The Bitcoin whitepaper was published on 31 October 2008, ten years ago today.
Amazon’s Jeff Bezos on decision making, in his 2016 Annual Letter to shareholders:
Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.
First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.
Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.
This isn’t one way. If you’re the boss, you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told the team my view: debatable whether it would be interesting enough, complicated to produce, the business terms aren’t that good, and we have lots of other opportunities.They had a completely different opinion and wanted to go ahead. I wrote back right away with “I disagree and commit and hope it becomes the most watched thing we’ve ever made.” Consider how much slower this decision cycle would have been if the team had actually had to convince me rather than simply get my commitment.
Note what this example is not: it’s not me thinking to myself “well, these guys are wrong and missing the point,but this isn’t worth me chasing.” It’s a genuine disagreement of opinion, a candid expression of my view, achance for the team to weigh my view, and a quick, sincere commitment to go their way. And given that this team has already brought home 11 Emmys, 6 Golden Globes, and 3 Oscars, I’m just glad they let me in the roomat all!
Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.
I’ve seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages – that was a big one. Many smart,well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.
“You’ve worn me down” is an awful decision-making process. It’s slow and de-energizing. Go for quick escalation instead – it’s better.
So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.”
Two buskers practicing, Tavistock Street, Covent Garden, London, this morning. They each had three skittles, and threw one up with their right hand at the first and second beat of three beats, while throwing a skittle to the other juggler on the third beat. The other juggler caught the thrown skittle with his left hand. They stopped practicing as soon as they saw me take this photo.
In late 2014, the first edition of DevCon (labelled DevCon0, in computing fashion), the Ethereum developers conference held in Berlin had a dozen or so participants. A year later, several hundred people attended DevCon1 in the City of London. The participants were a mix of pony-tailed hacker libertarians and besuited, besotted bankers, and I happened to speak at the event. Since New Year, I have participated in a round-table discussion on technology and entrepreneurship with a Deputy Prime Minister of Singapore, previewed a smart contracts project undertaken by a prominent former member of Anonymous, briefed a senior business journalist on the coming revolution in financial and regulatory technology, and presented to 120 people at a legal breakfast on distributed ledgers and blockchains. That audience was, as it happens, the quietest and most attentive I have ever encountered.
For only the second time in my adult life, we are experiencing a great dramatic sea-change in technology infrastructure, and this period feels exactly like the early days of the Web. In 1994-1997, every corporation and their sister was intent on getting online, but most did not know how, and skills were scarce. Great fortunes were to be made in clicks and mortar: IBM took out full-page ads in the WSJ offering to put your company online in only 3 months and for just $1 million! Today, sisters are urging investment in blockchains, and as much as $1 billion of venture funding went to blockchain and Bitcoin startups in 2015 alone.
The Web revolution helped make manifest the Information Society, by putting information online and making it easily accessible. But, as I have argued before, most real work uses information but is not about information per se. Rather, real work is about doing stuff, getting things done, and getting them done with, by, and through other people or organizations. Exchanges, promises, and commitments are as important as facts in such a world. The blockchain revolution will manifest the Joint-Action Society, by putting transactions and commitments online in a way that is effectively unrevokable and unrepudiable. The leaders of this revolution are likely to arise from banking and finance and insurance, since those sectors are where the applications are most compelling and the business needs most pressing. So expect this revolution to be led not from Silicon Valley, but from within the citadels of global banking: New York and London, Paris and Frankfurt, and perhaps Tokyo and Singapore.
At the first Internet of Things and Distributed Ledgers Hackathon, Barclays Rise Hackspace, Notting Hill, London, 7 November 2015.
One annoying feature of the verbal commentariat is their general lack of real-world business experience. A fine example has just been provided by political blogger Marbury, who derides Gordon Brown for not asserting himself when Prime Minister over his Cabinet Secretary on the matter of an enquiry into voicemail hacking at certain newspapers.
Well, to be fair to Gordon Brown, Marbury has clearly never led an organization and tried to force the people below him to do something they adamantly oppose doing. No doubt, Brown when PM could have ordered the Cabinet Secretary to implement a public enquiry, but every single person in the chain of command could then have: (a) leaked the CabSec’s advice opposing the instruction, and/or (b) exercised their pocket veto to delay or prevent the enquiry happening, and/or (c) implemented it in a way which backfired upon Brown and the Cabinet. No rational manager tries to execute a policy his own staff vehemently oppose, even when, as appears to be the case here, he knows he has morality, the law, good governance, and the public interest all on his side.
What are models for? Most developers and users of models, in my experience, seem to assume the answer to this question is obvious and thus never raise it. In fact, modeling has many potential purposes, and some of these conflict with one another. Some of the criticisms made of particular models arise from mis-understandings or mis-perceptions of the purposes of those models, and the modeling activities which led to them.
Liking cladistics as I do, I thought it useful to list all the potential purposes of models and modeling. The only discussion that considers this topic that I know is a brief discussion by game theorist Ariel Rubinstein in an appendix to a book on modeling rational behaviour (Rubinstein 1998). Rubinstein considers several alternative purposes for economic modeling, but ignores many others. My list is as follows (to be expanded and annotated in due course):
- 1. To better understand some real phenomena or existing system. This is perhaps the most commonly perceived purpose of modeling, in the sciences and the social sciences.
- 2. To predict (some properties of) some real phenomena or existing system. A model aiming to predict some domain may be successful without aiding our understanding of the domain at all. Isaac Newton’s model of the motion of planets, for example, was predictive but not explanatory. I understand that physicist David Deutsch argues that predictive ability is not an end of scientific modeling but a means, since it is how we assess and compare alternative models of the same phenomena. This is wrong on both counts: prediction IS an end of much modeling activity (especially in business strategy and public policy domains), and it not the only means we use to assess models. Indeed, for many modeling activities, calibration and prediction are problematic, and so predictive capability may not even be possible as a form of model assessment.
- 3. To manage or control (some properties of) some real phenomena or existing system.
- 4. To better understand a model of some real phenomena or existing system. Arguably, most of economic theorizing and modeling falls into this category, and Rubinstein’s preferred purpose is this type. Macro-economic models, if they are calibrated at all, are calibrated against artificial, human-defined, variables such as employment, GDP and inflation, variables which may themselves bear a tenuous and dynamic relationship to any underlying economic reality. Micro-economic models, if they are calibrated at all, are often calibrated with stylized facts, abstractions and simplifications of reality which economists have come to regard as representative of the domain in question. In other words, economic models are not not usually calibrated against reality directly, but against other models of reality. Similarly, large parts of contemporary mathematical physics (such as string theory and brane theory) have no access to any physical phenomena other than via the mathematical model itself: our only means of apprehension of vibrating strings in inaccessible dimensions beyond the four we live in, for instance, is through the mathematics of string theory. In this light, it seems nonsense to talk about the effectiveness, reasonable or otherwise, of mathematics in modeling reality, since how we could tell?
- 5. To predict (some properties of) a model of some real phenomena or existing system.
- 6. To better understand, predict or manage some intended (not-yet-existing) artificial system, so to guide its design and development. Understanding a system that does not yet exist is qualitatively different to understanding an existing domain or system, because the possibility of calibration is often absent and because the model may act to define the limits and possibilities of subsequent design actions on the artificial system. The use of speech act theory (a model of natural human language) for the design of artificial machine-to-machine languages, or the use of economic game theory (a mathematical model of a stylized conceptual model of particular micro-economic realities) for the design of online auction sites are examples here. The modeling activity can even be performative, helping to create the reality it may purport to describe, as in the case of the Black-Scholes model of options pricing.
- 7. To provide a locus for discussion between relevant stakeholders in some business or public policy domain. Most large-scale business planning models have this purpose within companies, particularly when multiple partners are involved. Likewise, models of major public policy issues, such as epidemics, have this function. In many complex domains, such as those in public health, models provide a means to tame and domesticate the complexity of the domain. This helps stakeholders to jointly consider concepts, data, dynamics, policy options, and assessment of potential consequences of policy options, all of which may need to be socially constructed.
- 8. To provide a means for identification, articulation and potentially resolution of trade-offs and their consequences in some business or public policy domain. This is the case, for example, with models of public health risk assessment of chemicals or new products by environmental protection agencies, and models of epidemics deployed by government health authorities.
- 9. To enable rigorous and justified thinking about the assumptions and their relationships to one another in modeling some domain. Business planning models usually serve this purpose. They may be used to inform actions, both to eliminate or mitigate negative consequences and to enhance positive consequences, as in retroflexive decision making.
- 10. To enable a means of assessment of managerial competencies of the people undertaking the modeling activity. Investors in start-ups know that the business plans of the company founders are likely to be out of date very quickly. The function of such business plans is not to model reality accurately, but to force rigorous thinking about the domain, and to provide a means by which potential investors can challenge the assumptions and thinking of management as way of probing the managerial competence of those managers. Business planning can thus be seen to be a form of epideictic argument, where arguments are assessed on their form rather than their content, as I have argued here.
- 11. As a means of play, to enable the exercise of human intelligence, ingenuity and creativity, in developing and exploring the properties of models themselves. This purpose is true of that human activity known as doing pure mathematics, and perhaps of most of that academic activity known as doing mathematical economics. As I have argued before, mathematical economics is closer to theology than to the modeling undertaken in the natural sciences. I see nothing wrong with this being a purpose of modeling, although it would be nice if academic economists were honest enough to admit that their use of public funds was primarily in pursuit of private pleasures, and any wider social benefits from their modeling activities were incidental.
POSTSCRIPT (Added 2011-06-17): I have just seen Joshua Epstein’s 2008 discussion of the purposes of modeling in science and social science. Epstein lists 17 reasons to build explicit models (in his words, although I have added the label “0” to his first reason):
1. Explain (very different from predict)
2. Guide data collection
3. Illuminate core dynamics
4. Suggest dynamical analogies
5. Discover new questions
6. Promote a scientific habit of mind
7. Bound (bracket) outcomes to plausible ranges
8. Illuminate core uncertainties
9. Offer crisis options in near-real time. [Presumably, Epstein means “crisis-response options” here.]
10. Demonstrate tradeoffe/ suggest efficiencies
11. Challenge the robustness of prevailing theory through peturbations
12. Expose prevailing wisdom as imcompatible with available data
13. Train practitioners
14. Discipline the policy dialog
15. Educate the general public
16. Reveal the apparently simple (complex) to be complex (simple).
These are at a lower level than my list, and I believe some of his items are the consequences of purposes rather than purposes themselves, at least for honest modelers (eg, #11, #12, #16).
Joshua M Epstein : Why model? Keynote address to the Second World Congress on Social Simulation, George Mason University, USA. Available here (PDF).
Robert E Marks : Validating simulation models: a general framework and four applied examples. Computational Economics, 30 (3): 265-290.
David F Midgley, Robert E Marks and D Kunchamwar : The building and assurance of agent-based models: an example and challenge to the field. Journal of Business Research, 60 (8): 884-893.
Robert Rosen : Anticipatory Systems. Pergamon Press.
Ariel Rubinstein : Modeling Bounded Rationality. Cambridge, MA, USA: MIT Press. Zeuthen Lecture Book Series.
Ariel Rubinstein : Dilemmas of an economic theorist. Econometrica, 74 (4): 865-883.
New York Times Op-Ed writer, David Brooks, has two superb articles about the skills needed to be a success in contemporary technological society, the skills I refer to as Getting-Things-Done Intelligence. One is a short article in The New York Times (2011-01-17), reacting to the common, but wrong-headed, view that technical skill is all you need for success, and the other a long, fictional disquisition in The New Yorker (2011-01-17) on the social skills of successful people. From the NYT article:
Practicing a piece of music for four hours requires focused attention, but it is nowhere near as cognitively demanding as a sleepover with 14-year-old girls. Managing status rivalries, negotiating group dynamics, understanding social norms, navigating the distinction between self and group — these and other social tests impose cognitive demands that blow away any intense tutoring session or a class at Yale.
Yet mastering these arduous skills is at the very essence of achievement. Most people work in groups. We do this because groups are much more efficient at solving problems than individuals (swimmers are often motivated to have their best times as part of relay teams, not in individual events). Moreover, the performance of a group does not correlate well with the average I.Q. of the group or even with the I.Q.’s of the smartest members.
Researchers at the Massachusetts Institute of Technology and Carnegie Mellon have found that groups have a high collective intelligence when members of a group are good at reading each others’ emotions — when they take turns speaking, when the inputs from each member are managed fluidly, when they detect each others’ inclinations and strengths.
Participating in a well-functioning group is really hard. It requires the ability to trust people outside your kinship circle, read intonations and moods, understand how the psychological pieces each person brings to the room can and cannot fit together.
This skill set is not taught formally, but it is imparted through arduous experiences. These are exactly the kinds of difficult experiences Chua shelters her children from by making them rush home to hit the homework table.”
These articles led me to ask exactly what is involved in reading a social situation? Brooks mentions some of the relevant aspects, but not all. To be effective, a manager needs to parse the social situation of the groups he or she must work with – those under, those over and peer groups to the side – to answer questions such as the following:
- Who has power or influence over each group? Is this exercised formally or informally?
- What are the norms and practices of the group, both explicit and implicit, known and unconscious?
- Who in the group is reliable as a witness? Whose stories can be believed?
- Who has agendas and what are these?
- Who in the group is competent or capable or intelligent? Whose promises to act can be relied upon? Who, in contrast, needs to be monitored or managed closely?
- What constraints does the group or its members operate under? Can these be removed or side-stepped?
- What motivates the members of the group? Can or should these motivations be changed, or enhanced?
- Who is open to new ideas, to change, to improvements?
- What obstacles and objections will arise in response to proposals for change? Who will raise these? Will these objections be explicit or hidden?
- Who will resist or oppose change? In what ways? Who will exercise pocket vetos?
Parsing new social situations – ie, answering these questions in a specific situation – is not something done in a few moments. It may take years of observation and participation to understand a new group in which one is an outsider. People who are good at this may be able to parse the key features of a new social landscape within a few weeks or months, depending on the level of access they have, and the willingness of the group members to trust them. Good management consultants, provided their sponsors are sufficiently senior, can often achieve an understanding within a few weeks. Experience helps.
Needless to say, most academic research is pretty useless for these types of questions. Management theory has either embarked on the reduce-and-quantify-and-replicate model of academic psychology, or else undertaken the narrative descriptions of successful organizations of most books by business gurus. Narrative descriptions of failures would be far more useful.
The best training for being able to answer such questions – apart from experience of life – is the study of anthropology or literature: Anthropology because it explores the social structures of other cultures and the factors within a single lifetime which influence these structures, and Literature because it explores the motivations and consequences of human actions and interactions. The golden age of television drama we are currently fortunate to be witness to also provides good training for viewers in human motivations, actions and interactions. It is no coincidence, in my view, that the British Empire was created and run by people mostly trained in Classics, with its twofold combination of the study of alien cultures and literatures, together with the analytical rigor and intellectual discipline acquired through the incremental learning of those difficult subjects, Latin and Ancient Greek languages.
UPDATE (2011-02-16): From Norm Scheiber’s profile of US Treasury Secretary Timothy Geithner in The New Republic (2011-02-10):
“Tim’s real strength … is that he’s really quick at reading the culture of any institutions,” says Leslie Lipschitz, a former Geithner deputy.
The profile also makes evident Geithner’s agonistic planning approach to policy – seeking to incorporate opposition and minority views into both policy formation processes and the resulting policies.
Some excerpts from an ethnographic study of the operations of a Wall Street financial trading firm, bearing on distributed cognition and joint-action planning:
This emphasis on cooperative interaction underscores that the cognitive tasks of the arbitrage trader are not those of some isolated contemplative, pondering mathematical equations and connected only to to a screen-world. Cognition at International Securities is a distributed cognition. The formulas of new trading patterns are formulated in association with other traders. Truly innovative ideas, as one senior trader observed, are slowly developed through successions of discreet one-to-one conversations.
. . .
An idea is given form by trying it out, testing it on others, talking about it with the “math guys,” who, significantly, are not kept apart (as in some other trading rooms), and discussing its technical intricacies with the programmers (also immediately present).” (p. 265)
The trading room thus shows a particular instance of Castell’s paradox: As more information flows through networked connectivity, the more important become the kinds of interactions grounded in a physical locale. New information technologies, Castells (2000) argues, create the possibility for social interaction without physical contiguity. The downside is that such interactions can become repititive and programmed in advance. Given this change, Castells argues that as distanced, purposeful, machine-like interactions multiply, the value of less-directd, spontaneous, and unexpected interactions that take place in physical contiguity will become greater (see also Thrift 1994; Brown and Duguid 2000; Grabhar 2002). Thus, for example, as surgical techniques develop together with telecommunications technology, the surgeons who are intervening remotely on patients in distant locations are disproportionately clustering in two or three neighbourhoods of Manhattan where they can socialize with each other and learn about new techniques, etc.” (p. 266)
“One examplary passage from our field notes finds a senior trader formulating an arbitrageur’s version of Castell’s paradox:
“It’s hard to say what percentage of time people spend on the phone vs. talking to others in the room. But I can tell you the more electronic the market goes, the more time people spend communicating with others inside the room.” (p. 267)
Of the four statistical arbitrage robots, a senior trader observed:
“We don’t encourage the four traders in statistical arb to talk to each other. They sit apart in the room. The reason is that we have to keep diversity. We could really hammered if the different robots would have the same P&L [profit and loss] patterns and the same risk profiles.” (p. 283)
Daniel Beunza and David Stark : Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room. In: Trevor Pinch and Richard Swedborg (Editors): Living in a Material World: Economic Sociology Meets Science and Technology Studies. Cambridge, MA, USA: MIT Press. Chapter 8, pp. 253-290.
M. Castells : The Information Age: Economy, Society and Culture. Blackwell, Second Edition.