Tag Archives: strategy

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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Why Values are Important in Chaos

An article I just read for strategy class hinges around a perplexingly unsatisfying phrase: “Not all, not none, but some.” Strategists can’t understand and control everything, the more they try the more their well laid plans blow up in their faces. They also can’t consider themselves powerless, hypothesizing systems that blow uncontrollably in the wind, because there are far too many examples of well laid plans actually WORKING. The unsatisfying answer seems to be to try to understand and control some things but not all things. This seems almost pointless, why bother understanding just a few pieces of a dynamically interconnected whole? And how on earth do you choose which pieces they are?

This dilemma is paralleled beautifully with something I like to call the Freshman Problem, which I’ll populate with a real-life example. My brother, Michael Jay, just started at Skidmore in upstate New York. When he arrived on campus there were several thousand smart, interesting new people for him to meet, all of them constantly rearranging themselves by affinity group, interest area and major. Who should he decide to become friends with? He could take an arrogant view- meticulously selecting his friends and rigorously ignoring the rest, but he’ll probably wind up being unsatisfied and coming off as a dick. He could also take a humble view, simply sitting back and seeing which friends come to him, but this will also be unsatisfying because he’ll wind up with little say over his own social life and will come across as a wet noodle.

The answer (or the best one I know) has to do with values. My brother should decide what he values and seek friendships that will allow him to explore and fulfill those values, even though those friendships are intrinsically unpredictable. When he arrives on campus my brother can use his values to find a crew of 5 friends who we spends all of his time with. A year later, when those friends are split into new dorms and new interest areas, my brother can use a more evolved version of his values to restructure his existing friendships and make new ones. As a complex and chaotic system, his campus is predictable in an important way: its entropy will always chip away at what he has and will always offer him unexpected opportunities for something new. It is only by understanding his own values that he can give this creation and destruction a strategic context.

Values put the satisfaction back in “Not one, not all, but some.” When systems are too chaotic to plan around and too orderly to ignore the middle path is to find a system for making plans. Values are at the core of of any such system. Like the systems that they grapple with values are always evolving and never really changing, as resilient as they are unpredictable. They’re a hat that protects you from the harshest rain and sunshine that a system has to offer and, just as importantly, gives the system a clear signal about how it can best integrate you. Hold on to your hat.

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On Listening for Silence

Reading Blue Ocean Strategy, I’m struck by a strong common theme in the six paths to Blue Oceans. The book seems to advocate that businesses understand their market offerings as existing in a system, one with complicated relationships between groups of buyers, types of industries, psychological forces and periods in time. Once those complicated relationships are understood (though they can never be understood fully), there is a subtle art to laying out the system and exploring the gaps that might help it to hum.

The book reminds me of the group facilitation training that I received at a young age. I was taught to listen not for what was being said in conversations, but HOW it was being said. By examining the assumptions, power dynamics, and conversational flow within the group it was easy to see how I could introduce a missing element in the conversation to move it forward. This stance, that of facilitator, is fundamentally different than that of a conversational participant. I cannot simultaneously focus on the dynamics of the conversation and focus on developing my own opinions as a participant. Facilitation requires that I hold myself back from being invested in the elements of a conversation (who is right in an argument, which idea the group will accept, etc) and instead focus on seeing the conversation as made up of equally important complimentary parts.

This detached stance seems like an important part of embracing blue oceans, and of strategy in general. To see a company operating in a broader system, one must become emotionally detached from the value of it’s product, the extraordinary qualities of it’s employees, even the survival of the firm. It means accepting that the system surrounding a company has the inalienable right to let the organization thrive and to rip it to shreds. Only when stepping away from the value of my own opinions and my own fate can I maintain the clarity necessary to see a system for it’s glorious silences and the endless opportunities nested there.

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