Fooled by Randomness

I just finished reading Fooled by Randomness by Nassim Nicholas Taleb. I read his later book, The Black Swan, and because I enjoyed both his irreverent style and his logical arguments, thought I might also like this book. I did.

In brief, his point is that humans are ruled by their emotions even when they know better, and, in fact, if we did not have our emotions to help guide us, we would find it difficult to make even the most basic decisions. However, we often spend a lot of time fitting random noise in the world, such as the stock market going up or down just a few points, to some seemingly logical story, such as "The market was down today on worries about the job market." We're hard-wired to try to fit facts into causal stories, and then store these stories in our memory rather than the random facts. And when we do this, we can find ourselves in a lot of trouble.

Taleb's book in many ways is a collection of short, highly readable, highly engaging essays, and he spares no effort in skewering what he considers pseudosciences trying to apply the wrong tools and wrong approaches to problems. (He treats economists in particular without mercy.)

Taleb's writing style is very conversational, and even if you don't agree with all of his conclusions, his essays are very engaging and approachable.

Motivation and the annual raise

The University of Michigan has an annual rite: Departments and organizations are allocated a pool of money, typically some small fraction of the total salaries in that department or organization, and managers assign some portion of it to each staff member as an annual increase in base pay. The overall increases are not large by any means, and it isn't that unusual for people to view it almost as a cost-of-living increase.


Along this same topic, I've also been reading a book called Drive written by a gent named Daniel Pink. The book is an interesting read and essentially argues that reward-based systems are just great for mechanical, repetitive work, but actually have the opposite effect if the work requires any sort of creativity whatsoever. In particular, when there is a task or project at hand, it kills performance when there is some type of "IF-THEN" statement made up front, like: "IF you deliver the solution quickly and correctly, THEN you will get a bigger reward." He makes a pretty compelling case.

There's a nice video from TED where Pink presents the core argument from his book too. He's a good speaker, and even if you've read the book, the video is also worth watching.

And so I've been thinking about how Pink's advice in Drive relates to this annual rite at Michigan.

One possible scenario is that Pink is right, and instead of differentiating raises across different staff, everyone should just get the same increase. All of the tech staff are doing creative work on a daily basis, and since we know cash incentives result in worse performance, that makes the most sense.

Another possible scenario is that Pink is still right, but because this process occurs only once per year, the relationship between the performance on any one job or task is almost wholly unrelated to the increase. I cannot think of a single time where I based an annual increase on a single project or task. And because the increase does not take the form of "IF you do a good job on project X, THEN you will get a better raise", maybe it doesn't apply? Maybe the raise is really saying, "BECAUSE you did such a good job on so many different things over this past year, we're recognizing this with a higher increase"?

He does go on to say that when a reward is given after the fact, and is unexpected, this does have the anticipated result, and is motivating. Maybe a higher annual raise is more like this - unexpected, and more like a thank you?

Rework

I've been reading Rework by the 37signals guys. It's a very fast read, consisting of a series of brief essays grouped into different thematic chapters.

Most of the essays are bracingly irreverent, but I've been finding that many of them contain at least some elements that match my own perceptions having worked at small companies, large companies, and in both the public and private sectors.

Here are a few tidbits from one of my favorites, their essay Meetings are toxic(!).

The worst interruptions of all are meetings. Here's why: ... They require thorough preparation that most people don't have time for. They frequently have agendas so vague that nobody is really sure of the goal...

and

If you decide that you absolutely must get together, try to make your meeting a productive one by sticking to these simple rules: ... Always have a clear agenda. Begin with a specific problem. ...

I've really enjoyed reading this, and would recommend it to almost anyone, but particularly those that work at places that rely heavily on tech.

Good to Great

I recently finished reading Good to Great by Jim Collins. I used to read business-oriented books on a more regular basis when I was working for America Online's ANS Communications division and then UUNET, and it was nice returning to that style.

The subtitle of the book is Why Some Companies Make the Leap... and Others Don't. And while the book is focused on the business world, and a common metric of success such as exceeding the average return in the major stock markets, it would be a mistake to think that this book can't teach us about the not-for-profit world that ICPSR occupies.

One tenet of the story the book tells is that organizations often lose their focus, wander into the weeds, and then suffer failure, sometimes catastrophic failure. The successful companies figure out their core mission, keep it simple, and then slowly but inexorably gain momentum to dominate and win. For example, the book contrasts the story of Gillette and Warner-Lambert. While the former focused squarely on its core, Warner-Lambert flailed between different goals, eventually being swallowed up by Pfizer.

The book refers to this type of focus as the Hedgehog Concept and breaks it into three elements:

1. What you are deeply passionate about
2. What drives your economic engine
3. What you can be the best in the world at

My sense is that this is an important message, particularly for successful organizations. It's easy to grow heady with success and start chasing bigger and more diverse deals, losing focus on what led to success.

Another interesting element of successful organizations was their use of "stop-doing" lists. While all organizations keep track of their "to-do" lists, which get longer and longer and longer and ..., the highly successful organizations made a conscious decisions about what to stop doing. This too resonates with me, and my experience is that if organizations don't make the hard decisions about what to stop doing, they end up spreading their resources too thinly, and then nothing gets done well.

A final interesting item I'll note here is how the budget process is described at highly successful organizations. It isn't an opportunity to ration income across a myriad of areas; rather it is an exercise to decide which areas are core and should be funded fully and completely, and which areas are not core, and should be funded not at all. Once again the root message is about focus.

There are many other very interesting observations from the research behind the book, and I'd recommend it to anyone who plays a leadership role at an organization.