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De-Nerding the Integration of Emergence, Fractals, and Uncertainty

I read The Black Swan about a year ago when Hunter recommended it. Since then I’ve been diving into the world of scale-free networks and emergent systems, and I’ve developed a deeper appreciation for Taleb’s idea of fractal randomness.

In essence, Taleb argues that shit happens. It always has, and we might as well get ready for it to happen in the future. He rejects the idea that randomness happens only in neat bell curves, which are useful when systems are built for a particular scale (ie the length of a snickers bar) and completely useless when systems operate without regard to scale (ie the number of computers infected by a particular virus.)

Towards the end of the book, Taleb hand-waves at the notion of fractal randomness, which sounds really flippin’ cool but which I can’t seem to find anything on. (Lovely and brilliant man, but his website looks like a word doc that got the shit kicked out of it in the playground.) I think I see what he’s getting at. I’m not certain that I can de-nerd the integration of emergence, fractals and uncertainty but here’s a shot:

What’s the difference between a box and a tree? (Stop me if you’ve heard this one before.) A box relates to the world at one scale, and a tree operates across scales.  If you’re a 2’x2’x2′ box, then 2′ is about all that you have to say to the world. Things can go into you if they’re not bigger than 2′. You can stack on something if it’s around 2′ or larger, and it can stack on you if it’s around 2′ or smaller. What’s the probably that a box coming out of a 2′ box factory will be exactly 2′? Probably pretty good. That probability probably looks something like a bell curve.

Compare that box to a tree. A tree relates to the world across scales. Picture it’s root system. The trunk of the tree needs to get water and nutrients from the soil, so it shoots out roots to get them. Those big roots ALSO want to get water and nutrients from the soil, so they shoot out smaller roots, and so on and so on until you’re down to a microscopic level. The tree does one basic thing, drawing matter from the soil, across a wide range of scales. As a result it’s geometrically far more complicated than the box. It’s not going around saying “2 feet,” it’s going around saying “water” from the molecular level from the molecular level all the way up to the width of its trunk.

Got it? When relationships operate at a particular scale (like the box), you get bell curves and neat, easy geometry. When relationships operate regardless of scale (like the tree) you get batshit-crazy geometry and a wholly different kind of uncertainty.

The interesting thing about fractal uncertainty (and Black Swans), is that Taleb’s NOT saying that anything can happen. As Taleb outlines it, he’s actually making a pretty clear prediction about what kind of crises to expect. He’s not saying that the box factory will suddenly pump out boxes 2 miles high, or that the laws of physics will up and change on Tuesday. He’s saying that anything that can happen at a small scale in a scale-free system can also happen at a large scale, provided that the basic relationships stay intact. Can your small business fail? Well guess what: so can the global economy, and probably for the same basic reasons.

Taleb isn’t telling us to throw our hands in the air and just expect the unexpected. He’s telling us to watch the systems around us for changes that can scale up, and to be do our best to be ready when they catch us off guard.


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Sizing and Testing Your Market

How to gauge a market for energy efficient hair dryers

How to gauge a market for energy efficient hair dryers

Ok, this is dry but TOTALL magical to me. Ripped from my textbook and regurgitated- some examples of how to size and target a market:

Say that I wanted to sell energy-efficient hair dryers and am best equipped to sell/distribute in San Francisco and LA.

I would start by using the market-buildup method to explore the commercial market. I would go to the North American Industry Classification System (NAICS) to get a directory of all of the hair salons in the two cities. I would then survey a random sampling of hair salons to learn the rate at which they currently buy hair dryers, along with a way to gauge ways that my product could expand that market. Would hair salons replace a perfectly good hair dryer if the energy savings paid back the cost in 3 months? The number of hair salons times the number of hair dryers purchased times the price would be my total addressable market. I would then have to decide which segment of the market to invest in energy efficiency (probably high-turnover hair salons where the dryers get more use and the savings would be more pronounced.)

The next step would be to explore my consumer market using the multiple-factor index method. Say I found a number for total hair dryer sales across California. I would multiply that number by the % of Cali’s population in SF and LA, then tweak it with several numerical factors. I might look at the number of hair salons per capita across california- if it’s above average in SF and LA, I would add that proportion to my equation (presumably more hair salons means that people care more about their hair.) I would also add multipliers if disposable personal income or total retail sales were above average. Once I had my total addressible market I’d be able to use similar math to go census tract by census tract and find the highest-impact retail stores in which to place my product.

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Reading Notes:Marketing Management

That’s right, it’s back to dry reading notes time. I’ll try my best to instill a little narrative from time to time, but this semester’s f’gunna be crazy.

Chapter 1– Defines marketing from a few different perspectives. The one that resonates most with me is that of demand management. Just as operations manages a company’s supply of goods and service capacity, marketing manages the demand that exists for the company’s services, experiences, ideas and products. Like most topics in business, this one claims a necessary presence in all parts of an organization.

From a managerial standpoint, marketing is about all of the decisions impacting demand for your company’s products and services. That includes decisions about where to examine the market, what to sell and how to make the market aware of it.

Chapter 2– Goes into more detail about crafting marketing strategy. The framework that I like most breaks it down into three components:

Exploring Value– Which is about understanding the intersection between the value saught by customers (what can improve their lives and how the think about those things), the value created by the organization (your core strengths) and the value offered by collaborators (the types of value held by stakeholders that you can access and combine in interesting ways.) It starts with listening and integrating, which is very much how I roll.

Defining Value– Once the intersections have been identified, they need to be crystallized into a presence in the market. This includes a product or service, a delivery mechanism, a brand, and stakeholder engagement strategy, and internal marketing to build an appropriate corporate culture. It’s about putting the components in place to create the relationships that your company needs to thrive.

Delivering Value- Once the pieces are in place, you can deliver the value that you have to offer to the marketplace. This is all about finding, connecting with, and staying connected with customers and other key stakeholders. This is where traditional advertising fits in, though I like the model of market-centered community building a lot more personally.

I’d like to see this process modeled as a cycle more than as a linear progression. All three need to happen continuously, how can delivering value also be a mechanism of value exploration that constantly informs value creation? How can these three components be fractalized so that they exist in essentially the same relationship to one another at all scales of the process? Srsly.

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Reading Notes: The Powers to Lead Ch. 3

Powers to lead

Leadership Types and Skills

We often describe leaders in terms of charisma, but this is difficult to pin down as a cause of success. Leaders are often called “charismatic” only when they are doing well. Charisma is more about the followers-when they are looking for dynamic change they will follow someone who articulates that change well, and in that moment the leader is called charismatic. Then one of two things can happen- either the leader maintains focused on her own vision or she remains focused on listening to and reflecting the changing vision of the group. The first path can get tyrranical and disastrous.

This leads us to the difference between transactional and transformational leadership. Transactional leaders focus on the mechanics of getting things done, and transformational leaders focus on the moving towards a broader vision that is empowering for the group.

Transformational leadership requires a couple of skills:

Emotional Intelligence: is about understanding one’s own emotions and having empathy for others. This is vital for the listening and communicating that leaders need to do.

Communication: both broadly to groups and in small conversations. This is largely about rhetorical skills, but it’s also about the ability to put together a good narrative.

Vision: The ability of the leader to clearly articulate the a solution to the needs of the group. Visions which lose touch with these needs, or with the feasibility of a solution, can be problematic.

Organizational Skills: This is about the day-to-day of task management, but more importantly it is about the design of information flows and decisionmaking processes within an organization. 

Machiavellian Political Intelligence: The set of political skills required to build coalitions to achieve a vision. This can be about Machiavellian bullying so long as the end game is the goal and not the assertion of hierarchy. It can also be about an in-depth, intuitive map of the stakeholders who influence an outcome and their leverage points.

Ultimatley, leaders need to understand how to combine the above skills to fit their situation. In order to develope leadership ability, one must both hone the above skills and learn to utilize them strategically.

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Reading Notes: Beyond Leadership Ch. 2-4

Warren Bennis, Jadis Parik, Ronnie Lessem

There is an old paradigm of static-state, intellectually driven leadership that needs to change. The book offers a new paradigm which balances self-management, integrative thinking, and a sense of constant change.

Discussion about a monolithic “old paradigm” is a huge turn-off for me, because it sets up a blatantly false dichotomy. This book constructs this dichotomy and then gives it weight by talking about the crises of the day, though doesn’t do a good job of saying what these crises have to do with the paradigms in question. I should be wary of doing this with paradigms, like sustainability, that I believe in.

The new paradygm is about

  • Thinking in open systems rather than static states–  accepting that the world is highly interconnected and constantly changing. Leaders should be able to change their viewpoints constantly, rather than getting invested in a particular view of the world. This directly contradicts what the book says later about visions!
  • Having the flexibility to think from a diverse range of viewpoints– and therefore to bridge cultural and other cognitive divides. This seems like it’s about listening more than open-minded imagination, though the text doesn’t address that directly.
  • Seeing the interrelatedness of everythingBuddhist, but not practical from a managerial standpoint. Which connections do you focus on given limited time?
  • Increasing shared abundance– A positive standpoint that’s contrasted with the scarcity of traditional economics.
  • Accepting diverse data inputs– This seems to be about technology, the book is from the early days of the internet.


In order to effectively work with organizations, one must first learn to manage oneself. This is about focusing on integration points- places where your skill, your passion, and organizational needs intersect (and, ideally, broader social needs intersect.) Focusing on these areas allows one to maintain a positive, vision driven outlook. The book doesn’t talk about how to ignore things that aren’t in that narrow area of intersection but still demand attention, which is probably the chief complaint of the problem-swamped person. I would say that it’s about seeing how those problems integrate with the broader vision and prioritizing them accordingly.

One key way to reduce stress and focus on these integration points is detached involvement.

Detached Involvement

Detached involvement is about building and maintaining the relationships that do work in a group, rather than taking direct responsibility for that work yourself. To do this you take on a variety of roles:

  • Focalizer– establishing or nurturing a sense of purpose which creates a sense of shared value in the group.
  • Facilitator– creating a structure of communication which allows those relationships to grow and function smoothly.
  • Synergizer- integrating relationships within the group with the goals and sources of value in the broader organization.
  • Co-creator-when it comes to the actual work, contribute by example as one among equals. 

There’s a bit in there about letting go of the ego that reminds me of my own thinking around focusing on relationships as a source of meaning rather than on self, but it’s hard to understand b/c it’s in the language of their paradigm and not that concretely grounded.

Visionary Leadership

Leaders need to establish and visions, “goals which beckon” for the organization. These visions create a shared sense of empowerment which the org can then self-organize around.

Creating a good vision involves paying attention to:

  • The Past– in order to avoid past pitfalls and to understand long-term trends that a vision can harness.
  • The Present– in order to understand the desires of the people who need to accept the vision, the feasible long-term opportunities that could empower those people.
  • The Future- through projection of trends in the past and present, a vision should articulate an attainable, empowering version of the future. There should be lots of room for those who are to become invested in the vision to fill in their own details.

I like the listening and reflecting version of vision creation a lot more. This book puts a lot more cognitive burden on the leader to weigh the different opportunities, come up with a magical solution and convince the group to love it. It seems like a leader should establish a process for the group to do that, not try to do it herself. This will create a more grounded vision and will help with buyin. Appreciative inquiry processes, followed by iterative positive focusing (“what is most exciting to you about this right now?”) seems like it can accomplish this in a group.

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Reading Notes:Macroeconomics in Context, Chap 8: The Structure of the US Economy

Neva Goodwin, Julie A Nelson, Jonathan Harris

The US Economy can be broken up into 3 sectors:

The Primary Sector– Extracts natural materials and feeds them in to industry. This includes mining and agriculture.

The Secondary Sector– Takes natural materials and turns them into finished products.

The Tertiary Sector- Sells finished products and uses them to perform services.

The Primary Sector

Though important, is a tiny section of GDP. This is mostly becuase natural resource extraction has become highly labor efficient and financially efficient (if not necessarily energy and resource efficient.) Does this mean that we can potentially double the cost of these raw materials to get them sustainably without a major impoact on the global economy? If anything, this would employ more people.

The Secondary Sector

The US is still the largest manufacturer in the world, though other countries are catching up to us. Though the value of what we produce has stayed constant, the jobs it takes to produce those things have had a huge drop. Many of those jobs have gone overseas. while many more have been eliminated due to labor efficiency. (Even in China net manufacturing jobs have gone down due to increases in efficiency.) A focus on material and energy efficiency, rather than labor efficiency, would create demand for higher skilled jobs while lowering overall costs. This could reduce the ecological impact of manufacturing while increasing the # of people employed. 

The Tertiary Sector

This sector is by far the biggest and the fastest expanding. A huge chunk of it is (was?) financial services, though areas like healthcare and education are also significant. GNAW states that a big chunk of this sector is used managing and optimizing the system, including growing sectors of data and waste management. Continued growth of this sector, with skillsets similar to those in the financial sector, seems like it could line up well with a shift to a more sustainable economy. The only question in my mind is how the demand for such an economy can be effectively expressed in market terms. 

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Industrial Ecology, Paradigm Shift or Normal Science?

John R. Ehrenfeld

Ehrenfeld discusses the idea of industrial ecology and breaks down what he sees as two fundamentally different approaches to the science:

Normal Science– This is focused on using industrial ecology to more effectively do what our economy does already- drive growth and profits through eco-efficiency. It is based on metrics and highly focused, concrete studies and principles.

Paradigm Shift– This takes broad principles from industrial ecology, such as the idea that all waste with energy content must be scavenged and used, and fundamentally restructures the economy around them. This is less concrete, and it more about finding and alleviating fundamental frustrations around which the current economic system is based.

Ehrenfeld argues that we need to focus on a paradigm shift before we can get to the normative science. He considers the current goals of industry to be fundamentally unsustainable, and thinks that we need to focus on changing those goals before we can set about the task of accomplishing them effectively.

To do this he uses a metaphor of scientific revolutions, taken from Thomas Khun. Khun proposed that scientific revolutions happen when scientific problems become fundamentally unsolvable within the current broad scientific framework. Scientists have to work fruitlessly on these problems and become frustrated and that frustration has to percolate up to the most established minds in the field in order to create a ripe environment to adopt a new paradigm. Eventually a radically new framework will be proposed which answer the original problem, and will become broadly accepted as a new paradigm.

 Ehrenfeld argues that our economy needs to go through a similar shift, and I am inclined to agree. Our economy need to become more focused on building economically powerful relationships and less focused on building economically powerful entities (be they products, people or corporations.)

Unfortunately, I don’t think that a scientific revolution is a good metaphor to describe this process. Academic politics aside, science is an institution built to pursue understanding. People become frustrated when understanding is not reached, and the culture celebrates accepting good ideas because they are good ideas.

Economies are much hairier. In economies it is much more likely that a bad idea will line up with an individual’s self interest. A paradigm shift in science may disrupt a few professorships, and that relatively small disruption can cause tremendous friction and infighting. A paradigm shift in an economy disrupts large corporations, the livelihoods of millions, and national governments with large armies. Governments are explicitly dedicated to protecting public stability, its complicated system of checks and balances is explicitly designed to make it difficult to enact disruptive changes to the status quo.

If a paradigm shift is a disruption of old ideas, how many of these old ideas are we’re talking about doing away with? If major corporations and governments are built on those ideas, do they have to go too? If so then the “resistance” that the new paradigm faces could take the form of widespread geopolitical instability, even large-scale armed conflict. Such resistance is more than we can simply squint and barrel through, as Ehrenfeld seems to suggest. We must find a happy medium which aggressively shifts to a new paradigm while keeping strategically managing the instability caused by that transition.

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