idiot proofing tests. At Piero, we regularly invite high school students in for work experience to have them bash on our system. We sit them down with no training, just a user manual, and we say ‘get the system to work’. As they work through the steps in the guide, they hit instructions that aren’t clear, ambiguous references and inconsistent steps. We note every obstacle they hit and then make a task to either fix the documentation or improve the usability of the system. This approach (among other rigorous steps) has been critical to making the system easy to use for customers who don’t speak English as a primary language. This group is over half of our installed base and the training sessions are often inadequate to get people fully skilled up on their own. The bonus dividend is that with usability targeted for the lowest common denominator, the system is astonishingly fast and easy to use for more proficient professionals with more experience and practice.

Adams regularly explores the disconnect between how we see the world and how it really operates. His post “The Monty Hall Problem and Schrodinger’s Cat” illustrates this conundrum well…

• “This reminds me of the Schrodinger’s Cat thought experiment in which a cat in a sealed box (presumably with air holes) exists in a state of being simultaneously alive and dead depending on the results of a randomized event happening inside the box. How can a cat be alive and dead at the same time? Math says it can happen, my brain says no. The pattern recognition part of my brain is connecting the Monty Hall problem with the Shrodinger’s Cat thought experiment because both situations feel like proof that our brains are not equipped to understand reality at its most basic level. Most of us accept the idea that math is a better indicator of truth than our buggy personal perceptions. Math doesn’t lie, but our brains are huge scam artists. The Monty Hall problem and Schrodinger’s Cat are examples in which our perceptions of reality and the math of reality disagree in a big way. It makes me wonder how much of the rest of my so-called reality disagrees with math without me knowing.”

Adams has even made this characteristic of human nature a central tenet of his semi-apocryphal political platform in this week’s post “The Joiner’s Dilemma”. It actually seems more like a manifesto for a “Skeptic Party” embracing the failure of one’s position at the highest level of government…

• “It turns out that people rationalize whatever their political party supports independent of the facts…My idea is that as President of the United States I would support the majority opinion on every topic with my veto powers and my legislative initiatives while vigorously supporting the argument of the opposite side.”

Scott Adams’ post “My Skeptical Journey” is autobiography of sceptical doubt that only seems to intensify and expand as his life goes on. In a transparently public confessional, he provides an open viewing to practicing what he preaches…

• “A rational mind needs regular maintenance. One of the maintenance systems I employ is to remind myself of things I used to be sure about and later discovered to be untrue. I started a list organized by the approximate ages at which I realized my errors. A healthy rational mind needs regular doses of humility. (I might need more humility than most people.) Here is the approximate age at which I stopped believing in different stuff…”

He then goes on to catalogue 42 different things he has stopped believing in from the age of 8 to 50+. Many of his failure of his confessions of failed models and notions paralleled my own – childhood fairy tale myths, open-mindedness to paranormal phenomenon, vitamin supplements, the legitimacy of the stock market. Some of his shifts I myself haven’t come to yet mostly in the area of sport (eg. “Exercising is a big help for losing weight…Stretching helps athletic performance.”). I suspect that his experience in exercising is focused on certain types and approaches where possibly these general principles don’t specifically apply as strongly.

My own confessional of beliefs that I stopped believing in include…

• Teens – Politics is a noble career.
• 20s – Ignorance of the devout.
• 30s – Sales is a shallow discipline.
• 40s – Microsoft.
• 50s – Flying superstitions (more of a meditation as way to relax myself, but after the Skeptics in the Pub session on superstition, I decided to drop it).

One of my most fundamental disillusionments throughout my life has been about the nature of reality itself. Books such as “Godel, Escher, Bach” and “Thinking Fast and Slow” opened my eyes to how deceptive my own eyes can be.

Joseph Schumpeter’s birthday today. The coiner of the failure embracing oxymoron “Creative Destruction”. The volcano eruption that creates a new island. The typhoon that carves a new coastline. The river that gouges a canyon. The broken eggs that make the omelette.

Wired did a piece on his concepts a while back titled “The Father of Creative Destruction”…

• “Schumpeter argued that capitalism exists in the state of ferment he dubbed ‘creative destruction,’ with spurts of innovation destroying established enterprises and yielding new ones. This view seems far more current than Smith’s Newtonian notion of an ‘invisible hand’ generating stability in the marketplace. Smith was a conceptual breakthrough for Europe, but he didn’t say much about bone-jarring technological shifts or the crucial role of entrepreneurship.”

A more modern variant is “Disruptive Innovation” which is often the cornerstone of any breakthrough business or society changing advance.

• “[A comic strip] has to be drawn well enough, not perfectly. No one goes to a rock concert because the band is in tune. They have to be close enough to not be distracting, but being in tune isn’t the point…As creators, our pursuit of perfection might be misguided, particularly if it comes at the expense of the things that matter.” – No one reads a comic strip because it’s drawn well

Happy Birthday Scott. Scott Adams doesn’t just write about embracing failure, but he walks the walk. The quote above embraces his failure to do award-winning drawing. He takes a similarly positive view about the “oops” that he makes regularly in his writing…

• “I’m well-suited for drawing comics and writing blog posts because I can erase/delete/adjust a thousand times before the public sees it. I’d be bad at, for example, walking a tightrope across a canyon or doing brain surgery. Those professions don’t respond well to ‘oops.’ I use this blog to practice my writing, try different styles, float ideas, and generally get into the heads of the public. It’s a bad idea in my profession to assume I know what other people want to read. I can only know for sure what is in my own head. And as a general rule, the people who go into my line of work don’t think like normal citizens, for better or worse. So I take a business approach to writing; I test different styles and topics, observe the reactions, and adjust accordingly.” – “About the Bear Thing”

Today marks the anniversary of the biggest business failure in USA history – the bankruptcy of the revered investment house, Lehmann Brothers. Seven years on, the economy is just now emerging from the damage and people are still scratching their heads about the silver linings to this fiasco.

Everyone who applauds the capitalist system portrays it as a meritocracy of competition where success rises on its merits and failures are removed from the system. Unfortunately, the individuals most responsible for failure are the ones most insulated from its embrace in the modern day perversion of capitalism that most Western countries operate. Stakeholders have engineered complexity and interdependence into the system so that they can plays a heads-I-win-tails-you-lose game where they are inoculated against failure. An NBC report “Too big to fail often means too big for jail” analyses…

• "’Deterring future crimes can’t be accomplished simply through fines or negotiated financial settlements – which many banks regard as the cost of doing business,’ Phil Angelides, who chaired the government commission that investigated the financial crisis…‘Senior executives need to know that if they violate the law, there will be real consequences.’ There’s no one single reason for the dearth of high-profile criminal convictions. Some prosecutors have argued that, in some cases, the crimes related to the financial meltdown of 2008 were too complex to pin on individuals. In others, they argued, the law had not kept up with the complex financial engineering that brought about the crisis.”

Complexity is often the result of running from failure. Instituting back-up to the back-ups, intricately intertwined interconnections, a superabundance of processes many of which do little except operate on other processes. All in the vain aspiration to avert any failure. Of course, the result is a modicum of short-term stability at the expense of a much deeper and broader fragility. In the end, the faulty components are hidden from view and shielded from accountability.

I’m not the only one not making New Year’s Resolutions. For starters, Scott Adams’ book on embracing failure “How to Fail at Almost Everything and Still Win Big” includes the biting aphorism “Goals are for losers” (though one could argue that people can make resolutions to change the habits, practices and ‘systems’ in their lives without the noxious goal-setting).

FastCompany’s resolution list last year went a step further with its resolution rejectionism…

11. Don’t Listen To These Happiness Myths, And Know The Power Of Negative Thinking. This might be the only New Year’s resolution list that will tell you to not “maintain a positive mindset.” In fact, we say just the opposite: it’s beneficial to feel your emotions (all of them) and more productive to “focus on behavior, not internal states.”

They linked to the piece “5 Big Happiness Myths Debunked” by Oliver Burkeman whose embrace of “negative thinking” I’ve featured a few times here.

May your all your failures bring positive consolations in 2016.

“My observation over a lifetime is that when it comes to a fight, the craziest person has a huge advantage because he’s not worried about his own losses.” – Scott Adams, “Our Moon Shot”

This blog connects Leadership and Management with Embracing Failure through the common thread of embracing risk. Scott Adams’ observation above says a lot about the power of embracing failure as well as explaining the surge of success for Donald Trump in the biggest leadership contest in the world.

The thing is, as they say in poker, going all-in constantly works every time…until it doesn’t. It will be interesting to watch when and if Trump “blows up” with all his craziness. But in the meantime, he is a powerful illustration of the “loose aggressive” play and the effect it can achieve when failure is not a worry.

Tom Scott shouldn’t feel too bad about his findings as false finding are the stock and staple of the entire domain of science. In fact, the post “Why all research findings are false” by the “Devil’s Neuroscientist explores this in depth:

• Science never proves anything. You may read in the popular media about how scientists ‘discovered’ this or that, how they’ve shown certain things, or how certain things we believe turn out to be untrue. But this is just common parlance for describing what scientists actually do: they formulate hypotheses, try to test them by experiments, interpret their observations, and use them to come up with better hypotheses. Actually, and quite relevant to the discussion about preregistration, this process frequently doesn’t start with the formulation of hypotheses but with making chance observations. So a more succinct description of a scientist’s work is this: we observe the world and try to explain it.”
• Science is always wrong – This analogy highlights why the fear of incorrect conclusions and false positives that has germinated in recent scientific discourse is irrational and misguided. I may have many crises but reproducibility isn’t one of them. Science is always wrong. It is doomed to always chase a deeper truth without any hope of ever reaching it. This may sound bleak but it truly isn’t. Being wrong is inherent to the process. This is what makes science exciting.”

His analysis provides a very thorough illustration of not just the tenet that “Correlation is not Causality”, but the general limitations of using statistical analysis (“Just like science at large, statistics never prove anything, except perhaps for the rare situations where something is either impossible or certain – which typically renders statistical tests redundant.”).

Sadly, in our current times when “science” has never been so vital to our welfare, a surging number of “science deniers” are turning their backs on this discipline. Typically, spurred by charlatans who’s mischief is refuted or exposed by science, one of the most prominent rhetorical trick these huckster use is to point to science’s own admission of its fallibility. A specific failing identified in science does not make all science a failure (throwing the baby out with the bath water). The logical fallacy they are plying is “false equivalence”. Science is embrace of incompleteness and inaccuracy might surface many specific failings, but the overall effect is to make science stronger not weaker.

• “I knew a guy with passion to be a pro golfer and the brain to be a great accountant. He followed his passion. He’s homeless now.” – Scott Adams (tweet)

Some people just don’t know when to quit (especially some prominent politicians).

Entrepreneurship has romanticised failure like it is some ceremonial hazing from which you emerge a bit bruised or maybe humiliated but inducted into the fraternity of successful business leaders. You don’t get too many articles regaling the hospitalisations and virtual deaths of this failure ritual. One rare account is Ali Mese’s piece “How quitting my corporate job for my startup dream f*cked my life up”.

He asks some critical questions for those who choose to embrace the failure so indelibly imbued in entrepreneurship…

1. Are you ready for the social pressure? (echoes of “Nobody Cares – Population 6 Billion”)
2. Are you single or do you have an extremely supportive partner?
3. Do you have enough cash to last at least a year?
4. Are you ready to sleep only few hours a day?
5. How do you define success?

Mese goes on to observe:

• “As if the social pressure and loneliness were not enough, I was meeting the mother of all stresses: running out of cash much faster than I had imagined. This was killing my productivity and ability to make proper decisions. I was panicking and rushing to be successful and to make money.”

Yes, entrepreneurship is a great classroom for the lessons of embracing failure. But sometimes, graduating with honours means dropping out altogether.