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Forecasting, Chance, Probability and more

Oscar Foulkes January 10, 2014 Books No comments
In years past, I’ve opened my holiday reading with an escapist novel that I don’t put down until it’s finished, surfacing only for meals. I find it’s a great way to disconnect, which is the point of a holiday, after all.

This year, I kicked off with Nate Silver’s The Signal and the Noise. It was an uncharacteristic choice because it’s not a novel, and far from being a vegetative experience, the book encourages some self-examination.

It is a richly-layered examination of prediction, probability, correlation and causality. He is all about finding meaningful relationships between data. A very simple, but highly illustrative example, is the observation that in the same months that ice cream sales peak, there is also an increase in the number of bush fires. There is correlation, but no causality. He makes the point that Big Data increases the opportunity of finding data points that randomly correlate, thereby actually working against good predictions.

Silver expounds a Bayesian approach to prediction, in which a base rate or ‘prior probability’ is the beginning point. Having made the first prediction, the ‘prior’ is updated, which offers the opportunity of fine-tuning second- and third-round predictions. It’s all very interesting and thought-provoking.

There is related subject matter in my second read, Daniel Kahneman’s Thinking, Fast and Slow.

The spontaneous, generally involuntary ‘fast’ thoughts produced by what he calls System 1, can result in a variety of biases and prejudices. Overcoming these is the work of System 2, our ‘slow’, more analytical way of thinking. It’s not as easy a read as Silver’s book, but it is no less interesting. Kahneman was awarded a Nobel Prize for his work, so it is no surprise that his book is a much more dense read.

Nate Silver was a professional poker player for a while, putting his predictive abilities to the test. There certainly is a fit between gambling and prediction; over time, unsuccessful gamblers are those who demonstrate poorer understanding of probability.

Chance is linked to probability, but it’s different to luck. Kahneman cites Nassim Taleb in introducing “narrative fallacy”, which is our tendency to string together apparently relevant events in an attempt to construct causality, without allowing for the huge role played by luck. If you don’t like the word ‘luck’, substitute good fortune. For example, Google – and its founders – is the subject of numerous case studies. However, in the early years they would have sold the entire company for less than $1 million, but the potential buyer thought the price was too high. The Larry Page and Sergey Brin legend would have read very differently!

Even if we are not forecasting professionals, we are required to assess probability on a daily basis. We may as well learn to do it better. These books are a great place to start.



Holiday Reading

Oscar Foulkes January 13, 2012 Books No comments

For me, holidays are a prime opportunity to pack in a LOT of reading. In previous years I’ve kicked off by diving into a Robert Goddard, or something similar. You know, a plot into which one escapes for a day, or so, and by the time you emerge from the book the daily grind has magically vanished.

This year, I dived straight into the more serious stuff:

The Quest: Energy, Security, and the Remaking of the Modern World, by Daniel Yergin
If you think the title of this book is daunting, wait until you encounter the book itself. Well, I didn’t because I read it on iPad, but it must be quite a tome in physical form. Yergin won a Pullitzer Prize for his 1992 book The Prize (about oil), and he is something of a one-man energy think-tank. I won’t deny that reading the book requires a fairly substantial commitment; apart from its length, Yergin is not the most polished writer around (and, there are irritating errors, like “amuck” instead of “amok”)

The Quest is a bit like a semester course on oil, gas, coal, nuclear, geo-politics, prospecting, renewables, conservation, electricity, cars, and environmental issues. There is quite a large technical component to the book, but Yergin keeps it all interesting by incorporating some fascinating history (and a suprising cast of characters).

Energy, in its various forms, is something we consume – usually without even thinking about it – every second of every day. The world couldn’t be what it is without electricity and our various forms of vehicular transport, all of which require energy.

I give The Quest a definite thumbs-up. It’s worth making the effort to read this fascinating book.

The 52 Seductions, by Betty Herbert
This book is listed in chronological order of reading; there is absolutely nothing that ties 52 Seductions to The Quest. For starters, Herbert is a good – and funny – writer. Secondly, while the title and plot line suggest that sex is the subject, the book is actually about long term relationship, and marriage in particular.

The (real life) story is based upon a pact made by the author and her husband when they realise after 10 years of marriage that they seldom have sex. It’s not as if love has departed the relationship, far from it. No, desire is the missing ingredient. So they agree to take weekly turns at ‘seducing’ each other. Yes, it is a bit of date night with a twist (not all of them have what you might euphimistically call ‘happy endings’), but it’s really about marriage from the woman’s perspective, which is always a good thing for men to know about.

This is a light and easy read, which I’d also recommend.

Even Silence Has an End, by Ingrid Betancourt
By the time I’d finished this book I’d had a rather intense dose of woman-focused literature. Betancourt was a Colombian politician when she was captured by FARC rebels. It’s not that they were targeting her, but once they had serendipitously netted her they weren’t about to release this valuable bit of political capital. This book is about the six-and-a-half years she was in the jungle as their hostage.

She suffered all kinds of abuse – including being chained to a tree by her neck – and deprivations, which at times included a prohibition from speaking, or being spoken to. What preserves her throughout the ordeal is the realisation that, while she is a captive, she remains free to choose how she is going to respond, and what kind of person she is going to be. This is pretty much the same conclusion reached by Viktor Frankl in Man’s Search for Meaning, which deals with his experiences in Nazi concentration camps.

There were so many FARC hostages in various parts of the jungle that one of the radio stations would broadcast messages recorded by friends and family, which they were able to listen to, sometimes covertly. This component made me think of the fixation we’ve developed with various forms of social media, which enable all kinds of conversations to happen. Betancourt was not only deprived of her liberty, but was restricted to receiving one-way communication only.

Betancourt has written a powerful and thought-provoking book, which I definitely recommend.

Chasing the Devil, by Tim Butcher
Butcher has previously reported from Liberia and Sierra Leone. He returns in order to – literally – follow in the footsteps of Graham Greene, who trekked in 1935 from Freetown, through Sierra Leone, into Liberia, then through Guinea, back into Liberia, and then by boat from Buchanan to Monrovia.

When Greene made the trip he was disenchanted with Europeans. He went in search of a kind of simplicity or purity, which he found in the jungle-dwelling Africans. Butcher has a somewhat different interest, in that he is trying to make sense of the extreme brutality and murderousness which characterised the various internecine wars that have taken place in the region over the past couple of decades.

Butcher observes that the jungle is a harsh environment in which to live. The locals’ best chance at survival is to stick together, which usually means towing the ‘bush’ line. Young men are trained – and indoctrinated – by highly secretive bush societies, or cults. In this context, the local tribe will carry far more sway than a distant government administration which makes no positive contribution to people’s lives, and which may in fact make their lives worse, through corruption and discrimination. He makes the (depressing) observation that, in Africa, Africans survive. In order to thrive they need to go elsewhere.

The presence of valuable natural resources has not improved their lives; if anything, minerals have resulted in more misery, as aggressors seek to control the assets.

Butcher is not only a deep an observant thinker, but also an excellent writer. I’ll be making to effort to read his other book, Blood River, soon.

The Hare With Amber Eyes

Oscar Foulkes December 3, 2011 Books 2 comments

Edmund de Waal, a ceramic artist, is bequeathed a collection of 264 netsuke (small and intricate Japanese carvings) by a great-uncle living in Tokyo. They entered the once-wealthy Ephrussi family in the 1870s when a Paris-based relative, Charles, bought the collection, which he later gave to a Viennese cousin as a wedding gift.

In The Hare With Amber Eyes, de Waal tells the fabulously engaging story of how his family, originating in Odessa, established something of a trans-European trading and banking empire similar to the Rothschilds’. He follows the story of the netsuke to Vienna, where the Jewish Ephrussi have an inevitable assignation with history.

The Ephrussi escape Nazi Austria, but forfeit their business, property and art. Through the intervention of a maid the netsuke are saved, which leads de Waal to ask the question: “Why should they have got through this war in a hiding place, when so many hidden people did not?”

Cape Town art dealer Michael Stevenson’s PhD thesis, Art & Aspirations, deals with the role that art collecting played in the Randlords validating their mining fortunes. The Ephrussi family, having settled in Paris and Vienna, did much the same thing.

Regardless of how nouveau the riche, old objects trace a path through history, and de Waal has told a wonderful tale around these netsuke. The Hare With Amber Eyes is unquestionably one of my favourite reads of the year.

Fantasy vs Reality

Oscar Foulkes September 7, 2011 Books No comments

Does this man look like the writer of lurid sexual fantasy? Nicholson Baker, author of House of Holes

The future of physical book shops is not looking bright. Apart from the fact that many people couldn’t be bothered to read (or, even in developed countries, can’t read), there is the entire digital thing. Books are cheaper and quicker to get in electronic form, and a variety of websites deliver cutting edge references on any subject you can imagine.

I love browsing book shops as much as anyone, but I have joined the ranks of Kindle users (using the Android tablet I bought last month). According to Amazon, by May 2011 they had sold more book downloads than they did in all of 2010!

The thing is this. Yes, it’s half the price, but the immediacy is so damn appealing. Last week I was reading an FT interview with Nicholson Baker, the author of House of Holes, and was able to buy the book without walking more than three steps.

House of Holes is an exercise in unbounded sexual fantasy. Think Roald Dahl (in adult short story format), Enid Blyton fairies and Alice in Wonderland, all of it viewed through a light mist of psychedelia. One reviewer has even tossed a little bit of Tellytubbies into the mix.

The book is largely about body parts – the book even opens with a pleasure-giving arm that has parted company with its host body – that are driven by pleasurable sensations. In the context of this book, the pleasure is all sexual, and no holds are barred.

Baker manages to keep it all light, comical even, with rhythmical narrative that at times is more reminiscent of poetry than prose. Writing about sex also brings up the weighty issue of how one describes it, and the body parts involved.

I haven’t been able to work out why one character refers to his penis (as in John Thomas) as his Malcolm Gladwell, but Baker trots out an impressive sequence of euphemistic references. I found myself chuckling at some of these.

One of the other ways he keeps the book light, I suspect, is by not making much effort to develop any characters. House of Holes is an entertaining read, which is sexual, but not necessarily pornographic.

Not exactly a convent girl, Roxana Shirazi, author of Last Living Slut

Last Living Slut, on the other hand, is a real story, about a real person’s sexual exploits. I was exposed to it in a real book shop, but bought it electronically (yes, I know I was leeching off their overheads). The Slutwalk movement has given new meaning to the word slut, and the author, Roxana Shirazi, is at pains to defend the position of (often promiscuous) women who match men’s interest in sex. What’s good for the goose is good for the gander, can’t argue with that.

And, with a surname that is one vowel away from being the name of one of my favourite grape varieties – Shiraz – my curiosity was piqued. I should also add, at this point, that the Facebook page for The Very Sexy Shiraz (one of the products I created at Cloof) has been inhabited by a large number of Iranians (you can read more that here).

Roxana Shirazi lived in Iran until she was 10, and then moved to the UK with her grandmother to get away from the revolution. A lay psychologist (upon reflection ‘lay’ is perhaps not the ideal word) could have a field day extrapolating an absent, opium-addicted father, physically abusive stepfather and a sexually abusive lodger, into the rock groupie that she grew into.

I can’t say that I found Last Living Slut a satisfying read. Yes, the book is littered with explicit descriptions of her (and friends’) uninhibited exploits with rockers, but once that component is removed, not much remains. I couldn’t say that the book goes anywhere with its potentially fertile material; there must – surely – have been scope for greater examination of deeper issues. Various themes or episodes are left dangling, which include her attempted suicide, and, to some extent, her abortion.

I would fault the book, also, on a generally staccato, if not chaotic, flow, which is also somewhat sloppy (OK, given the context, perhaps this is also not the ideal word). She starts one (short) chapter aged 21, and ends it a few pages later aged 24, without any sense of a passage of time. Perhaps it is what one would expect from a rock groupie, but this one has a Masters degree.

I’ve never been able to sing, nor can I play any musical instruments. But for these basic requirements I could happily have been a rock star. If nothing else, Roxana Shirazi has shown us some of the – admittedly transient – perks of being the object of young women’s adulation (if she ever pitches up at my house I’ll instantly start bashing away at my son’s drums!).

I’m sure she could have done a better job of writing her story. Perhaps she’ll come back to it all at some point in the future and have another stab at it.

Until then, I have to declare the work of fantasy as the winner of this month’s read-off.

Surviving Failure

Oscar Foulkes July 24, 2011 Books No comments

I am willing to wager a substantial amount of money that the majority of people in the world have a problematical relationship with failure. Against a backdrop of empirical measurement of our academic ability – especially a method that delivers a pass/fail result – and a general culture that makes it uncomfortable even for sub-optimal achievement, failure is not a condition we can be expected to embrace. We don’t like it, plain and simple. We avoid failure as if it were the plague.

Tim Harford, in his excellent book Adapt, isn’t exactly suggesting that we should seek out failure. Instead he says that experimentation is a necessary part of the evolution and success of organisations (and organisms). Failure is an inevitable consequence of experimentation, so we’ll all be better off if we have a sustainable way of dealing with it.

This matter-of-fact attitude to failure is quite reassuring, actually. It’s a relief to know that one can try something out, that it may not work out, but that’s OK. In fact, it’s normal.

The one part of this book with which I’m not in agreement is the choice of sub-title, “why success always starts with failure”, which strikes me as being intended to shock potential readers into a purchase. It’s not really what the book is about.

It’s not as if Adapt doesn’t describe failures; there are dozens of them, from the collapse of the Soviet Union’s economy to oil spills, Broadway musicals, and yes, the credit crisis. Harford relates the background to many of these failures in a most interesting and readable manner.

While he describes failure as natural, and certainly not a phenomenon that requires any feelings of shame, there are some provisos.

The first one is that failure should not lead to the extinction of the organisation or organism. In other words, the extent of the failure should be survivable.

The second critical component of failure is knowing that you’ve failed. Chasing your losses only makes it worse. So, it becomes critically important to have effective feedback loops. In the command economy of the Soviet Union any dissenting feedback generally resulted in the messenger getting shot. Donald Rumsfeld’s poor management of the war in Iraq was compounded by him shutting out feedback that didn’t accord with his position.

It’s only in the final chapter that Harford gets on to the personal dimension of failure. Up until that point he colours his message with a number of fascinating examples that he keeps at a reassuring distance. However, it was quite early in the book that I started thinking about my own failures.

My biggest failures have not obeyed the first rule of manageability. While there may not have been anything wrong with the experimentation, I committed myself on a scale that made survival almost impossible if it didn’t work out right.

Another example he uses, is of those huge domino set-ups, where disturbing one will lead to all of them getting knocked over. It’s a great spectacle if they start tipping at the correct time, but a disaster if it’s premature. It is for this reason that the builders of these arrangements employ safety gates. This example he likens to the contagion that accompanied the credit crisis. One failure led to a whole bunch of others.

These examples offer just a small glimpse; there are many more.

Adapt is going to go onto my list of the most important books I’ve read. It doesn’t set out to be a self-help book, but for a perpetual experimenter like myself it’s a really important reference.

Where failure is concerned, the only failure is to omit it from the possible outcomes. And not to allow new information to change your course of action.

Where’s the Glory?

Oscar Foulkes March 29, 2011 Books No comments

Jon Krakauer’s book Where Men Win Glory is one of the most thought-provoking I’ve read. On one level, it’s the story of professional footballer Pat Tillman’s life, ending at the hands of ‘friendly’ fire that the US Army did its best to obfuscate. It’s a heartbreaking story, made more tragic by the knowledge that dozens of soldiers (in the broader sense encompassing the navy and air force) die under similar circumstances every year.

Military Intelligence is often used as an example to describe the word ‘oxymoron’. To this, having read Krakauer’s meticulously reported book, I have to add “military precision”. The story of Jessica Lynch’s rescue from an Iraqi hospital was widely spun by the US government at the time. The part that was missing from the tale was the blundering that led to her capture, as well as the unnecessary death of numerous military personnel (some of them as a result of fratricide) that accompanied the sad episode.

Bruce Springsteen sang, “War, what is it good for?” To this one has to add a whole bunch of questions about the motivation of ordinary people who sign up for hardship and possible death. Through the example of Pat Tillman we see that it obviously is not money. Rousing rhetoric invoking patriotism seems to be quite effective. In fact, doubly so, because any dissenting views can be trashed as “unpatriotic”.

The rescue of Private Lynch and the death of a football star while in the service of his country are – furthermore – fabulous material if you’re wanting to manipulate a gullible populace into supporting a war effort. Krakauer quotes Hermann Göring:

“Naturally, the common people don’t want war … Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to greater danger. It works the same way in any country.”

The way that many industries work has changed profoundly as a result of the internet and other technology. Yes, modern weapons are much more high-tech than they were 50 years ago, but the fact remains that soldiers, seamen and airmen (and women, in each case) can still expect to be killed, sometimes by their own side. The main differences between war in the 21st century, compared with the 11th century, is that death is inflicted at greater distance and is more likely to involve fratricide. It remains a brutal and crude solution to the problems of animals capable of reason.

Perhaps I’m an idealist; I can just can’t seem to get rid of the feeling that war is an anachronism. Surely there’s a better way of resolving conflicts?

“Yes, an’ how many times must the cannon balls fly
Before they’re forever banned?”

(Bob Dylan)

The Power of Pass-it-on

Oscar Foulkes March 1, 2011 Books No comments

It is a requirement of people who live an online life – especially those who do it professionally – to be at the cutting edge of whatever is new. In doing my own little bit of ‘pass-it-on’, about a wonderful book I’ve just finished reading, I am revealing myself to be a long way behind the times. You see, Viral Loop was published in 2009, and 15 months, or thereabouts, is a very long time in ‘online years’.

It was only as I reached the end of the book that I realised its author, Adam L. Penenberg, writes for Fast Company, one of my favourite reads of the month. What he’s done in this book is to take the internet hall of fame – Hotmail, Flickr, Google, Paypal, eBay, Facebook and others – and use them to illustrate the power of virality. Even if tech and internet aren’t your things, it’s fascinating to read how these turned into huge and successful companies.

What one doesn’t realise is that other people were doing similar things at the same time. The ones that made it hardwired the viral loop into their offering, which is what ultimately allowed them to gain traction.

The opening chapter deals with Hot or Not, a website which illustrates the effects of virality perfectly. Within 90 minutes of launch, the number of users doubled every two hours. On the second day, they doubled every hour. Penenberg tells the story of how the site’s founders, James Hong and Jim Young, scrambled to find hosting to keep the site up during this eye-popping growth. It reads like a thriller.

It isn’t all internet, though. Tupperware gets a chapter, too, and serves also to illustrate the need for product creators or brand owners to communicate the relevance of products if they want to sell them successfully. It now seems self-evident that no household can survive without Tupperware, but before Brownie Wise got her teeth into the brand it languished on shop shelves. The sales method she created has been copied by myriad other businesses, becoming a cliché in the process.

If you only read one business-related book this year, make it Viral Loop.

The Last Resort

Oscar Foulkes September 8, 2010 Books No comments

I have to admit to having been very reluctant to start reading The Last Resort, Douglas Roger’s family-based account of the crisis in Zimbabwe (or Zimbodia, as a Sunday Times satirist calls it). By default, any white person in Zimbabwe (especially an exile), is a victim, and there are only so many victim stories one can bear to read.

It’s not that I don’t empathise with what’s happened, nor that I don’t condemn Mugabe’s misrule; it’s just that Zim books seem to follow a theme. It’s also probably a lot harder for South Africans to read such accounts, because one can imagine the same thing happening here. There’s probably too much ‘structure’ to allow it to happen, but when one looks at the worst of Malema and other ANC comrades, it is possible to negatively predict a slow slide into the abyss. For us, Zimbabwe – both as a country and topic – is very close to home.

And yet The Last Resort is different. Rogers builds his story around characters that he has developed as well as any novelist. Whether they are his parents, surprisingly cheerfully – and at times grimly – holding on to their property, or the fearsome ‘war veterans’, they are fully-formed people that rise from the engagingly-written pages.

The central characters in the book are his parents, who may be more real to me because of their ‘Southern African-ness’, but I suspect they’d be as real to a reader in Los Angeles, London or Auckland. I’m not suggesting that being white and assailed in Zimbabwe is anywhere near the experience of Jews in the Holocaust, but I couldn’t help thinking of Viktor Frankl’s Man’s Search for Meaning, the central theme of which is that – regardless of how dire the circumstances – we have the freedom to choose our response.

Rogers doesn’t hold back on facts and figures, but because they are woven so seamlessly into a narrative of characters with whom the reader is able to empathise there is no chance of getting bored or overwhelmed by them.

Read The Last Resort, if not for the story it tells, then for the masterful way in which Rogers has told the Zimbabwe story with such humanness. And no ‘victims’.

Oh, The Places You’ll Go!

Oscar Foulkes July 24, 2010 Books 1 comment

I sometimes get asked, as one does, for a list of my favourite books of all time. The one I’m about to share with you may not get into even the top 1000 of the most absorbing, entertaining or stimulating books. However, it’s right up there as a simple encapsulation of life wisdom. Moreover – without question – it is the most surprising source of such guidance ever.

If I told you that this gem was penned by Dr Seuss you’d probably doubt my sanity.

So, the cat is out of the hat, if you’ll excuse the expression. The book’s title is Oh, the Places You’ll Go! True to form, it has all the typically crazy pictures and delightfully rhythmical text that just begs to be read aloud.

As you read it you may recognise some of your own experiences. I’m tempted to quote selected lines, but that – I’ve decided – just wouldn’t do the book justice. I’ll simply leave you with the first two pages:
Today is your day
You’re off to Great Places!
You’re off and away!
You have brains in your head.
You have feet in your shoes.
You can steer yourself any direction you choose.
You’re on your own. And you know what you know.
And YOU are the guy who’ll decide where to go.”

Buy it for yourself. Buy dozens of copies to give away to friends. Make sure you read it aloud.

Rationally Irrational

Oscar Foulkes May 7, 2009 Books No comments

I’ve just finished reading Predictably Irrational. It’s written by Dan Ariely, a professor of Behavioural Economics, and the book is essentially constructed from his extensive research material. The insights into human behaviour, especially with regard to the choices we make as consumers, are absolutely fascinating. This book is an obvious must-read for anyone involved in marketing or sales, but its audience should actually be very much broader than that (rationally thinking, of course).

Ariely tells the story in a most engaging, easy-to-read manner, but his approach is 100% scientific (or as far one can be scientific when dealing with human behaviour!).

The basis of classical economics is the principle of making rational choices on the basis of the utility one is expecting to gain. Ariely recounts fascinating research into what price similar groups of people will pay for goods and how they were ‘manipulated’ to adjust their value perceptions. Particularly telling was the work he did in establishing the degree to which people could be expected to be dishonest. One of his honesty-motivating tricks was to get subjects to write out as many of the Ten Commandments as they could remember. This reminds me of an example in Paco Underhill’s Why We Buy, in which shop lifting in Walmart stores was found to be reduced when shoppers were greeted at the entrance by an elderly (granny-type) woman.

The bottom line of his experience is that people are very much less rational than economists would have us believe.

One of the chapters deals with the human tendency to procrastinate. So, perhaps you’re thinking that you might look out for Predictably Irrational, but the best way of dealing with your current interest in reading this fascinating book is to click here and order it right now:
Predictably Irrational: The Hidden Forces That Shape Our Decisions

If you’ve read any of Malcolm Gladwell’s books (The Tipping Point, Outliers, Blink), Freakonomics (Steven Levett and Stephen Dubner), or anything by Tim Hartford, you’re sure to enjoy this book.