Jun 17, 2024 | Change, Strategy
80% of Googles revenue comes from advertising. The obvious question is how the explosion of AI after the release of ChatGPT will impact on that revenue, and virtual monopoly of search that delivers it.
Rather than typing in a query and getting pages and pages of options for an answer, headed by 5 or six links that have paid to be at the top of the first page, AI will give you an ‘exact’ single answer.
At least you hope it will be the right answer.
If it is a simple black and white question, like what is the capital of Australia, you can be pretty sure it will be right, but if you want a detailed explanation of the science of climate change, it will be insufficient, and potentially misleading.
However, in a world of instant gratification, the first answer that appears right will be accepted, and as the late Daniel Kahneman demonstrated, we like the quick, ‘fast’ response in favour of the considered ‘slow’ answer.
Google has responded to this existential threat to its profitability with a tool called ‘AI Overviews’, currently in beta. It summarises search results and presents them as a single answer to the query.
‘Overviews’ It operates on the principle of “satisficing,” or providing quick, decent answers rather than a range of options.
Presumably, the ‘toll-booth’ will still be at the point of click through, while advertisers will be given the option to be on the ‘satisficing’ menu, for a price. Not a lot of change from current, frankly.
However, the tectonic forces driving the adoption of Ai will have impacts across the face of business, government and our personal lives, few of which are easily forecastable.
Darwin’s dictum that it is not the biggest or fastest that survive, but the most adaptable to change will really be tested in the coming decade.
Jun 14, 2024 | Communication, Governance
You cannot expect the right answer to come from the wrong question.
Too often we spend inordinate amounts of time trying to answer those questions before we understand the context or the ‘frame’ from which the answer will come.
Before anything else, to ensure the best answer possible, consider all the ‘frames’ through which the situation in front of you could be seen. Hypothesise what alternatives to the immediately obvious could be possible that might drive the situation you are examining.
Several months ago, early on a summer Saturday evening, I was walking my dog. As I passed the church at the end of my street, I saw a vague acquaintance crying.
There were a few other people milling around, so I just made an assumption without realising that is what I had done, and offered to help if I could. Her response was that she was Ok, crying for joy, her first grandchild had just been baptised.
Clearly the question that popped into my head led to an entirely to the wrong conclusion that her crying was from distress.
The frame through which I observed the woman crying led to making an automatic, but incorrect conclusion.
How often in our commercial lives do we ask questions which just assume the presence of some factor, when in fact that assumption is wrong?
The lesson here is make sure you have the context right before you start coming up with answers.
Header credit: Tom Gauld at www.tomgauld.com
Jun 11, 2024 | Analytics, Governance
Goodhart’s law is a much quoted adage that states: When a measure becomes a target, it ceases to be a good measure’.
When we see numbers cited as evidence, we tend to instinctively give them more credibility than they may deserve. Without an examination of the source and scope of the numbers, just believing them on face value can lead to very bad choices.
Charles Goodhart is a prominent British monetary economist. His public profile started as a footnote to a 1975 article and read: ‘any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes’. It took on its now well-known form, above, when restated by an anthropologist seeking to link the idea to a much wider context than economics.
In almost every business I visit, I see examples of Goodhart’s law. The most common is the use of EBIT as a measure of success. The reality however, is that it is simply a financial measure of the outcome on the myriads of smaller actions and decisions that have been taken in the deployment of resources.
Two of the most public failures of measurement should make us all wary of using quantitative targets as a measure of performance.
The 2010 Volkswagen software scam. VW installed software in a range of cars with their turbocharged direct injection diesel engines that ensured that when being tested, the cars made the emissions standard of the US EPA.
The Vietnam War body count. The US defence department sought to justify the billions of dollars and thousands of lives expended in the defence of a corrupt government in South Vietnam. The measure became the body count of VC fighters and North Vietnamese regulars, which led to wholesale slaughter. These imaginary and bloody numbers were used for years as the basis for increasing commitment. It finally became obvious that they did not in any way reflect the ability or willingness of much of the population to fight what they saw as aggression by the US.
There are thousands of examples. If you looked, you would see them every day, especially when politicians open their mouths and quote numbers.
Header Photo: Charles Goodhart. Professor Emeritus at the London School of economics.
PS. When you look at the header, Dr. Goodhart is looking directly into your eyes. You will tend to believe anything he tells you.
Jun 5, 2024 | Governance, Leadership, Management
The word ‘argument’ has many meanings, depending on the context. It can mean a friendly difference of opinion, a negotiation point, a statement of reasoning a lawyer might use, to an expression in a mathematical formula.
A quarrel is far more specific, requiring a disagreement, the cause of which is often lost in the chaos of emotion a quarrel elicits. The only other meanings of the word I can think of is as a collective noun for a group of energetic and opinionated mammals noisily exchanging insults, such as monkeys, squirrels, cooks, and lawyers. It also refers to the tip of a crossbow bolt.
There is a standard three step formula for making an argument stick in the minds of the receiver. It is evident in every news cast you ever heard, the ‘newsreaders secret formula.’
- Tell them what you’re going to tell them. This is always called ‘the headline’.
- Tell them. The story, or series of stories.
- Tell them what you told them. Restate the headline, and any conclusion or resulting actions that emerged.
To win an argument, as you would a negotiation, debate, or in court, you need to modify the news readers trick by adding a step.
That step is analysis of a guiding fact, or set of facts.
This enables you to analyse those facts in a way that leads you to the conclusion you are arguing for.
For the sake of ease of use you can break this into a pneumonic ‘CRAC’
- Conclusion. State your conclusion.
- Rule. Identify the fact or facts upon which your conclusion is based.
- Analysis. Provide an analysis of how that rule makes any conclusion other the one you’ve reached invalid.
- Conclusion. Restate the conclusion.
This CRAC process was used very effectively recently by an acquaintance chairing a community group that was protesting a pending building approval decision of their local council.
She stated that the approval, if it was to proceed, was in defiance of the councils own regulations.
She then cited the specific regulations.
She then pointed out the specific parts of the pending approval that was in breach of the regulations, and why they breached them.
For good measure she also pointed out 2 other proposals similar to the one that appeared to be about to be approved, that had been rejected on the basis of the specific parts of the regulations stated previously.
She then repeated the conclusion that the project was in defiance of the council’s own regulations, and therefore should not proceed.
It was an impressive performance, well planned, well executed, and ultimately successful after some embarrassing back downs by several councillors.
With a bit of practise, it is easy to use, and always better than resorting to a quarrel.
Header cartoon credit: Scott Adams and his mate Dilbert.
Jun 3, 2024 | AI, Change, Leadership
My time is spent assisting SME’s to improve their performance. This covers their strategic, marketing, and operational performance. Deliberately, I initially try and downplay focus on financial performance as the primary measures, as they are outcomes of a host of other choices made throughout every business.
It is those choices around focus, and resource allocation that need to be examined.
Unfortunately, the financial outcomes are the easiest to measure, so dominate in every business I have ever seen.
When a business is profitable, even if that profit is less that the cost of capital, management is usually locked into current ways of thinking. Even when a business is marginal or even unprofitable, it is hard to drive change in the absence of a real catalyst, such as a creditor threatening to call in the receivers, or a keystone customer going elsewhere.
People are subject to their own experience and biases, and those they see and read about in others.
Convention in a wider context, status quo in their own environment.
Availability bias drives them to put undue weight in the familiar, while dismissing other and especially contrary information.
Confirmation bias makes us unconsciously seek information that confirms what we already believe, while obscuring the contrary.
Between them, these two forces of human psychology cements in the status quo, irrespective of how poor that may be.
Distinguishing between convention and principle is tough, as you need to dismiss these natural biases that exist in all of us. We must reduce everything back to first principles, incredibly hard, as we are not ‘wired’ that way.
The late Daniel Kahneman articulated these problems in his book ‘Thinking fast and Slow’ based on the data he gathered with colleague Amos Tversky in the seventies. This data interrogated the way we make decisions by experimentation, which enables others to quantitively test the conclusions, rather than relying on opinion.
That work opened a whole new field of research we now call ‘Behavioural Economics’ and won Kahneman the Nobel prize. Sadly however, while many have read and understand at a macro level these biases we all feel, it remains challenging to make that key distinction between convention, the way we do it, the way it has always been done, and the underlying principles that should drive the choices we make.
As Richard Feynman put it: “The first principle is that you must not fool yourself—and you are the easiest person to fool. So, you have to be very careful about that.”
