In “The Politics Of Projects“, Robert Block rightly states: “People want products, not projects“. The ideal project takes zero time, no labor, and no financial investment. The holy grail is to transition from abstract desire to concrete outcome in no time flat :). Nevertheless, for any non-trivial product development effort requiring a diverse team of people to get the job done, some sort of project (or, “coordinated effort” for you #noprojects advocates) is indeed required. Whether self-organized or dictator-directed, there has to be some way of steering, focusing the effort of a team of smart people to achieve the outcomes that a project is expected to produce.
At the simplistic BD00 level of comprehension, a project is one of two binary types: a potential revenue generator or a potential cost reducer.
Startups concentrate solely on projects that raise revenue. At this stage of the game, not a second thought is given to cost-reduction projects – the excitement of creating value reigns. As a startup grows and adds layers of “professional” management to control the complexity that comes with that growth, an insidious shift takes place. The mindset at the top flips from raising revenue to reducing costs and increasing efficiency. In large organizations, every employee has experienced multiple, ubiquitous, top-down “cost reduction initiatives“, the worst of which is the dreaded reduction-in-force initiative. On the other hand, org-wide initiatives to increase revenues are rare.
Since his philosophical ideas are refreshingly new, counter-intuitive, and mind-boggingly deep, I decided to re-read all four of Nassim Taleb’s books. I just finished re-reading “Antifragile” and am now well into my second pass through “The Black Swan“.
As with all good books that resonate with me, I find that re-reading them brings new learning, excitement, and joy. It’s almost like I’m reading them for the first time.
The reason I’m magnetically drawn to Mr. Taleb’s work is because his mission is truly noble and humanitarian. It is to make the world a better place by creating a system in which so-called elites (e.g. economists, politicians, academicians, Harvard-trained managers, high frequency traders) with no “skin in the game” cannot harm millions who follow their predictions/advice/policies without being harmed themselves. Requiring big-wigs to place some “skin in the game” (Mr. Expert, does the content f your portfolio align with your forecasts/advice?) precludes the alarming and increasingly asymmetric transfer of anti-fragility from regular Joe Schmoes like you and me to smug, self-serving elites.
In case you are new to the concept of antifragility, consider the figure below. A fragile system is one in which, as the magnitude of an external stressor is applied, the harm it experiences increases non-linearly. An antifragile system is the exact opposite. It is more than simply resilient or robust. It actually gains from volatility (up to a point, of course).
Since you can’t know what’s going to happen in the next five minutes, let alone far into the future, you can’t guarantee your own personal antifragility. But you can take concrete action to reduce your fragility and minimize the risk of someone stealing whatever antifragility you do have. Eliminating debt decreases fragility. Adding redundancy (e.g. two kidneys, two lungs) and “having options” reduce fragility. Government bailouts transfer antifragility from taxpayers to executives and shareholders. Lack of term limits transfers antifragility from voters to politicians. Corporate mergers and buyouts transfer antifragility from employees to executives. Increasing size and centralization increases fragility. Lack of exercise increases fragility. Long periods of obsessively manufactured stability increase fragility. The ultimate fragilizer, and the one in which we can only accept, is…….. TIME.
I’m currently designing/writing the software component of a new air surveillance radar data processor that interfaces the radar to an existing, legacy combat control system. In order to test the software, I have to interact with the combat system’s GUI to issue radar commands and ensure that detected targets are received and displayed properly on the combat system display.
As the figure above shows, the acronym “SS2000” appears prominently on the GUI display. When I saw it for the first time, a sense of deja-vu came over me, but I couldn’t figure out why. After a few days of testing, I experienced an AHA! epiphany. Out of the blue, I suddenly remembered where I saw “SS2000” before. Ding!
Ya see, back in the early 2000’s, I read a Software Engineering Institute (SEI) case study on the concept of “software product lines“. It featured a Swedish company called “Celsius Tech“. The report meticulously described how Celsius Tech painfully transformed itself in the 90’s from an expensive developer of one-off naval combat systems into an efficient, low cost, high quality, producer of systems. Instead of starting from scratch on each new system development, Celsius Tech “instantiated” each new system from an in-place, reusable set of product line assets (code and requirements/design/test documentation) that they diligently built upfront.
I was so enamored with Celsius Tech’s technical and financial success with the concept of software product lines that I concocted an executive summary of the report and aggressively pitched it internally to everyone and anybody who would listen. But alas, I utterly failed to jumpstart an internal effort to transform my employer at the time, Sensis Corp., into a software product line enterprise.
The name of Celsius Tech’s software product line infrastructure was…… SS2000 = Ship System 2000! But wait, the story gets eerily better. Celsius Tech was subsequently purchased by Swedish defense company Saab AB (yes, they used to make cars but they sold off that business a long time ago) – the same company that bought my employer, Sensis Corp., in 2011. As a result of the buyout, I currently work for Saab Sensor Systems. Quite the coincidence, no?
When a control system is humming along, the gap between the desired and current states is so small that the frequency of command issuance by the Decision Maker component is essentially zero; all is well and goal attainment is on track. However, with the universe being as messy as it is, unseen and unpredictable “disturbances” can, and do, enter the system at any point of access to the structure.
If the sensors and/or actuators can’t filter out the disturbances or are malfunctioning themselves, then true control of the production system may be lost. Perceptions and commands get distorted and the distance between goal attainment and “reality” will be perceived as shorter or longer than they are. D’oh! I hate when that happens.
W00t! The pre-release version of Scott Meyers’ “Effective Modern C++” book is currently available to SafariBooksOnline subscribers:
In case you were wondering, here is the list of items Scott covers:
I’m currently on item number 11. What item are you on? :P
In case you were wondering what the hell the title of this post has to do with the content of it, here’s the missing piece of illogic:
Check out these three financial portfolio performance graphs from Mr. Nassim Taleb:
A fragile portfolio is one which is prone to getting decimated by a rare, unpredictable, event (a.k.a. a Black Swan). A robust portfolio is one which is relatively immune to the effects of a devastating Black Swan. An antifragile portfolio is one which experiences spectacular gains from a Black Swan.
Mr. Taleb asserts that the world’s financial system has been (since the 80’s when we first started bailing out banks), and still is, fragile. As long as bankers know that we, the taxpaying public, will continue to shoulder the cost when they blowup because they are too big too fail, they will continue to exhibit incompetent, reckless, risky behavior backed by bogus PhD calculations. They get their perennial bonuses before each big bust for “doing well“, but aren’t forced to give them back when they lose more money in an instant from a Black Swan than all the profits they’ve ever made previously in the history of banking. It’s a no-brainer with all upside and no downside. What a life… if you don’t have a conscience.
So, how do you construct a anti-fragile portfolio? According to Mr. Taleb, you allocate 80% of your portfolio to “cash” and 20% to wildly speculative investments. It’s called the barbell strategy – weighted investments at both ends of the risk spectrum and nothing in the middle. In the worst case, you’ll lose the full 20%, but the sky is the limit if you’re right with your speculative investment choices. The challenges are:
- To muster up the nerve to actually go against what the mindless “portfolio theory” trained herd says and reallocate your currently fragile portfolio,
- Figure out exactly what Nassim means by “cash” (no, it’s not a savings account at Citibust or Bank Of Nightmerica),
- Decide on which speculative financial instruments to invest in (gold/metals? commodities? real estate? “other”?) .
BD00 knows what these challenges are because, as an unsophisticated investor, he’s struggling to conquer them himself. WTF!