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Musings Report #25 6-18-16 Which Pays Off--A Focus on Process or on Outcome?
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Which Pays Off--A Focus on Process or on Outcome?
I've been thinking recently about the tangled connections between process and outcome (results). This may seem like an obscure or abstract topic, but it's actually key to understanding privilege, power, risk and responsibility in any society or organization.
Institutions are organized to produce a specific result, and to generate that result, the institution organizes processes that employees can follow to achieve the desired results/outcome.
So if the desired outcome is to prevail in war, the processes put in place include recruiting and training soldiers/sailors, building ships, tanks, jeeps, aircraft, etc.
If the desired outcome is experimental evidence of a new scientific law, the process is to collect data and analyze it with accepted mathematical processes.
If the desired outcome is young people with economically productive skills, the process is to create a curriculum and test the students's progress in learning useful skills.
The obvious problem with depending on processes to reach the desired outcome is that processes alone can fail: the institutions can follow the processes of assembling an armed force and still lose the war.
The scientists can collect the data and run analyses but not achieve any useful results.
The school can get an A for following the processes but still graduate students who learned very little and have few economically useful skills or knowledge sets.
The problem with processes is they can be gamed, or fulfilled in such a fashion that the outcome is poor.
The failure falls on those who suffer the poor results/outcome, which by design are those outside the power structure.
Thus the central planners of the war processes don't get killed; that poor outcome falls to the soldiers.
If students learn essentially nothing useful, the administration suffers no consequence as long as test scores and other process metrics are met. The failure of the educational process falls on the students, who learn their education is largely worthless only after leaving the institution.
The scientists who are getting paid to collect data suffer no loss if nothing comes of their data: they did their process-based jobs to perfection.
This is the intrinsic weakness of all large-scale, hierarchical organizations: the focus quickly becomes process rather than outcomes, and the risks are pushed down the chain of command.
Thus the institution didn't fail, the soldier/student/lab tech failed to achieve the desired outcome despite the correct processes being followed.
Small, decentralized organizations in which everyone is forced to have skin in the game (for example, a worker-owned collective) cannot focus on process because there's nobody further down the pyramid to accept the risk of poor outcomes.
Independent free-lancers/artisans can't afford to focus on process, except tricks of the trade that enable greater productivity and better results/outcomes.
Thousands of people can focus on processes in a centralized hierarchy and fail miserably in terms of outcome, yet nobody loses their job, pay or benefits.
One independent free-lancer can accomplish more in terms of output and results than three people in a centralized hierarchy because the power, risks, rewards and responsibility are unified in one position.
Nothing focuses the mind like the risk/danger of losing and the potential rewards of winning. Once there's no skin in the game, i.e. the risks and losses resulting from failure fall on somebody else, the system focuses on process rather than results, and from that point on the system is designed to fail.
Institutions and processes provide solutions to large-scale issues. The problem isn't institutions or processes per se, but the ease with which these become bastions of privilege that abandon responsibility for outcomes. The challenge is insuring everyone in institutions has skin in the game and is exposed to potential losses from poor outcomes and potential gains from positive outcomes.
Summary of the Blog This Past Week
Japan: A Future of Stagnation 6/17/16
The Disaster of De-industrialization 6/16/16
Pity the Poor Central Bankers: Playing Masters of the Universe Is No Longer Fun 6/15/16
Work Won't Be Scarce--It's Paid Work That Will Be Scarce 6/14/16
An Everyman's Guide To Understanding Cryptocurrencies 6/13/16
Best Thing That Happened To Me This Week
Reaping the rewards of buying a few bitcoin at $450 and $580. Yes, it's volatile and risky; play with care.
Market Musings: Bitcoin's Spectacular Rise since May
I wrote about bitcoin's potential to rise 10-fold in the Musings of May 21, 2016, at which point bitcoin (BTC) was $443 per coin. As I write this on Friday morning, June 16, BTC is $740, down from $770 yesterday after a hack attack on Ethereum dropped BTC to $737.
This goes to show how volatile and risky cryptocurrencies can be. They will remain a risky investment. That said, risk and outsized gains and losses are joined at the hip. If you want outsized gains, you have to accept higher risk.
This $300 per coin increase in less than a month is rather spectacular, translating into a 70% increase.
So where to from here?
I found this chart from a technician who follows BTC. He identified key levels as $550, $680 and $900. I would add $950 and $1,150, the previous peaks.
Nobody knows what bitcoin will do next, but technically, it's a reasonable guess that the round-number attractor of $800 will pull price up from $750 to $800.
From there, we might expect a profit-taking technical pullback. If we measure the rally from $450 to $800, a Fibonacci 31.8% retrace would be $110, or a decline from $800 to $690.
If we measure the run-up from $550 to $800, the 31.8% retrace measures 80, suggesting $720 as a target for any retrace from the $800 level.
Technically speaking, retraces are normal and healthy, as players take profits and selling triggers more selling until buying overwhelms the sell-off.
Once new highs are logged, selling can be expected to decline, as everyone who bought near the previous top and wanted to get out finally had the opportunity to do so.
This leaves only people who bought at lower prices and have no incentive to sell at any particular level. This suggests that once the previous highs are breached, there are no real technical barriers to $2,000 or higher.
Alternatively, another hacking scandal pushes bitcoin back below $500. Nobody knows what will happen; that's the definition of risk.
From Left Field
The World Nears Peak Fossil Fuels for Electricity
We’ve Hit Peak Human and an Algorithm Wants Your Job. Now What? (via Joel M.)
Globalization and the American Dream
The Milton Friedman Doctrine Is Wrong. Here’s How to Rethink the Corporation.
How you make excuses in order to maintain your beliefs (via Lew G.) One of the tools used by special pleaders is called moving the goalposts.
Why Do Health Costs Keep Rising? These People Know (via Joel M.)
Controlled chaos in Ethiopia intersection (via Lew G.) -- fun to watch the chaos speeded up...
The tech start-up planning to shake up the legal world (via Lew G.)
China's Hidden Unemployment Rate: Official employment data may underestimate the real picture. (via Joel M.)
The New "Hope": a coordinated global infrastructure spending boom
If agriculture is to continue to feed the world, it needs to become more like manufacturing, says Geoffrey Carr. Fortunately, that is already beginning to happen. (via David C.)
THE NEW MAP OF ECONOMIC GROWTH AND RECOVERY: "Twenty counties alone generated half of the country’s new business establishments." Wow, now that is asymmetric....
"To bankrupt a fool, give him information." Nassim Taleb
Thanks for reading--
charles |
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