Fix your flow, not the stock

I have been taking some interest in sports recently. This got triggered by the significant capital overlay for new shoes and rackets to support my sons’ style over substance pursuit of tennis coaching. I am indulging my children nevertheless, having seen the wisom levels of those who play sports in their childhood being far greater than the ones who did not. Like so facets of life I am late starter.
So I jumped up to notice when Boris Becker filed for bankruptcy. How could some one with significant wealth, talent and fame go bankrupt?

I turned to a concept from systems thinking – stock and flow – to make sense of this.

Stock is anything that is accumulated (water level, bank balance, inventory, good will) and flow either increments or decrements (monthly salary, expenses, sales). Any system can be understood as an interplay of stocks, flows and the feedback loops among those.

bathtub-stock-flow-diagram500px-Principle_feedback_loops.svg

Most people gravitate towards measuring the stock levels (no wonder most startups over index on valuation). It is more tangible and easier to compare. It often dulls us to ignore the critical role played by flow (or even more so feedback loops and delays).

If I were to ask you how fill a water tub, you are more likely to say the tap should be turned up and not think about stopping the leakage. Even if flow is understood, most of us are biased towards overestimating impact of incoming flows and underestimating outgoing flows.

No one wonder anyone will understand their salaries much more precisely than expenses. There is a lot of truth in the age old wisdom of  ‘it’s not how much u earn, but how much u save is what matters’.

Unless one understands and actively manages the flows, to in turn affect the stock levels, you are just clutching at an effect than the cause of a stock level.

Another trap related to flows is role of delay. Most of us tend to be very poor in estimating the time it takes replenish stock levels by not understanding the flow levels and the time to naturally modify them.

If your savings are off or health levels are down – do you understand that while temporary measures change the stock levels, sustainable solutions need to take into account how the flow levels are to be permanently improved.

So getting back to the sad story about Boris Becker. He didn’t become a world champion in a day nor did he go bankrupt.

Head winds / tail winds asymmetry

Do this exercise before you read rest of the post.

Round 1: List in 3 minutes all the head winds and tail winds in ur life.

Round 2: Them double the number of tail winds in 2 minutes.

Round 3: Double them in 2 minutes more.

Count the # of  head winds and tail winds after each round.

Typically the # of head winds and # of tail winds are very similar or the former is more at the end of round 1.

At the end of three rounds, most people were surprised to remind themselves the # of tail winds in their lives. And how they underestimate them.

Why is it that people easily recognize head winds in their lives more than tail winds? When they do people mostly recognize ‘other people’ than ‘systems / environments / intangibles’  in tail winds. And vice versa in head winds.

Why this asymmetry?

Listen to this NPR talk on Why is my life so hard? or read the transcript

What do you think about this concept?

What would you do with this asymmetry?

References:

  1. Talk on Head winds / tail winds asymmetry by Dr. Thomas Gilovich
  2. NPR talk – Why is my life so hard?
  3. Life’s headwinds and tail winds

Personalisation in Android

I keep thinking about why Android is Free.

The Apple vs. Google vs. Microsoft battle for the device OS is fascinating to watch. I am sure there are strengths each bring to the table. In the case of Google personalisation is probably one of those.

It seems with a mobile device there is a lot more personal information being share with Google – way more than thru the desktop. Google accounts seem to “network enable” an Android phones and link every search, every email and every app download with location information and other personal preferences.

Google is building a personal relationship with you … to make information available just the way you like it. For example Google Now is trying to proactively suggest restaurant reviews and directions based on the last search. Given there are many reasons to interact with Google – Search, Gmail, YouTube, Maps, Picassa (alas not Google+ yet) … there are more ways to figure out what you want.

Isn’t personalisation an exit barrier for holding onto Android users? Isn’t this personalisation at a scale never attempted before?

Power of boring execution

How did Obama win so easily in what was predicted to be a close election? Some fascinating lessons for any business

#1. Overnight success built over 8 years

Obama’s victory is a lot to do with the power of execution than with vision and great speeches like last time. Democrats out organised and out reached their supporters. In a way their over night success was 8 years in the making. The databases, the demographic analytics and on the field volunteers.

#2. Customer segmentation and targetting

If the strategy was to focus on the poor / middle class voters and certain segments of likely voters based on race – everything about the first term presidency now looks like targeting that segment. In the end no one can be all things to all people (not with standing the 47% remarks)

#3. Pace yourself

There are good days and bad days. But it’s a fascinating lesson in pacing yourself (keep in mind Obama had a day job all thru the campaign)

#4. Strike good partnerships

Who can question the credibility and connect Bill Clinton brought to the campaign?

No big speeches or tag lines this time. Boring boring. The power of boring execution is here to see !!

Learning from RahulG

RahulG is a great lesson for any entrepreneur …

1. You can aim for the moon, dream of reaching the stars and walk with your head in the clouds … but need to keep your feet on the ground – Know his guru Michael Porter taught him the power of grand vision and strategy … but he needs to appreciate the value of cheeky singles and keeping the score board ticking … and boring execution

2. You are only as good as your team – For all his enthusiasm and hard work, the team he projected to rule UP if they win wasn’t impressive … add to that bad advisors with foot-in-the-mouth disease !!

3. This is the world of alliances and re-usable libraries … you can’t do everything by yourself … co-opt others to help – Not finding good regional allies in an era of multi-party coalitions is the ultimate killer … true in politics … true in business … need partners.

4. Just do it – Why not just become a minister first, if not the PM … and just do it … how long will he “threaten to take over” … don’t over analyse and be paralysed … just do it.

Ignorance more frequently begets confidence than does knowledge

Charles Darwin noted “Ignorance more frequently begets confidence than does knowledge

Nobel prize winning psycho analysts defined what is known as the Dunning Kruger effect …

The Dunning–Kruger effect is a cognitive bias in which the unskilled suffer from illusory superiority, mistakenly rating their ability much higher than average. This bias is attributed to a metacognitive inability of the unskilled to recognize their mistakes” See here for more

So if you are an entrepreneur in an area that you have no prior experience or domain knowledge … remember there is an irony in “believe in your self … believe in your idea“.

Account for a learning curve … surround yourself with sources of learning (customers, advisors, field research etc.)

Yes or No? I vote Mu

There are a lot of questions you ask in a startup that can’t be answered with a simple “Yes” or “No“.

Get used to scenarios such as

You don’t know either way, for sure“, “You don’t know enough“, “It’s too early tell“, “Need more data“, “Need more time

In all these cases accept that fact that one needs to “Un-Ask the question“.

In Japanese (and Korean) there is a word called Mu (in Chinese it is Wu) … it’s like NULL value in programming. You could answer Yes, No or Mu ….

a.k.a. Wikipedia on the Mu

The term is often used or translated to mean that the question itself must be “unasked” – “mu” in this sense means to “unask” the question or that no answer can exist in the terms provided.

In Robert M. Pirsig’s 1974 novel Zen and the Art of Motorcycle Maintenance, mu is translated as “no thing”, saying that it meant “unask the question”. He offered the example of a computer circuit using the binary numeral system, in effect using mu to represent high impedance:

For example, it’s stated over and over again that computer circuits exhibit only two states, a voltage for “one” and a voltage for “zero.” That’s silly! Any computer-electronics technician knows otherwise. Try to find a voltage representing one or zero when the power is off! The circuits are in a mu state.

So don’t be afraid to say Mu … it may lead you ask a different question or answer it correctly in time.

So if your investor or employee or neighbour or wife or brother-in-law ask a question like “When will you be profitable” … relax, be confident, smile like a Zen master …. and  just say “Mu