The comment from Robert on Innovation Starvation reminded me of something I had read a long time ago by the “Purposeful Systems” guru Russell Ackoff regarding managers’ constant belief that they operate with a lack of information, whereas they are actually lacking only relevant information. As organisations and management systems have developed we are able to acquire data in massively increased amounts, but have not developed an effective discrimination mechanism to filter it. In Robert’s comment he refers to the Edwardian Butler who provided this discrimination in physical form. Visitors and telephone callers were filtered in an informed and courteous manner, the household books and staff were managed with only exceptions reported. Perfect.

There is a hierarchy which leads from data to knowledge:-

1. Data, the raw numbers.

2. Information, data held with structure.

3. Knowledge, information held with understanding.

Only when our 21st century “butlers” (Information systems, or if we are important enough, support staff ) have traversed this hierarchy should the results be passed to us. Unfortunately modern organisations tend to encourage staff to respond to requests for information with sheer tonnage of data as there are no other metrics by which their effort can be judged. This is compounded by managers who distrust much corporate data and like to hoard their own for private analysis.

You can read about Ackoff’s f-laws (Flaws geddit) here :- http://www.f-laws.com/pdf/A_Little_Book_of_F-LawsE.pdf

Some more of his most easily digestible quotes are:-

  • “See, doing the right thing is wisdom, effectiveness. Doing things right is efficiency. The curious thing is that the righter you do the wrong thing, the wronger you become. If you’re doing the wrong thing and you make a mistake and correct it you become wronger. So it’s better to do the right thing wrong, than the wrong thing right. So we’re now questioning, that it turns out every major social problem today is trying to do the wrong thing righter. So instead of looking at the efficiency with which we are perusing our objectives, we’re beginning to re-examine the objectives.”
  • About the education system. “Our system is not about learning, […] its about teaching. We don’t recognize that teaching is a major obstruction to learning.”; “Who in the classroom learns the most…. the teacher. See the classroom is upside down.”
  • “You never learn by doing something right, because your already doing it right. You only learn by mistakes.”

I took these from the blog at cuddletech.com and you could do worse than pay it a visit if you are interested in systems thinking.

Taking Steps

Barbican steps

I don’t know if you’ve ever endured a presentation by a vendor’s senior account manager when your company is trying to set up a project which will cost a significant sum, but if you have I bet it was like the ones I used to attend. The vendor’s team includes :-

    • A techie (sometimes more than one), who is not allowed to answer questions directly in case he makes some kind of implicit commitment that the vendor can’t fulfil, or inadvertently admits that you are being sold soon to be obsolete kit. He takes notes and actions to respond later via the account manager.
    • Your account manager who will shake everyone’s hand, introduce people, take notes and pay the restaurant bill for lunch.
    • The senior account manager who is to give the presentation. He (It is usually a man) has no technical knowledge but has the authority to take down your concerns and come back with an improved price. He will wear an expensive suit and speak nicely. His presentation will incorporate lots of fashionable biz-speak.

On your side will be some techies (Who sit at the back sniggering at technical gaffes and playing buzzword bingo) and you and your boss who will be sleeping with your eyes open.

These meetings are an almost complete waste of everyone’s time and resources except that on the client’s side they show the correct degree of rigour has been applied to the CAPEX proposal and on the vendor’s side that they can correctly follow the form of the elaborate courtship ritual that major sales require.

The only one of these I can remember with any clarity was for some software we wanted to introduce to improve administrative processes between companies and locations. Since this was in the 1990’s it was of course going to further our progress towards the “paperless office” (How’s that coming along with you?). It is only memorable to me because the senior account manager had seemingly compiled his presentation using one of these “30 minute MBA” type books but without actually having read it properly. He constantly confused, conflated or interchanged his use of the term “step”. At the time two step concepts were very much in vogue, stepwise refinement and step change.

Stepwise refinement is the habit of constantly making small improvements in products and processes so that whatever you are doing becomes better, more reliable, cheaper, more profitable etc. as you go.

Step change is discontinuous change, i.e. the sort that produces a graph with a step in it, a major leap forward, game changer, quantum shift etc.

Now both of these are desirable but they are not the same thing and are not done by the same people. Stepwise refinement is a process and step change is a resultant. You should aim for stepwise refinement always and everywhere, by and with everyone. You may choose to aim for step changes but these are projects and you may need to implement several to have one come off. Good organisations should always be looking for the next step change, either introduced by themselves, their competitors, or by changes in the fundamental technology they use. Without step changes you end up like a diagram for Zeno’s paradox of Achilles and the Tortoise, the best you can do is ascend to a plateau. With them you can scale new peaks.

This is what Neal Stephenson calls “Crossing the valley”, giving up short term position for long term gains. I think he is right, we all need a strategy to cross more valleys.

Where has all the money gone?

Having read Tim Harford’s book “Adapt:Why success always starts with failure” referenced in the Neal Stephenson article in the last post, I got to thinking about where the West’s success came from, and why it has halted over the last century or so.

Looking at the example I used in the last post, in 1922 the farm labourer would have had about the same square footage of rented living space as today’s minimum wage earner, and would have brought up a family (In poverty but not destitution) on his wage. He wouldn’t have even dreamed of owning a car. Today’s minimum wage earner probably shares accommodation with another minimum wage earner, requires and receives considerable support from the state to bring up his family and probably has a car for getting to work.

I don’t mean to posit an argument for revolution, or to ignore the freedom from want and uncertainty or the improvements in healthcare we all now enjoy in the west. I do wonder though whether the farm labourer who might just have fought in the Great War, would endure the Great Depression and then maybe have to fight in the Second World War in 17 years, perhaps alongside his children, would think he had struck a poor bargain if he could put himself in the shoes of his equivalent in the modern age. Why have western societies that have achieved so much not progressed more? (As Kate Atkinson has it “Everything is improved but nothing gets better”).

I suspect though, that even his disappointment would pale beside that of a middle-class person of 1922, the sort of person who bought the Austin 7. He would see his modern equivalent living in a smaller house with his wife having to work. They would have labour saving devices but no hired help. They would have a warmer more comfortable house, with lots of leisure equipment and toys, but at the cost of a degree of indebtedness which would have been horrifying in 1922.

Further up the social scale, the merchant classes have seen their shops and businesses made obsolete by supermarkets, out of town superstores, and globalisation. At the top of the merchant classes instead of people who created and owned businesses, we have a whole group of Senior executives who didn’t create their businesses, risked none of their own money and yet pay themselves ever increasing sums because it is too difficult and not worth any individual’s time and energy to stop them (See Tim Harford’s book “The Logic of Life” to see why).

Western Governments have changed their perceived role from keeping the borders secure, the currency sound and enforcing the rule of law to one of providing an equitable allocation of wealth. This often involves opening the borders when cheap labour is helpful and debauching the currency with inflation every time government debt has got out of hand. It also means that they have to take the wealth from those people and businesses that produce it, count it, weigh it, add some they’ve borrowed, and then give it out again to wherever and whomever they imagine it should go. The purpose of all this is fairness.

This is a lot of work to take on and means that in a modern western economy with a welfare state the Government controls some 50% of national output. It also seems true that the welfare provision we have in the west may be incompatible with globalisation and the free movement of labour. Most welfare systems from health to unemployment benefits to pensions rely on all of us contributing all of our lives, and taking out in a fairly predictable and controlled manner. If sufficient of us take the free healthcare and education on offer when we are young then go abroad, we don’t contribute during our productive years. If we need more young people in the workforce and they come from abroad they come with housing and healthcare needs, as well as possibly educational needs for their children. They will possibly leave to go elsewhere before collecting a state pension here, but it may still be due to them. If we’re not careful this could all go to pigs and whistles and collapse, or worse become “unfair”.

So big government hasn’t much improved the lot of the farm labourer in our example, and any improvements he has got in his material well-being have come from the support he now gets from the Government. After 90 years of progress shouldn’t he be able to do things worth more than minimum wage and to get by without the Government providing part of his income? Being a much wealthier society should surely mean that we are all able to create and keep more wealth ourselves.

Most if not all of the improvements we have seen in national wealth seem to be being consumed by the mechanism which processes and reallocates wealth. A fine example of this can be seen in Magnus Mills excellent “Scheme for full employment” where a benevolent government scheme entails otherwise unemployed people being employed to drive delivery vans between depots. The vans are made to a special government design and are (natch)outdated, slow and cumbersome. The public don’t object to the increase in traffic and delays, since the aims of the scheme are so worthy. Those on the scheme, knowing that the only cargo they carry is spare parts for their vehicles become disenchanted and spend all their time thinking up wheezes to avoid their essentially pointless work, becoming increasingly bolshie. Eventually the scheme collapses under the weight of its own futility.

The Goon Show had a more pithy example in the machine that does the work of three men, but requires four men to operate.

We have seen the idea that Governments should take an even bigger hand in the running of the economy tested to destruction over the last century and how it impoverished and dehumanised the very people it was supposed to be all for. (Still viewable in North Korea for the time being).

However those who lived through the introduction of the welfare state did not rise up in protest for a return to unrestrained laissez-faire capitalism with no safety nets, so that probably wasn’t all that great either.

Can we get similar welfare benefits to what we have now but at significantly lower processing costs then? i.e. keep the wealth that actually leaves the government system at the same level but with a smaller public sector.

Can we organise our affairs so that all people at work are capable of generating sufficient wealth that their employer pays them sufficient to live on without state subsidy? Supply and demand being what it is, this probably means labour needs always to be in short supply. Can western economies free themselves from the sclerosis induced by supra national bodies enforcing ever greater convergence in the way they go about things, stifling innovation for consensus?

Perhaps western economies are at a fork in the road. On the one side continued globalisation, on the other a return to post war trading blocks and controls.

Globalisation is the end result of some 200 years of free market laissez-faire capitalism which has been the single most effective engine in history for bringing the world’s people out of poverty, as it continues to do. It does however set global manufacturing wages at the level of the lowest common denominator, the developing countries paying poor wages and not having yet developed expensive modern welfare infrastructures. Western economies which do not change will continue in relative, if not absolute, decline until some kind of new equilibrium is established. This decline will likely be accompanied by constant striving for further efficiency and transfers of resources from the state to the productive sector, with a lower level of overall welfare provision.

Attempts to establish trading blocks with strong boundaries as a rebuttal to progressive globalisation would allow western economies some breathing space but at the cost of millions in the less developed economies not being brought above subsistence levels of existence or worse.

If we want the benefits of globalisation for the world’s poor to be combined with a maintenance or improvement in western levels of welfare, history has some lessons. The west needs to comprise vigorously competing independent polities with strong laws, prosperous merchant classes and free international / global trade. It’s how we got where we are and it’s how others are prospering now.

Innovation starvation

Austin 7

Reading this article by Neal Stephenson  set me to thinking about the progress we haven’t made in the last 100 years or so.

In 1922 you could buy an Austin 7 for about £100 which would (eventually) achieve 52 mph and would give 40-50 mpg. £100 was something like 71 weeks’ pay for an agricultural labourer at the time. The UK’s bestselling car last month was the Ford Fiesta at £9,495 which will achieve about 100 mph and yield about 50 mpg. The UK minimum wage is 6.08 per hour so that is £212.8 for a 35 hour week or 44.6 weeks’ work to buy a Fiesta. Even adjusting for tax that’s a bit of an improvement, but surprisingly little for 90 years of the most rapid technological change in the history of mankind.

Admittedly the Austin 7 looks like something constructed by men who had only built bicycles and prams before and your likelihood of surviving an accident at anything above walking pace is nearing 100% better in the Fiesta. On the other hand, for local urban or rural journeys 52 mph is rarely exceeded by much so performance and fuel economy are not improved in any practical realisable sense at all.

So why haven’t cars really improved in terms of performance or cost in the last 90 years? It’s surely not lack of industry competition, although there has been considerable consolidation of manufacturers.

It’s maybe the fact that we keep buying what they make because no-one is offering an alternative. Unless you want to go from the same place, to the same place, at the same time, as 500 other people a train is not an alternative. Even buses are too inflexible in when and where they go to exist without public subsidy. We buy cars then because they suit our needs, but innovation should still occur when there is competition and market feedback.

However, car makers only get market feedback from each individual consumer once every 3-7 years or longer. Suppose that instead of having to choose and finance a car say every five years and live with the choice you have made, there were many more, very local, places where you could rent a car for a few hours or days. You could rent a small one for local chores, a bigger one for holidays, a convertible for days out. If this were slickly managed, cheap enough, and combined with a delivery and collection service why would you want to own a car? Over time, the stock of cars held, and the numbers bought would probably halve.

More importantly, with people making a decision about choosing a car several times a month, rather than once every five years or so, consumer feedback to manufacturers would multiply more than a hundredfold. Even small differences in preference would assume importance, as would the performance of what was on offer. Small, local manufacturers would be at much less of a disadvantage, balancing much better local knowledge of preferences against the lack of economies of scale. Innovation and progress would flourish, because the lack of progress in car development is not due to a lack of technology, but a lack of information which only the market can provide.