Models and Biases

One of the abiding myths in economics is that there is such a being as homo economicus, or a perfectly rational person when it comes to making decisions. Now that myth has been undermined by the work of behavioral economists, who have described a whole series of biases and proclivities that control how we think and make decisions.

Their work has been used by the "big number" crunchers to justify a process called business analytics; they claim that by using their models we can avoid these biases and thereby reach a rational decision. Models don't have emotions and they don’t have biases, they're inorganic so they can't be swayed away from the facts. Sounds logical, right.  However, who creates the models? 

We fallible Homo sapiens create the models. us with all our pesky biases and non-rational behaviors.  People who build models do so with an end in mind. The model is built to reproduce a process. It is created from a set of requirements. It is formed from someone's belief in how a process works. That belief requires the creation of assumptions that underlie the models design. We know that assumptions are very susceptible to bias.

For example the financial models that were used in the mortgage industry pre 2008 did not allow for a decrease in property values, the widely held assumption was that property values always increase. Also the efficient market theory, much touted by economists, and its models assumed, no, asserted that the price of houses and shares was always right because the market "knew" all the facts about an asset and would price it correctly. The models did not, and still do not, allow for a price bubble. Can’t happen, so in theory the worldwide real estate crash and the resultant financial crisis shouldn’t have occurred, but it did. Oops. Guess the models are as flawed as the people who build them!

We project managers should always be careful when we are told that the “model” or the “tool” gives us a perfect answer. Unless we know the assumptions that went into building the application we should never take that statement on its face value. Do your own quick analysis to see if the answer is realistic, trust but verify. All PM’s should construct a mental bullshit detector. There’s never a shortage of BS, or people to spread it around!

Maps: The Big Picture and PM’s

I have been on vacation in the UK, a big deal for someone who has had a triple bypass, since it involved a nine hour trans Atlantic flight. Being the recipient of a CABG has a way of moving your “bucket list” from the status of “I’ll get around to it” to “better get started, pronto”.

Most of the week in London was spent "getting culture", as I trailed my wife around the National Gallery, the V&A. Museum, the Courtauld Gallery, both Tate museums- British and Modern -, and the Wallace Collection: Lots of Gainsboroughs, Turners, Monets, Manets, plenty of impressionists, classicists, modernists, with a smidgen of cartoonist. By the end of the week I was in dire need of another  ‘ist’, a chiropodist!

However I did manage to visit Prime Minister Winston Churchill's war rooms under the UK treasury building: the place where he directed the British war effort from 1940 until 1945.

One of the key exhibits is a collection of map rooms that Churchill ordered to be created showing the current worldwide deployment of British forces. These maps were kept up to date, 24/7,throughout the war. Only ceasing when the conflict finished in August 1945.

At a glance the PM, other members of the war cabinet, and the Chiefs of the Imperial General Staff, could see the current position of the war in any theatre: Europe, Middle East, Far East, etc, For the British, along with the Americans later on, were fighting a global war; the other participants were not! So it was important that the leaders could see, and be reminded of, the whole picture and not get sucked into concentrating upon one area, to the detriment of the wider conflict.

The lesson I drew from this museum is that every project manager needs her map room, virtual or otherwise, where she regularly, daily or weekly, looks at her project in total and resists the temptation to focus narrowly on the crisis of the day. So that the important is not crowded out by the merely urgent.

The technique I use is to mind map (http://en.wikipedia.org/wiki/Mind_map) my project or projects and to review and update the diagrams at least every week. At the end of the review I prepare an action list of project tasks that need to be done in the next week. That way I minimize the chances of important actions being overlooked. 

Captain Picard and Blunders.

In one of the Star Trek TV series the main protagonist is Captain Picard and he has a phrase that he uses to indicate that he has made a decision, the phrase is, “make it so Commander Riker”. So in episode after episode he listens to his subordinates as they come up with highly complex solutions to the apparently intractable current dilemma. Solutions involving tachyon beams, time shift distortions, black holes, phase modulation, the face angle on a sand wedge (I made that up) are put forward and in an instant Picard says, “make it so Commander Riker.  And low and behold in a short amount of time it’s done, it works and we are on to the next episode.

Now this is all great entertainment, unfortunately we have a generation of decision makers who have a similar “make it so” approach to policy making. They dream up policy solutions to problems and then give them to someone else to implement or not, as is usually the case.

Evidence to support my hypothesis can be found in an excellent book - The Blunders of our Governments, by Anthony King & Ivor Crewe - on project failures in the political realm. Failures that cost the British taxpayer billions of pounds over a 30 year period. A period that covers governments of all parties so political bias is not present; incompetence, as most project managers know only too well, is not ideological. Ideology may blinker people's thinking, but even if the policy is correct the application may still yet be a disaster.

Nor is incompetence technologically based, many of the examples where poorly conceived from the beginning, the technology just added to the confusion, or in some cases the lack of practical knowledge of the technology augmented the poor decision making. Nothing is so dangerous as a politician or executive who is convinced that there is a "silver bullet" solution to a complex problem.

One of the key points of the book is the apparent dividing line separating the policy makers from those who have to implement the policy; between the thinkers and the doers. In many cases the policy makers failed, in some cases deliberately, to consult the people with practical experience of the processes to be changed or "improved". This failure to consult resulted in the setting of arbitrary deadlines, which often had more to do with meeting political timescales or personal agendas than with how long the work would take. This of course is not limited to the public sector the private sector follows the same pathology. The problem is with the policy maker mind set and the divide with operations rather than with public or private sector. As the book illustrates the private sector companies and consultants called in to work on these solutions failed to meet the level of basic competency. And we are taking about household names in the consultancy field. No names, no lawsuits, just read the book!

So how does a project manager address this divide? How do we try to make the policy makers aware of the problems? Notice I use the word try, for try is all we can do. In reality there is nothing so blind as a policy maker with a dream. They can be zealots, who can see no other way than their way. No other solution. No other timescale.

The answer is through risk analysis. Use your knowledge and the experience of subject matter experts to detail the implications of various decisions. Make sure the findings of the risk analysis are circulated widely. Not just to the immediate stakeholders but all parties with an interest in the policy. In some of the cases quoted in the book key politicians were not aware of the implications of the changes and had they been aware they may have prevented the fiascos. The concept of unintended consequences is very relevant in all major organizations. Decisions have knock on effects that adversely impact other parts of the system, so the wider the consultation the better the chances of minimizing them. In real life “make so” rarely makes anything other than a mess.