Monthly Archives: October 2012

Big data and big ethics

My favourite story this week comes from an article published in February in The New York Times Magazine entitled How Companies Learn Your Secrets. Click the link and please read it – it’s mind blowing.

Ok, if you didn’t read it, here’s a summary – Target stores in America developed some sexy analytics to interpret shopping transaction data to create personalised individual marketing campaigns and incentives. So far so good. The market that they were targeting was pregnant women (leaving the pregnant men’s market for future growth opportunities). They were able to establish a sufficiently high correlation of shopping behaviour during the early phase of pregnancy that they could predict a future birth and the creation of a new ‘mother’ customer. Targeted advertising of baby and motherhood products in the lead up to the birth combined with incentives appear to have contributed to a massive increase in revenue for the retailer.

At this point, it looks like one of the already well worn feel good sales stories for big data – give us the IT budget and we’ll give you unheard of growth in revenue.

That probably wasn’t the thought foremost in the mind of the father who went in to complain to his local Target store about his daughter receiving promotions which were age inappropriate and unsuitable for a conservative, I’m guessing, Christian, household. It turns out that the daughter hadn’t told her family she was pregnant – instead, Target brought the conversation out in the open through their personalised marketing!

After the extreme impact of this social marketing gaffe, Target commissioned further research and found that – shock – instead of appreciating their offer of ‘help’, a lot of people thought that it was just too creepy to have a retailer stalking them along life’s journey.

The agile response to this consumer feedback was to include irrelevant promotions along with the targeted promotions so that consumers thought that the ‘right’ products had appeared serendipitously. Whoa!

This story alone would make a great movie – or maybe some future HBR case study in what to do or not not do in FMCG social marketing. Even more interesting to me was the underlying psychology and behaviour theory which suggested the goals for this kind of campaign.

As the article explains, with many useful references, buying habits are hard to break. This is another side of previous comments in this blog about the ease of intuitive, recurrent thinking compared to hard consideration of multiple dimensions and possibilities. From Target’s point of view, if someone always buys milk from their local grocery store it would take an extreme impact to change their default behaviour and buy milk from them instead. No matter how great the marketing, the potential milk buyer simply won’t register the possibility of buying milk elsewhere. Target could try to engineer an extreme impact – maybe giving it away for free or tainting the competitors supplies or……..they could wait for mother nature to deliver the event and track that through correlated evidence of behaviour.

Extreme life events such as divorce, death (of someone else – not the customer), and birth, cause extreme impacts and these events create a sufficiently complex environment that the customer will be open to change behaviour and break with old habits. I was already aware of this pattern from my work in crisis management and national security but I never made the connection to buying baby products. It makes perfect sense and best of all, I can speak from personal experience of the complexity introduced with a baby – particularly the first baby.

One of the challenges in educating people about complexity and extreme impacts is the difficulty of conveying that sense of a mind altering experience which sweeps away long held beliefs and assumptions.

Unfortunately, the baby example doesn’t really hold for true extreme risk. As a metaphor it would require that the woman wakes up one morning to unexpectedly find herself 6 months pregnant. In other words, if terrorists bought the same range of products from their local store a few months before an attack, it would make life a lot more simple for the intelligence community (this does kind of happen in a way, but we’ll come back to that later).

So let’s not confuse the discovery of correlation over a large population sample experiencing a regular (although at least initially quite private) event with a low likelihood / high consequence event where you don’t know the population and the events are emergent.

The real extreme impact here was the sudden appearance not of a black swan, but of a discount retailer playing the role of a stork.

Where does ‘convenient’ stop and ‘creepy’ start? I guess we can thank the commercial imperative to help provide us with some of the experiments. In any case, it’s worth considering how your own big data initiatives will play out and whether you will be perceived as using this power for good or evil. That’s an extreme risk.

Grasping for goals, reaching for the straws

Surprise, surprise, evidence is emerging to show that people (i.e. us humans) have evolved higher cognitive abilities in our pursuit of goal driven outcomes. Neurophysiological, neurobiological, neuroimaging, and computational studies march on but this turns out to be old news – a 2001 paper entitled An Integrative Theory of Prefrontal Cortex Function offers some evidence which supports the hypothesis that ‘goals’ are an integrative concept that can bring together a range of cognitive mechanisms. In the author’s words “The PFC is critical in situations when the mappings between sensory inputs, thoughts, and actions either are weakly established relative to other existing ones or are rapidly changing.” This sounds a lot to me like a crisis situation or one where the situation awareness is weak and the decisions are critical.

If you know your goals, then presumably, you’re well placed to maximise your mental efforts towards a clear mission in life – right? Well, as usual, the thorny issue arises as to whether you know what you think you know. Some researches in 2008 reported in Nature that in some situations, your brain makes up its mind up to ten seconds before you realize it. More and more studies are highlighting the fact that, in order to keep us sane, our conscious view of the world is inherently flawed – by design. Even the PFC command centre is highly dependent on the synthesis of inputs which the subconscious is offering up, complete with bias and unexplored assumptions.

Which leads me back to my current favourite subject of risk assessments. An interesting book which came out in July this year called Risk Intelligence: How to Live with Uncertainty helps the cause by promoting a useful definition for a measure of risk awareness.

At the heart of risk intelligence lies the ability to gauge the limits of your own knowledge — to be cautious when you don’t know much, and to be confident when, by contrast, you know a lot.

The author, Dylan Evans, has a deep pedigree in the psychology of estimation and he has applied this to the psychology of risk estimation (building on Kahneman and Tversky). He has commercialised his research and is spreading the word out on the hustings. You can even do a free test on his web site to find out your own ‘risk quotient’. I’m only offering this up as I apparently have a ‘high’ RQ of 78.85 which puts me in the upper quartile of the 28,677 people who have taken the test.

I think it’s important to get the Evans message out because a lot of risk management today is based on the fundamental notion that you can plot risks according some qualitative scale of likelihood and consequence. This is fine for controlled environments with high stability (until they fail catastrophically – more of that later), but it is often applied to the wrong environment. The more we can show people how naive most of this is, the better.

I do however wonder whether the RQ rating might lose it’s subtlety and be seen as an ability to predict – it’s more of an ability to restrain yourself from being wrong so often.

Putting these threads together, we have an amazing goal seeking brain which is directing you through your subconscious and allowing your conscious mind to imagine it is in control and knows what these goals are. Occasionally, as a reminder of your naivety, the subconscious allows the conscious to make a fool of itself all in the interest of the underlying complex resolution towards strategic goals. Sounds a lot like most of the tiered organisational management models I’ve seen.

I’ve been holding back in what would otherwise be a continuous reference to the work of Dave Snowden. Suffice to say that risk management techniques designed for complicated contexts don’t make sense in complex contexts. Risk intelligence is an interesting look into the complicated, maybe even as it approaches the complex – but it is itself a false comfort in the real complex world where events emerge truly unexpectedly and potentially with a very high consequence.

At least that’s what my handicapped and uninformed conscious mind is telling me….

Social media lost in translation across the generations

Another conflagration of social ideas this week with damage control / high consequence responses to statements by baby boomer male politicians which have ‘shocked’ certain audiences. At the same time, I see corporate CEO’s being encouraged to use Twitter, Facebook and blog in order to provide a more personal, social, face to their company’s brand. Why don’t they? Because in the commercial space, a strategic communication blunder can have an immediate and extreme impact on the share price or customer loyalty. In the political space, you have the opportunity to steer the spin harder and try to recover before the next election. One person’s high consequence may be another person’s routine emergency.

In the US, Mitt Romney is getting a caning for using the phrase ‘binders full of women‘ which has brought a very noisy amount of chatter across all the social media channels. In Australia, the leader of the opposition, Tony Abbott was called a ‘misogynist‘ by the Prime Minister, Julia Gillard. Ironically, in trying to use the most serious accusation she could, the PM’s word has now been watered down through the public airing. The Australian Macquarie Dictionary is now looking to ‘update’ it’s definition from ‘hating all women’ to ‘an entrenched prejudice against women‘. Many now attacking Mitt would therefore appear qualified to use the same word.

Leaving gender politics, stereotypes and maturity aside, this episode strikes me more as a simple case of some men of a certain age expressing themselves through a lens of the world as it was when they established their sense of the rules of the game. Sure, the rules have moved on, but it is inevitable that in any cross generational conversation that you’re going to get a clash of mindsets.

This raises some interesting challenges for the drive to socialise on the internet. In politics, there are minders and advisors who have a full time job to try and teach their master the language of the day and remain vigilant to recover or ideally prevent the smallest faux pas. The corporate affairs units of most commercial organisations are a much leaner operation than those found in politics and the marketing people pushing social media usually operate at a few degrees of separation removed from company Directors and senior executives.

I read an article recently (forgot where) encouraging large company CEO’s to become more active in social media in order to give their company’s brands a more personal, social, dimension. The author (from a younger generation) was keen to point out that 90% of all social communication is ‘safe’ from any risk to brand reputation. I suspect the reason for that percentage is that there are hardly any large company Directors or senior executive who are exposing themselves through these channels. If there were, I think you’d find a lot more examples of the kind of perceived slip ups that politicians are making.

Initially this could well lead to high consequences but I wonder if, over time, people would start to recognise that these are the views of a person three to four times your age who might have a lot of experience and ability but carries the inevitable weight of a familiarity with the past.

Until social media conversations mature, there will remain an extreme risk that underlying intent may be lost in translation.

Big stories bringing people together and creating communities

Read an interesting post by Tim O’Reilly on LinkedIn recently entitled – It’s Not About You: The Truth About Social Media Marketing in which he looks back at the history of his technology publishing company and finds lessons just as relevant in the ‘new’ social marketing world.

Anyone who has worked across multiple fields and practices is familiar with that feeling of deja vu when you see similar ideas and themes being expressed in slightly different language but espoused as being unique to one community – or individual.  I’ve had the opportunity to work across many different horizontal and vertical markets in my career and am often frustrated by the communication issues which arise between people who insist on looking at things through an inward looking, narrow, ‘tribe’ perspective.

Similar challenges arise when you are trying to market a general or horizontal solution – most people would prefer to see an out of the box, recognisable vertical solution rather than having to put the effort into applying the general solution to their specific circumstance.

When I have seen positive results, it has usually been with the promotion of a cross cutting concern which is of interest to a wide variety of people but which has not yet become ‘core’ to any one tribe. I believe that there is a unique inflection point where a new concept can act as an intervention to bring people together and, with sufficient momentum, create a new community of interest. Sometimes, the intervention involves introducing a bigger concept which encompasses and unifies multiple fields. As long as the higher level is not too abstract to appear as another horizontal solution, there is an opportunity to create a new, broader, composite vertical market.

In Tim’s words:

We tell big stories that matter to a community of users, and together we use those stories to amplify a message that we all care about. Framing ideas in such a way that they include and reinforce the identity of a group of people who might not previously have seen themselves as part of the same community allows everyone to tell their own story in a way that adds up to something bigger than any one of them might tell alone.

While he is using the language of the broad technology community, I believe the same sentiment applies across the evolution of all fields of human endeavour. Indeed, in hindsight, I’d say that most of my career has been driven by the pursuit of such emerging big stories, looking for opportunities to bridge entrenched domains into that ‘something bigger’. Trying, wherever possible “to find people and technologies that are worth paying attention to, and to share their knowledge and enthusiasm with others, who then carry it even further.”

Sometimes the big stories are not compelling enough to generate the energy required to form a new community. Sometimes the stories are taken up and amplified beyond anyone’s imagination. Either way, it’s a fantastic journey and one which social media will accelerate.

In Tim’s view, “the secret of promotion in the age of social media isn’t to promote yourself.  It’s to promote others.” Well, I guess, I’m doing my bit by promoting Tim!

Who are you promoting?

 

Expertise, Ignorance, Naiveté and Risk

One of the prerequisites of good threat and opportunity management is to be knowledgeable about the environment in which you operate. Goal seeking decisions and actions are informed by your sense of the world and your influence over it.

For the past few years there has been a growing wave of evidence showing that, in many cases, the confidence we have in our understanding of the world and our ability to control it is seriously misplaced.

A clear message has been emerging from many fields of research including behavioural economics, neuroscience, physics, biology, psychology, and social science – our ability to view the world as a rational, logical model of cause and effect is often achieved by selectively ignoring the clear evidence to the contrary.

Simple risk management methodologies are predicated on an ability to predict the events which may jeopardise the attainment of your goals, judge the likelihood of those events and estimate the impact of their consequences. The effectiveness of these methods is clearly going to be undermined if our predictions are flawed – and I believe they are flawed far more often than most risk managers (and project managers, and policy directors and sales representatives, and …) are willing to admit.

I’m sure this theme will recur in many future posts and for this entry, I’ll just offer a few recent examples where it is being played out.

In Thinking Fast and Slow – Kahneman references a large body of research to support his distillation of the idea that people are guided by two different thinking models – System 1 which is deeply instinctual and focused on short term survival and System 2 which is rational and able to develop complex, even contradictory mental models. System 1 is the default and it serves us well most of the time while we remain in familiar territory. Occasionally we employ System 2 to handle certain challenging thoughts, but this requires a lot of effort and people are inherently prone to conserve energy in case of emergencies (lazy).

The key to making consistently well informed decisions is to have enough experience with a situation that System 1 is guided by repetitive examples over many years while at the same time knowing when to alert System 2 to consider the possibility of exceptions to the norm.

Since reading the book, I’ve found myself seeing System 1 and System 2 examples in a number of other recent findings (and in doing so, perhaps becoming over confident at my own understanding!) – thanks to my Twitter sources for alerting me to these gems.

Last month, David Ropeik wrote an excellent op-ed piece for the New York Times Sunday Review called “Why Smart Brains Make Dumb Decisions about Danger” which discusses recent findings on the architecture of the brain and why this leads us to be so bad at predicting risk factors.

This month, in a piece recorded for the BBC, Jeremy Wagstaff raised the interesting question – “If we can’t imagine the past, what hope the future” – reminding us as to just how little we know of the past – and that’s supposed to be the easy bit!

An article by Maia Szalavitz in the September issue of Time magazine discusses the psychological factors which might explain “Why Misinformation Sticks and Corrections Can Backfire” – rejecting information takes more mental effort than accepting it. Hardly the characteristics of a trustworthy decision model!

The October 6th issue of the Economist reviews a book by Nate Silver called “The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t” which offers a range of examples and research exploring the ways in which people struggle to think in probabilistic terms and incorporate  uncertainty into their mental models. He suggests that people learn to keep an open mind and adjust their models to reflect available observations.

Finally and perhaps fittingly, consider this review of a book by Oliver Burkeman entitled “The Antidote: Happiness for People Who Can’t Stand Positive Thinking” – learn to enjoy uncertainty, embrace insecurity and become familiar with failure.

Easier said than done!

Expecting to find the unexpected

If you search hard enough through enough information, can you expect to find the unexpected?

A number of angles appeared to me looking into a review of the US DHS’s Counter-Terrorism ‘fusion centres’ in Wired Magazine recently. The simple summary is that the US has spent between  $289 million and $1.4 billion to product ‘a Bunch of Crap’. I have personal experience of national centres although nothing on the scale of the US DHS and can see the possibility of this smelly outcome.

The article discusses reviews by Senate (political) committees into public service activities. The perspective and motivations of such reviews should automatically alert you to clarify what, if any, spin was desired in the outcome. References and ‘facts’ quoted by the reviews help to let the reader form some opinion but just remember that somewhere in another filing cabinet will be a review commissioned by the public servants praising the outcomes of the work. The truth lies (?) somewhere between these two extremes and in my experience, the more clearly the objective evidence is portrayed separate to the subjective, the better. While this is true in government across the world, national security seems to have a particular challenges due to the gravity and sensitivity of the mission and the cloaks which operate around the edges of activities and information.

The idea that the budget expenditure would be between $289M and $1.4B is clearly an indictment of fiscal accountability and transparency. For a smaller country like, say, Australia, the equivalent statement would be that the funding was between $28,000 and $140,000. A big difference, but not one that’s likely to keep anyone awake for too long. It does show the scale of things in the US and obviously suggests that even at this scale, it’s not working.

In my experience, the idea of ‘sharing information’ between a broad set of stakeholders to arrive at a cohesive, more informed, holistic result is extremely difficult. The best ‘fusion’ usually occurs between individuals maintaining personal connections across agency lines. The more bureaucratic the process, the less dynamic and adaptive and inevitably, the lower the fidelity of the complex, dynamic, real world information trail. Agencies would do better by encouraging and facilitating these domain wide communities but that would require lowering the drawbridge into the silo and losing a sense of control and budget.

Even if you can get agencies to collaborate with a shared intent and cooperation, there are technical and methodological challenges in fusing, synthesising, distilling etc. volumes of data which are generated in a wide variety of contexts. Often the military terminology of ‘situation awareness’ and ‘common operating picture’ is used here however the military environment is significantly different to that of national security. Indeed the military environment is one of many environments that come together here including health, emergency management, intelligence, foreign affairs, customs, etc.. No matter how parochial different arms of defence services are, the military has the benefit of a much more tightly integrated command / control structure than will ever exist in the vast domain of national security. Complexity and extreme risk methods are more likely to achieve results than brute force applied to an assumption that answers will just drop out with the right goggles.

The article discusses the diversion of funds to local crime fighting and the twist of the police that local crimes are a form of local terrorism. There are definitely overlaps between the capabilities required for national security and local security. The goal of the national security investment however, should be to improve the national security and, as a by-product, enhance capabilities which can also be useful in other areas of local security, national disaster, pandemics and CBRN accidents.

An alternate strategy is to invest in the capability of capability management. Using this approach, capabilities to handle routine emergencies in many domains are pooled as a portfolio which is configured in response to specific threats. Rather than investing in national capabilities which may never be utilised, this approach focuses the investment on the ability to manage the stakeholder network – something which is taken as a given in typical national initiatives yet which is usually the weakest link in the strategy to execution chain.