How We Build Ideas Together

The recent healthcare debate is a painful reminder of how incapable we are, as a society and culture, to methodically debate a topic and improve our overall understanding of the issue. We cannot frame a problem, state unassailable facts, outline the interactions and influences, and propose strawmans for discussion. But, we can get angry. That seems to be our only strength.

As an observer of the debate, I typically end up with more questions than clarifications of the model. BTW, that's what it is: a model. Healthcare is a variety of proposals of a system that is defined by a model that the Congress is supposed to articulate for the President to approve for law. This is highly complex and interdependent. But, instead our society believes that we can focus on single components of the model as evidence of the value of the entire model.

Then, many of us focus on the character (or the interpretation thereof) of the players involved as evidence of the validity of the proposal. If the character of the person was a critical factor in the definition of a valid proposal, DNA would not be an accepted fact.

This is a sad characteristic of our society's inability to effectively govern itself: when we cannot make sense out of the issue we over-simplify the model order to have an opinion. Having an opinion is more important than improving our understanding of the proposal.

7 Ways to Fund a Startup

I'm finally making sense out of all the paths an entrepreneur can take to funding his startup. There are probably more, but this is a much better list than any startup consultant, investor or friend has given to me: http://snurl.com/d4pmk

Business Intelligence for the Rest of Us

The Prius has an interesting display that few other cars have. It's called an multi-functional display (MDF). It tells you what your gas mileage is at any given moment, and displays an average MPG over 5-minute increments. You can see how your driving style (i.e. lead-foot) and the terrain (i.e. hills) changes your gas mileage - on a real-time basis. Almost instant feedback. This display of information has fostered a community of Ultramilers - people who can coax 110 MPG from their Prius. You really know when you are wasting gas in real-time.

I was running up and down a hill last week (a very big hill), and I thought of that display and how it might relate to my body as I exercised. What were my electrolytes doing? I assume they matter. What was my glucose level looking like? That's my gasoline, right? Was this average, or was I trending in a bad direction? Was I really loosing weight, or just making myself sore (which I still am, dang-it!). I wanted an MDF for my body's operations. I wanted relevant, real-time FEEDBACK.

Trying to keep my mind off of the pain, I started thinking about feedback. If I had perfect, relevant feedback on my body, I might be able to optimize my workout. I'd be able to achieve exactly what I needed, and know if I'm not working hard enough, or correctly enough to reach those goals. Exactly what are those goals? Right now it's my weight. But that's because I can measure that. I can't easily measure all of the other metrics that lead up to weightloss. That requires equipment I don't have, and probably will not be functional in the context I'll need it (i.e. running up and down that hill). But, feedback is what will help me optimize that situation.

Business look to metrics for feedback. Typically, it's called Business Intelligence. It's a feedback loop on how well the business is doing. In my consulting, I recommend that you connect your metrics to any number of 4 objectives: 1) Revenue increase, 2) Cost Reduction, 3) Future Revenue Increase and 4) Future Cost Reduction. The latter two are typically called "Strategy", as in "we are not going to get a return on that project immediately, but it's supporting the company's Strategy." Every metric should have a story that ties back to one of these four objectives - otherwise it's a "discovery" metric - which means you don't know what value it brings to the table, but it may cause you to ask questions that later impact the business. I've seen big projects justified on "discovery" metrics, which should not be justified for very long.

But, what else is Business Intelligence and Feedback? Does it have to be a fancy MDF or a Business Objects application? I get feedback from my bathroom mirror in the morning (usually very negative, requiring significant improvement). My tougue provides feedback on the state of my cereal's milk. Software on my computer provides visual feedback on how many colleagues are logged in to communicate with. These are direct metrics. Useful and obvious. It's the indirect ones that cause us to be sloppy and to build ideologies and illogical opinions.

A person's house provides an interesting and impactful example of the benefits of feedback. When you pay your heating bill, you are engaging the summary-metric for your home's energy efficiency. If the bill goes up, you may think "was it colder last month, or do I have a problem with the house?" If there is a significant rise, you might look around for an open window or a faulty heater, or an improperly set thermostat. Then, you wait until next month for the reaction (aka: the Utility Bill). The cause-effect thread is: 'Opened Window' --> 'cold air in' --> 'thermostat clicks on' --> 'heater turns on' --> 'oil/gas is used' --> 'Utility bill goes up'. But, which window was it? How many dollars flew out the window in the form of heat?

Because we get a coarse feedback on these metrics, we don't really know how to take action. If your hair is in disarray in the morning, your mirror provides immediate feedback on your efforts to comb it down. If we knew how many of our dollars each window, door, attic, garage, wall, floor, basement, etc was sending out into the great outdoors, we'd probably take action immediately. If you were asked to place a $20 on each window and it disappeared each month, you'd probably get pretty angry at the condition of that window and take action. Unfortunately, that's what's happening in many homes today because of the lack of feedback. Consider how well you brush your teeth each day. The feedback is usually under the drill in the dentist's chair - after it's too late to take corrective measures.

Consider the new Stimuluous Package just passed by Congress. Money is going into these programs and an impact is anticipated. We'll start measuring GPD and keep our eyes on home prices and the Dow. What does that feedback thread look like? How many steps must it take before we see positive movement on those indicators? How many other factors are going to cloud the data before it reaches those indicators?

We should be proposing numerous indicators at key points along that thread. Job creation on a per-project basis is one. Then there's $'s/new-job created; Speed of job creation after funding; Seond-order economy on a per-project basis (i.e. local restaurants see an increase); Change in local consumer sentiment after a project starts in their town; local home sales and prices; etc, etc. We need a dashboard on how this is progressing. When we see a failure in the thread, we can take targeted action.

Otherwise, we're just hoping that we closed the right window - or maybe we should have been looking for a gas leak instead? They both have the same ultimate indicator, but one of them can bring the house down if you are not specifically tracking it.

Two Thresholds in Human Nature

The Economist magazine recently presented an analysis of the world's middle class. Apparently a majority of the population is now middle class. Maybe not by US standards as we define them, but sufficiently wealthy to cause them to cross a critical threshold in their attitudes and priorities. The newly middle classed person is interested in the future of their children, their greater spiritual fulfillment through their vocation, and they have gained enough emotional traction that they can begin to aspire to an even more comfortable and fulfilling existence. The poor do not think like this, probably because they are investing too many emotional and mental cycles in survival. Who could be bothered with wanting a bigger house if your food supply is in jeopardy?

Once these people cross that first threshold, they will use these spare cycles to fight against any threat that would pull them back down into their subsistence lifestyle. They have tasted the good life and they are not going back. Those that have built a sufficient buffer against this threat will continue acting as middle class consumers. Those who believe that threshold is uncomfortably close will change their buying habits considerably. The second threshold is where they aspire to transcend, but the first threshold is the very real, hungry lion at the door.

Americans have had a long history of relative wealth and wellbeing. But, information is plentiful of what can occur when the worst happens. The Great Depression, while experienced by few consumers, is still an iconic threat. Stories of failed states and repressed masses queuing in lines to receive their portion of rice are readily available on the nightly news broadcasts, newspapers and online. Recent stories of foreclosures and layoffs are now shifting the perceived location of that threshold to where it is uncomfortably close.

This is probably the only reason why extended unemployment benefits and improvements in the availability of healthcare will improve the chances of escaping this recession. People must begin to feel comfortable with spending again. If they do not get beyond that second threshold, they will not spend. They will hoard. I do not have the metrics on what percentage of the population is under this second threshold, but if it approaches 33%, fully 25% of our economy will dry up. If Americans can be made to feel as though there is a safety net that they can rely upon, we may see the return of this economy - but not before that time.

Politics is Primitive
I continually experience the impact of a certain person's thought processes. If I wasn't interested in how she thinks, I'd have gone crazy years ago. This person is a huge influence in my life, and her statements and interactions with the other people in my life influence their dynamics with me. Because she is intolerant to disagreement, arguing with her is a poor approach to the issue. In order to work with her and live with her I need to understand how she goes about her though processes; how does she think?

This is how her thought processes work:
1. Worry about a group of things until you get a list of ideas
2. Look for confirming evidence that any of those ideas is potentially correct
3. Refine the story around the confirming evidence to validate the idea

For example:
1. I think I have cancer
2. Someone I know likes apples and he got cancer, and someone on TV said that apples are not as healthy as we all thought
3. Eating apples must cause cancer and I've eaten apples all of my life, therefore I'm certain that I have cancer

This is how wild animals refined their routines and developed instincts. Over time, some of these worries turned out to be true. To color the story: those chimpanzees avoided getting eaten, and therefore were potentially our evolutionary ancestors. We didn't evolve from the ones that didn't worry about everything.

Listening to the House and Senate partisans debate the details and themes of the stimulus package brings to the surface the depth of analysis being used by these parties. Bold, broad statements are continually being made about details: "Kennedy and Regan cut taxes, so that's the way we need to go..." "That bush shook last week and a tiger jumped out and ate Sally. We'd better run next time that happens." Even our 'leaders' are instinctual and heuristic in their analysis to this critical process. Do they question the deeper effects that occurred during those eras that are applicable today? Do they know if that causation is applicable to that effect? Do they question their ignorance? Where is the curiosity on the details, and subsequently the model of the economy that this huge expense is supposed to positively impact? Who is outlining the model that should be used to frame the debate? Who is outlining the scale of impact to job creation and retention of each component of the stimulus, and the probability of it coming to pass? Who is modeling the present propensity of the consumer to spent each incremental dollar they net from a payroll tax break? If they get that dollar, will they really buy something, or just bank it until they cross a comfort-threshold on their savings and assets?

Until we recognize how we think and how others around us think, we are doomed to our instincts, heuristics and foolish conclusions. What works in convincing the public to vote for a candidate does not translate to the process of analyzing an economic program. Rhetoric alone will not stimulate an economy, and ideologies and philosophies have no place in what can be called the economic sciences.

The Painful Truth About Our Economy
There has been a lot of talk about stimulating the economy. But, as my economics professor once told me, the best the government (or Fed) can do is provide a soft landing instead of crashing through the "real growth curve" and into a deeper recession than is necessary. This implies a key factor that is not getting enough air time: We don't value this 'stuff'.

We don't value the services.
We don't value the new products.
We don't value the extra products on the shelves.
We don't value the incremental person in the company doesn't move the needle.

We feel bad about the loss of jobs (and I feel that pretty hard in my family today, right now), but the economy is terribly overbuilt. We have extended our investment in businesses of all types on the assumption that this particular business will win out over that other one. But, they both can't win. Or, all 450 of them can't win. Retail is overbuilt by a factor of 10. The inherent demand of the consumer market cannot support it. Therefore, the retailers are collapsing. We cannot forever continue to purchase more houses at this rate. Therefore, the housing market is collapsing - regardless of the banks' inefficiencies and lack of trust with each other.

We need to recognize that we cannot restart the economy until we hit the bottom. We need the reset in order to determine where the value remains in our society and its economy. We cannot continue to do the same thing.

The prospect of the future revenues we were banking on are becoming less ambiguous. The data is in. No questions remain about what those revenues look like. There's no value to anticipate. The future is now, it has arrived, and it is bleak.

The government can only soften the landing. We cannot hit that growth-curve floor with any velocity and not avoid many more months to recover than is necessary. But, we have quite a ways to go until we hit that floor. We can sustain ourselves on much less than where we are presently. Until we start seeing fewer cars on the lot, fewer shirts on the hangers, fewer boxes of cereal on the shelves, we're probably overbuilt.

So, were is the value-appreciation located? Look for the poor. Look for those that aspire to minimize the pain of their condition. The average American family makes $48K. That's about 20X some of the poorest families on earth. We are relatively comfortable. The biggest delta of value appreciation is elsewhere, and probably in the developing countries. Fortunately, they are plentiful. Unfortunately, they are often repressed and unable to generate enough value themselves to participate in the economy.

China was on an upswing to bring their masses into that category. Maybe they crossed a threshold and enough of them will begin to become resourceful and spawn a new generation of entrepreneurs to sustain their growth internally instead of having the US shovel money at them? They might then want to purchase our goods and services someday. Maybe enough of India has been developed to enable them to segue more of their people into the middle class and generate more demand for the fundamentals of a modern lifestyle? More Cisco routers for those households? If those societies have crossed that tipping point of per-capita revenue-generation, then we are now merely at a short respite before the world economy really takes off. Those societies will spiral up as long as their governments can get out of their way.

But, the next boom will not be taking off in the US anytime soon. Maybe we'll figure out how to capitalize on that overseas value creation, but if we're relying upon our own society to suddenly regain its appetite, we're kidding ourselves. We need to build for everyone else. That's the future. Not here.
Post Note 2/23: The Economist magazine apparently thinks the same way I do:

The Gift He Left Us
Today is the last full day of George Bush's presidency. The international newspapers are full of condemnation and scant praise. Regardless of your opinion of the man and his administration and how history will judge him, you cannot disagree that it has attracted a significantly higher-than-expected level of strong opinion than what might have been anticipated in yr 2000.

I'm not going to judge the man or his decisions in this post. What I believe needs to be called out is the gift of Example that he provided to us and our culture. The Presidency is one of the most public examples of decision making Results in our times. We all look to a person, a single person, for a decision to complex questions. Guidance and leadership are the outcome. Although, we are rarely exposed to the process of the decision-making itself. The logic, heuristics, ideologies and emotions that factor into a decision are what make this office a profoundly human manifestation. We evolved from animals with a fundamental desire to not get killed, and suddenly we developed a rational mind. Once Galileo saw the moons of Jupiter through his telescope, the facade of our instinctual decision-processes and interpretation of our perceptions began their long, slow crumble. The US Presidency has become one of the most powerful archetypes that humanity can consider when assessing the progress of that crumbling facade.

We are also "middlings". We live short lives. We have limited perceptions. We need to simplify our reality in order to function. Therefore, we also need high contrasts to perceive the conditions we were once in, and presently are. The transition of a US Presidency provides the opportunity for that contrast for humanity to learn. We will be able to comprehend the change that happens. Our 'boiled frog' status might be perceived - on a culturual level. This may be the lasting gift that George W. Bush provides to our country, our culture, and to humanity - that contrast of mind between the ideologues and rationalists and the impact it has on us as a society. As with any moment in time, there must be another side to the unit, the concept and story. Barak Obama will have to provide that second bookend, that contrasting example to lead us to a better understanding of our own humanity's potential to supercede our reactive, instinctual beings and leverage our rational capabilities. We may finally bring down that scholastic edifice established by Aristotle once and for all, and start a truely new age of humanity.

Sage or Sloppy Thinker?
This is a continuation of my prior post regarding the way people think. The two categories: Ideologue and Rationalist, are still probably too coarse and I hope to make greater sense out of this over time.

I recently heard an ancient passage about the wisdom of sages. Who were these sages? Who are they today? And, how did/do they think? They provide a conclusion, an answer to an issue or question. But, how did they work their way through to that conclusion?

Given how poorly understood was the rational approach to problem solving in the "days of old", I suspect that these sages were ideologues. Therefore, their insights and advise were based on a primitive understanding of the nature of the physical universe and the abstract sciences such as psychology and sociology. They were often doctrine-based. This scares me.