L’Aquila Earthquake: Science collides with the law…

22 10 2012

Today we heard that a group of seismologists have been jailed over the advice they gave prior to the 2009 quake in L’Aquila in Italy which killed over 300 people.

Is this good and right?

Well let’s start by imagining you lived in l’Aquila and a series of tremors had the town worried. A group of experts comes to town, and after a long meeting, come out and declare the risk is miminal. So rather than evacuating, you go home, rest assured, only to lose your family two days later.

I would want blood. I would want to lash out. My family could have been saved!

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So at first glance this judgement may seem like a last sad ripple from a tragic event, however, it isn’t. Upon further reflection, this judgement has serious implications for the relationship between science and the law.

I have always been troubled by how a guilty verdict means ‘you did it’ even if you didn’t, turning ‘beyond a reasonable doubt’ into no doubt at all. I have previously blogged about pragmatism in law, and how you cannot be 80% guilty and thus serve 80% of a sentence.

With such pressures on the law to come to a clear conclusion, it was only a matter of time before a court was asked to decide on whether scientific advice was correct…

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So today, when a court decided that scientists were ‘too reassuring’ to the public, my alarm bells were set ringing and still haven’t stopped.

Armed with the hindsight that an earthquake in fact did occur, it is natural that the families of the victims are appalled by the advice they got. However, in this case it is critical to also put yourself into the shoes of the scientist – in the days before the quake.

They must have honestly doubted a quake would happen. If you had expected a quake you would surely have said so!

In their statements they confirmed a quake was possible but unlikely. So what we have to ask is this: based on the data they had, was that conclusion faulty?

To answer that you only need to ask – do all tremors lead to quakes? Well no, most don’t. So the quake was by no means likely, let alone inevitable. They were not covering up. None in the group was suppressed or censored. I can only conclude that they, after years of chasing  tremors, had come to discount the value of tremors as indicators.

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And today, a judge decided that their advice was not only wrong, but criminally wrong.

The problem here is that science is not a PR exercise. If scientists put spin on data, they lose credibility. If they cry wolf, they lose credibility. The only safe way to do science is to stick to the facts. The facts did not indicate an imminent earthquake. The judge does not seem to realise: scientists cannot, and do not claim to be able to, predict earthquakes.

Perhaps the judge should read Taleb’s treatise on rare events, and he’d seen that just because something is unlikely (as the scientists said) does not protect us from the possibility it may still happen.

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So what we have seen today is this: scientists, giving their edified analysis, have been thrown in jail. The mob are satisfied, but you should be distinctly worried.

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See also: Letter from the AAAS to the Italian president





Global Warming Canaries, Anyone? A short intro to why most scientists are worried about climate change…

18 08 2012

The current state of arctic sea ice (see graph below) sends a chill down my spine.

Image

So what it says is that the ice is melting furiously, and looks like it’s not yet slowing down even though the days have started to draw in.

However, any scientist will tell you that no single data point can be used as evidence of global warming, there are simply too many fluctuations for anything to be concluded over anything but the longest timescales. We cannot simply look at the mean temperature for a hot year and say, there you go, global warming!

Now, the issue is, there are well-known cycles over pretty much all timescales – this pretty much undermines all serious attempts at prediction.

So, what to do? Well all is not lost; there are still some clever little leading indicators we can look at to give us that sobering wake up call.

#1:  CO2

Firstly, we know CO2 concentration is up, no doubt or argument, this can be seen in the famous Hawaii data above, complete with the seasonal ‘breathing’ by global plant-life. The argument is about whether the greenhouse models that say this will result in warming will turn out right. I honestly don’t know, but I wouldn’t even have to wonder if the CO2 levels weren’t going up, would I?

#2: A Record Breaking Rate of Record Breaking

Secondly, rather looking at averages or ‘new records’, we can look at the frequency of records. So rather than saying, “we just had the hottest summer ever in some parts of the US, there’s the proof” we can look at how often records are set all over the world – hottest, coldest, wettest, dryest and so on. This approach creates a filter; if it shows there are more records being broken on the hot side than the cold side, could this be an indicator? I hope not, because there are.

Again, it could be part of a long-term cycle that could bottom out any time now. But on the other hand, if it was going the other way, I wouldn’t have to hope, would I?

#3: Sea Ice

Now the sea ice. The sea ice is another proxy for temperature. The reason it’s interesting to climatologists is because it is a natural way to ‘sum-up’ the total warmth for the year and longer; if ice is reducing over several years, it means that there has been a net surplus of warmth.

CryoSat – The European Space Agency’s Sea Ice Monitoring satellite launched in 2010 – (Image credit ESA)

Today we are seeing a new record set for minimal northern sea ice. And not only is there less area of ice, but it is thinner than previously realized and some models now suggest we could be ice-free in late summer in my lifetime.

Now if that does not strike you cold, then I didn’t make myself clear. This is not some political posturing, not some ‘big-business’ spin, nor greeny fear mongering. It’s a cold clean fact you can interpret for yourself, and it could not be clearer.

So is it time to panic?

Well it can still be argued the melting is part of a cycle, it could of course reverse and hey, no biggy. After all, what does it matter how much ice there is?

Well, yet again, I hate to rely on the ‘hope’ that it’s a cycle. Because if it continues, the next effect will be felt much closer to home…

Sea Level

Sea level is the ultimate proxy for warming. Indeed, sea level change can be so serious, maybe it is the problem rather than the symptom. If the ice on Greenland and Antarctica melt, the rise in sea level would displace hundreds of millions of people and change the landscape so dramatically it’s a fair bet wars and famine will follow. Now that is serious.

So have we seen sea level rise? Well, yes. Here’s the plot:

Now, it looks pretty conclusive but hold the boat. Some say’s it’s proof of warming but not everyone agrees. It’s true it could again be a cycle. Also, the sea level rise is fairly gradual; what people are really arguing about is whether we should expect it to speed up. If temperature goes up a few degrees it could go up 5 or 10 times faster. The speed is the issue. Humanity can cope if the level goes up slowly enough, sure, countries like Tuvalu will be in big trouble either way, but countries like Bangladesh and cities like New York and London will only be in real trouble if the rate increases.

Actual Canaries

Canaries taken into mines in order to detect poisonous gases; the idea being they would suffer the gas faster than the people and if the canary dropped, it was time to vacate. Do we have systems that are hypersensitive to climate change?

Yes! There are many delicately balanced ecosystems that can can pushed over a tipping point with the lightest of touch. Is there an increase in the rate of species loss, or an increase in desertification? Yes!

We can also look at how far north certain plants can survive, how high up mountains trees can live or how early the first buds of spring arrive.

Again, these indicators fail to give solace. Everywhere we look we see changes, bleached coral, absent butterflies, retreating glaciers.

The conservative approach is to ascribe these changes to the usual cut and thrust of life on earth; some take solace from the fact that humankind has survived because we are the supreme adapters and that the loss of species is exactly how the stronger ones are selected.

Yes, we are great at adapting, however, to kill any complacency that may create, consider the following: for humans just ‘surviving’ is not the goal, that’s easy, we also need to minimize suffering and death, a much tougher aim. We’ve also just recently reduced our adaptability significantly by creating ‘countries’. Countries may seem innocuous, but they come with borders – and mean we can no longer migrate with the climate. Trade across border also needs to be of roughly the same value in both directions.  While some countries will actually see productivity benefits from global warming, most will not, and without the freedom to move, famine will result. Trade imbalances mean inequality will become extreme. The poorest will suffer the most.

So for now changes are happening, and advances in agricultural technology are easily coping; however, because ecosystems are often a fine balance between strong opposing forces, changes may be fast should one of the ropes snap.

Conclusion

Looking at the long history of the earth we have seen much hotter and much colder scenes. We have seen much higher and much lower sea levels. We are being wishful to assume we will stay as we have for the last 10,000 years. It may last, or it may change. Natural cycles could ruin us. And mankind is probably fraying the ropes by messing with CO2 levels.

Can we predict if we are about to fall off of our stable plateau? No, probably not. But is it possible? Heck yeah.

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If you liked this, you may like these earlier posts on the subject of global warming:

  1. What does the earth’s history tell us about climate? And how can we find out if our house will be one that sinks should sea levels rise? Find out here!
  2. Can we  change the planet’s dangerous behavior? Read my call for a study in mass behavior.




Energy Drink Misinformation

11 09 2011

Zero calorie ‘energy’ drinks piss me off. Why?

A zero calorie energy drink is a flat-out contradiction. 

Think about it. What is a calorie? If you don’t know, look it up. Yes, exactly, it is a measure of… energy content! WTF?

What I want to know is this: how come we let big business redefine our language to their own greedy ends? I mean the people who make low-calorie energy drinks know they have no energy in them, so why are they called energy drinks?

I think its because energy is a misunderstood concept and they are taking advantage of this.

Understanding what energy is (and more importantly isn’t) will allow people to more accurately decide things correctly – like whether it’s a good idea to try hike 100 miles across a desert armed only with zero calorie energy drinks.

So for background, please take a look at my article on energy designed for people with too little time to read a whole book, or even a pamplet.

Now, the specific issue here is that people are confusing energy sources with stimulants. Sure, the sugary versions do actually supply some energy, but no more than a can of Coke – but these guys are not charging those absurd prices for sugar – those prices, and claims, are for the drugs. Compounds like caffeine affect our nervous system and interfere with our built-in protection systems, systems that make us feel tired after effort, mechanisms that force us to get the sleep we need in order to rest our muscles and reboot our brains.

The issue here is that the word stimulant is not as easy to sell as ‘energy’, and the English language does allow us to mix up feeling ‘energetic’ with feeling alert and ready for action.  The nerdy scientific truth issue here is that tired people actually still actually have plenty of energy (especially if they are prosperous about the middle) it is just their inclination to use that energy that changes.

So next time you feel tired but need to keep going, by all means get a ‘so-called’ energy drink but remember it is mainly just a drug. The next time you hit a wall 20 miles into a marathon, remember to get some real energy.

 

 

Postscript

So is messing with you body’s tiredness systems bad? Not necessarily! We must also resist overreacting and committing another crime – resorting to the naturalistic fallacy that messing with nature is fundamentally a bad idea. I quite like it when medical science messes with natural things like smallpox and malaria for example. Stimulants are not all bad, keeping alert can keep us safe when driving, and used in moderation can actually help us focus through tedious study or exams.




The Amgen Tour of California – a few pictures

20 05 2011

I though I would pop up a few pictures I took today watching the tour of California. My wife (the professional) suggested I should have stopped after the first one. And she could not repress the hint of a sneer as we scrolled down past #3. I could read it in her eyes: photoshop filters, she was thinking, should require a license. I guess I’ll need to keep my day job 🙂

On the plus side, the bottom one actually seems to get a little clearer if you blur your eyes. Especially the front wheel which comes into shape. Prizes for anyone who explains it!





Death by KPI. The unintelligent design of the modern company… and what to do about it.

25 04 2011

KPI!

A beginner’s guide to KPIs…

Background, Context and all that…

Some of you luckier readers will be wondering what on earth a KPI is. Alas, many of my readers will know, and rarely will they have a happy tale to tell about them. Let me tell you mine.

You see, to me the story of the KPI is none other than the story of the modern trend to remove the human element (that most fallible of elements) from big business. I propose that there has crept up upon us, starting when we came down from the trees and now coming to its final fruition with the industrial revolution, a situation in which the workings of our society, our organisations, governments, armies or companies, are simply too complicated to be designed or managed by any one person, whatever force his or her personality might possess.

No, the time of the one big man, the head honcho, the brain, scheming away in his tower, is over – and we enter the era, nay the epoch, of the human hive.

For now we see that in order to achieve great things, it is the ability to sort and organise mankind, rather than the ability of each man on his own, that matters most.

I could wander from my thesis awhile to describe a few side effects, for example, to point out the age of ‘middle management’ is here to stay, or to philosophize about the world where no one is actually ‘driving’ and the species is wandering like a planchette on a Ouija board and how this explains why no one seems to be able to steer us away from the global warming cliff just ahead…

But no, I will not be pulled off course, I will return to our good friend, the KPI.

So it seems we have these complex organisms, such as the venerable institution that is the company, that have evolved to survive in the ecosystem that is our global economy. Money is the blood, and people, I fancy, are the cells. And just as no particular brain cell commands us, no particular person commands a company. Just as the body divides labour among cells, so does the company among its staff. We train young stem cells into muscle, tendon and nerve. We set great troops of workers to construct fabulous machines to carry our loads just as our own cells crystallize calcium to make our bones.

Having set the scene thus I must move on, for where are the KPIs in all this?

As clever as the cells of our bodies may be, to choose depending on the whims of circumstance to turn to skin or liver or fat, that is but nothing compared with the cleverness with which the cells are orchestrated to make a cohesive body, with purpose and aim,  with hopes and dreams, and of course sometimes even the means to achieve them. And the question is: how is that orchestration achieved?

Being a devout evolutionist, its is clear to me that it was by no design, but rather by the constant failure of all other permutations that led to the fabulously clever arrangement, and so it is with the organism that is the company.

It is this conviction that leads me to claim, contrary to the preaching of many business schools, that good companies are not designed, but evolve, and by a process of largely unconscious selection. Like bacteria on a petri dish, companies live or die on their choices, and by every suceeding generation, the intelligence of these choices is embroidered into the DNA of the company.

Yes, I am saying that the CEO of Microsoft, or Rio Tinto of Pfizer, is no more sure of his company’s recipe for success than any one cell in your brain is at understanding how it came to be that you can read these words. Ok, maybe that is unfair. They probably have a good shot at reproducing success in other companies, but they only understand how the company works, not why.

It is well to remember that very few of the innovations present in a modern successful company were developed within that company – the system of raising money from banks or through a system of stocks and shares, the idea of limiting liability to make these investments more palatable, of development the of modern contract of employment to furnish staff; nay the very idea that a group of people can actually get together and create the legal entity that is the ‘company’ has been developed over centuries.

Even within the typical office we see many innovations essential to run a business that could never have been ‘designed’ better by single mind – the systems to divide labour into departments – finance, marketing, sales, R&D, logistics, customer service; the reporting hierarchies and methods for making decisions; the new employee checklists, the succession plans, the new product stage-gate system, the call-report database, the annual budget, the balance sheet, the P&L – these are all evolved and refined tools that incorporate generations of brain power.

Whether it is the idea of share options or the idea of carbon copies, the list of machinery is endless and forms the unwritten DNA of the modern company. The company of today has little in common with the farmstead of 300 years ago, and indeed, just like the bullet train, it would not work too well if taken back in time 300 years. It only works in its present setting. It is part of a system – an ecosystem.

Now a business tool that has been evolving for some time, slowly morphing to its full and terrible perfection is the Key Performance Indicator or KPI.

The Key Performance Indicator

There is a saying in engineering circles: you cannot improve what you do not measure.

This philosophy accidentally leaked to the business community, probably at Harvard, which seems a great place to monetize wisdom, and so there is presently a fever of ‘measurement’ keeping middle managers in their jobs, and consultants on their yachts.

This sounds reasonable – but let’s pick at it a little.

When the engineer installs a sensor in a reactor to measure its pressure, it is usually just one element in a holistic system of feedback loops that use the measurement in real-time to control inputs to that reactor. Thus we can see that measurements in themselves are not enough, there needs to be an action that is taken that affects the measured property – a feedback loop.

Likewise any action taken in a complex system will tend to have multiple effects and while you may lower the pressure in a reactor, you may raise it somewhere else, thus the consequences of the action need to be understood.

And lastly, if the pressure in the reactor is now right, the value of the knowledge has diminished, and further action will be of no further benefit.

So just like a body, or a machine, a company needs to be measured in order to be controlled and improved, and it occurs to me that these key measurements, the KPIs, need to fulfil a similar set of requirements if they are to be of value.

A few years ago I decided to write a list of KPI must-haves, which I present here:

  1. the property measured must be (or correlate with) a company aim (eg profitability)
  2. measurements need to taken to where they can be interpreted and acted upon, using actions with predictable effects, creating a closed loop
  3. the secondary effects of that action need to be considered
  4. repeat only if the benefits repeat too

Now let’s take a look at some popular KPIs and see if they conform to these requirements.

Production KPIs

There are a multitude of KPIs used the ‘shop floor’ of any enterprise, be it a toothpick factory, a bus company, a florist or a newspaper press. Some will relate to machines – up-time metrics, % on time, energy usage, product yield, shelf life, stock turns – indeed far too many to cover here, so I will pick one of my favourites.

Availability” is a percentage measure of the fraction of time your machine (or factory or employee) is able to ‘produce’ or function. If you have a goose that lays golden eggs, then it is clear that ‘egg laying activity’ will correlate with profits, so point #1 above is satisfied, and measuring the egg laying frequency is potentially worth doing. If you then discover that your goose does not lay eggs during football matches you may consider methods to treat this, such as cancelling the cable subscription. A few trials can be performed to determine if the interference is effective, proving #2. Now all you need to do is worry about point #3; will the goose fly away in disgust at the new policy?

What about #4? Indeed you may get no further benefit if you continue to painstakingly record every laying event ad infinitum. KPIs cost time and money – they need to keep paying their way and may often be best as one-off measures; however, what if your goose starts to use the x-box?

So that is an example of when the KPI ‘availability’ may be worth monitoring, as observing trends may highlight causes for problems and allow future intervention. So surely availability of equipment is a must-have for every business!?

No. There are many times when plant availability is a pointless measure. Consider for example an oversized machine that can produce a year’s supply in 8 minutes flat. So long as it is available for 8 minutes each year, it does not matter much if it is available 360 days or 365 days. Likewise, if you cannot supply the machine with raw materials, or cannot sell all the product it makes, it will have forced idle time and availability is suddenly unimportant.

The simplest way to narrow down which machines will benefit from an availability or capacity KPI is to ask: is the machine is a bottleneck?.

For other types of issues, let’s look at some other KPIs.

Quality KPIs

Quality KPIs are interesting. Clearly, it is preferable to ship good products and have happy customers. Or is it?

In any production process, or indeed in any service industry, mistakes will be made. Food will spoil, packaging will tear, bits will be left out. It is now fashionable to practice a slew of systems designed to minimise these effects: to detect errors when they are made, to re-check products before they are shipped, to collect and collate customer complaints and to feed all this info back into an ever tightening feedback loop called ‘continuous improvement‘.

KPIs are core to this process and indeed KPIs were being used in these systems long before the acronym KPI became de rigueur. To the quality community, a KPI is simply a statistic which requires optimization. The word ‘Key’ in KPI not only suggests it represents a ‘distillation’ of other numerous and complex statistics, but implies that the optimising of this particular number would ‘unlock’ the door to a complex improvement.

Thus, a complex system is reduced to a few numbers, and if we can improve those numbers, then all will be well. This allows one to sleep at night without suffering  nightmares inspired by the complexity of one’s job.

The reject rate is a common quality KPI – it may encompass many reasons for rejection, but is a simple number or percentage. It is clearly good to minimize rejects (requirement #1) and observing when reject rates rise may help direct investigations into the cause thereof satisfying requirement #2.

However, from rule #2 we see that this KPI is only worth measuring if there will be follow-up: analysis and corrective action. This must not be taken for granted. I have visited many plants that monitor reject and when asked why, they report that head office wants to know. What a shame. Perhaps head office will react by closing that factory some time soon.

The failure to use KPIs for what they are intended is perhaps their most common failure.

Another quality KPI is the complaint rate. Again, we make the assumption that complaints are bad, and so if we wish to reduce these we should monitor them.

Hold the boat. How does the complaint rate fit in with company aims? We already know that mistakes happen, and them eliminating quality issues is a game of diminishing returns, so rather than doggedly aiming for ‘zero defect’ we need to determine what an accept complaint rate is.

So here is another common KPI trap. Some KPIs are impossible to perfect, and it is a mistake to set the target at perfection. Think of your local train service. Is it really possible for a train system to run on time, all the time? The answer is an emphatic no!

The number of uncontrolled inputs into a public transit system – the weather, the passengers, strike actions, power outages and the like will all cause delays, and while train systems can allow more buffer time between scheduled stops to cater to such issues, this type of action actually dilutes other aspects of service quality (journey frequency and duration). Add to that finally the fact that a train cannot run early so losses cannot be recovered.

The transport company will of course work to prevent delays before they occur, and lay on contingency plans (spare trains) to reduce impacts, but the costs and practicality mean that any real and meaningful approach needs to accept a certain amount of delays will be inevitable. A train company could spend their entire annual profit into punctuality and they would still fall short of perfection.

So it is with most quality issues, the law of diminishing returns is the law of the land. Thus the real challenge is to determine at what point quality and service issues actually start to have an impact on sales and cashflow. This is another common pitfall of the KPI…

The correlation between the KPI and profitability is rarely a simple positive one, especially at the limits.

Some companies get no complaints. Is this good? No, often it is not! This company may be spending too much money on QC. The solution here is to work with and understand the customer – what issues would they tolerate and how often? If you did lose some customers by cutting quality, would the financial impact be greater than the savings?

However, and on the other hand, don’t make the opposite mistake: once a reputation for poor quality is earned, it is nearly impossible to shake.

Financial KPIs

As companies become bigger, there is a tendency to divide tasks according to specialized skill and training. Thus it can happen that the management of a big mining company may never set foot in a mine, may not know what their minerals look like, nor may they know how to actually dig them up or how to make them into anything useful. In other words, they would be useless team members after a nuclear apocalypse.

However, this is no different from our brain which is little use at growing hair, digesting fat or kicking footballs.

It is thus necessary that the organism (the company) develops a system to map in a flow of information from its body to its mind and then another mapping to take the decisions made in that mind and distribute them to the required points of action.

Indeed to blast in a quarry, or to kick the football are indeed best done by organs trained and capable and no less important than the remote commanders in the sequence of events.

And just as our bodies have nerves to transmit information about the position of our lips and the temperature of the tea to our mind, so the company has memos, telephones and meetings. And KPIs are the nouns and subjects in the language used.

Furthermore, some KPIs need to be further distilled and translated from the language of the engineer (Cpk), the quality manager (reject rate) or the plant manager (units shipped) to that of the accountant (revenue) , the controller (gross margin) and eventually that of the general manager and the shareholder (ROI). This is perhaps the main duty of middle management, bless their cotton socks.

Unfortunately, the mapping of everyday activities to financial KPIs is fraught with danger. The biggest concern comes from the multiple translation issue. That is to say, KPIs can suffer from a case of Chinese whispers, losing their true meaning along the way, resulting in the worse result: a perverse incentive.

Yes, ladies and gentlemen, this does happen.

Let’s say you want to improve your cash situation. You may choose to change the terms in your sales contracts for faster payment, in essence reducing the credit you allow your customers. This may have the desired effect, lowering the KPI  called “receivables” and this looks good on the balance sheet – but let’s look at requirement #3 in the KPI “must have” list. What are the ripple effects of this move? It is clear this will not suit some of your customers, who, considering recent economic trends, probably also want to improve their cash situation; thus you may lose customers to a competitor willing to offer better terms.

And so we see the clear reason for perverse incentives is the consideration of KPIs individually instead of collectively. There has to be a hierarchy upon which to play KPIs against one another. Is revenue more important than margin? Is on-time shipping a part-load preferable to shipping “in full” a little late?

So we see again that the systems used to distill company indicators the choice of which decisions are centralized and which are localized need to be developed and constantly refined using an iterative process. The art of translating the will of shareholders into a charter or mission statement and then translating that into targets for sales, service and sustainability is a task far too complex to perfect at first attempt.

KPI Epic Fails

While on the subject of KPIs I cannot resist the opportunity to bring to mind a few fun examples of KPIs gone badly wrong.

The Great Hanoi Rat Massacre

The French administration in Hanoi (Vietnam) were very troubled by the rat population in Hanoi around the start of the last century, and knowing as they did about rat’s implication in the transmission of the plague, set about to control the population. A simple KPI was set – “number killed” and payments were made to the killers on this basis. There was immediate success with rats being brought in by the thousand and then the tens of thousand per day. The administration was pleased though somewhat surprised by the sheer number. There surprise gradually transformed into disbelief as time wore on and the numbers failed to recede.

You guessed it. The innovative residents of Hanoi had started to breed rats.

The Magic Disappearing Waiting List

Here’s a more recent example from the National Health Service in the UK (the NHS).

A health service is not there to make a profit, it is there to help the population, to repair limbs, to ease suffering, to improve the length and quality of life – and to do this as best it can on a finite budget. So the decisions on where to invest are made with painstaking care – and needless to say, KPIs are involved. Not only big picture KPIs like life-expectancy, or cancer 5-year survival rates, but also on service aspects, such as operation or consultation waiting times.

It will therefore not be surprising to you to learn that the NHS middle management started to measure waiting times and develop incentives to bring these down, or even eliminate them. This sounds very reasonable, does it not?

Now ask yourself, how do you measure a waiting time? Say a surgery offers 30 minute slots – you may drop in and wait for a vacant slot, but as the wait may exceed a few hours it is just as well to book a slot some time in the future and come back then. So one way to measure waiting times is to measure the mean time between the call and the appointment. This of course neglects to capture the fact that some patients do no actually mind the wait and indeed may choose an appointment in two weeks time for their own convenience rather than due to a lack of available slots. Lets put that fatal weakness aside for the minute as I have not yet got to the amusing part.

After measurements had been made for some time, and much media attention had been paid to waiting times, the thumb-screws were turned and surgeries were being incentivized to cut down the times, with the assumption they would work longer hours, or perhaps create clever ‘drop-in’ hours each morning or similar.

Pretty soon however, the results started coming in, the waiting times as some surgeries were plummeting! Terrific news! How were they doing it?

Simple: they simply refused to take future appointments. They had told their patients: call each morning, and the first callers will get the slots for that day. This new system meant nobody officially waited more than a day. Brilliant! Of course it is doubtful the patients all felt that way.

How The Crime Went Up When It Went Down

If you work for the police, you will be painfully aware that measuring crime is difficult. And so it is with the measurement of many ‘bad’ things – for example medical misdiagnoses or industrial safety incidents.

Let’s look at workplace safety; while it may be fairly easy to count how many of your staff have been seriously injured at work, it is much harder to record faithfully the less serious safety incidents – or more specifically, the ones that might have been serious, but for reasons of sheer luck, were not. The so-called ‘near-misses’.

Now to the problem. Let us say you are a fork-lift driver in a warehouse and one day, it a moment of inattention, you knock over a tower of heavy crates. Luckily, no-one was around and more luckily, no damage was done. So what do you do? Do you immediately go to the bad-tempered foreman with whom you do not get along and tell him you nearly killed someone and worse, nearly caused him a lot of extra work? Or do you carefully stack the crates again and go home for dinner?

The police suffer a similar predicament. The reporting of a crime is often the last thing someone wants to do, especially if they are the criminal. Now let’s say you are an enterprising young administrator just starting out in the honourable role as a crime analyst at the Met. You want to tackle crime statistics in order to ensure the most efficient allocation of funds to the challenges most deserving thereof. Do bobbies on the beat pay for themselves with proportionately reduced crime? Does the ‘no broken windows‘ policy really work? Does the fear of capital punishment really burn hot in the mind of someone bent on murderous revenge? Such are the important questions you would wish to answer and you have a budget to tackle it. What do you do?

You set out to gather statistics of course, and then to develop those tricky little things, the KPIs.

Now let’s say a few years pass, and after some success, you are promoted a few times and your budget is increased. Yay! You have always wished for more money to get more accurate data! Another few months later and the news editors are aghast with the force. Crime is up! Blame the police – no, blame to left – no blame the right! Blame the media! It’s video games – no, it’s the school system!

No, actually it’s a change in the baseline.  The number of crimes recorded most likely went up because the effort in recording them went up. The crime rate itself may well have gone down.

The opposite can also happen. Say you run a coal mine and you will be given a huge bonus if you can get through the year with a certain level of near misses. Will you really pressure your team to report every little thing? I think not.

So the lesson here is: watch out for a KPI where you want the number to go one way to achieve your longer term aims, but where the number will also depend on measurement effort.

The Profit Myth

Most KPIs are dead dull. The very mention of KPIs will elicit groans and be followed swiftly by a short nap. The ‘volume of sales’ KPI is no different. The issue with the volume KPI is probably made worse by the clear fact that actually thinking about KPIs is a strong sedative. Surely selling more is good? Well, if you can fight through the fog of apathy, and actually think about this for a second, it is easy to see this is often not so.

To see why, it is important to understand price elasticity. It if often true that lowering price will increase sales, so an easy way to achieve a target ‘volume’ (number) of sales is to drop price. That way to can make your volume KPI look good, as well as your revenue KPI, and so long as there is still a positive margin on all the units sold your earnings KPI (aka profit!) will see upside. There can’t possibly be any downside, can there?

Of course, astute financial types can find this fault easily, and perhaps the question of ‘how’ would make a good one for a job interview. It turns out more profit is not always good (seriously!). Whether more profit is really worth taking depends on the ratio of the increased earnings to the increased investment that is needed to make them.

There is another KPI I mentioned earlier the “ROI” or return on investment. When I discussed it I implied that it was only of interest at the GM level, but really the reason only the GM tends to see this KPI is because it is difficult to calculate, and often only the GM has the clout to get it – but it should be considered by all. To me, it is the king of KPIs for a publicly listed company. And it turns out the ROI may actually go down with increasing profit.

If making more widgets requires no further investment, then the maths is easy, but that is rarely true.

The question is this: is it better to have a large ‘average’ business or a smaller one with higher profit margins? It turns out, from an investor’s perspective, that the latter is fundamentally preferable.

The ROI treats a business a bit like a bank account: asking what interest rate does it offer? The business should be run to give the highest interest rate‘(%), not the highest interest ($). It is always possible to get more interest from a bank account – just put more money in the bank.

Translating a Mission Statement into company KPIs

I mentioned above that the ROI is a pretty darn good KPI – so can we use it alone? Of course not. Recall that the KPIs are mere numbers we measure that try to tell us how we are doing against the company mission statement, and while the company mission statement may unashamedly describe vast profits as a goal, this is almost universally not the whole story.

The organism that is the modern company has one particular need besides profit today, and that is profit tomorrow. The ROI does not capture this need, so more KPIs are required, and trickier ones – ones that capture sustainability, morale, innovation and reputation (brand value). This is the turf of the mission statement.

Even though the more cynical of my readers will know the mission is usually ‘make lots of dosh’, and anything beyond that is window dressing, I would venture that the mission statement is the first step to figuring out which KPIs to put first.

Let’s dissect a few examples. In my own 2-minute analysis I decided they fall into four types:

  1. To appeal to employees:
    McGraw Hill:
    We are dedicated to creating a workplace that respects and values people from diverse backgrounds and enables all employees to do their best work. It is an inclusive environment where the unique combination of talents, experiences, and perspectives of each employee makes our business success possible. Respecting the individual means ensuring that the workplace is free of discrimination and harassment. Our commitment to equal employment and diversity is a global one as we serve customers and employ people around the world. We see it as a business imperative that is essential to thriving in a competitive global marketplace.
  2. To appeal to customers (aka the unabashed PR stunt)
    A recent one from BP:
    In all our activities we seek to display some unchanging, fundamental qualities – integrity, honest dealing, treating everyone with respect and dignity, striving for mutual advantage and contributing to human progress.
    I couldn’t leave the is one out from Mattel:
    Mattel makes a difference in the global community by effectively serving children in need . Partnering with charitable organizations dedicated to directly serving children, Mattel creates joy through the Mattel Children’s Foundation, product donations, grant making and the work of employee volunteers. We also enrich the lives of Mattel employees by identifying diverse volunteer opportunities and supporting their personal contributions through the matching gifts program.
  3. To appeal to investors. This is usually a description of how they are different or what they will do differently in order to achieve big dosh.
    CVS:
    We will be the easiest pharmacy retailer for customers to use.
    Walt Disney:
    The mission of The Walt Disney Company is to be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world.
  4. For the sake of it – some companies clearly just made one up because they thought they had to, and obviously bought a book on writing mission statements:
    American Standard’s mission is to “Be the best in the eyes of our customers, employees and shareholders.”

Now a great trick when analysing the statement of any politician, and thus any mission statement, is to see if a statement of the opposite is absurd. In other words, if a politician says “I want better schools”, the opposite would be that he or she wants worse schools, which is clearly absurd. Thus the original statement has no real content, it is merely a statement of what everyone would want, including the politician’s competitors. Thus to judge a politician, or a mission statement, it is important to look not at what they say, but at what they say differently from the rest.

Mission statements seem rather prone to falling into the trap of stating the blindingly obvious, and as a result become trivial, defeating the point. Such is the case with American Standard. Of course you want to be the best. And of course it is your customers, employees and shareholders who you want to convince. Well no kidding!

So discounting those, we can see that a good mission statement will focus on difference. If we look at CVS, their mission is to be easy to use. This may seem like a statement of the obvious, but I don’t think it is – because they have identified a strategy they think will get them market share. Now they can design KPIs to measure ease of use. This is the sort of thinking that led to innovations like the ‘drive-thru’ pharmacy.

If we look at Disney, you can go further. “…[To] be one of the world’s leading producers and providers of entertainment…” OK, so they admit being #1 is unrealistic, and if you want to be taken seriously, you need to be realistic. But if you are one of many, how do you shine? “Using our portfolio of brands to differentiate” They realise they can sell a bit of plastic shaped like a mouse for a lot more than anyone else can. There is a hidden nod to the importance of brand protection. So KPIs for market share and brand awareness fall right out. They finish off with “the most creative, innovative and profitable entertainment” Well you can’t blame them for that.

Very rarely, you see a mission statement that not only shows how the company intends to make money, but may also inspire and make pretty decent PR. I like this one from ADM:

To unlock the potential of nature to improve the quality of life.

I have no idea how to get a KPI from that though!

Summary

In this article I have tried to illustrate how measuring a KPI is much like taking the pulse of a body – it’s a one-off health check, yes, but more importantly it can be a longer term measurement of how your interventions are affecting company fitness in the longer term.

I also try to describe some common pitfalls in the use of KPIs and presented four simple tests of their value:

  1. the KPI must correlate to a company’s mission
  2. the KPI must form part of a corrective feedback loop
  3. perverse incentives can be avoided by never considering any single KPI in isolation
  4. repeat the treatment only if the benefits repeat too

I have personally used this checklist (with a few refinements) over the years to some good effect in my own industry (minerals & materials) and though I am confident many of my readers will have more refined methods, I live in hope that at least one idea here will of benefit to you.





Educational way to spend four minutes…

2 01 2011




Good reading for anyone wanting to be more energy efficient…

7 10 2010

I am busily researching a series of articles on energy, and thought htis article deserved an immediate link…
http://www.environmentmagazine.org/Archives/Back%20Issues/September-October%202008/gardner-stern-full.html





Skeptics vs Deniers

31 08 2010

There is a growing movement, grassroots in nature, but starting to connect, called the skeptics community.

Who exactly are they? Are they people who are starting to uncover the truth – that most world governments are a sham and that secret societies control our every move? Do they deny the holocaust and suspect 9/11 was a complex plot?

No.

A skeptic is merely someone who needs to be convinced of things through reason, rather than one who accepts things on some-one’s say-so.

Simple!

So what is a global warming ‘skeptic’?

Climate science is complex, and consensus opinion is that man’s activity has led to increased greenhouse gas emissions which are likely to reduce outgoing radiation and thus lead to a net shift upward in the temperature of the Earth’s delicate surface. Yes, there are other possible causes, yes, the models contain assumptions, and yes, some fools have fabricated data to look cool. It is also true that many respected scientists will not say it is a cast iron ‘fact’.

So that is the scene – and there seem to be a few types of stakeholders:

  • the ‘global warming denier’
  • the  ‘global warming skeptic’
  • the regular ‘skeptic’
  • and lastly, the gullible!

A ‘global warming denier’ has come to mean someone who does not think the evidence stacks up enough to warrant concern, or worse, thinks it is all a giant conspiracy.

A ‘global warming skeptic’ has come to be somewhat synonymous with a denier, but perhaps without the conspiracy angle. However, many are just people who are on the fence – they are often very smart, and don’t just believe what they are told, but on the other hand, they are easily misled, as there is just so much misinformation out there. They may be the ones who say “I heard the jury is out…” rather than actually looking at evidence.

Some legitimate scientists have foolishly allowed themselves to be given this label, just because they debate some small details (like the rate of heating, or the likely nature of socio-political impacts). These scientists are then lumped with deniers. Tough luck to them.

I found this is some random folder on the 'net. If it's yours, please let me know, I love it! Update: it looks like it may well be from thisisindexed.com - click it to link - nice one Jessica Hagy!

Now a true skeptic will weigh all evidence according to the following principles:

  • is it logical?
  • does it conflict with other strong theories? If so, is it strong enough warrant a change to your previous understanding?
  • is there independent corroboration?
  • do the proponents have a  proven track record (credibility)?
  • is there any incentive by stakeholders to twist the facts?

This describes most good scientists, so its not a bad thing.

In the case of global warming, most true skeptics who have looked closely at the evidence and weighed it appropriately, agree that there is real cause for concern.

But yes, we skeptics will always retain just a little doubt, because you just never know…





What exactly is ‘science’?

14 05 2010

I used to think science was the practice of the scientific method; i.e. you propose a hypothesis, you develop a test of the hypothesis, execute it and prove the hypothesis.

That worked for me until the end of high school.

At university, I was a true nerd. I read all my textbooks cover to cover (mainly because as I was too shy for girls and too poor for booze). During this time, the definition above started to fail. So much of the science was maths, statistics, observation, pattern recognition, logic and quite a bit of rote learning. Not all of it fitted into my definition of science. I became a fan of a new definition: science is the study of the nature of reality .

But then I did post-grad, and I realised that not much in science is ‘proven’ (I guess this is the point of post grad study). Evolution, for example, is not proven. That the sun revolves around the earth is not ‘proven’. I discovered that the only things that could be proven were ‘ideas’ about ‘other ideas’. Bear with me on this one.

Let us say we define the number system – this is an ‘idea’ or conceptual construction. Within this construction we can ‘prove’ that one and one is two. Because we ‘made’ the system, with rules, then we can make factual and true statements about it. We can’t do this about the real world – we cannot say anything with absolute certainly because we rely on flaky inputs like our own highly fallible perception.

It’s like that old chestnut: how can you be sure you are not living in a giant simulation? Of course you can argue that it is pretty unlikely and I would agree, and right there we have a clue to a better definition of science.

It turns out that much of modern science deals in ‘likelihood’ and ‘probability’ rather than proof and certainty. For example, we can say that the theory of evolution is very likely to be more-or-less right, as there is a lot of corroborating evidence. Science cannot be run like a law court – where the prosecution only need to reach a threshold of reasonable doubt to ‘prove’ someone guilty.

Aside for nerds: Science says you can use logic to prove things absolutely, but logic only works with ideas, and there is a breakdown between ideas and reality, so one can never prove things in reality. So it is thoroughly wrong for a court to say that someone has been proven guilty. The courts use this language as a convenience, to “draw a line under” a case as they have not found a moral way to dole out punishments based on probabilities. Imagine a world in which a murder suspect gets a 5 year sentence because the was a 20% chance he was guilty! Sports referees often operate in this decisive way, perhaps because it saves a lot of arguing!

Anyway, good science cannot just give up and say once there is consensus something passes from theory to fact. This is sloppy. We have to keep our options open – forever.

Think for example of Newton’s Laws of Motion. They are called ‘Laws’ because the scientific community had so much faith in them they passed from theory (or a proposed model) to accepted fact. But they were then found wrong. Strange that we persist in calling them laws!

It took Einstein’s courage (and open mindedness) to try out theories that dispensed with a key plank of the laws – that time was utterly inflexible and completely constant and reliable.

So it is that the canon of scientific knowledge has become a complex web of evidence and theories that attempt to ‘best fit’ the evidence.

Alas, there are still many propositions that many so-called scientists would claim are fact or at least ‘above reproach’. Evolution is attacked (rather pathetically), but the defenders would do well to take care before they call it ‘fact’. It is not fact, it is a superbly good explanation for the evidence, which has yet to fail a test of its predictions. So it is very very likely to be right, but it cannot be said to be fact.

This is not just a point of pedantry (though I am a bit of a pedant) – it is critical to keep this in mind as it is the key to improving our model.

Two great examples of models people forget are still in flux…

1) The big bang theory

2) Quantum theory

I will not go into global warming here though it is tempting. That is one where it doesn’t even matter if it is fact, because game theory tells you that either way, we better stop making CO2 urgently.

Back to the big bang.

I heard on the Skeptic’s Guide podcast today about an NSF questionnaire that quizzed people about whether they believed the universe was started with a massive explosion, and they tried to paint the picture that if you didn’t believe that, then you were ignorant of science. This annoyed me, because the big bang theory is now too often spoken of as if it were fact. Yes, the theory contributes viable explanations for red-shifted pulsars, background radiation, etc, etc, but people are quick to forget that it is an extrapolation relying on a fairly tall pile of suppositions.

I am not saying it is wrong, all I am saying is that it would be crazy to stop exploring other possibilities at this point.

You get a feeling for the sort of doubts you should have from the following thought experiment:

Imagine you are a photon born in the big bang. You have no mass, so you cannot help but travel at ‘light speed’. But being an obedient photon, you obey the contractions in the Lorentz equations to the letter, and time thus cannot pass for you. However, you are minding your own business one day when suddenly you zoom down toward planet earth and head straight into a big radiotelescope. Scientists analyse you and declare that you are background radiation dating from the big bang and that you have been travelling for over 13 billion years (they know this because they can backtrack the expansion of the universe). Only trouble is, that for you, no time has passed, so for you, the universe is still new. Who is right? What about a particle that was travelling at 0.999 x the speed of light since the big bang? For it, the universe is some other intermediate age. So how old is the universe, really?

This reminds us of the fundamental proposition of relatively – time is like a gooey compressible stretchable mess, and so is space, so the distance across the universe may be 13.5 billion light years, or it might be a micron (how it felt to the photon). It all depends on your perspective. It is much like the statement that the sun does not revolve around the earth and that it is the other way around. No! The sun does revolve a round the earth. You can see it clearly does. From our perspective at least.

Now, quantum theory.

Where do I start? String theory? Entanglement? Please.

The study of forces, particles, EM radiation and the like is the most exciting part of science. But being so complex, so mysterious, so weird and counter intuitive, it is super vulnerable to abuse.

Most people have no idea how to judge the merits of quantum theories. Physicists are so deep in there, they have little time (or desire or capability) to explain themselves. They also love the mystique.

I do not want to ingratiate myself with physicists, so I will add that the vast majority have complete integrity. They do want to understand and then share. However, I have been working in the field for long enough to know that there are weaknesses, holes and downright contradictions in the modern theory that are often underplayed. In fact these weaknesses are what make the field so attractive to people like me, but is also a dirty little secret.

The fact is that the three forces (weak nuclear, strong nuclear and magnetic) have not been explained anything like as well as gravity has (by relativity). And don’t get me started on quantum gravity.

———————-

Anyway, thinking about all these issues, I concluded that science was (definition #3) the grand (platonic) model we are building of reality, ever evolving to best fit our observations.

My man, Plato

That works well for me. However, I recently came across a totally different definition for science:

# 4) “Science is a tool to help make the subjective objective.”

OK I paraphrased it to make it more snappy. It was really a discussion about how science was developed to overcome the fallibility of the human mind. Examples of weaknesses it needs to overcome are:

  1. The way our perception is filtered by preconceptions
  2. How we see pattern where there is none
  3. How we select evidence to match our opinion (confirmation bias)
  4. How we  read too much into anecdotal evidence
  5. etc etc.

I could go on. So ‘science’ is the collection of tricks we use to overcome our weaknesses.

I like this definition. We are all going about, and in our heads we are building our model of the world… and its time for an audit!





The Apple Mac: It’s a religion…

6 02 2010

It has been explained by writers better than I how our minds are wired in a way that makes them vulnerable to religion.

Whether it is our desire to feel secure or have simple and complete explanations for natural phenomena or simply because we enjoy the social scene at church, there is no doubting the power of the effect. Even in modern times, entire lives, indeed entire civilizations are devoted to the superstitious concept of supernatural Gods.

Although L. Ron Hubbard may have started a religion while knowing it was all a sham, most religions did not need such deliberate action. Our innate need to have faith in things has allowed religious concepts to emerge and evolve freely in our communities as far back as records go.

So why do I bring that up?

It occurred to me today while pondering why people are so defensive about Apple Mac computers – I realised that their behaviour had much in common with religious ‘zeal’.

Then it occurred to me how much the success of Apple relies on perception and conception. If it was just about getting the fastest computer, you would not buy a Mac. If it was about buying something that has wide compatibility, you would not buy a Mac. If it was about cost, you certainly would not buy a Mac.

Some might argue that Macs are more intuitive and ‘easy to use’. These are people whose idea of computing is buying a shiny box, plugging it in and doing exactly what they are expected to do. They are people who just accept it when they are told they need to buy a new printer. Or worse, they blame the printer – what a crappy printer, not compatible! These are people who do not need to set up a complex network, or run a database server.

Anyone who has a Powerbook G4 that cost several grand and is not actually compatible with the latest OSX release, yet needs that OSX release in order to actually work, and still hugs and caresses the machine as it it were a newborn baby while defending its honour and wanting to spend another several grand on a newer shinier one, is, in my opinion, dabbling in a cult.

OK, before you write me off as some sort of anti-mac fanatic, I will admit they are beautiful.

Moving swiftly on, I think it is worth analysing Apple’s success.

How does a company that controls the details of their products so completely compete with a product (the PC) that is made by hundreds of companies all constantly competing, innovating, coming and going, rising and falling? The modular design of the PC allows almost anyone to buy all the bits and assemble the machine themselves; with so many companies making monitors and keyboards and hard drives, some will make bad (fatal) decisions and die, some will make good decisions and thrive and if there are enough upstarts to keep up the supply, the consumer will only ever see the winners, even if their victory was a flook, it was a victory none the less.

You could say that PC is the computer you get from natural selection (survival of the fittest), the Mac is the the computer you get when you try to control the evolution (unnatural selection).

Now a company that tries to make everything itself can capture the value chain, sure, but as it is only one company, it cannot make even one fatal decision, and thus needs to be a little more cautious. This means it is doomed to always lag slightly on the performance vs value curve – so what does it do?

Easy, get the consumer to accept poor value. Make up for performance by buying in high quality technologies (lcd screens, hard disks, etc), and make the customer pay the premium. Then focus on marketing.

Marketing is the art of making people want something. It is unnecessary for products people need.

So what happened at Apple?

Apple, perhaps by good luck, became perceived as a David vs the Goliaths of IBM and Microsoft. For some reason (was it deliberate?) Apple computers gained traction in music recording and graphic design, and gained a sort of bohemian chic that is rather impressive considering that it is essentially “Big Business” and, like most companies, designed to make money.

Clever partnerships, and particularly the inspired partnership with Adobe (think Acrobat PDF’s, think PhotoShop) strengthened their position with journalists, publishers and illustrators establishing the Mac as the creative profession’s computer of choice.

This turned out to be a good thing, as the naughties have been the most art friendly decade yet, as popular culture has come to resent things like ‘work’ and ‘industry’, and a certain sections of society have come to view activities like sport as trivial and meaningless when compared to the value and depth in culture, poetry, good food, yoga, spiritualism and so on.

In other words, the artists have moved up in the world.

Some of the more switched on folk will realise that brands like Gucci/Armani/Christian Dior or Ferrari/Porche/Aston Martin  or Rolex/Michel Herbelin/Patek Philippe are based entirely on massaging the egos of their customers, and in the last case, they probably don’t even keep better time than a black plastic Casio.

But not many of the arty crowd have realised that Apple is using their independent nature against them. The Mac user seems to be infected with the idea that in using a Mac they are somehow being beneficent to the world, will somehow be more creative, they they are part of some loving brotherhood that has exclusive access to the truth and the light.

This is because, by accident or design, the Apple brand has been developed to find that part of our mind that wants to believe and wants to belong, and is easily dazzled; the brand is acting like a religion.

———————

Apple’s alliance with artists continues with U2 and the Black Eyes Peas, both highly credible symbols of free-thinking modernism. But I want you to ask yourself: what is free thinking about this computer company? I’m not sure, but I suspect the only free-thinking thing about Apple is its association with icons of the free-thinking world. It is just an electronics company for Pete’s sake. Like Sony, like Samsung, like Nokia.

If you believe there is any more to it than that, then you are welcome to pay for it.

=======================

PS: Besides the defunct G4 in the drawer, there is also an iPod classic in my home. I like it. I like to hold it. Mmm.