Archive for January, 2005

Tweet In the space of a couple of weeks, there have been several stories focussing on stress. There was news that January 24 is the most depressing day of the year based on a mathematical formula that crunches when the bills come in from Christmas, the average time to have passed before New Year’s resolutions […]

Tweet Racing driver Alex Zanardi is an unusually driven man. In 2001, just a few days after 9/11, he lost both legs in a catastrophic accident, where his car was hit at 190mph as it emerged out-of-control from a pitstop. Equipped with highly articulated prosthetic limbs he has not only walked again, but returned to […]

Norah Jones sold 20 million albums as a new signing to EMI, but her second record’s global sales are just short of 10 million. In an interview with the boss of EMI’s Jazz Classics label, the FT today illustrates how success can go to the collective executive head. Bruce Landvall indicates that one of his superiors was completely confident that the second album would sell 20 million records just off the bat. This must be an experienced person working in a notoriously fickle business, so it is interesting to consider why someone in such a position should be such a willing victim to the old saying of “the triumph of hope over experience.”

In mathematics, this kind of retracement from an unusually high point is called “regression to the mean:” the gravitational pull of the average is very powerful in all areas of nature. But for some reason, and it must usually be fear or greed, this rational understanding of the natural order of things, and the inability of success to constantly outpace itself, gets suspended, especially in business.

A retired executive the other day told of a similar dynamic to the Jones phenomenon in a board level discussion to set sales targets for the period going into the 1990, a period that marked the beginning of a deep recession. The board was unanimous, (except for this executive), that sales targets should be set higher than the previous successful year. The executive argued that the business had always followed the economic cycle, and had never been able to grow market share faster than the manufacturer whose sales franchise they owned. This caution was dismissed, as was the executive later the following year when he failed to meet the new sales targets, despite his own record sales the previous year. The executive who replaced him in the short run seemed to be succeeding, but word eventually reached the manufacturer that the way he was presenting his own sales figures to qualify for bulk discounts might not have been all they appeared to have been. There was an audit, the figures were shown to be cooked (not just in the lean years, but in the good years too.) Sales later fell back and the company lost the franchise completely.

Performance managers and investors need to understand that real, sustainable success is not achieved by a straight line. Unfortuantely, our loss aversion bias, makes us poorly equipped to accept the necessary retracement in performance, from which subsequent higher performance can be achieved.

Athletic training offers a very tangible metaphor. A runner must modulate his/her training load during a week, with hard and more relaxed recovery exercises, and from week to week, there must be modulation too. Without that, you get “blow up”, which normally manifests itself in injury that can last weeks and months.

Donate and help me buy back my Fender ('About' tells you why)

No tag for this post.

The question of Einstein’s brain and the source of his genius was presented on Channel 4, Monday Jan 17. Typical of more and more pop science programmes this was as much about style as substance, but this was another reflection of a growing obsession with how the brain works, generated by technical developments such as magnetic resonance (responsible for the neuroscientific explanations of economic behaviour of the earlier post.)

Einstein spoke late as an infant, suggesting, according to one contributor, that he had autistic tendences. Another proposition was that he was synaesthetic, a capacity where two senses are intertwined like colour and number–a fact confirmed by his own observation. As another post discussed, synaesthesia is believed to be at the root of our power with language through the use of metaphor.

That genius, or even the high levels of creativity we might more regularly meet in day to day life, may have observable sources in such behavioural phenomenon should give managers and investors pause. Such behaviours frequently don’t find easy expression in business life as they are seen to get in the way, even though their presence may be essential to long-term success.

Donate and help me buy back my Fender ('About' tells you why)

No tag for this post.

Behaviouralists like Kahneman, Tversky, Thaler et al have demonstrated using field experiments that the economic decisions we make will vary depending on how their potential outcome is framed. In other words, the idea of loss and gain affects us differently. Essentially, we are loss averse, so if an outcome is framed as a potential loss we will chose differently than if it is described as a profit. Neuroscience, according to the Economist this week, appears to confirm these findings, demonstrating that patterns of activity show different parts of the brain are at work, depending on this framing of loss or gain.

Ultimately, the pressing question is why, despite a wealth of human experience to the contrary, economists have persisted with such a rationalist model of economic behaviour, when every one from Plato (as the Economist observes) to your everyday marketing manager knows that is not the way people think and act.

What further compounds this paradox is, despite classical economists famously’ disastrous record for forecasting, their levels of employment show no signs of declining; likewise our readiness to cling to the certainties they produce. No doubt a simple matter of supply and demand, as they would have it.

Donate and help me buy back my Fender ('About' tells you why)

No tag for this post.

the knackered hack

Tim Penn
Alltop, confirmation that I kick ass

free updates by email

t-shirts for tired writers

Support This Site

knackered eye view

www.flickr.com
This is a Flickr badge showing public photos from knackeredhack. Make your own badge here.

Kino’s Viktor Tsoi

Kino's Tsoi
Close
E-mail It
Socialized through Gregarious 42
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
This work by Tim Penn is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported.
make PrestaShop themes