Category Archives: Employee Engagement
The past was so simple. Life was so simple and good. Those were the good old days. How often have you heard these ruminations? It is fairly common! Surprisingly, as we forge a path into the future, these ruminations gather pace. We become nostalgic and we thus rake fear of the future. We attribute a good life to a simple life. But the simple life is measured against the past. In fact, our modus operandi is to chunk up the past into timeboxes and then surface all the positive elements. While that is an endeavor that might give us some respite from what is happening today, the fact is that the nostalgia is largely grounded in fiction. It would be foolish to recall the best elements and compare it to what we see emerging today which conflates good and bad. We are wired for survival: If we have survived into the present, it makes for a good argument perhaps that the conditions that led to our survival today can only be due to a constellation of good factors that far outweighed the bad. But when we look into the future rife with uncertainty, we create this rather dystopian world – a world of gloom and doom and then we wonder: why are we so stressed? Soon we engage in a vicious cycle of thought and our actions are governed by the thought. You have heard – Hope for the best and plan for the worst. Really? I would imagine that when one hopes for the best and the facts do not undermine the trend, would it not be better to hope for the best and plan for the best. It is true that things might not work out as planned but ought we to always build out models and frameworks to counter that possibility. We say that the world is complex and that the complexity forces us to establish certain heuristics to navigate the plenar forces of complexity. So let us understand what complexity is. What does it mean? And with our new understanding of complexity through the course of this chapter, would we perhaps arrive at a different mindset that speaks of optimism and innovation. We will certainly not settle that matter at the end of this chapter, but we hope that we will surface enough questions, so you can reflect upon where we are and where we are going in a more judicious manner – a manner grounded on facts and values. Let us now begin our journey!
The sky is blue. We hear this statement. It is a simple statement. There is a noun, a verb and an adjective. In the English-speaking world, we can only agree on what constitutes the “sky”. We might have a hard time defining it – Merriam Webster defines the sky as the upper atmosphere or expanse of space that constitutes an apparent great vault or arch over the earth. A five-year-old would point to the sky to define sky. Now how do we define blue. A primary color between green and violet. Is that how you think about blue or do you just arrive at an understanding of what that color means. Once again, a five-year-old would identify blue: she would not look at green and violet as constituent colors. The statement – The sky is blue – for the sake of argument is fairly simple!
However, if we say that the sky is a shade of blue, we introduce an element of ambiguity, don’t we? Is it dark blue, light blue, sky blue (so we get into recursive thinking), or some other property that is bluish but not quite blue. What has emerged thus is an element of complexity – a new variable that might be considered a slider on a scale. How we slide our understanding is determined by our experience, our perception or even our wishful thinking. The point being that complexity ceases to be purely an objective property. Rather it is an emergent property driven by our interpretation. Protagoras, an ancient Greek philosopher, says that the man is a measure of all things. What he is saying is that our lens of evaluation is purely predicated on our experiences in life. There is nothing that exists outside the boundaries of our experience. Now Socrates arrived at a different view – namely, he proved that certain elements are ordered in a manner that exists outside the boundaries of our experience. We will get back to this in later chapters. The point being that complexity is an emergent phenomenon that occurs due to our interpretation. Natural scientists will argue, like Socrates, that there are complex systems that exist despite our interpretations. And that is true as well. So how do we balance these opposing views at the same time: is that a sign of insanity? Well, that is a very complex question (excuse my pun) and so we need to further expand on the term Complexity.
In order to define complexity, let us now break this up a bit further. Complex systems have multiple variables: these variables interact with each other; these variables might be subject to interpretation in the human condition; if not, these variables interact in a manner to enable emergent properties which might have a life of its own. These complex systems might be decentralized and have information processing pathways outside the lens of science and human perception. The complex systems are malleable and adaptive.
Markets are complex institution. When we try to centralize the market, then we take a position that we feel we understand the complexity and thus can determine the outcomes in a certain way. Socialist governments have long tried to manage markets but have not been successful. Nobel winner, Frederich Hayek, has long argued that the markets are a result of spontaneous order and not design. It has multiple variables, significant information processing is underway at any given time in an active market, and the market adapts to the information processing mechanism. But there are winners and losers in a market as well. Why? Because each of them observes the market dynamics and arrive at different conclusions. Complexity does not follow a deterministic path. Neither does the market and we have lot of success and failures that suggest that to be the case.
Let us look at another example. Examples will probably give us an appreciation for the concept and this will be very important as we sped through the journey into the future.
Insect behavior is a case in point. Whether we look at bees or ants, it is a common fact that these insects have extremely complex systems despite the lack of sufficient instruments for survival for one bee or one ant. In 1705, Bernard Mandeville wrote a book called: Fable of the Bees. It was a poem. Here is a part of the poem. What Mandeville is clearly hinting at is the fact that there would be an innate failure to centralize complex systems like a bee hive. Rather, the complex systems emerge in a way to create innate systems that stabilize for success and survival in the long run.
A Spacious Hive well stock’d with Bees,
That lived in Luxury and Ease;
And yet as fam’d for Laws and Arms,
As yielding large and early Swarms;
Was counted the great Nursery
Of Sciences and Industry.
No Bees had better Government,
More Fickleness, or less Content.
They were not Slaves to Tyranny,
Nor ruled by wild Democracy;
But Kings, that could not wrong, because
Their Power was circumscrib’d by Laws.
Then we have the ant colonies. An ant is blind. Yet a colony has collective intelligence. The ants work together, despite individual shortcomings that challenge an individual survival, to figure out how to exist and propagate as group. How does a simple living organism that is subject to the whims and fancies of nature survive and seed every corner of the earth in great volumes? Entomologists and social scientists and biologists have tried to figure this out and have posited a lot of theories. The point is that complex systems are not bounded by our reason alone. The whole is greater than the sum of the parts.
A complex system is the result of the interaction of a network of variables that gives rise to collective behavior, information processing and self-learning and adaptive system that does not completely lie in the purview of human explanation.
It has been a while since I posted on this blog. It just so happens that life is what happens to you when you have other plans. Having said that, I decided early this year to ready 42 books this year across a wide range of genres. I have been trying to keep pace, and have succeeded so far.
Here are the books that I have read and plan to read:
- Song of Solomon by Toni Morrison ( Read)
- The Better Angels of Our Nature by Steven Pinker ( Read)
- Black Dogs by Ian McEwan ( Read)
- Nutshell: A Novel by Ian McEwan ( Read)
- Dr. Jekyl and Mr. Hyde by Robert Louis Stevenson ( Read)
- Moby Dick by Herman Melville
- The Plot Against America by Phil Roth
- Humboldt’s Gift by Saul Bellow
- The Innovators by Walter Isaacson
- Sapiens: A Brief History of Mankind by Yuval Harari
- The House of Morgan by Ron Chernow
- American Political Rhetoric: Essential Speeches and Writings by Peter Augustine Lawler and Robert Schaefer
- Keynes Hayek: The Clash that defined Modern Economics by Nicholas Wapshott
- The Year of Magical Thinking by Joan Didion
- Small Great Things by Jodi Picoult
- The Conscience of a Liberal by Paul Krugman
- Globalization and its Discontents by Joseph Stiglitz
- Twilight of the Elites: America after Meritocracy by Chris Hayes
- What is Mathematics: An Elementary Approach to Idea and Methods by Robbins & Stewart
- Algorithms to live by: Computer Science of Human Decisions by Christian & Griffiths
- Andrew Carnegie by David Nasaw
- Just Mercy: A Story of Justice and Redemption by Bryan Stevenson
- The Evolution of Everything: How New Ideas Emerge by Matt Ridley
- The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse by Mohammed El-Arian
- The Relentless Revolution: A History of Capitalism by Joyce Appleby
- The Industries of the Future by Alec Ross
- Where Good Ideas come from by Steven Johnson
- Original: How Non-Conformists move the world by Adam Grant
- Start with Why by Simon Sinek
- The Discreet Hero by Mario Vargas Llosa
- Istanbul by Orhan Pamuk
- Jefferson and Hamilton: The Rivalry that Forged a Nation by John Ferling
- The Orphan Master’s Son: A Novel by Adam Johnson
- Between the World and Me: Ta Nehisi-Coates
- Active Liberty: Interpreting our Democratic Constitution
- The Blue Guitar by John Banville
- The Euro Crisis and its Aftermath by Jean Pisani-Fery
- Africa: Why Economists get it wrong by Morten Jerven
- The Snowball: Warren Buffett and the Business of Life
- To Explain the World: The Discovery of Modern Science by Steven Weinberg
- The Meursalt Investigation by Daoud and Cullen
- The Stranger by Albert Camus
Financial awareness of key drivers are becoming the paramount leading indicators for organizational success. For most, the finance department is a corner office service that offers ad hoc analysis on strategic and operational initiatives to a company, and provides an ex-post assessment of the financial condition of the company among a select few. There are some key financial metrics that one wants to measure across all companies and all industries without exception, but then there are unique metrics that reflect the key underlying drivers for organizational success. Organizations align their forays into new markets, new strategies and new ventures around a narrative that culminates in a financial metric or a proxy that illustrates opportunities lost or gained.
Having been cast in operational finance roles for a good length of my career, I have often encountered a high level of interest to learn financial concepts in areas such as engineering, product management, operations, sales, etc. I have to admit that I have been humbled by the fairly wide common-sense understanding of basic financial concepts that these folks have. However, in most cases, the understanding is less than skin deep with misunderstandings that are meaningful. The good news is that I have also noticed a promising trend, namely … the questions are more thoroughly weighed by the “non-finance” participants, and there seems to be an elevated understanding of key financial drivers that translate to commercial success. This knowledge continues to accelerate … largely, because of convergence of areas around data science, analytics, assessment of personal ownership stakes, etc. But the passing of such information across these channels to the hungry recipients are not formalized. In other words, I posit that having a formal channel of inculcating financial education across the various functional areas would pay rich dividends for the company in the long run. Finance is a vast enough field that partaking general knowledge in these concepts which are more than merely skin-deep would also enable the finance group to engage in meaningful conversations with other functional experts, thus allowing the narrative around the numbers to be more wholesome. Thus, imparting the financial knowledge would be beneficial to the finance department as well.
To be effective in creating a formal channel of disseminating information of the key areas in finance that matter to the organization, it is important to understand the operational drivers. When I say operational drivers, I am expanding that to encompass drivers that may uniquely affect other functional areas. For example, sales may be concerned with revenue, margins whereas production may be concerned with server capacity, work-in-process and throughput, etc. At the end, the financial metrics are derivatives. They are cross products of single or multiple drivers and these are the elements that need to be fleshed out to effect a spirited conversation. That would then enable the production of a financial barometer that everyone in the organization can rally behind and understand, and more importantly … be able to assess how their individual contribution has and will advance organization goals.