Wednesday, September 26, 2007

Did You Know; Shift Happens - Globalization; Information Age

This video is stunning. It simply makes my head spin. The changes coming in the next few years are unimaginable.

Tuesday, September 04, 2007

Crack the Whip

The expression crack the whip has two meanings. It can be in the sense of a boss (or parent), becoming more strict about work expectations, or it can be referring to the kids game, Crack The Whip. This post is about the latter, but as applied to work.

I have been doing headquarters staff work for several years now. One of the issues with it is that you are collecting data and information from people who are not really interested in providing it. Then giving it to people who will not take no for an answer and have high expectations of the quality of the work as well as the data.

The game crack the whip is described this way on wikipedia "One player, chosen as the "head" of the whip, runs (or skates) around in random directions, with subsequent players holding on to the hand of the previous player. The entire "tail" of the whip moves in those directions, but with much more force toward the end of the tail. The longer the tail, the more the forces act on the last player, and the tighter they have to hold on."

So what happens, is a person several steps removed organizationally has the task to put together some information. Each person has to clear the information with his boss before it can move up the chain of command. Everyone is busy, so it is sometimes difficult to get an appontment. Typically, in the headquarters function, we have given the business units as much time as we dare, recognizing that once the data comes in, we still have to analyze it.

Anyway, as the data works its way up the chain of command and time grows shorter, anxiety increases, the data comes in late, and the headquarters guys end up working until the wee hours trying to incorporate the late data and come up with a coherent story.

This is not to say that HQ people are saints, just that being the last one in a long chain is really hard.

Thursday, August 02, 2007

Best T-Shirt Folding Video Ever

This one is aimed at Cooper and Will as they prepare to go out on their own, and also so that I have it archived.

Being able to fold a t-shirt in 2 seconds is a good thing.

Thursday, July 26, 2007

Inbox Zero

Merlin Mann of 43Folders fame has a philosophy called Inbox zero. He gave this talk at the Google campus in July 2007. It's worth a listen, but if you don't have time, his advice boils down to dealing with your inbox everyday. Every mail gets one of 5 things done to it:
  1. Delete (or Archive) - Don't spend a lot of time on building archive folders. Use built-in search capabilities to find things
  2. Delegate (Forward to someone else)
  3. Respond (keep it short) - Appropriate response length is good. My comment is to put important content into the subject.
  4. Defer (Put into a pending folder) - something that you check periodically to see if it has resolved. I use flags in Outlook to keep track of my deferred actions
  5. Do or capture a placeholder for it (such as a calendar or a task)

General principles:
Do email less (unless of course your job is real-time)
Do email on a schedule. Turn off mail arrival signals, then once per hour process it using the above five actions. Go back to work.
Filter junk email (especially spam, but also those non-critical listserv notes, etc.)
Don't fiddle - focus on getting your stuff done, not playing with your email organization

Take this advice and be productive.

Tuesday, June 12, 2007

Plans, Goals, Forecasts, and Estimates

This entry on the Overcoming Bias blog got me thinking.

Bosses just want the number.

I see a lot of confusion between planning, estimating, goal-setting, and forecasting.

Forecasting as often used in business is simply giving someone the number that represents business performance. Forecasting accurately is impossible, except maybe in the very short or very long term. Nonetheless, you still at some point need to come up with a number. Forecasting is best done using probabilistic techniques and reporting events as probabilities. Simply predicting a number, even if you are right is of little value in most circumstances.

Can you imagine a weather forecaster simply saying, "Rain"? Without a percentage and a timing, it's simply not a real forecast.

Likewise when you estimate business performance, wouldn't it be better to say, given the manpower and marketing budget, there is a 10% chance that we can sell 10,000 units, and a 90% chance that we can sell 8,000 units. Wouldn't that provide more information than just 10,000 units. It is a richer way of expressing a "forecast" and helps put reality into the process of planning for contingencies.

Ah, but goal-setting is important and helps people keep focused. That is true, but goals are not good forecasts. Also the goal setting process is usually based on an arbitrary standard, and negotiated without good information. There's a lot of push, pull, and sandbagging that occurs. Any resemblance of a goal to a forecast is unintentional.

Plans set up a sequence of events or actions that can be taken towards achieving those goals. Plans like forecasts are never accurate, but they do help clarify your path. Plans can and should include resources, cash, timing, contingencies, and risks. There is usually a number that comes out of it, but that number is never a good forecast. Never. No never.

I have two references to point you towards:
The first is Why Can't You Just Give Me The Number? An Executive's Guide to Using Probabilistic Thinking to Manage Risk and to Make Better Decisions by Pat Leach. If you care at all about the topic in this entry, buy the book. In fact, buy a few and give them to your bosses and colleagues. Pat explains in straightforward terms why probabilistic approaches are better. (Disclaimer: Pat and I worked together at Texaco. Chevron does a lot of business with his current employer, Decision Strategies.)

The other is The Strategy Paradox: Why committing to success leads to failure (and what to do about it) by Michael Raynor. In particular, chapter 5, "The Limits of Forecasting" is really good. Other parts of the book didn't quite work for me, but that chapter should be required reading for anyone in business.

Monday, June 04, 2007

Why Paying Off Your Mortgage Early Might Be A Bad Idea

I work with portfolios of real assets. One of the basic concepts of portfolio analysis and management is that you must know what you value. Very seldom does an organization have one single goal that it pursues to the exclusion of all others.

It is a useful framework for looking at the mortgage problem that I wrote about earlier.

If your single goal in life is to minimize the amount of interest you pay in your life, paying off your mortgage early may be a good strategy. For most people their house loan is the biggest loan they will ever get, typically paying hundreds of thousands of dollars in interest over the life of the loan. These are big numbers, exagerrated by the size of the loan and the time period.

However, most people have goals besides minimizing the interest paid. If you take it up to a higher level, most people want to maximize their wealth, which in simple terms is simply money in minus money out. Money in that equation can represent any form of value including house appreciation, stock appreciation, etc. We normally also have other goals that are not financial. We look for things like free time, strong family bonds, raising healthy, happy children, pursue hobbies, travel, a circle of friends, health, etc.

In this framework, the mortgage interest expense is one part of the money out equation, which feeds into the wealth maximizing goal, which is one of many priorities that you have in your life.

In that framework, minimizing the interest paid on your house becomes a part of the overall goal of reducing costs (so you would probably choose to pay off your high interest credit cards first). That is a part of maximizing your wealth, so you might choose to invest the money instead. Then you have the less quantitative pieces of your portfolio goals--lifestyle choices, hobbies, family issues, travel, etc--any of which may have a higher priority than the financial ones.

All I'm saying is to sit back and look at the big picture before you make this kind of investment.

Sunday, June 03, 2007

Do NOT Pay Off Your Mortgage Early

The pay-off-a-little-more-each-month-on-your-mortgage fallacy has been around for a long time. The deal is that the numbers are big, so they are really impressive.

Yes. It builds equity faster. (But it's just converting your cash from a flexible form of equity into a less flexible form.)

Yes. You pay less interest over time. (But you lose opportunity to invest).

Yes, you pay off your house sooner. (How many of us will live in our house for 20+ years though?)

There are several ways to look at this prolem though. First, from a strictly financial perspective, the right way to look at this is to consider the alternative uses of the extra money you would be putting into the equity.

For example, a 6% loan has an after tax 4% rate. Instead of putting the money into your house, why not put it into a SP500 index fund? It will get you 8% over time (5.33% after taxes). So by putting $1000 into your house, you lose $13.33 each year. Put it into the IRA that you haven't been funding and it looks even more attractive, because it is tax-deferred (net $40.00/yr/$1000)

If you haven't paid off all those 20% credit cards, and the non-deductible 8% car loan, don't even think about putting extra into your 6% deductible mortgage.

From a risk and contingency standpoint, putting the money into your house is a low-risk way to earn 4% after taxes. At the same time, you effectively lose the use of that money. If you get laid off or need money to pay for medical bills or something, it will be more difficult to get at it. You can do a home equity loan, but now you're paying to get at your own equity.

Alternatively, maybe you take that round-the-world trip that you have always wanted to do, invest in a good personal trainer to enhance your health, or maybe get a good therapist to help you get your emotional act together. You can't put a value on those, but in any case, the pay-off-your-mortgage-faster idea is only for people who do not otherwise have the discipline to save in other ways.

It's kind of like the people who advocate extra withholding from their paycheck so they get more back in April. It makes no sense financially, but if you otherwise lack the discipline, it can be a plus.

Thursday, May 10, 2007

Zachary's Pizza - The Google of the Noble Pie

Zachary's Pizza is an East Bay institution. It was first started in Berkeley in about 1983 by Barbara Gabel and Zach Zachowski. Recently they opened their third store in San Ramon, CA. They have won every Best Pizza in the Bay Area award, and continue to delight.

I grew up in Chicago, so I love the deep dish style with lots of tomatoes. I believe that Zachary's is as good as it gets.

I don't know if they have a motto, but "Do no evil." seems to fit them well. One of their defining legacies is that as Zach and Barbara prepare for retirement, they are putting ownership of the chain into an ESOP trust to provide for their own retirement and and for their employees.

If you are in the San Francisco Bay area, even if you com from Chicago and are used to the great food there, check it out.

Sunday, March 11, 2007

What to do about global warming

I am an agnostic on the issue of man's effect on global warming. I do not deny that the earth is getting warmer, maybe even alarmingly so. I feel comfortable saying that man's activities are at least a partial cause of this warming, whether from greenhouse gases, deforestation, paving paradise, or simply pumping heat into the atmosphere.

I also suspect there are other natural factors at work. Changing orbits, long-term cycles, etc. I am concerned that a big piece of the data is being misrepresented. I am hearing more and more that this correlation and perceived causal relationship between CO2 levels and temperature may be incorrect, that in fact CO2 lags temperature increase by about 800 years typically. This bothers me.

All this is probably not relevant in the short and medium term. The linked article is an opinion piece from the San Francisco Chronicle on March 11, 2007, written by Henry I. Miller, a fellow at the Hoover Institution, a think tank at Stanford University.

Is reduction of greenhouse gases to be a penance for our past sins? It certainly is not a solution in any reasonable time frame. It would stifle economic growth and cause many hardships long before it would fix anything.

Bjorn Lomborg gave a talk at the TED Conference in 2006. He prioritized the world's problems, using input from economists, health experts, etc. Actually, as he points out in his talk, he doesn't prioritize the problems, but rather, prioritizes solutions to the world's solutions. The frame is if you had US$50Billion to spend over the next 4 years, given that you can't solve everything, how should it be spent?

They narrowed the world’s problems to 10 major issues: Civil conflicts, Climate change, Communicable diseases, Education, Financial stability, Governance, Hunger and malnutrition, Migration, Trade reform, Water and sanitation. They did it in 2004, then again in 2006.

The 2006 results are as follow:
1. Communicable Diseases - Scaled-up basic health services
2. Sanitation and Water - Community-managed water supply and sanitation
3. Education - Physical expansion
4. Malnutrition and Hunger - Improving infant and child nutrition
5. Malnutrition and Hunger - Investment in technology in developing country agriculture
6. Communicable Diseases - Control of HIV/AIDS
7. Communicable Diseases - Control of malaria
8. Malnutrition and Hunger - Reducing micro nutrient deficiencies
9. Subsidies and Trade Barriers - Optimistic Doha: 50% liberalization
10. Education - Improve quality / Systemic reforms
11. Sanitation and Water - Small-scale water technology for livelihoods
12. Education - Expand demand for schooling
13. Malnutrition and Hunger - Reducing Low Birth Weight for high risk pregnancies
14. Education - Reductions in the cost of schooling to increase demand
15. Sanitation and Water - Research to increase water productivity in food production
16. Migration - Migration for development
17. Corruption - Procurement reform
18. Conflicts - Aid post-conflict to reduce the risk of repeat conflict
19. Sanitation and Water - Re-using waste water for agriculture
20. Migration - Guest worker policies
21. Sanitation and Water - Sustainable food and fish production in wetlands
22. Corruption - Grassroots monitoring and service delivery
23. Corruption - Technical assistance to develop monitoring and transparency initiatives
24. Migration - Active immigration policies
25. Subsidies and Trade Barriers - Pessimistic Doha: 25% liberalization
26. Corruption - Reduction in the state-imposed costs of business/government relations
27. Climate Change - The Kyoto Protocol
28. Conflicts - Aid as conflict prevention
29. Corruption - Reform of revenue collection
30. Financial Instability - International solution to the currency-mismatch problem
31. Conflicts - Transparency in natural resource rents as conflict prevention
32. Conflicts - Military spending post-conflict to reduce the risk of repeat conflict
33. Financial Instability - Re-regulate domestic financial markets
34. Conflicts - Shortening conflicts: Natural resource tracking
35. Financial Instability - Reimpose capital controls
36. Financial Instability - Adopt a common currency
37. Subsidies and Trade Barriers - Full reform: 100% liberalization
38. Climate Change - Optimal carbon tax
39. Climate Change - Value-at-risk carbon tax
40. Climate Change - A carbon tax starting at $2 and ending at $20

I'm amazed to see that Climate Change doesn't even make it in the top 25. Kyoto protocol comes in at 27. I am pretty confident that if you compare this list to media coverage you would find an enormous disconnect.

I'm not saying that Lomborg is right necessarily, but I do believe that this approach beats the hell out of our current approach which is something like an "alleged squeaky wheel gets the grease" approach. It's just not a good way to run the world.

So to answer the question posed in the blog title, it seems that we should focus our resources on other higher priority efforts. Conserving is good overall in any case, and frankly, I think oil prices will continue to go up and force conservation. New energy plants should be held to strict standards on pollution of any kind. This is good stuff to keep in mind as we go into the 2008 election year.

From the TED website:
Economist Bjorn Lomborg makes a persuasive case for prioritizing the world's biggest problems, asking "If we had $50 billion to spend over the next four years to do good in the world, where should we spend it?" His recommendations - based on the findings of the 2004 "Copenhagen Consensus" - controversially place global warming at the bottom of the list (and AIDS prevention at the top). Lomborg was named one of the 100 Most Influential People by Time magazine after the publication of his controversial book, The Skeptical Environmentalist which challenged widely-held beliefs that the environment is getting worse. Now the Danish economist is taking on the world's biggest problems with his Copenhagen Consensus. (Recorded February 2005 in Monterey, CA. Duration: 17:27)

Wednesday, January 17, 2007

Complain to Gain - Assertiveness is good

We all know this. There are sayings, e.g. "The squeaky wheel gets the grease." "Stand up for yourself," "Fight for your rights."

It is nice to see some reinforcement of this though. Here are a couple of recent examples from my family.

Not long ago, we went to a restaurant in Dublin, California called Stacey's at Waterford. (Scott Adams of Dilbert fame is one of the owners). During the course of a very pleasant meal, everyone had basically finished but one. The waitress came to remove the plates and took all but the one plate. Etiquette 101 says not to do this because the slow eater in the bunch then feels rushed. After we got home, my wife called the restaurant back to point this out to the manager (we did not want to make a fuss at the restaurant). We weren't looking for anything, but at the end, the manager ended up sending us a coupon for money off on our next visit. This worked for us, because we got some cash equivalent, and it worked for them because they (maybe) learned something, and we did go back and spend about $100 on a subsequent visit. I feel confident that they made money on the deal.

Another recent example was with Sprint cell phone accounts. We had activated texting for the kids on their cell phones and gave them a 500 message limit after which they would pay 10 cents per message. To digress a little bit, this is the biggest rip-off in the history of telecommunications. Text messages are very low bandwidth and not real-time. I am so opposed to the charges on them that it makes me see red. The kids can't live without them, etc. Blah blah. End of digression.

So one month, a week into our billing period, my daughter was at 350 messages. We called Sprint and asked them to suspend messaging. It was that way for two more weeks, then we took the hold off. Two days later she was up to over 1000 messages. This seemed insane to me. It also meant that we would have owed over $60 for the text messages. (600 messages x 100 characters max < 60 k bytes), that represents less than 1 second on my cable modem. But I digress again.

I called Sprint to find out what the deal was with the texting. Was she receiving, sending, when was this happening, and overall, 750 text messages in two days seemed ridiculously high? I wanted verification of that. I told them that if they could send or fax me a statement, that would be fine. They would not or could not do that.

The people in their call center could pull up screen by screen and tell me what time the messages were sent and received and the number that they came from or went to, but they did not want to make a print of the whole list. So I raised it to the manager. She started to read the time, date, and phone number of each one of the texts. After about 10 minutes we got to about 50 or so, and I was entering every one of them. She asked me to hold and we got disconnected. I called back, and the operator with whom I spoke informed me that there was a $60 credit on my bill.

I wasted a lot of time running around with Sprint on this, but in the end, got my money back. It was worth it, and I wonder how much money Sprint makes off less assertive people.

In any case, unless you are a self employed person who charges by the hour, it usually pays to spend some time to get what is due to you. If you are self-employed, have your secretary do the negotiating or at least the phone sitting.