Innovation, economics, society at large – Page 102

Fuzzy risk language

[Antwerp. Seriously.]

In some previous post, I posited that we should move from quantitative (quod non) to qualitative or even intuitive risk management.
And how that may be difficult. ‘cause it is.
As an intermediary step, I propose to build a better language with which to communicate, discuss and calculate (sic) with qualitative risk management.

Because I see a place for a combination of fuzzy logic and wavelet theory, including neural network signal combination functions.
As my time is limited, this time of year, would anyone have pointers to what’s already out there in papers, practical applications, etc..? That could kickstart the discussion. And I’ll return with more, better, more extensive, more thought out stuff on the subject later.

Bit coin: Money bytes sovereignty

[Berlin again, tucked away, much underrated]

Bitcoin’s hopping up and down in ‘real’ currency terms and everyone is happy to declare it all a pyramid game.
It is, but so is any other currency issued on the promise of maybe some future repayment in … the same or another currency. The underlying value of any currency depends on the future income stream of the issuing entity, or intermediate trade for … other currencies, services, or goods. Exactly like Bitcoin.

Except, of course, that ‘normal’ currencies are issued by governments, geography-based entities from the past when geography mattered.
But does it, still, today, much ..? And will it in the near future? Aren’t we already in a blended world, a blended society, where for the lower layers of Maslow’s pyramid we’re still physical entities and hence geography-dependent (safety, water, food, shelter, etc.) but for the higher layers (group belonging, recognition, self-actualisation) we don’t care from where it comes ..? Once our (developed) world develops further, with so much more automated, silicon- rather than carbon-based, intelligence and sentience becoming available, will the importance of the lower layers not diminish ..?
Up to a point, I know, we can’t ‘shed’ the lower layers. Though the Singularity could, almost, and could at least do without us…

But that’s not the point. the point is that if the sovereignty of nations, understood here in the narrow sense to regard the right and possibility to create and issue money at will, backed by a grossly overestimated guarantee (would you dare to guess how often governments have declared insolvent, in the past few centuries alone ..? On the principle, they all were and are equals…), is lost because others can have the same sovereignty and other sovereignties previously reserved for nation-states, why would we still regard nation-states as the highest entities ..?
[You will now point out that some nations of nation/states spring up, e.g., USofA (sic), EU, UN; right, but their structure is just an amalgamated mesh of more of the same]

And, why would we regard what we previously had, as currency, while not understanding Bitcoin and the many others around (see this and that, possibly incomplete), as such, too ..? Or would we need a ‘real’ economy to underpin a currency; where would you draw the line, then..? What would be the link between a currency and its ‘underlying’ economy, what would be the boundaries of the economy, what definition of sovereign debt would we include or not (there’s many definitions; e.g., would we include guarantees?), how would we establish a ‘value’ in what other ‘currency’..? Gold has been dethroned, remember?

So, we need to study harder, and all of us need to understand more, about the nature of money altogether and only then take a look at digital currencies and their merits (or non-). Would anyone have pointers to good in-depth on-line courses or so ..?

The Compliabullies

[Berlin at dusk]

Just a thought: Would investigation and analysis show that the kids that were bullied in prep school and / or (separate hypotheses…) high school, in later life be the ones that end up in Compliance and Risk Management (not being management of risks…!) departments, to take eternal revenge on those that bullied them..?
Because the latter will not have noticed too much the damage they did (they were kids back then) and have merrily gone their own way as they were allowed to be prepped to do. Now, they find themselves being caught in a web by the ones that have frustration embedded deep in their brains at the lower levels that (truly) developed early on, the ones that want to get even by tossing around and beating the innocent puppets into ill-understood compliance with stupid rules.
The bullying instigators, of course, the ones that were behind the scenes, are the big stingers that happily fly straight through the web that catches only the little bugs.

If so, will there be a fix, so much needed, to the totalitarian bureaucracy explosion of the last decade or will the ossification have to go even further before the current economic structures collapse under the weight of their overhead and inproductivity ..?
Sometimes I’m optimistic that the cycle has already reached its peak (see some earlier posts). Sometimes I’m not, and would appreciate your ideas…

Slight update: From Qual to Intu

A slight update to the previous post: What I propse in the end isn’t as much a shift to qualitative risk management as such, but an even further step to intuitive risk management. Yeah, that’s fuzzy. But doable. And will boil down to the sort of ‘real’, normal management that leaders-managers have already practiced throughout the centuries (and certainly in the better parts of the 20th century).
So no worries, the future isn’t all certain but that makes it fun, right ..?

The 15.5 risk

Your 15.5 risk is of no interest at all! I have a 15.6 risk! Hm, I only have a 13.1
Seriously.
You know you’re doing that. But will you admit it, and learn, and move to something better ..?

[Hi, DC!]

There’s a lot wrong in risk management today. I mean, not only can one still rant about the ‘three lines of defense’ (quod non) as I do regularly on this blog, but one can also dive into the details of how risks are managed, if not when, and find a lot of systemic error and particularly, non-thinking all around.

Let’s start with one core element: weigh(t)ing and comparison of risks. With my guesses, based on decades of experience and science/literature:
Do you include all risks, or just the tiny fraction that your mind can get a hold of? My guess is: The latter. So you miss the vast majority of the risk universe and will be grossly incomplete.
Do you include upside potentials (actions unthought of, and uncontrolled/unsmashed by measures) too? My guess is: No, again you’re incomplete, but also you’re so biased I can’t trust you anymore.
Do you use High-Medium-Low for impacts? My guess is: Yes. Or you use 1-5 scales or so, maybe (sic) even with sort-of indicator thresholds or brackets to determine what goes where. But you don’t realise that impacts can vary, very much so and in time, too. Averages will not do in subsequent calculations or other analysis! You must have (continuous!) impact functions of time and chance. If they’re hard to establish (I’d say: Impossible, given the scarcity of data!), that’s your bad.
Do you use High-Medium-Low for probability (frequency expectations)? My guess is: Yes. Or you use 1-5 scales or so, maybe (sic) even with sort-of indicator thresholds or brackets to determine what goes where. But you don’t realise that probabilities can vary, very much so and in time, too. Averages will not do in subsequent calculations or other analysis! You must have (continuous!) probability functions of time and impact. If they’re hard to establish (I’d say: Impossible, given the scarcity of data!), that’s your bad.
Do you know the difference between statistics and chance calculus? I guess not. Hah, and then you still abuse both ..? Do you know the difference between discrete and continuous mathematics (functions)? If not, you’ll make errors all around. How would you arrive at a 15.5 score when all choices are discrete 1-5 …?
And if you notices the duality of impact functions of probability, and probability functions of impacts; you’re welcome. And if you noticed that on top of this all, you should also calculate (sic) for the cost (impact) of pre-emptive, detective, corrective etc. measures, and the chances of their partial or full (in)effectiveness, in a mesh of cause and effect.
Do you use Impact X Chance to establish severity of risks? Guessed so. But unless you take the whole continuous (!) two-dimensional landscape of every risk into account, you’re gonna fail with certainty.
Do you compare relative risks by their combined scores? Yeah, that indeed was the whole purpose of your exercise. But you failed already on so many points, the results are both literally and figuratively ridiculous
And you continue by considering a ‘15.5’ risk to be worse or higher than some ‘15.4’ risk….

And you don’t consider the enormous mesh of causes and effects (just one by one, or per single event only) with all sorts of feedback and feedforward loops, and the mesh of ‘preventative’, detective and corrective mitigating measures in between, all with their distinct cost(impact!)s, mutual reliance, reinforcements or and other influences, all with their inefficiencies and ineffectiveness (sic) levels – in percentages? In number of incident elements caught and missed?

We may continue. But it’ll lead to more of the same; you’re fooling yourself, and fooling decision makers. Didn’t know that that was in your job description. What would you think would happen if the decision makers would find out?
And oh yes they will! You lead them astray so much, that they will find (you) out about plain wrong negative impact times frequency totals in Write-Offs, and when (not if) they’ll dig deeper, find quite a lot of unnecessary, inefficient and ineffective Risk Mitigation Measures Overhead Cost.

Is there another way? Yes of course.
But it’s not easy. It takes the European (vis-à-vis the wrongly dubbed Anglo-Saxon) approach where the focus is not on data but on qualitative scenarios. As with data, these can be had externally, or internally from experience and insight. As with data, external inputs can be of doubtful relevance and fit. As with data, internal input may (in case of data: will!) be (much) too limited to work with. And yes, going through the motions to determine some risk on all four areas (external vs. internal, data vs. scenario) and finding some gross common denominator, one can get a balanced view on things. But it’ll be balanced over four erroneous outcomes; way to go!
If the outcomes will be understood at all. Value At Risk being the case in point, that would better be called Amount of Company Value Not Being Lost At Some Random Probability. Or so, depending on your working definition and working understanding of VaR…

The only solution seems to be to stop using a quantitative approach and switch to a radical qualitative approach. This may be awkward, but quantities are just so much too weak to describe reality that they are a fly in the face fraud.
And indeed, we we don’t know how to do organisation-wide qualitative risk analysis and management let alone how to do it for meso- and macro-levels, let alone how to communicate, understand and argue about one risk to the next. But we have nothing else that can work; we must. And, it may fit better with the way humans, the human brains, work, with all their psychological ‘flaws’ (quod non!) in the management of risks. Kahnemann, remember? Well, maybe to align with what our brains have gotten used to handle over the aeons, from the savannah to our latter-day deserts of cubicle offices may be the best way to go. And why not? Do you really want to argue that today’s offices differ from hunter-gatherer tribes batteling the elements, predators and prey, and other tribes?

So, qualitative management of risk it is. Any takers?

Is ID you?

[Guess the location]

Your digital ID becomes your pseudo-identity becomes who you are (considered to be), more than your actual you.
Your actual you, your innate identity, the one you discovered when only a couple of years old, will no longer be of interest to the world once your digital identity has all that the world cares about. Then, it can get stolen, lost, manipulated and altered, without you actually needing to notice. But who cares? Your digital ID is, you are just the carbon-based remnants of an outdated world. Just make sure there’s a fallback scenario that you can (or wouldn’t need to) prove you are you, your digital ID isn’t you.
The singularity may do away with you because you only use up scarce resource. You are not productive, your digital identity is. So you should care. Or?

If social media use ‘you’ as a resource, uses your apparent digital ID (ID and all posts, tweets, etc., turned into a persona, sold to all bidders) to operate, can you not deploy some artificial intelligence mechanism to do the socmed postings on your behalf ..? What’s the difference to the socmed companies that not your brain, but an artificial brain is used ..? Or do they already have their own farms of AI personas, to beef up traffic and sellable ‘user’ generated content ..?

Their AI personas may create a world separate from yours, a virtual world where they make money, not needing actual users anymore.
Your personal self may deploy AI to detach from their abusive, you-usurping world.
Case closed?

Why not Necker ..?

[Surprise in the (business) heart of Paris La Défense]

With all the hype about BYOD and the New Way of Working, flexible work place etc. having died down almost to zero, why are we still in offices ..? Why aren’t we all (…?) more like @richardbranson also for our working lives?
We certainly had the time to build a suitable infrastructure where there was none, if only under the guise (as it often is) of helping development (to the ideal level of material-only development that we have ..!?). I mean, cheap or free fast WiFi on any and all tropical beaches. Then, we could al have moved there and live a re-engineered happy life.

Oh, and we would have had to change the way we organise, and manage and control, work. Just a detail. The question seems to be: Why haven’t we?

Probably because of massive societal (level) fear of the Unknown. No, not fear of losing control, that’s just part, and one side, of it. We fear the loss of our warm, established social environment more than the gains of a warm, physically beneficial environment. Even if the gains are larger than the losses (that may be partial or replaced, in this case), fear drives more than hope (risk aversity).

Which may be overcome by the individual, by the minority that does venture out of the cave (see some earlier blog entry). But there, one might fear being the single odd one out, losing before gains could be had. Hm.
Or we could consciously take it step by step, starting with actual telework, videoconferencing etc. not immediately on a massive scale, just one by one (huh) or in small organisational communities. We need more of these dust grains in a supercritical fluid!
And at the same time, organise work better, bottom-up, in a sea of temporary collections of independent professionals banding together for a common goal (and with respective gains distributions) and then dissolving once the job’s done (project over, even if the project lasts decades like even blue chips are on average gone in half a century), to new ventures elsewhere.

Will we return (?) to a world where work is no longer life’s almost-single purpose but is maybe something bothersome just to earn the money to buy breathing space all the way down and up Maslow’s pyramid, and is something that caters to the higher levels of that so that all talent is expressed and rewarded ..? Looks like a ‘first world problem’ — hence one that can be solved!

Time flies only when you realise it

[Some opera… Calatrava, Valencia]

Do animals have a sense of time ..? Probably. But do they also have a sense of ‘non-personal’ time ..? Do they realise time to be something external, a (half)dimension..? Do they understand their inevitable death..? Is this what makes us stand out over (??) other animals?

Is this the major part of Original Sin ..? The existence or initiation, or realisation, of human mortality was (according to Milton) the first thing that happened after having eaten from the Apple. Before, there was no fear of death as it wasn’t known. After Original Sin, the fear of death determined everything.

So far. We’ll come back to the subject later, more extensively (I’ve only some 30 pages yet ;-).

Control, not privacy

In the discussions re privacy, there seems to be only two alternatives: Absolute privacy, with any individual holding complete, total and continuous control over who gets to see (not take in) any data point that may be, even in the remotest of ways, be recombined into anything useful for anyone – or Absolutely no privacy, everything being considered lost anyway and all one’s data being out there somewhere.

Which creates not some binary future state, but a bandwidth on which we should be able to choose. Because it is not privacy that people are concerned about, but the loss of control once data slips out of your hands. That is why everyone is so concerned when TLAs are found out to collect so much data on everyone (they have tried, and partially succeeeded, already for decades; nottoo many people were concerned) or when (not if) yet another credit card data processor looses some backup tapes. It is not the privacy in itself (one passes off the credit card number (and CVC) happily to just any unchecked device), it is not being able to get the data ‘back’, not being able to track the use in all the enormous amount of systems one knows is out there handling your data. Those systems ranging all the way from the benign to the crooked, always …

What we should have, then, is some mechanism by which we would be able to transparently and trasitively (sic) release the data we must (in order to get some service in return), and be rewarded for any data other parties earn money with (they are using your resource!), and not more. We’ll have control back; all we wanted.
Anything else, and we’ll end up in one of both extremes. To our own extreme detriment.

Inter faces

[Educational institute x 3, campus Free University, Amsterdam]

When sleeping over problems, one often comes up with solutions that both are real and so all-encompassing that they’ll need much elaboration before being applicable in a nimble way.
This one was/is on information security, again. Recall the ‘discussions’ I posted some days ago about (industrial) process control versus administrative control? Well, I’ve some more elements for a grand new scheme now.

It struck me that the operators at the (chemical) plant control room, are the ones with the dashboards. Not necessarily their managers. Nor their manager managers, etc. What if instead of some machine equipment, we plug in hoomans into the whole ..? And let them interact like the übercomplex ‘machines’ that they are, doing their (administrative / service) thing that they (want to?) do. All the way to the point where we have no equipment, just humans (with tools, by the way, but those would be under ‘complete’ control of the ones using them so are just extensions of them). One ‘manager’ could then control quite a lot; have a huge span of control…

If, big if, if only the manager would understand the overall ‘process’ well enough, that is, to be able to work with the dashboard then provided. Just Continuous Monitoring as a job, not much more (one would have 2nd- and/or 3rd ‘lines of control’ (ugh for the expression) to fix deviations, do planned maintenance, etc.). Probably not. But one can still dream; organizations would be flat without chaos breaking out.

And if you’d say it would be impossible altogether, have a look at your SOC/NOC room where techies monitor IT network traffic and systems’ health. They even have some room to correct..! And they are aware, monitor, the appropriateness of what flows over the lines, having professional pride in catching un(machine)detected patterns of irregularity possibly being break-in/break-out attempts. And they leave the content for what it is, that’s for the experts, the users themselves, to understand and monitor if only they would.
Why wouldn’t other ‘managers’ copy the idea to their own desk? No, they don’t, yet. They get Reports that they hardly read, because someone else had thought for them in determining what should be in there. And reports aren’t continuous. Walking around is, but would (rightly) be viewed as micromanagement and a bit too much given the non-continuous nature of what modern knowledge workers do. So, we’ll have to define some gauges that are monitored semi-continuously.

Now, a picture again to refresh:

[Westpunt, Curaçao]

But with the measurements not influencing the primary production ..! To let knowledge workers do their thing, in mutual cooperation without interference by some busybody thinking (s)he knows better for no reason whatsoever.
Through which we note that the use of dashboards should not, must not, start with ‘Board’s or similar utterly superfluous governance levels. Governance is for governments. As it is ‘implemented’ in larger organizations, it doesn’t look like kindergarten kids playing Important for nothing. The use of dashboards should start from the bottom, and should include quite rigorous (but not merely by the numbers) pruning of both middle-level ‘managers’ (keep the good ones, i.e., not the ones that are only expert in hanging on! otherwise you spell death), and all sorts of groupie secondary and third-line staff.

Which will only work if you haven’t yet driven out all the knowledge workers by dumbing down their work into ‘processes’ and ‘procedures’ that are bereft of any productive (sic) rationale. And if you haven’t driven out all the actual managers and are left with the deadwood that is expert only in toeing the line or rather, sitting dead still in their place.

Now have a look back also on how you do information security. Wouldn’t the little bit of tuning you may need to do, be focused best on the very shop floor level that go into the ‘industrial’ process as inputs? You would only have to informationsecure anything that would not be controlled ‘automatically’, innate in the humans that handle the information (and data; we’ll discuss later). Leave infosec mostly with them, with support concentrated at an infosec department maybe, and have managers monitor it only to the extent necessary.

And, by extension, the same would go for risk management altogether. Wouldn’t this deliver a much more lean and mean org structure than the top-down approaches that lead to such massive counterproductive overhead as we see today? With the very first-line staff that would need all the freedom feasible to be productive (the managers and rest of the overhead, aren’t, very very maybe only indirectly but certainly not worth their current income levels!) then not having to prove their innocence… See Menno Lanting’s blog for details…
Org structures have become more diamond- than pyramid-shaped; which is plain wrong for effectiveness and efficiency…

So let’s cut the cr.p and manage the interfaces, vertically, and horizontally, noting the faces part; human. An art maybe, but better than the current nonsense…