Dunbar’s Strategy Group – limited places

[70 places left]

I just read Seth Godin‘s post on Dunbar’s Number.

Dunbar’s Number is thought to be around 150, and represents the number of people that we humans can place in a group before stable social relationships begin to break down.  The thinking is that we simply lose track of new people when the group gets bigger than this.

Last week I created a Facebook group for people who are interested in business and investment strategy.  Members are able to create discussions, share ideas, and post interesting links, photos and videos.  I am hoping this new group will be a good learning experience for everyone involved.

The group is called “Dunbar’s Strategy Group“, and when it grows to a size of 150 it will be closed to new members.

If this sounds like a group you would like to be a part of, please consider joining.

Daniel Pink on the surprising science of motivation

There is a mismatch between what science knows and what business does

DANIEL Pink puts forward the idea that there is currently a mismatch between what science knows and what business does.

Pink presents the Candle Problem, an experiment invented in 1945 by Karl Duncker. The experiment works as follows: I bring you into a room and give you a candle, a box of tacks, and some matches. Your job is to attach the candle to the wall so that the wax doesn’t drip onto the table. This is a seemingly simple problem, but the problem is difficult to solve because of the difficulty of overcoming something known as “functional fixedness”. The items are presented in such a way that there is a “mental block against using [them] in a new way that is required to solve a problem” (Duncker 1945). Watch the video to see a good explanation of the Candle Problem.

Now here is the interesting thing. At Princeton University, an experiment was conducted using the Candle Problem to look at the power of incentives. Two groups of people were taken and the first group were offered individual monetary rewards if they solved the Candle Problem quickly. The control group were not offered an incentive. The result was amazing, the incentivised group performed significantly worse than the control group … external incentives reduced performance.

Pink makes a number of insightful points on motivation, in summary:

  • As long as a task requires only mechanical skill, bonuses work as they would be expected – the higher the pay, the better the performance.
  • Once a task calls for even a rudimentary amount of cognitive skill, a larger reward often leads to poorer performance.
  • Extrinsic motivators, which Pink refers to as “if-then” rewards, often destroy creativity.
  • In early 2009, economists at LSE looked at pay for performance schemes and concluded that “financial incentives … can result in a negative impact on overall performance.”
  • The secret to high performance isn’t rewards and punishment but rather that unseen intrinsic drive, the drive to do things for their own sake, the drive to do things because they matter.

Autonomy, mastery and purpose

The solution to achieving high performance in business in the 21st century will be based on intrinsic motivation, on the desire to do things because they matter, because they are interesting, and because they are important. Pink argues that this new operating system for business is to be based around 3 elements:

  1. Autonomy – the urge to direct our own lives;
  2. Mastery – the desire to get better and better at something that matters; and
  3. Purpose – the yearning to do what we do in the service of something larger than ourselves.

As Pink argues, if we can repair the mismatch between what science knows and what business does, and bring our notions of motivation into the 21st century, we can strengthen our businesses, solve a lot of those Candle Problems … and maybe even change the world.

Book version of this speech

I wrote Dan an email to thank him for this great speech.  He informs me that the book versionof the speech will be released in the US in December and in Australia around April or May.  If the book is even half as insightful as the speech, I think it will be well worth reading.

Off to a flying start!

A WEEK AGO TODAY, an aspiring management consultant started blogging about the consulting application process – he has already written 27 posts!

Wait a second, I hear your say, there are dozens of consulting blogs, why does this blog rate a mention?

Well, KR is not your ordinary consulting blogger.  Apart from being an eloquent writer, KR is a PharmD,PhD,MBA graduate who is currently working as a postdoc at Harvard Medical School, and playing the Harvard trump card to get interviews at all the big consulting firms. KR is giving us an up-close-and-personal look at the consulting application process.

The name of the blog is Consider Consulting, and I’ve added a link to my blogroll for our future reference.

This blog is well worth following over the next few weeks/months.  I am looking forward to reading all of KR’s insights on the consulting application process, straight from the horses mouth!

Good luck in the interviews, KR!

Economic indicators: how to look for economic recovery in 2009

An economic indicator is any statistic (e.g. the unemployment rate or GDP) which indicates the past, current or future strength of the economy

THERE is talk about town and in the media of an economic upturn in the final quarter of 2009 – “banks are lending, consumers are buying, and companies are hiring.”  While it is not possible to predict the movement of the economy with any level of certainty, and recent history has reminded us of this fact, it is important for business people and government policy makers to have some idea of what lies ahead.

The practice of reading omens in order to foretell the future has been employed since ancient times. In ancient Rome, priests known as “Augurs” would determine the will of the gods by studying the flight of birds, while other persons known as “Haruspices” practiced a form of divination which involved inspecting the entrails of sacrificed animals.

Things have progressed a little since then. Today economists devine the future by examining “economic indicators”.

Economic Indicators

In order to assess the likely strength of the economy in the future, economists look at “economic indicators”.

An economic indicator is any economic statistic (e.g. the unemployment rate, GDP, or the inflation rate), which indicates the current strength of the economy and/or the future strength of the economy.

Economic indicators are generally classified by reference to  two attributes:

  1. Correlation with the strength economy; and
  2. Contemporaneousness with the strength of the economy (let me know if you can think of a simpler word)

1. Correlation

If an economic indicator is “correlated” with the economy, then we would expect a change in the value of the economic indicator to correspond with a movement in the economy.  The correlation of an economic indicator may be described as procyclical, countercyclical, or acyclical:

  1. Procyclical: A procyclical economic indicator is one that moves in the same direction as the economy. For example, Gross Domestic Product (GDP) is a procyclic economic indicator because it gets larger as the economy gets stronger.
  2. Countercyclical: A countercyclical economic indicator is one that moves in the opposite direction as the economy. For example, the unemployment rate is a countercyclical economic indicator because it gets larger as the economy gets weaker.
  3. Acyclical: An acyclical economic indicator is one that has no relationship to the economy and is generally of little use in predicting the future strength of the economy.

2. Contemporaneousness

Contemporaneousness refers to the timing of the change in the economic indicator relative to the movement in the economy.  The contemporaneousness of an economic indicator may be described as leading, lagged, or coincident:

  1. Leading: A leading economic indicator changes before the economy changes. For example, construction activity is a leading indicator as the level of construction activity usually begins to decline before the economy declines and improve before the economy improves. Leading economic indicators are the most important type of indicator for investors, business people and policy makers because they help to predict the future performance of the economy.
  2. Lagged: A lagged economic indicator is one that does not change direction until a few quarters after the economy does. For example, the unemployment rate is a lagged economic indicator because it typically takes at least two quarters to decrease after the economy begins to recover.
  3. Coincident: A coincident economic indicator is one that moves at the same time as the economy does. For example, Gross Domestic Product is a coincident indicator.

Creative destruction: fighting the Gumblar virus leads to new look

I was forced to delete and re-install WordPress today in a bid to get rid of a virus known as the Gumblar virus. Thank you to the Blue Tortoise for talking me through this painfully slow process!

I really hope that my effort was successful because, in the process of deleting WordPress, all of my photos and images have been lost. I have backup copies and I will be replacing these over the next couple of weeks, so please bear with me.

I like to think that life is a constant process of creative destruction, and I am hoping that the destruction of my blog will lead to some improvements. I am trialling a new WordPress theme called “Arthemia” which I have been thinking about trying for a little while. Arthemia is a very clean and crisp theme and allows me to feature my newest and most interesting content at the top of the page, which should help direct readers to the articles which are most interesting and useful.

I am a bit worried about the new look though. My previous blog was a nice shade of blue and this new theme is very white, perhaps too white!?

I am also concerned about the two prominent spots for ads in the new theme. This may offend people or turn readers away because it may appear that I am emphasising advertising over ideas and content. My main priority has always been to share ideas about consulting, business strategy and investing, and I can’t help but think that the prominence of advertising might detract from this. Either because it distracts readers from the content on my blog, makes them think that the blog looks cheap and mercenary or, even worse, because it distracts me from the reason why I started the blog in the first place.

So – what do you think? Am I worried about nothing? What would you change about the appearance of this blog?