Wednesday, 4 September 2013

Book Review: Antifragile

Nassim Nicholas Taleb is an exceptional writer - though not entirely in a good way. He is variously described as a "superhero of the mind" (Boyd Tonkin) and "Wall Street's principal dissident" (Malcolm Gladwell), and much commentary focuses on his style more than his content. Few dispute that he is brilliant, though he feels compelled to demonstrate this with striking frequency.

His most recent book Antifragile: Things that Gain from Disorder is an exciting challenge to received wisdom about adopting middle-of-the-road strategies in personal health and finance, macroeconomics and much more besides. But it comes with a strong dose of personal advertisement and gratuitous demonstration of Taleb's breadth of learning.

It is worth putting up with this though. The essence of his argument is that a spectrum runs from fragility through robustness to antifragility, and that we should seek to develop antifragility - the ability to become stronger through challenges - in our bodies, our finances, our politics and our economies.

With examples from a wide variety of disciplines Taleb illustrates that we often describe certain things as good or bad when in fact the key consideration is dose. By careful dose control we can increase our tolerances of many things that would otherwise be very harmful to us - and in doing so we increase our antifragility. Taleb himself reacts to this insight by training with streetfighters rather than personal trainers and investing in a contrarian portfolio.

His arguments have fascinating ramifications for individuals and policy makers. For example, he suggests that our public health systems are riven by agency risks and the malign influence of what he calls "iatrogenics". He praises entrepreneurs as the heroes of humanity - the people who knowingly or unknowingly take risks that probably condemn them to losses but drive forward progress for the societies to which they belong.

One of Taleb's interesting conclusions is that we are terrible at making complex judgements and that we should therefore trust the only reliable assessor of quality - time. In other words, we should suspend judgement on things (foods, medicines, concepts, philosophies) until they have stood the test of time. He points out that the best predictor of how long something will last is how long it has already lasted. As a result, he advocates drinking wine and coffee but avoids all processed foods.

This is an exciting and bold book and it may change your behaviour in any of several ways. You may consider changing your diet, your attitude to saving and investment and even your career. It is well worth reading.

Book Review: Connected

Connected: The Amazing Power of Social Networks and How They Shape Our Lives by Nicholas Christakis and James Fowler is an accessible exploration of the fundamental role of networks in our world. These respected academics bring together research from a wide variety of sources to demonstrate the importance of networks to our health, wealth, thoughts and fashions.

Without resorting to jargon the authors explain the extent of influence in networks (typically significant to 3 degrees of separation) and the breadth of factors that demonstrate contagious behaviour within networks (including divorce and obesity). I wonder what influences Kevin Bacon and I may be having on each other...

The book touches on the network significance of religions in which adherents have a direct relationship with God. They explain how this increases the interconnectedness of faith networks since all believers are only one remove from each other through their direct connection with God. Through outbreaks of contagious laughter and disease to discussion of the wealth of nations, this book has plenty to stimulate the thoughts of policy-makers and casual readers alike.

I found "Connected" encouraged me to have greater sympathy for individuals as the product - to a greater extent than I had imagined - of the networks in which they develop.

Book Review: Thinking, Fast and Slow

Thinking, Fast and Slow by Daniel Kahneman is a must read book. Kahneman synthesises the lessons of his 60 year nobel prize-winning career into this tome. As one of the fathers of Behavioural Economics he has been at the forefront of exposing the inherent illogicality of the human mind - features such as loss aversion (the endowment effect) and our tendency to see coherence and causation where there is none.

Kahneman fills this book with quick exercises that illustrate our habitual jumping to flawed conclusions - the "fast" thinking of the title. He explains that this is a fundamental and sometimes useful characteristic of our brains and suggests ways to mitigate the consequences and harness the "slow" thinking which buys us time to correct our instinctive mistakes.

This book is bristling with challenges to the rational economist, and provides tempting insights for the salesman and the potential criminal. It is playfully written and although the author has been an eminent academic since the 1950s, it is modern and engaging for the non-technical reader like me.

Kahneman reflects on happiness. His suggestions are fascinating. Two notable points:
  1. Choose your goals carefully so that they are achievable. Kahneman singles out those who aspire to success in the performing arts as particularly prone to disappointment.
  2. Spend time with friends. This, Kahneman asserts, is the key to happiness. Read the book to find out more, then come over for supper to discuss it!

Book Review: A Voyage for Madmen

This summer we spent a wonderful week on the Devon coast at East Prawle, a few miles West of Start Point. On our first evening the yachts of the Fastnet Race swept past our window on their outward leg, and on the bookshelf beside the window I found a book I had heard of but never read: A Voyage For Madmen

Peter Nichols' book follows the nine diverse characters who set out to be first to sail around the world non-stop. The race started in 1968 and Nichols does a great job of exploring the characters of these extraordinary men, and the dynamics of the race that developed, fuelled by the growing interest of the media. It held particular interest to me as I have met two of the survivors of the race, John Ridgway and Robin Knox-Johnson, who eventually won the race.

First to start was John Ridgway, an early celebrity favourite having rowed across the Atlantic two years earlier with Chay Blythe. Like most of the other competitors, Ridgway was sailing in a fundamentally unsuitable craft, the bilge keeled English Rose IV, and after a collision with a press boat as he leaves Ireland he was baling out all the way south through the Atlantic. He pulled out after only 6 weeks at sea.

Ridgway and Blythe (who set sail a week or so later) were both early casualties of the malign influence of sponsors - both were sailing boats provided by manufacturers eager for publicity for inshore cruisers that were not fit for the Southern Ocean. But much greater pressure was to befall the last competitor to set sail, Donald Crowhurst, who beat the race deadline of 31 October by only a few hours. He had gambled his house on winning the competition for the fastest circumnavigation, and set sail in a boat that was entirely unfit for the storms ahead.

Nichol tracks Crowhurst's lonely preparations, departure and, eventually, his decision to cheat in order to save his family. After months at sea and a surreal episode when he goes ashore in South America and has a fine meal with customs officers, Crowhurst's log records his descent into madness. His abandoned craft was found sometime later. He is presumed to have stepped overboard.

Meanwhile, Robin Knox-Johnson, with his radio and self steering gear broken, is relentlessly progressing through the mountainous seas of the Southern Ocean, and eventually returns to a hero's welcome as the only competitor to complete the circumnavigation. In a remarkable act of generosity he gave his winnings to Donald Crowhurst's widow. Psychologists' reports of Knox-Johnson commissioned by his media sponsors before he left described him as "distressingly normal".

Nevertheless, this is an excellent and entertaining study of 9 remarkable men and their endeavours in a bygone age in which it was possible to be without contact with any other human for more than 4 months. I heartily recommend it to anyone interested in the study of determination and adventure.

I worked for John Ridgway in 1990 as an instructor at his adventure school in the highlands of Scotland and so it was a special treat for me to read an account of one of his earlier exploits. I spent a very enjoyable evening with Robin Knox-Johnson more recently at an event where he was presenting on the challenges of raising sponsorship for sporting events. When I mentioned that I had worked for John before becoming a Royal Marine, he collected us some drinks and regaled me with tales of his encounters with Royal Marines in Norway and elsewhere for the rest of the evening.

Wednesday, 24 April 2013

The wisdom of crowds - a shortcut to better decisions

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Leadership, especially military leadership, is often characterised as a lonely experience - the loneliness of command. At the point of decision, a leader is alone with his or her responsibility - think of Eisenhower deciding when to launch Operation Overlord in 1944 for example.

But before the time comes for decision, leaders have the opportunity to observe and orientate. The wisdom of crowds can help make this observation and orientation quicker and more accurate. And emerging technology and techniques are making it easier to gather and respond to crowd wisdom.

Estimating distance

I was introduced to the concept of crowdsourcing as a trainee Royal Marine. We were taught that the best way to estimate the distance to a target was to ask everyone with you to make their own estimate, and then to take an average of all the estimates. The result, we were assured, is reliably more accurate than the estimate of any single individual.

This fits with the work of researchers such as Scott E. Page who wrote The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Edition). Page argues that his claims that "collective ability equals individual ability plus diversity" and "diversity trumps ability" are "mathematical truths, not feel-good mantras".

Safety in numbers

Business success depends on the engagement of crowds of people with your business idea. These may include customers, employees and investors. While the entrepreneurial vision is your own, its prospects of success depend on the response of others. Balancing your own enthusiasm with "reality checks" is essential, and there are more and more tools that make it easier to do this.

If you are able to gauge the response to your business before committing large investments of time or capital, you will reduce the risks involved, and you may pick up some valuable insights at the same time.

How to ask the crowd

With the proliferation of social media and special interest forums it is easier than ever to collect crowd insights. You could start by asking your friends on Facebook using the polling feature, or starting a discussion in a relevant LinkedIn group. For a larger crowd you could try visiting forums and posting questions - a technique I found very useful last year when investigating raising capital for This Tribe.

For more formal research there are also plenty of services like Crowdflower. And of course for crowdsourced fundraising (in which you invite a crowd to put their money where their mouths are), there are a growing number of crowdfunding platforms in the UK such as Crowdcube and Seedrs.

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Monday, 14 January 2013

Linkedin and Coffee - two essential tools for ex-military entrepreneurs

Linkedin and Coffee
This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

For people leaving the Armed Forces, one of the most important - and time consuming - activities is developing personal networks.

If you have spent most or all of your career in the military, it is likely that most of your friends and professional contacts are also military themselves. But in creating a career beyond the Armed Forces, it pays to reach out further afield.

Networking

The most powerful personal networking tool I have found is Linkedin - a website used by over 100m people to manage their professional profile and engage with others. One of its key features is that it enables you to see who connects you to people who you may want to engage with - and so who can help you with introductions. It is also a great source of information about personal and organisational interests and priorities.

Many service leavers have extensive networks within the services, but if you are moving on to civilian life it is best to focus on developing a network that gives access to the key shapers of the environment you are entering. This helps with recruiting potential mentors, introducers, customers, advisors, competitors and even regulators. And if you explicitly set out to increase your network you will quickly identify key contacts who are themselves great networkers and can open many doors for you.

6 Steps to Kevin Bacon

To illustrate how far networking can reach, I decided to check on how many removes I am from the Holywood actor Kevin Bacon. In 1994 he famously claimed to have worked with everyone in Holywood, but since then the world has become much more connected. In summer 2012 I went to Linkedin to find that I was 3 removes from Kevin Bacon - 7 people I knew knew someone who knew one of the 142 people he listed as connections. 6 months later I now know 11 people who know one or more of his 204 connections.

In other words, it is possible to build very broad networks as soon as you recognise the value your contacts can have by introducing their own contacts - so always end a meeting by asking for introductions. This is the alchemy of networking.

Caffeine Rush

Investing time in meeting people face to face is a great approach, and to adapt a military phrase, "time spent in coffee shops is rarely wasted". Getting to know people whose activities shape your environment is essential, and learning from their experience is usually less costly than trying to work everything out alone.

Coffee has played a part in networking for hundreds of years - in fact many of the great trading and banking institutions of the City of London grew out of coffee shops in the 17th and 18th Centuries, as did the RSA, which still does a fine job of promoting networking more than 250 years after it was founded. For more on the value of coffee in the generation of good ideas, see is video of Steven Johnson.

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Thursday, 13 September 2012

Timing and Capital - Early Bird or Second Mouse

Timing and Capital
Timing and Capital
This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

If you never leave home without a wrist watch and wallet, you already know the importance of timing and capital. In a competitive commercial context these two tools are of vital importance.

Service leavers can bring their skills to bear usefully at every stage in the life of a company and an industry, and this post aims to illustrate some of the timing and capital considerations that may help a service leaver to choose a market that best suits their skills and expectations.

Timing

As the market for any product or service develops, demand typically follows a predictable pattern. After development and launch, a small number of "early adopters" are gradually joined by a growing group of customers. The market grows to maturity and then eventually declines.

Understanding the importance of timing and capital is essential if you are to harvest the best results from the market you are in - or thinking of getting into.

Early stage - to the victor the spoils

If you join a market at a very early stage - or create it - timing is critical. Get it right and you can enjoy high profit margins and high growth as early adopters sing your praises and spread the word. Get it wrong and you may find that demand doesn't appear - or takes longer and costs more than you expected.

While many early stage markets don't require large quantities of capital to enter, unless you are sure of your timing it is essential to have sufficient resources to survive if demand takes longer to pick up than you expected - you may also need to refine what you are selling so that more people want to buy it.

Of course any given quantity of capital will last much longer if you have a tight grip of costs and keep the "burn rate" as low as you can.

Growth markets - more capital required and less timing risk

If you choose to join the market later in its development - perhaps as a "fast follower" improving the initial offerings of others (Apple and Virgin are great examples of companies that do this), you are less exposed to the timing risk - the danger that you will have launched something that is ahead of its time - but you will probably also need more capital in order to capture customers and gain attention.

Mature and declining markets - optimisation and big balance sheets

Once a market has matured, the profit margins typically reduce and competitive success turns on being able to run the leanest operations. The search for economies of scale lead to consolidation and the creation of larger and larger organisations - along with the need for larger and larger quantities of capital. Strategic timing becomes less of an issue - but tactical timing is essential working capital management in particular becomes a key determinant of success.

You choose - bird or mouse

Military experience can fit people for each of these stages. The early stage of the development of a market is typically characterised by uncertainty - one of the staples of a military career - while fast following involves learning quickly from the experiences of others and seeking to build on their insights.

"The early bird catches the worm, but it's the second mouse that gets the cheese"

Since the military in the UK could fairly be described as a mature and declining market, servicemen and women have plenty of practice in optimising systems and processes to try to find efficiencies - particularly in large supply chains and communications systems.

Capital - be sure of your budget and backup

Each of these options depends to some extent on the capital available. While (except in some industries like mining or pharmaceuticals) there is often little capital required in the early stages of a market, joining an established market can require massive scale and resources.

Beyond the resources and expectations that an entrepreneur can bring to bear personally, they may need to seek additional capital from other investors or lenders. Understanding the expectations and constraints of those investors - whether they be friends and family or formal investors like business angels and venture capitalists - is essential to ensuring that the entrepreneur has the resources to realise their vision.

So gaining a clear understanding of the investor perspective should be high up the list of tasks for any entrepreneurial service leaver.


This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.