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jerryking : underestimation   8

Opinion: Canadian companies must prepare for disruptors to come knocking
July 26, 2019 | The Globe and Mail | by JOHN RUFFOLO.

In August, 2011, technology legend Marc Andreessen wrote his seminal article titled Why Software Is Eating the World, which became the central investment thesis behind his venture capital firm Andreessen Horowitz. Andreessen’s prognostication has since followed Amara’s Law on the effect of technology, which aptly states: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” [JCK: See also Andy Kessler's definition of S-Curves "Technology develops in S curves: Things start slow, go into hyperbolic growth, and then roll over. "] The feast has really just begun.

We are in the midst of the Fourth Industrial Revolution – or as some call it, the Information Revolution.....the Information Revolution really began to take shape in 2008, catalyzed by three incredibly powerful and converging forces – mobility-first, cloud computing and social media. All three forces collided together with full impact in 2008, spawning a wave of new technology companies.......The next phase of the Fourth Industrial Revolution will see the rise of a new species of company – the “disruptors.” While technology companies will continue to grow, we are witnessing the enablement of those technologies across all economic sectors as the leading weapon used by new entrants to disrupt the traditional incumbents in their respective industries. The massive influx of venture capital to support the building and growth of technology companies over the past 10 years has produced these tools, such as artificial intelligence, machine learning, and the internet of things, which are now being leveraged across all industries......Those companies that can harness these new technologies to operate better and faster, and to gain unmatched insights into their customers, will prosper. Although these disruptors are not technology companies in the conventional sense, their tight focus on value creation through innovation further blurs the lines between a technology company and a traditional company.

The incumbents, however, are not asleep at the wheel. To ward off the disruptors, they know they must embrace technology. It is this battleground that I believe will generate the greatest wealth creation and transfer opportunities over the next decade. The disruptors, naturally, are particularly active in those industries where they perceive the incumbents to be burdened by outdated technological infrastructure or business models, and hard-pressed to counterattack.

Yesterday, the disruptors focused primarily on consumer sectors such as the music industry, travel booking, newspapers, magazines and book publishing. Today, it’s groceries, entertainment and personal transportation, thanks to Amazon, Netflix and Uber, respectively.

But consumer-focused sectors were just the start for the disruptors. Before long, I believe we will see them try to disrupt varied industries such as banking, insurance, health care, real estate and even agriculture and mining; no industry will be immune. These sectors all represent emblematic Canadian brands, and yes, each will in turn will go through the same jarring disruption as so many others.
See [Why It’s Not Enough Just to Be Disruptive - The New York Times
By JEREMY G. PHILIPS AUG. 10, 2016] Creating enormous value over the long term requires turning a tactical edge into some form of durable advantage....Superior tactical execution can still create real value, particularly where it provides ammunition for a bigger war (like Walmart’s battle with Amazon). And in the long term, value is created not by disruption, but by weaving together advantages (as both Amazon and Walmart have done in different ways) that together create a barrier that is hard to storm.
Amara's_Law  artificial_intelligence  cloud_computing  digital_savvy  disruption  incumbents  insurgents  investment_thesis  John_Ruffolo  legacy_tech  Marc_Andreessen  mobility_first  overestimation  S-curves  social_media  software_is_eating_the_world  start_ups  technology  underestimation  venture_capital 
july 2019 by jerryking
The Future Isn’t What It Used to Be
June 17, 2019 | WSJ | by Andy Kessler.

Founded in 1867, the Keuffel & Esser Co. commissioned a study of the future for its 100th anniversary. If you’re of a certain vintage, you might have used a K&E slide rule. Their “visionary” study was a huge dud, missing completely the electronic-calculator boom that came a few years later. They shut down their slide-rule engravers in 1976. As Mark Twain said, “It’s difficult to make predictions, especially about the future.” Or was it Niels Bohr? Maybe Yogi Berra?

My father was a proud member of the Book of the Month Club. Bored on a visit home in 1989, I devoured that month’s selection, “Megamistakes” by Baruch College professor Steven Schnaars, where I read about K&E’s study. The book’s message was simple: Don’t be fooled by prevailing opinion, and don’t extend trend lines into the future. Mr. Schnaars chronicles how 1950s jet-age thinking morphed into ’60s dreams of a space-age utopia. A 1966 study by conglomerate TRW forecast manned lunar bases by 1977, autonomous vehicles by 1979 and intelligent robot soldiers by the ’90s. AT&T ’s Picturephone service, ultrasonically cleaned dishes, cheap energy forever, future shock everywhere—all wrong.

Of course, the 1973 oil embargo changed everything. But by the end of the ’70s, expensive oil was considered permanent and the future was about scarcity and energy saving and we’d all be driving small cars with CB radios and living in R. Buckminster Fuller-inspired geodesic domes. General Electric even ramped up production of small refrigerators. Mistakes!Im-82150

Then the ’80s came along. A bull market and cheap oil lifted the ’70s fog, but everyone believed the Japanese would soon rule the world since they were kicking our butts in manufacturing and the Imperial Palace in Tokyo was worth more than all the real estate in California. Personal computers were mere toys. Oh, and the Soviet Union was a world superpower. Megamistakes!

After the ’87 crash and first Iraq war, the prospects for economic growth in the ’90s were dim. Then Netscape and its browser went public in 1995 and we were off to the races again. By 1999 techno-utopia was in full swing, and all you needed was a good name like to raise millions and be worth kazillions. Gigamistake!

The Nasdaq’s dot-bomb implosion and 9/11 changed the mood quickly. In 2003 I tried to pitch a book about Silicon Valley and Wall Street and was told nobody would care about them ever again and asked if I knew anything about bioterrorism or Islamic fundamentalism. Uh, no. But I wish I knew about house or derivative flipping - that’s what the aughts were about, until the Great Recession. The 2010s were about holding cash, maybe in your mattress, vs. owning stocks. Oops— Apple , Amazon and Microsoft would soon flirt with trillion-dollar valuations. Teramistake?

Mr. Schnaars advised discounting extrapolations, playing down historical precedent, challenging assumptions, and distinguishing fads from growth markets. Easier said than done. The future happens, just not the way most people think. How you pick your investments, your job and even where you live can end up a dead end or the most vibrant upside imaginable. Choose carefully, but as Mr. Schnaars suggested, think for yourself.

Today low interest rates mean risk is on and caution is old-fashioned. Companies sell at 20 times revenues instead of earnings (Note: Beyond Meat is at 43 times its 2019 sales forecast, and Tableau Software recently sold for 16 times its 2018 revenue.) Politically, populism and nationalism have won the day. Internationally, China is the new U.S.S.R. Economically, the future is now. Will any of it last?

For a while, Tesla was valued as if every new car would soon be electric. The 2020s are still blurry, but apparently that doesn’t cloud the pundit class’s clear vision on climate change, drones, autonomous vehicles and the effect of artificial intelligence. We’ll all share cars, bikes, scooters and even pogo sticks. WeWork is valued as if we’ll all share offices. What’s next, communes?

My experience is that people tend to overestimate the absurd, like Elon Musk’s dreams of building a hyperloop and colonizing Mars, and underestimate the mundane, like improvements in messaging and shopping. I’m usually bullish until dreams become hallucinations. Technology develops in S curves: Things start slow, go into hyperbolic growth, and then roll over. [ JCK: See also John Ruffolo's explanation of Amara’s Law on the effect of technology, which aptly states: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” ] That’s why “the singularity”—self-improving, unrestrained artificial intelligence—probably won’t happen. Don’t extend the trend.

The tempests of change blow hard. Reading the prevailing winds, we’re all about to become robot-replaced, drone-delivered-synthetic-meat-eating, augmented-reality-helmet-wearing, bitcoin-spending, fruit-flavored-vaping, neutered democratic socialists chirping “Comrade” and streaming “The Handmaid’s Tale” Season 10, “Dystopia’s Discontents,” on our watches while collecting universal basic income. You don’t need a slide rule to calculate the megamistakes.
Amara's_Law  Andy_Kessler  forecasting  future  linearity  mistakes  overestimation  predictions  S-curves  straight-lines  underestimation 
july 2019 by jerryking
How Not to Drown in Numbers -

If you’re trying to build a self-driving car or detect whether a picture has a cat in it, big data is amazing. But here’s a secret: If you’re trying to make important decisions about your health, wealth or happiness, big data is not enough.

The problem is this: The things we can measure are never exactly what we care about. Just trying to get a single, easy-to-measure number higher and higher (or lower and lower) doesn’t actually help us make the right choice. For this reason, the key question isn’t “What did I measure?” but “What did I miss?”...So what can big data do to help us make big decisions? One of us, Alex, is a data scientist at Facebook. The other, Seth, is a former data scientist at Google. There is a special sauce necessary to making big data work: surveys and the judgment of humans — two seemingly old-fashioned approaches that we will call small data....For one thing, many teams ended up going overboard on data. It was easy to measure offense and pitching, so some organizations ended up underestimating the importance of defense, which is harder to measure. In fact, in his book “The Signal and the Noise,” Nate Silver of estimates that the Oakland A’s were giving up 8 to 10 wins per year in the mid-1990s because of their lousy defense.

And data-driven teams found out the hard way that scouts were actually important...We are optimists about the potential of data to improve human lives. But the world is incredibly complicated. No one data set, no matter how big, is going to tell us exactly what we need. The new mountains of blunt data sets make human creativity, judgment, intuition and expertise more valuable, not less.

From Market Research: Safety Not Always in Numbers | Qualtrics ☑
Author: Qualtrics|July 28, 2010

Albert Einstein once said, “Not everything that can be counted counts, and not everything that counts can be counted.” [Warning of the danger of overquantification) Although many market research experts would say that quantitative research is the safest bet when one has limited resources, it can be dangerous to assume that it is always the best option.
human_ingenuity  data  analytics  small_data  massive_data_sets  data_driven  information_overload  dark_data  measurements  creativity  judgment  intuition  Nate_Silver  expertise  datasets  information_gaps  unknowns  underestimation  infoliteracy  overlooked_opportunities  sense-making  easy-to-measure  Albert_Einstein  special_sauce  metrics  overlooked  defensive_tactics  emotional_intelligence  EQ  soft_skills  overquantification  false_confidence 
may 2015 by jerryking
Underpricing risky business
February 1, 2013 | G&M report on Business pg B2 |by David Parkinson.

As energy and mining reserves have become increasingly expensive to find in other, more stable parts of the world, Africa's dangers have been glossed over in the quest to cash in on the continent’s still relatively undeveloped resources. Companies have been ignoring the risky reality, and investors have been underpricing it...Africa's significant growth potential has generated optimism, however, the geopolitical risks facing investors in Africa remain, for the most part, underestimated.”
The biggest threat to business in Africa, he argues, is “re1igious/ ideological militancy"--especially from Islamist/jihadist groups - which he says “has been vastly underestimated, and will pose significant risks to foreign investors in much of Africa."
He believes companies and their investors are underpricing the risks of doing business in Aŕrica, including rising security and insurance costs and cant project delays that could come from security threats, military conflicts or regime changes....Until the market starts pricing risk into African resource investments before a crisis forces the realization upon it, there will be little incentive for companies to seek less risky and less corrupt places to put their money.
And there will be more harsh and costly awakenìngs for investors who are themselves willfully blind to the risks.
underpricing  risks  Africa  natural_resources  political_risk  geopolitics  Mali  war  underestimation  frontier_markets  corruption  mining  mispricing  Islamists  jihadis  willful_blindness 
february 2013 by jerryking
How to Tell When A CEO Is Toast: The Early Warnings -
April 18, 2000 | WSJ |By CAROL HYMOWITZ

Here's a short list of telltale warning signals indicating trouble at the top.

TURNING A DEAF EAR to directors: When the CEO of a technology company that had grown considerably during his tenure suddenly faced enormous competition from a faster-growing rival and difficulty absorbing two acquisitions, he ignored a number of suggestions from his board. "We told him to try this, do that, consider this -- and he simply wouldn't listen," fumes a director who did not want to be named. The more the CEO insisted on business as usual and refused to listen to his directors' concerns, the more he lost their trust. "His failure to listen became a warning signal to us" and led to his ouster, the director says.
[Illustration of a CEO with a rocket strapped to the back of his chair]

Similarly, former Coca-Cola KO +0.36% CEO Douglas Ivesterdidn't heed his board's urgings to name a No. 2 executive. And when Coke customers in Belgium and France complained of nausea after drinking Coke products, Mr. Ivester ignored at least one director's advice to go quickly to Belgium and address the situation.

Turning a deaf ear to employees: Mr. Ivester also decided, as part of a management reorganization, that the company's highest-ranking African American, Carl Ware, one of his longtime supporters, would no longer report directly to him -- effectively demoting him. The timing couldn't have been worse since Coke is facing an employee lawsuit alleging discrimination. Mr. Ware announced plans for early retirement, and Mr. Ivester lost more credibility as Coke's leader. He stepped down as CEO at the end of last year. Mr. Ivester couldn't be reached for comment.

Former Delta Air Lines DAL -1.69% CEO Ronald Allenalso was a victim of his own insensitive management style three years ago. Mr. Allen had pulled Delta out of a financial tailspin by slashing costs. But a lot of those cuts represented employee layoffs and he did little to smooth over anxieties. Directors ultimately blamed him for a drop in morale throughout the company. With many executives who reported to Mr. Allen leaving and blue-collar workers considering unionization, Mr. Allen was asked to step down. He declined to comment about the ordeal.

PROMISING TOO MUCH: At toymaker Mattel , MAT +0.59% former CEO Jill Barad madeearnings forecasts to her board and shareholders that the company then failed to meet. "Nobody likes surprises," says Thomas Neff, chairman of the executive recruiter Spencer Stuart's U.S. operations. "The best CEOs beat their forecasts, while the worst thing you can do is be overly optimistic," he adds.

Ms. Barad at times dismissed forecasts made by other executives, insisting to directors that Mattel would do better. She resigned in February, after three years as CEO and a stream of disappointing earnings. She was unavailable for comment.

Misreading expectations: A former CEO ousted from his job with a large financial-services company a few years ago recalls how he thought he was in agreement with his board on a succession plan, only to realize they wanted him gone much sooner, mostly out of fear that he was intentionally dragging his feet. The CEO had formed a search committee for a successor, but was taking his time about recommending candidates. Then, at a board meeting, he was asked to leave the room so directors could confer alone. What he thought would be a 15-minute exchange turned into an hour-long discussion. "That's when I knew something was up," he says. "They wanted to move on succession right away."

Underestimating conflict: Bank One 's ONE +2.80% former CEO John McCoyoversaw numerous acquisitions before he merged his Columbus, Ohio, bank with First Chicago to create a $260 billion powerhouse Midwestern bank. Previous smaller mergers, he says, took about 18 mon
aloofness  blue-collar  Carol_Hymowitz  CEOs  expectations  misinterpretations  misjudgement  overoptimism  overpromising  signals  surprises  tailspins  underestimation  unionization  warning_signs 
june 2012 by jerryking
Newt Gingrich wants you to make him run for president
February 5, 2007 | Fortune | Nina Easton.

Has anyone revitalized or created a bright spot in a flat or declining industry?
At the Tempe conference, Gingrich politely listens to such proposals as applying Toyota-style production-control techniques to the health system - and then slices through them with an alternative mantra of competition, deregulation, modernized information systems, and personal responsibility. ...In other words, in Gingrich's world consumer health care should look more like Travelocity...Instead, the Center for Health Transformation offers policy ideas to companies that want to get health-care costs off their backs but oppose government-imposed, universal-health-insurance plans as costly and burdensome. The center's roster of 75 clients is impressive, including insurers Blue Cross & Blue Shield and GE Healthcare, providers like the American Hospital Association, and employers like GM (Charts) and Ford (Charts). Clients pay fees ranging from $10,000 to $200,000 a year....Gingrich's own epiphany about a presidential run dates back three years, when he picked up Harold Holzer's "Lincoln at Cooper Union." The book tells the story of how Lincoln's lengthy 1860 speech in New York City - an intellectually rigorous rebuttal of slavery's legal grounding - wowed the Eastern establishment and transformed a gawky, badly dressed Western politician into a leading presidential candidate. Gingrich saw himself in this story of the underestimated outsider making good, despite the seeming hubris of comparing himself to Lincoln, and it now underpins his unorthodox quest for the presidency...Gingrich also says things like "If you want to shape history, it's useful to actually know history" without a hint of self-consciousness...Of the other Republican contenders for President he says, "We're not in the same business. They are running for the White House. I am trying to change the country."..."My planning horizons are 17 years. I want to give you a sense of scale," he explains, as if helping me focus on his long view of things. "I also do what I think the country needs. I don't operate under personal ambition." ...."There are 3,300 counties, 17,000 elected school boards, 60,000 cities and towns, 14,000 state legislators, 50 governors, and 535 elected federal legislators," he says.
profile  historians  healthcare  lean  books  Six_Sigma  innovation  best_practices  change_agents  long-term  unorthodox  decline  competition  deregulation  information_systems  personal_responsibility  underestimation  outsiders  Abraham_Lincoln  personal_ambition  intellectually_rigorous 
may 2012 by jerryking
Spillonomics - Underestimating Risk -
May 31, 2010 |NYT | By DAVID LEONHARDT. The people running BP
did a dreadful job of estimating the true chances of events that seemed
unlikely — and may even have been unlikely — but that would bring
enormous costs....We make two basic — and opposite — types of mistakes.
When an event is difficult to imagine, we tend to underestimate its
likelihood. This is the proverbial black swan...On the other hand, when
an unlikely event is all too easy to imagine, we often go in the
opposite direction and overestimate the odds.
unimaginable  BP  risk-taking  risk-assessment  oil_spills  mistakes  black_swan  underestimation  underpricing  unthinkable  overestimation  dual-consciousness  frequency_and_severity  improbables  disasters  disaster_preparedness  imagination  low_probability 
june 2010 by jerryking

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