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Posts tagged with ‘VUCA’

Ito’s Nine Principles

Michael Copeland of Wired interviewed Joi Ito of the MIT Media Lab, getting past the techno-utopianism and down to an almost Taoist set of principles for thriving in the postnormal world, a time of mounting uncertainty, ambiguity, complexity, and volatility. After chatting about the falling cost of innovation, and Schumpeterian disruptions in hardware, genetics, and healthcare we get down to the meat:

Michael Copeland, Resiliency, Risk, and a Good Compass: Tools for the Coming Chaos

Wired: And in the face of that we ought to do what?
Ito: What you need to do is understand these changes are happening, and build systems and governments and ways of thinking that are resilient to this kind of destructive change that is going to happen. It’s a kind of change that is really hard to predict, it’s really hard to control, so how do you as a human being, or as an organization, survive in this chaotic, unpredictable system where planning is almost impossible?

Wired: Please tell me you have an answer.
Ito: There are nine or so principles to work in a world like this:

  1. Resilience instead of strength, which means you want to yield and allow failure and you bounce back instead of trying to resist failure.
  2. You pull instead of push. That means you pull the resources from the network as you need them, as opposed to centrally stocking them and controlling them.
  3. You want to take risk instead of focusing on safety.
  4. You want to focus on the system instead of objects.
  5. You want to have good compasses not maps.
  6. You want to work on practice instead of theory. Because sometimes you don’t why it works, but what is important is that it is working, not that you have some theory around it.
  7. It[’s] disobedience instead of compliance. You don’t get a Nobel Prize for doing what you are told. Too much of school is about obedience, we should really be celebrating disobedience.
  8. It’s the crowd instead of experts.
  9. It’s a focus on learning instead of education.

We’re still working on it, but that is where our thinking is headed.

A few thoughts:

The ‘risk/safety’ dichotomy is also ‘be biased toward speculative experiments that allow deeper understanding of implications, rather than optimizing around lowering disruption and short-term costs’.

One thing missing is the principle related to resilience: ‘go slow to go fast’. This means you need to step out of the flow of today’s operational frenzy to take new actions. In martial arts, this means you must relax your muscles and nerves to respond or attack quickly.

You don’t get a Nobel Prize for doing what you are told’ is priceless.

(via brucesterling)

(via arig)

Venture Capital Becomes Even More Uncertain An Investment

Venture capital firms are closing, decreasing the size of funds, or dropping partners, as a result of a worsening marketplace for start-ups to get to liquidity. As a result, the VC firms are finding it harder to raise money to invest:

Pui-Wing Tam,  Venture Firms Take a New Tack

U.S. venture-capital funds garnered $20.3 billion in 2012, essentially flat from 2011 and down from $39 billion in 2007, according to Dow Jones LP Source.

Overall, there were 842 venture-capital firms in the U.S. in 2011 that raised money in the previous eight years, down 16% from 1,004 in 2007, according to the National Venture Capital Association.

[…]

More venture firms “realize that in order to be successful and deliver returns, they need to be focused on smaller groups of people and smaller sets of companies,” said David Hornik, a venture capitalist at August Capital, which in October closed a $300 million fund, compared with $350 million for its previous fund. Six partners are investing out of the new fund, down from seven for the prior fund, he added.

Many venture firms are responding to a higher bar from investors, who have been disenchanted with scant venture returns and are scrutinizing partnerships closely to pick out the stronger versus weaker venture capitalists in a firm.

Investors “have become more selective because their return requirements are higher.” said Tom Gladden, a partner at investment management firm Adams Street Partners, which invests in venture funds. “We’re going to evaluate the [venture firm’s] team to the point of looking at the personal franchises of individual partners.”

What is unsaid in this story is that investors the world over are finding it harder to determine where to invest. Uncertainty and ambiguity make it difficult to pick sectors or investment vehicles — like start-ups — with anything like a dependable return. 

The Biggest If Of All, Part II

Scott Rafer riffs on my recent post, The Biggest If Of All, where I suggest that this time it might be different, this time we may have moved into a new era, a new economy: the postnormal. Rafer says it’s just the same old same old:

@stoweboyd This purely academic question gets asked every business cycle. It was being asked on the upside in the late 90s if you recall. In this (not very) regulated financial environment, investment managers figure out how to play new conditions which makes the answer to your question “No” +/- 20%. 

Well, logically, just because someone said X would happen 15 years ago and it didn’t doesn’t mean that someone saying X now is wrong. Those are independent events, at least in principle.

My point is something else entirely. We are living in a time where uncertainty is so great that businesses and investors are finding it increasingly impossible to make judgments about where things are headed. Andrew Ross Sorkin recently wrote about this:

The Election Won’t Solve All Puzzles - Andrew Ross Sorkin via NYTimes.com

“Uncertainty” has become the watchword over the last several years for many chief executives, politicians and economists as an explanation — or perhaps an excuse — for the economy’s slow growth, for the lack of hiring by business and for the volatility in the stock market.

“The claim is that businesses and households are uncertain about future taxes, spending levels, regulations, health care reform and interest rates. In turn, this uncertainty leads them to postpone spending on investment and consumption goods and to slow hiring, impeding the recovery,” a group of professors from Stanford University and the University of Chicago wrote in a study that found “current levels of economic policy uncertainty are at extremely elevated levels compared to recent history.” (The professors have created a Web site, policyuncertainty.com, where you can track the “uncertainty” levels.)

image

If you go look at the other charts — like the European Policy Uncertainty Index — economic uncertainty has been steadily rising since 2007.

We are moving from a world of problems, which demand speed, analysis, and elimination of uncertainty to solve, to a world of dilemmas, which demand patience, sense-making, and an engagement of uncertainty. - Denise CaronSo my point is different. Investors and other business people will find it harder to reason about possible futures because we have moved onto shifting ground. It’s a VUCA world, characterized as increased volatility, uncertainty, complexity, and ambiguity.

As I wrote in July, regarding our blindness regarding the postnormal climate we’ve made for ourselves,

The biggest problem is that people’s thinking patterns are stuck in the old days, and I don’t just mean their expectations about ‘normal’ weather. No, even worse is that people can’t accept the reality that in the post-normal we will never have the luxury of time to assess and then adapt. Linear problem-solving approaches will simply not work anymore.

But this is not a call for more old world leadership, characterized by moving fast, and looking for permanent ‘solutions’ to well-defined and researched ‘problems’. Instead, we need leaders demonstrating the ‘VUCA Prime’ characteristics, as Bob Johansen has styled it.

image

Denise Caron makes the break between the old world and the new one very clear:

We are moving from a world of problems, which demand speed, analysis, and elimination of uncertainty to solve, to a world of dilemmas, which demand patience, sense-making, and an engagement of uncertainty.

So, in this context, there is no ‘solution’ to infrastructure stress and failure based on more violent weather. We are stuck in a problem space which is fundamentally unsolvable, but we have to try to make sense of this in the context of the larger world.

For example: the financial constraints of our weakened economy mean that we may not be able to repair the interstate highway system, but we might extend and maintain the train system for people moving. Do we have the foresight to disinvest in the highway system? Can we shift from a truck-based logistics system to boats, trains, and airships for long-distance hauling?

image

We are just as trapped in our thinking as we are in a rapidly changing global weather system, and without leaders with the mindset and skillset geared for the post-normal world, we will never find our way out.

The analysis about weather is paralleled by our inability to logically untangle the financial mess the world is in. And it’s not that we need to get smarter, do more analysis, put more brilliant minds on it: the system is so large, interconnected, and complex that it cannot be understood. It is a complex non-linear system, barreling along as fast as we can fuel it, and it cannot be neatly reduced to a set of smaller, more easily understood parts, unless we actually start disconnecting the parts.

But are we taking steps to disconnect the world’s financial markets? To raise trade barriers, and diminish global supply chains? To require companies to only do business in one country, and to only compete in a single marketplace? To break up vertically integrated multinationals? No. And leaving aside whether this would be a ‘good’ thing in some moral or ideological sense, we aren’t doing it. If anything, the world is growing more interconnected and complex. 

At the macroeconomic level, this poses astonishing policy issues, the first of which is seeing the forest for the trees: that we’ve moved into new territory and we have no map. At the microeconomic level, the investor or business leader has a set of tools that used to work, a map that used to show the way, a compass that found north. But they don’t work anymore. They no longer point the way, or suggest that all ways forward are equally uncertain of success.

Specifically with regard to investments in tech, David Lee at SV Angel recently said ‘It has never been easier to start a company, and never harder to build one’, regarding the structural issues in the tech funding world. VC’s don’t see a clear path for a real return on investments in commerce 2.0, games, or apps that rely on Facebook, Twitter, or other platforms. And the result of that uncertainty is being reflected in a decreased amount of later stage investments. This is an echo of the international fund managers I wrote about in the first installment of The Biggest If Of All, many of whom state that uncertainty has never been greater, or of more import in the investment world. So they, like tech VC’s, are holding back, and waiting for a return to normalcy.

But what if it never comes?

We know that the changes we’ve already made to our ecological world will take at least hundreds of years to reverse. Perhaps we’ve turned a similar curve in the economic and policy world. And we don’t know what the world will look like in a hundred years or so, and perhaps there is simply no way to figure out what is going to happen in the next five years, either.

Laura Dineen on Leadership In The Social Business

Laura Dineen of Bloom Social Business wrote some great notes about the event, and came up with this diagram and extremely condensed synopsis of what Paul Greenberg and I discussed there.

Courage, trust, purpose and collaboration: social business change from Pivot - Laura Dineen

#PivotCon kicked off perfectly with Stowe Boyd and Paul Greenberg setting the scene for the whole two days ahead. Things have changed in profound ways and we’re now living in the postnormal – a world that’s changed but hasn’t caught up to us yet. For leaders this is scary and uncertain (VUCA), which makes it difficult to make decisions, and difficult to use existing data to plan for the future. Organisations are closed with big bad departmental silos, whilst employees are disengaged and lack shared vision.

The disengaged employee is actually the 4D of the 3D workforce: distributed, discontinuous, decentralized and increasingly disengaged from the business.

Laura has made a real contribution with her diagrams. (Maybe I should talk to her about creating more for my Beyond Social book?)

Go read all of her notes on Pivot: it’s a great synopsis.

Oh, and I found this doodle of Paul Greenberg and me talking, by TheRealDanMeth:

We are moving from a world of problems, which demand speed, analysis, and elimination of uncertainty to solve, to a world of dilemmas, which demand patience, sense-making, and an engagement of uncertainty.

Denise Caron

Post-Normal Weather: The Need For New Leadership

As the weather spins into the post-normal — more volatile, uncertain, complex, and ambiguous (VUCA) — our aging infrastructure is failing, and we are going to see much more serious disruptions in the future because our governments a/ don’t want to talk about the climate (too scary) and b/ are laying off the workers that we should be using to fix the power lines, train tracks, roadways and bridges.

Matthew Wald and John Schwartz, Rise in Weather Extremes Threatens Infrastructure via NYTimes.com

The frequency of extreme weather is up over the past few years, and people who deal with infrastructure expect that to continue. Leading climate models suggest that weather-sensitive parts of the infrastructure will be seeing many more extreme episodes, along with shifts in weather patterns and rising maximum (and minimum) temperatures.

“We’ve got the ‘storm of the century’ every year now,” said Bill Gausman, a senior vice president and a 38-year veteran at the Potomac Electric Power Company, which took eight days to recover from the June 29 “derecho” storm that raced from the Midwest to the Eastern Seaboard and knocked out power for 4.3 million people in 10 states and the District of Columbia.

In general, nobody in charge of anything made of steel and concrete can plan based on past trends, said Vicki Arroyo, who heads the Georgetown Climate Center at Georgetown University Law Center in Washington, a clearinghouse on climate-change adaptation strategies.

Highways, Mr. Scullion noted, are designed for the local climate, taking into account things like temperature and rainfall. “When you get outside of those things, man, all bets are off.” As weather patterns shift, he said, “we could have some very dramatic failures of highway systems.”

Adaptation efforts are taking place nationwide. Some are as huge as the multibillion-dollar effort to increase the height of levees and flood walls in New Orleans because of projections of rising sea levels and stronger storms to come; others as mundane as resizing drainage culverts in Vermont, where Hurricane Irene damaged about 2,000 culverts. “They just got blown out,” said Sue Minter, the Irene recovery officer for the state.

In Washington, the subway system, which opened in 1976, has revised its operating procedures. Authorities will now watch the rail temperature and order trains to slow down if it gets too hot. When railroads install tracks in cold weather, they heat the metal to a “neutral” temperature so it reaches a moderate length, and will withstand the shrinkage and growth typical for that climate. But if the heat historically seen in the South becomes normal farther north, the rails will be too long for that weather, and will have an increased tendency to kink. So railroad officials say they will begin to undertake much more frequent inspection.

Some utilities are re-examining long-held views on the economics of protecting against the weather. Pepco, the utility serving the area around Washington, has repeatedly studied the idea of burying more power lines, and the company and its regulators have always decided that the cost outweighed the benefit. But the company has had five storms in the last two and a half years for which recovery took at least five days, and after the derecho last month, the consensus has changed. Both the District of Columbia and Montgomery County, Md., have held hearings to discuss the option — though in the District alone, the cost would be $1.1 billion to $5.8 billion, depending on how many of the power lines were put underground.

Even without storms, heat waves are changing the pattern of electricity use, raising peak demand higher than ever. That implies the need for new investment in generating stations, transmission lines and local distribution lines that will be used at full capacity for only a few hundred hours a year. “We build the system for the 10 percent of the time we need it,” said Mark Gabriel, a senior vice president of Black & Veatch, an engineering firm. And that 10 percent is “getting more extreme.”

Even as the effects of weather extremes become more evident, precisely how to react is still largely an open question, said David Behar, the climate program director for the San Francisco Public Utilities Commission. “We’re living in an era of assessment, not yet in an area of adaptation,” he said.

In the post-normal we will never have the luxury of time to assess and then adapt. Linear problem-solving approaches will simply not work anymore.

The biggest problem is that people’s thinking patterns are stuck in the old days, and I don’t just mean their expectations about ‘normal’ weather. No, even worse is that people can’t accept the reality that in the post-normal we will never have the luxury of time to assess and then adapt. Linear problem-solving approaches will simply not work anymore.

But this is not a call for more old world leadership, characterized by moving fast, and looking for permanent ‘solutions’ to well-defined and researched ‘problems’. Instead, we need leaders demonstrating the ‘VUCA Prime’ characteristics, as Bob Johansen has styled it.

Denise Caron makes the break between the old world and the new one very clear:

We are moving from a world of problems, which demand speed, analysis, and elimination of uncertainty to solve, to a world of dilemmas, which demand patience, sense-making, and an engagement of uncertainty.

So, in this context, there is no ‘solution’ to infrastructure stress and failure based on more violent weather. We are stuck in a problem space which is fundamentally unsolvable, but we have to try to make sense of this in the context of the larger world.

For example: the financial constraints of our weakened economy mean that we may not be able to repair the interstate highway system, but we might extend and maintain the train system for people moving. Do we  have the foresight to disinvest in the highway system? Can we shift from a truck-based logistics system to boats, trains, and airships long-distance hauling?

We are just as trapped in our thinking as we are in a rapidly changing global weather system, and without leaders with the mindset and skillset geared for the post-normal world, we will never find our way out.

(via underpaidgenius)

Re: The Future Impact Of Big Data In 2020 and The Limits Of Our Knowledge →

In reading through the Pew/Elon University Big Data survey analysis, I come away with the sense that I diverge with many others on a basic notion around big data. I don’t believe that big data technology and techniques will end the volatility, uncertainty, complexity, and ambiguity of the post-normal world. Those factors are growing faster than our data exhaust, and our capacity to mine it.

This doesn’t mean that big data collection and analysis is pointless. On the contrary, it may be a critical factor in developing new ways to sense, model, and think about a future growing increasingly opaque.

But some comments, like those of Patrick Tucker, strike me as techno-utopian and unsupportable. He makes that case that Google is already in the business of predicting the small-bore future around issue like flu prevention, based on flu sufferers search queries.

But the passing of the flu bug from person to person is a first-order result of contact. The nature of complex and unpredictable systems is that unforeseeable results arise from second-, third-, and higher-order connections. The public health implications of direct contact have been know for hundreds of years: Google is merely finding a faster way to track the well-understood.

As Tucker argues,

Futurist machines are taking over the job of inventing the future. Their predictions have consequences in the real world because our interaction with the future as individuals, groups, and nations is an expression of both personal and national identity. Regardless of what may or may not happen, the future as an idea continually shapes buying, voting, and social behavior. The future is becoming increasingly knowable. We sit on the verge of a potentially tremendous revolution in science and technology. But even those aspects of the future that are the most potentially beneficial to humankind will have disastrous effects if we fail to plan for them.

The future, alas, is not becoming more knowable.

Unconstrained and dynamic complex systems — like our society, the economic system of Europe, or the Earth’s weather — are fundamentally unknowable: their progression from one state to another cannot be predicted consistently, even if you have a relatively good understanding of both the starting state and the present state, because the behavior of the system as a whole is an emergent property of the interconnections between the parts. And the parts are themselves made up of interconnected parts, and so on.

Yes, weather forecasting and other scientific domains have been benefited by better models and more data, and more data and bigger analysis approaches will increase the level of consistency for weather, but only to a certain extent. There are rounding errors that grow from the imprecision of measures and oversimplifications in our models, so that even something as potentially opaque as the weather — where no one is intentionally hiding data, or degrading it — cannot be predicted completely. In everyday life, this is why the weather forecast for the next few hours is several orders of magnitude better than the forecast for 10 days ahead. Big data — as currently conceived — may allow us to improve weather prediction for the next 10 days dramatically, but the inverse square law of predictability means that predictions about the weather 10 months ahead are unlikely to dramatically improve.

So, consider it this way: Big data is unlikely to increase the certainty about what is going to happen in anything but the nearest of near futures — in weather, politics, and buying behavior — because uncertainty and volatility grow along with the interconnectedness of human activities and institutions across the world. Big data is itself a factor in the increased interconnectedness of the world: as companies, governments, and individuals take advantage of insights gleaned from big data, we are making the world more tightly interconnected, and as a result (perhaps unintuitively) less predictable.

Rachel Armstrong on The Problem With The Future

This was a comment to a post, The Future is Now, but the comment is better than the post.

Rachel Armstrong

The problem with ‘the future’ - is that is is actually not the future at all - it is a version of now.

At a very real and practical level when we talk about ‘the future’ - we are not addressing  an evolving, changing, unpredictable set of causes and effects - but predetermined, concrete concepts that already exist. Yet we fool ourselves that somehow we can either know ‘the real future’, or can style it in such a way that suggests that today’s ideas and solutions belong to a time yet to come.

This approach is the backbone of science fiction - in other words - taking elements of something that we understand today and weaving narratives around it. This approach served to explore, in a thought experiment, how an imaginary timescale might change the way we see ourselves today - through technology - and perhaps persuade us to make different choices in the here and now. Science Fiction is an engaging model of reality but it is not realty - it addresses an imagined future. 

In order to design and build ‘the real future’. We need systems, strategies and teams of people that can respond to a constantly changing contexts. We need real technologies that can cope with unknowable outcomes. These technologies exist - this is exactly what life does - and understanding the way that living things persist and adapt to their varied contexts holds the key to positive human development. 

Appreciating that the future is fundamentally unknowable - and therefore cannot be productised - raises some unique research questions that can offer strategic approaches to dealing with uncertainty.

For example:

  • How do we design with emergence?
  • How can we effectively engage with constantly moving targets?
  • How should we design our economic infrastructures that appreciate the risk involved in this evolving scenario?
  • How do we build to deal with inevitable change?

Right now we make a prediction based on certainty that in itself is extrapolated from something that his happening now. By the time we actually implement the solution to these abstractions e.g. The Thames Barrier - the interventions are already out of date.

If we really are interested in dealing with the future, we must start to address the fundamental challenges in new, systemic ways. These issues that affect the humane development of our cities are not exclusive to the construction industry and affect all of us in one way or another.

From an operational perspective, a critical factor in maintaining the status quo of human development is the short-termism that has been cultivated by the prevalent economic model, which values harvesting natural resources but refuses to attribute real value to investing in them. Whilst there is no easy fix, or overnight solution to our predicament, it is vital to engage industry-wide long-term management strategies to find productive new approaches. These conversations need to happen - NOW!

Many of us are already making a personal investment in finding ways to address the complex set of underlying conditions that are the root cause of the toxic environmental symptoms of our time.

Many of these investors in our shared future - cannot imagine what the exact ‘profits’ of their enterprise will bring, nor do many of them expect material rewards. They also appreciate that their inaction is a bigger risk to their humanity than not being able to predict their investment returns in economic terms. Yet, these investors will enjoy great riches in their lifetimes because their investment in ‘our shared future’ is based on a value system that is estranged from commerce and appreciates the value of culture, shared vision, tradition, a conversation between generations, an expanded worldview, discovery, exploration and a common goal - to leave this planet in a better condition than the way we found it. None of these qualities are valued by our current markets because each of them are priceless. 

Armstrong doesn’t say post-normal, or VUCA (volatility, uncertainty, complexity and ambiguity) but she might have well have done so. She’s grappling with the post-normal world, where linear extrapolation of industrial era trends is laughable.

Ziauddin Sardar explained the post-normal as an age

characterised by uncertainty, rapid change, realignment of power, upheaval and chaotic behaviour. We live in an in-between period where old orthodoxies are dying, new ones have yet to be born, and very few things seem to make sense. A transitional age, a time without the confidence that we can return to any past we have known and with no confidence in any path to a desirable, attainable or sustainable future. (Sardar, 2010)

And of course those that are using orthodox tools will find that they don’t work, but they’ll reject new approaches that do work, because the orthodox don’t understand them.