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February 16, 2009

Comments

Chris Ward

So what do we do, as IBMers ?

I guess the ultimate backstop is the Business Conduct Guidelines http://www.ibm.com/investor/governance/business-conduct-guidelines.wss ; all of us sign them every year, we should know what they say; and it should give us guidance so that we don't have to phone Sam Palmisano every 5 minutes and ask his advice. What with them being on the external web site, clients can see them too, as can entities which have no direct financial relationship with IBM.

He needs the 'space' to concentrate on the longer term, the strategic issues, the things that matter beyond the daily circulation of little green pieces of paper. Maybe "Oil" , "Water", and other fundamentals related to continuity of all sorts of businesses.

If you're going to quote Asimov, then I'll quote HitchHiker's Guide. "It isn't usually the little green pieces of paper that are unhappy."

The dollars are our servant, they are not our master.

There's a significant 'shift' going on, at least in the USA and Europe. It appears to be that private enterprises are falling into public hands; instead of Ford, Chrysler, and GM, we are looking at the possibility of "First American Government Automobile Manufacturers". Is that 'Staring into the abyss' from which we might shrink back ? Or is it the inevitable way of the future ? Do Western governments want to operate automobile manufacturing plants and showrooms, to staff them with what in the UK we would call "Civil Servants" ? Or is the aim to place them back into private profit-seeking hands as and when ?

I'm not sure what's happening in the rest of the world; are China and Russia performing the gyration in reverse, putting things in the hands of private businesses, and asking them to compete ?

Day to day, though, the IBMers are adequately funded; correctly in harness to their managers; willing and able to serve in all their different roles from Research Scientist, through Development Engineer, Marketing Specialist, Sales Person, Service Delivery Specialist, Business Consulting Servant, Global Technology Servant, and a number of other specialised but interlocking fields.

Just don't ask us to develop or market Lotus SmartSuite, OS/2, Personal Computers, Hard Disks, Typewriters, or Card Punches. Some things just cannot be done profitably by IBM any more.

Throttle up ... gently, so as to keep in good control ... and let's see where tomorrow leads.

So long as Microsoft and IBM are separate, so long as there's no grand relaunch as "IBM-o-Soft Corporation" with it flagship product "IBM Loto-Soft Office", so long as potential customers have a choice in how to deploy their technology spend, I think we are OK.

The old rivalries are intact. And the public interest is served.

Jo Grant

Chaos, in the mathematical sense, stems from feedback situations. I think many of these "Black Swans" are better explained by the greater number of recursive systems in our society. In many ways, the finance sector was due something like this from the time they went electronic.
As IBM looks more at things like self correcting systems and advanced business logic it would be well to remember this lesson.

Chris Ward

Jo,

A sense in which everyone's indicator switched to 'sell' at the same time ... but failed to say "who to", and "at what price would they buy".

IBM's in a lot of businesses. I guess when delivering Business Consulting Services, it could be one of the factors advised about. When delivering Global Financial Services, it is a risk factor to assess. But if you're selling Websphere Software, or Lotus Notes, or Mainframe Computers, or chips for games consoles, I suspect that IBM will have to trust that the customer knows what they will do with the product. IBM can (and does) warrant that the product will function to its specifications; but the question of whether the customer can make a profit out of it is surely a 'user management responsibility'

How to sell to a bank, without becoming a bank ? IBM likes selling a lot of technology to banks; but I think has no desire to become a bank, to run a banking business on its own account.

Mcihael Rowe

I really enjoyed the book "The Black Swan", as a matter of fact it was the first business book I reviewed on my new Kindle Podcast (Random Abstractions - http://www.michaelrowe01.com/Random_Thoughts/Random_Abstractions/Entries/2009/2/14_Random_Abstractions_-_Episode_2_-_The_Black_Swan.html ). I think it really does point out that we tend to limit our thoughts and actions based on our understanding of things around us. We don't look to find the those things which are outside of our understanding. As a matter of practice, many people will actively discount things that don't confirm to their understanding.

I think the sales question that is raised is a bigger issue, I think we know the who and the what, but one of the big questions that is ignored is the why. While I am a big supporter of research for the desire of knowledge, but when it comes to many IT offerings, I think we constantly drive customers and consumers to by the next big thing, without answering the fundamental WHY question.

We are constantly upgrading applications and tools, but do we really need them? Most people use less than 20% of the functionality of mature products, and yet, they still upgrade to the next version, which is mostly feature bloat. So while competition is good do we need yet another office clone (to address Chris's point). Why not a simplified word processor?

Richard Schwartz

The Nocera article you refer to is excellent, however I have a problem with characterizing events as "highly improbable" just because they "seem so far outside the boundary of normal probability that you can’t imagine they could happen in your lifetime." The key word there is "seem".

Probability may deal with uncertain outcomes, but it is itself a mathematically precise concept. "Seem" is dead giveaway of an imprecise application of the concept. The probability in reality was actually very close to one -- we know this because it happened, and because we can easily see in hindsight that the chances of avoiding it were extremely low. It only seemed like the probability was close to zero to the experts because they were not looking at the right inputs and behaviors, and therefore did not follow them through to their logical conclusion.

I'm not a game theorist, but it seems to me that what the experts did not see was that rational behavior by actors throughout the system could lead to a "tragedy of the commons" outcome, not due to an improbable event, but simply due to playing the game through enough rounds. The game was basically one of increasing risk by spreading it around, and taking short-term profits rather than holding reserves to hedge against the increased systemic risk; but without a mechanism to stop the game the total risk rises to the point that it simply can't be spread around enough, there are insufficient reserves, and the game collapses.

A mathematical model that accurately embodied the rules, accurately implemented rational decision-making according to each type of actor's perceived short-term interests, and played the game on the right scale through enough rounds should have reached that outcome. Of course, nobody had that model. A very interesting question though is this: if someone had had that model, and had raised the alarm, would anybody have gone against their short-term interests and actually listened?

Chris Ward

Richard,

Have you ever played Monopoly ? (The kids' board game, (c) Parker Brothers in the USA, I think, apologies if I have incorrectly used someone's trade dress)

It always ends with one player having all the money and everyone else bankrupt.

This seems to be roughly what's happened in real life. Not quite so extreme, but the concept is there.

Can we say that we have had enough of Monopoly, we will put the game back in its box and pick another one ? I'm not entirely sure that the next games on my kids' shelf are any better ... Diplomacy and Risk ... but they are different.

How to avoid these extreme outcomes ? Do we need to empower governments to intervene in markets ? What kind of intervention would you allow, and how would you ensure that the intervention was on the vaguely-Benthamite principle of "The greatest good for the greatest number" ... in particular, you might want to ensure that those chosen to govern didn't use their power to line their own pockets.

I would mention Microsoft Windows and Microsoft Office, but although that has enriched a select group of people beyond the wildest dreams of most of the world (and drained cash from the rest of us to do it), I don't actually think that it's Microsoft's fault in any sense. Should a government intervene to break that special tie, to enforce a standard interface, to force interopearbility and facilitate competition ? Or should it be left, to be eventually obsoleted by cellphones and games consoles ?

If you want a probability of an event which either 'happens' or 'does not happen', you have to run reality (or a model) many many times, and count.

Steven Adler

No risk can be managed if it isn't first measured.

Our current regulatory infrastructure is simply outpaced by the scale and speed of financial processing, and in that gap greed, fraud, and incremental errors and omissions will creep until the system overloads and we witness an enormous crash.

The meltdown isn't a symptom of the failure of capitalism or dark forces at the fringe. It is simply a normal consequence of human self-interest unmonitored and unchecked.

Computer models based on historical analysis may indeed help future humans avoid catastrophes - if the information is widely available. First step is to make it available.

Mike Duncan

Why are black swans always disasters? Or is a disruptive innovation a black swan? Any thoughts.

Sorry for this delayed response - I started reading this blog after this was posted and have just been browsing some back numbers.

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