*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
Einstein once said "elegance is for tailors". His comment was in
relation to the love of elegant mathematics in the physical sciences. In
essence he was saying that simply because something was elegant, it did not
necessarily make it correct.
Should we heed his words in risk management? Should politicians and
regulators heed his words? Would we all be better off sometimes if we
simply realized that risk management can be messy and inelegant?
Friday, July 19, 2013
Wednesday, July 17, 2013
Nature’s CRO
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
Nature is pretty good at sorting stuff out and managing itself. Therefore
it is reasonable to assume that if nature had a Chief Risk Officer they would
also be pretty good at figuring things out and at managing things.
It is not beyond reason – if you fall into the camp that all things are
calculable and that the sole goal of risk management is to reduce uncertainty
and risk – to speculate that Nature's CRO would be able to reduce risk
and uncertainty to zero. However where would that leave us? Would the
wild flowers grow in my yard? Would we have changing weather and its
associated change of seasons? Would we have labradoodle puppies? Would
plant splicing allow for the creation of more hardy strains of wheat to feed
the world? Would Darwin be studied in school?
Would nature's CRO embrace the concept that "all things are calculable
and that the sole goal of risk management is to reduce uncertainty and
risk"? Personally I doubt it.
Partner, RSD Solutions Inc./*
Nature is pretty good at sorting stuff out and managing itself. Therefore
it is reasonable to assume that if nature had a Chief Risk Officer they would
also be pretty good at figuring things out and at managing things.
It is not beyond reason – if you fall into the camp that all things are
calculable and that the sole goal of risk management is to reduce uncertainty
and risk – to speculate that Nature's CRO would be able to reduce risk
and uncertainty to zero. However where would that leave us? Would the
wild flowers grow in my yard? Would we have changing weather and its
associated change of seasons? Would we have labradoodle puppies? Would
plant splicing allow for the creation of more hardy strains of wheat to feed
the world? Would Darwin be studied in school?
Would nature's CRO embrace the concept that "all things are calculable
and that the sole goal of risk management is to reduce uncertainty and
risk"? Personally I doubt it.
Monday, July 15, 2013
Complexity in a mirror
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
Recently the TEDx talk I gave was posted. The talk, titled "Physics Meets
Wall Street: Complexity In Business", was to be an introduction to
complexity science and how it impacts business and how our management
techniques accordingly need a paradigm shift from complicated thinking to
complexity thinking.
I was very honoured and excited to be asked to give a TED talk – even if it
was a TEDx talk. Like most presenters I thought long and hard about what I
was going to say, and how I was going to say it. I eagerly awaited the day
of the talk. Mentally in my mind I went through my talk. I had presented
many of the ideas before, albeit to specialized audiences, and thus with
narrower themes. This was one of my first times presenting these ideas to a
general audience so a bit more thought and practice was required.
I have to admit that I was quite excited when my turn came to present. I
wasn't any more nervous than usual, but the opportunity to talk about a
subject that I am passionate about to such a distinguished and diverse
audience held a special appeal. Unlike most speakers at the event I was not
utilizing a slide show, nor was I using a prompter with speaking notes on
it. However I had a set opening that I planned to use, and then a very
clear line of arguments I wanted to present. I had practiced my talk
several times to make sure I did not go over the very strict time limits that
TED events impose on their speakers. Most of the conferences I am invited
to speak at also have time limits, but if you are long or short by a few
minutes it simply means that the Q&A period is adjusted accordingly. For
TED events you do not have this luxury of flexibility. Mainly for this
reason my talk was more highly structured than most talks I give. Finally
the talk was going to be broadcast live on the internet, and furthermore
recorded and posted. Any screw-ups could and would live for a long time.
When the day came I was ready.
After my introduction I bounded up on stage full of energy and adrenaline.
This was going to be fun. I was ready for this and began my talk exactly as
planned. Glancing at the timing monitor on stage, I saw that my opening
remarks were exactly on schedule. Timing, my biggest concern with this
talk, would not be an issue. And then …
And then the audio malfunctioned! The producer comes up on stage and stops
my talk. This was not what I had planned for. I was on a roll, and now I
was not. Ok, I can deal with this – although unless you have been in the
situation you cannot understand the awkwardness of being in front of
approximately 300 people while a team of technicians rewires you. Obviously
you want this job to be completed quickly and efficiently. You want it to
be completed so quickly that you do not notice in the moment that the tech
has physically taped not only the microphone to your head, but he has also
taped some of your hair into your mouth! In any case, a new audio set was
ready to go, and I was given the signal to go. But …
But I now had to start over. I couldn't use my planned opening.
Everyone there had already heard it, and if I more or less repeated it I
would lose the spontaneity of the live audience. I had to go to plan B –
the only problem being of course that I did not have a plan B talk
prepared. Making it up on the fly I started with a different opening that I
hoped I would be able to link together as I went along into a coherent talk.
By some stroke of luck I was able to spit out a fresh opening and hoped the
audience would not sense how awkward I felt or hear how choppy I believed my
words were coming out. Having survived the crisis of creating a new opening
on the fly I glanced at the timing clock to see how much time I had after my
improvised opening. Now I really started to freak – the producer had not
reset the clock and it was stuck on 14:22! I would have to guess how much
time I had left, and I would have to do that based on my intuition. Ok, I
have done plenty of 30, 50 and 80 minute talks – but this was to be 18
minutes, and NO MORE than 18 minutes. Although I had practiced my talk for
timing purposes, this was a new talk, and now it was in front of a live
audience – an audience that had already seen this talk become a train wreck
already. This was not what I needed.
And then it hit me. This was a talk about complexity, that was quickly
becoming complex – despite my well executed complicated-thinking planning.
It would not have been reasonable to forecast that I would have to restart
my talk with a fresh opening. Complexity teaches us to expect the
unexpected. Furthermore with complexity the disruptions and uncertainties
do not grow linearly. Thus it would have been absurd to think that I would
have not noticed a tech person mistakenly taping hair into my mouth.
(Trying giving a public speech with hair taped into your mouth sometime!)
Finally who would have expected the timing clock to not be set when in the
pre-conference preparations we were told to "watch the clock!"
Somehow I got through the talk and learned that if you talk about managing
complexity then you have to be able to manage complexity. It was an
interesting and humbling learning experience about managing complexity and
not relying on complicated planning.
In case you are interested the link to the talk is:
http://www.youtube.com/watch?v=FQO_wxxinH4 [1]
[1] http://www.youtube.com/watch?v=FQO_wxxinH4
Partner, RSD Solutions Inc./*
Recently the TEDx talk I gave was posted. The talk, titled "Physics Meets
Wall Street: Complexity In Business", was to be an introduction to
complexity science and how it impacts business and how our management
techniques accordingly need a paradigm shift from complicated thinking to
complexity thinking.
I was very honoured and excited to be asked to give a TED talk – even if it
was a TEDx talk. Like most presenters I thought long and hard about what I
was going to say, and how I was going to say it. I eagerly awaited the day
of the talk. Mentally in my mind I went through my talk. I had presented
many of the ideas before, albeit to specialized audiences, and thus with
narrower themes. This was one of my first times presenting these ideas to a
general audience so a bit more thought and practice was required.
I have to admit that I was quite excited when my turn came to present. I
wasn't any more nervous than usual, but the opportunity to talk about a
subject that I am passionate about to such a distinguished and diverse
audience held a special appeal. Unlike most speakers at the event I was not
utilizing a slide show, nor was I using a prompter with speaking notes on
it. However I had a set opening that I planned to use, and then a very
clear line of arguments I wanted to present. I had practiced my talk
several times to make sure I did not go over the very strict time limits that
TED events impose on their speakers. Most of the conferences I am invited
to speak at also have time limits, but if you are long or short by a few
minutes it simply means that the Q&A period is adjusted accordingly. For
TED events you do not have this luxury of flexibility. Mainly for this
reason my talk was more highly structured than most talks I give. Finally
the talk was going to be broadcast live on the internet, and furthermore
recorded and posted. Any screw-ups could and would live for a long time.
When the day came I was ready.
After my introduction I bounded up on stage full of energy and adrenaline.
This was going to be fun. I was ready for this and began my talk exactly as
planned. Glancing at the timing monitor on stage, I saw that my opening
remarks were exactly on schedule. Timing, my biggest concern with this
talk, would not be an issue. And then …
And then the audio malfunctioned! The producer comes up on stage and stops
my talk. This was not what I had planned for. I was on a roll, and now I
was not. Ok, I can deal with this – although unless you have been in the
situation you cannot understand the awkwardness of being in front of
approximately 300 people while a team of technicians rewires you. Obviously
you want this job to be completed quickly and efficiently. You want it to
be completed so quickly that you do not notice in the moment that the tech
has physically taped not only the microphone to your head, but he has also
taped some of your hair into your mouth! In any case, a new audio set was
ready to go, and I was given the signal to go. But …
But I now had to start over. I couldn't use my planned opening.
Everyone there had already heard it, and if I more or less repeated it I
would lose the spontaneity of the live audience. I had to go to plan B –
the only problem being of course that I did not have a plan B talk
prepared. Making it up on the fly I started with a different opening that I
hoped I would be able to link together as I went along into a coherent talk.
By some stroke of luck I was able to spit out a fresh opening and hoped the
audience would not sense how awkward I felt or hear how choppy I believed my
words were coming out. Having survived the crisis of creating a new opening
on the fly I glanced at the timing clock to see how much time I had after my
improvised opening. Now I really started to freak – the producer had not
reset the clock and it was stuck on 14:22! I would have to guess how much
time I had left, and I would have to do that based on my intuition. Ok, I
have done plenty of 30, 50 and 80 minute talks – but this was to be 18
minutes, and NO MORE than 18 minutes. Although I had practiced my talk for
timing purposes, this was a new talk, and now it was in front of a live
audience – an audience that had already seen this talk become a train wreck
already. This was not what I needed.
And then it hit me. This was a talk about complexity, that was quickly
becoming complex – despite my well executed complicated-thinking planning.
It would not have been reasonable to forecast that I would have to restart
my talk with a fresh opening. Complexity teaches us to expect the
unexpected. Furthermore with complexity the disruptions and uncertainties
do not grow linearly. Thus it would have been absurd to think that I would
have not noticed a tech person mistakenly taping hair into my mouth.
(Trying giving a public speech with hair taped into your mouth sometime!)
Finally who would have expected the timing clock to not be set when in the
pre-conference preparations we were told to "watch the clock!"
Somehow I got through the talk and learned that if you talk about managing
complexity then you have to be able to manage complexity. It was an
interesting and humbling learning experience about managing complexity and
not relying on complicated planning.
In case you are interested the link to the talk is:
http://www.youtube.com/watch?v=FQO_wxxinH4 [1]
[1] http://www.youtube.com/watch?v=FQO_wxxinH4
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