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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine


by Denise Caruso ~ November 13, 2008

It is not always happy-making to be ahead of one’s time.

On Tuesday, the New York Times published package of articles that explored new genetic research and new ideas of what a gene is.

Much of the package was based on the findings of the ENCODE study, which was sponsored by the National Human Genome Research Institute.

The upshot of ENCODE, which was published about a year and a half ago, in June 2007, was pretty straightforward: the human genome is not a “tidy collection of independent genes,” after all, with each sequence of DNA linked to a single protein, which in turn is linked to a single function, like the production of an enzyme.

Instead, genes appear to operate in a complex network, and interact and overlap with one another and with other components in ways will challenge scientists ”to rethink some long-held views about what genes are and what they do.”

The lead story in the package notes this perspective, writing that scientists “no longer conceive of a typical gene as a single chunk of DNA encoding a single protein,” and quoting one of them as saying, simply, “It cannot work that way.”

YES! I was so excited that this issue was finally going to get some attention. Not only was one of the central themes of my book, Intervention, but I too wrote a column about ENCODE for the New York Times — called “A Challenge to Gene Theory, A Tougher Look at Biotech” — right after the results were published, in July 2007.

In it, I asked what (to me) is the most obvious and important question, but it was addressed nowhere in the NYT package: Continue reading »


by Mike Neuenschwander ~ October 29, 2008

I was recently talking to some German friends about their trips to the United States. Apart from the standard touristy things they found memorable about the U.S., they were all greatly impressed that they could go shopping for almost anything in the middle of the night. Even to modern Europeans, the concept of midnight shopping seems fantastic. Imagine their amazement when I explained that, in the U.S., they could go shopping on almost any holiday as well.

Today’s business culture thrives on on performance, success, winning, and constant availability. The world continues on its frenzied trend toward 24×7 services, “five 9’s” of up-time, and six sigma products. The drive to succeed has provided us with all sorts of modern conveniences—and plenty of modern instances.


But I’d like to say a few words in defense of failure, because I believe failure has an important purpose and we can’t simply wish failure away by focusing on success. In my view, systemic failures can be averted simply by introducing some planned imperfections into the systems we build. One of the lessons that should be learned from the current financial crisis is how securities originally thought to be insular from the housing market were proven to be directly on the financial fault line.

Here’s the problem: when a system (such as a computer network, power grid, or financial market) performs steadily for a period of time, it fades into the background and seems as certain as the rising of the sun. Over time, a complex and interdependent mesh of relationships develops. Because these dependencies aren’t explicit, it becomes nearly impossible to predict how the beating of the proverbial butterfly’s wings in one part of the system can wreak havoc in another.

Is there a way to tease out the dependencies in such networks and develop complex distributed systems that fail safely? I think there’s a simple solution: introduce the element of failure. Shoot for 4 9’s instead of 5. Interrupt the broadcast so that we can run the drill before the disaster strikes. Learning to fail on a regular basis could help us deal better with much larger, systemic failures in the future.


by Mike Neuenschwander ~ October 14, 2008

Next time you stand in line at an airport, take a moment to reflect on how your driver’s license is more likely to be accurate than the badge displayed by the TSA employees. A front page story in Monday’s USA Today reported on how the United States Office of the Inspector General (OIG) chastised the TSA in an an audit report for improperly managing badges, uniforms, and passes issued to personnel.

The agency overseeing security at the nation’s airports failed for years to track security passes and uniforms of former employees, creating widespread vulnerability to terrorists, says a government watchdog report obtained by USA TODAY.

The Transportation Security Administration lacked centralized controls over the secure passes issued to some of its employees, according to Department of Homeland Security Inspector General Richard Skinner. The passes grant people access to the most sensitive areas of an airport, such as where baggage is screened or planes are parked

Investigators found numerous cases in which former employees retained their passes long after they had left the agency.

The investigation also found that TSA uniforms were frequently not collected when employees left or were transferred.

People using improper badges, IDs or uniforms — particularly in combination — “could significantly increase an airport’s vulnerability to unauthorized access and, potentially, a wide variety of terrorist and criminal acts,” the report said.

For all the effort the Department of Homeland Security has devoted to constructing a nationwide identification system (such as Real ID and New York’s “enhanced driver’s license“), the revelation that even the TSA can’t properly manage identification for its own employees highlights the absurdity relying on identity systems for security. It’s a Catch-22: the more a security system relies on IDs for access, the more valuable the IDs become to attackers. After all, why would a terrorist bother to infiltrate an airport as a mere traveler when it’s easier and more effective to infiltrate as a TSA official? Continue reading »


by Mike Neuenschwander ~ October 12, 2008

Managing Risk is Not Enough
Late last year, I sat in a meeting in which several bankers were present. During the meeting, one of the bankers said something that in retrospect belongs in the highlight reel of “famous last words.” The comment went something like this: “We’re bankers! We understand risk, because it’s our business. We know how to manage risk. That’s why industry and government are looking to us to solve risk-related problems.”

As ridiculous as this statement now seems (especially to those of us whose retirement funds have been decimated) I’d argue that the statement holds true—even in a grizzly market. Yes, good bankers do know how to manage risk—their own risk. Which is why the best investment bankers view a recession more like a sabbatical, while the rest of us have to figure out how to keep food on the table. And even as the government is coming to the rescue, the Fed won’t be doing the risk management part: they’re paying bankers to figure out how to get out of the mess they’ve created. Talk about a win-win!

Not that these guys aren’t suffering. Here’s a bit of anecdotal evidence of how bad things have gotten: Continue reading »


by Mike Neuenschwander ~ October 7, 2008

Today, there was some interesting discussion in the New York Times on human instincts for punishment and forgiveness. According to the article, researchers have found that within a population, some percentage of people (between 10 and 40%) are attuned to following their “referee instincts” by ensuring evil-doers get their due. This instinct has clearly come into play during the wide-spread financial crisis:

The public urge for punishment that helped delay the passage of Washington’s economic rescue plan is more than a simple case of Wall Street loathing, according to scientists who study the psychology of forgiveness and retaliation. The fury is based in instincts that have had a protective and often stabilizing effect on communities throughout human history. Small, integrated groups in particular often contain members who will stand up and — often at significant risk to themselves — punish cheaters, liars and freeloaders.

But allowing such impulses to play out on a grand scale can also exacerbate a crisis. The article continues:

Some experts believe that Japan’s disastrous delay in bailing out its banks in the early 1990s was caused in part by a collective urge to punish corrupt bankers, and they fear a similar outcome today.

Game theory suggests alternative approaches to resolving social dilemmas. In running various gaming scenarios in which participants respond to each others’ uncooperative behaviors, the best outcomes for all players are achieved when players follow simple tit-for-tat strategies and allow for forgiveness. On this subject, the article states: Continue reading »


by Mike Neuenschwander ~ October 1, 2008

Yesterday, Olivia Judson published a piece in the New York Times about how human beings are almost incapable of being objective, particularly when it comes to the subject of themselves. This creates severe difficulties for studying humans as individuals, cultures, and civilizations. She points out:

The literature from psychology shows that, as individuals, we are good at seeing other people clearly, but poor at seeing ourselves. Most people, for example, describe themselves as being better drivers than average, and consider themselves better looking than other people consider them.

It seems the observer’s paradox applies also to self-observation. Who knew?


by Mike Neuenschwander ~ September 29, 2008

A story in today’s New York Times discusses how the media has struggled to explain the financial crisis to audiences. Admittedly, many industry experts are dumbfounded by the events of the last few weeks. Where the media has faltered, my good friend and former colleague Bob Blakley has succeeded with his down-to-earth post on “Wall Street’s Governance and Risk Management Crisis.” Thanks, Bob!

I particularly liked Bob’s phrasing of the “collective margin call” on the banks. It indicates that part of what’s happened is a failure in coordination: banks have cash on hand as long as only a few percent of their patrons want to withdraw their cash. This echoes a theme of a post I wrote about the credit crunch back in June. Here’s an excerpt from that post:

Clearly, a great crime has been committed. An entire nation has been robbed. World markets are shaken. But who’s responsible? Nobody. And everybody. The insidious nature of this crime is that we all collaborated to commit it and without a master plan. Can such collective action crimes be avoided? Or is the commons forever doomed to be the scene of tragedy?

Bob’s comments on risk management are also strongly reminiscent of Denise’s work on risk management in the biotech industry. Bob writes:

Risk management failures created the current financial crisis, and risk management failures have also created the personal information disclosure crisis, and the malware crisis, and a bunch of other problems which are not yet crises. We do risk management poorly in all disciplines. We do it poorly for a bunch of reasons: executives don’t understand their own businesses well enough to understand their risks; risk managers don’t know how to talk to executives about risk; incentives favor creating long-term risks in order to accrue short-term profits; the list goes on and on.

Denise’s main assertion in her book, “Intervention: Confronting the Real Risks of Genetic Engineering and Life on a Biotech Planet,” is that the biotech industry is similarly awash in poorly managed risk. Genetic engineering is another impending crisis that, once it reaches crisis levels, people will be dumbfounded to explain.

As an avalanche of new laws and regulations hit Wall Street over the next few years, I fear that we’ll lose sight of the most important learning to take away from this disaster. Again, Bob Blakley explains:

A final thought.  The financial crisis exists because of a failure of risk management. There will be a temptation to fix the problem using compliance mandates. Compliance mandates, however, don’t fix risk management problems. All they do is prevent specific risk management failures from happening over and over again. Organizations whose risk management is weak will find new ways to fail - and these new ways will circumvent compliance regulations. The right way to fix a risk management problem is to do a better job of risk management.


by Denise Caruso ~ August 28, 2008

Although the subject is mostly Mary Adams’s purview at Hybrid Vigor, I wanted to post the link to my Strategy+Business column on intangibles in this quarter’s issue of the magazine.

Unfortunately I was not able to quote either Mary or Henrik Martin, the CEO of Intellectual Capital Sweden, in the article, despite the fact that they both gave me terrific interviews, in order to avoid the appearance of conflict of interest: I’ve been talking to both of them about becoming a licensee/practitioner of the IC Rating method, which I think is one of the most sensible intangibles rating systems I’ve seen so far.


by Mary Adams ~ August 26, 2008

Jim Ludwig of Integral Input made a very thoughtful response to my posting Account for Intangible Cost, Not Value

I agree with Jim wholeheartedly that there are many aspects of intangibles that cannot be measured and an obsession with measurement can be counterproductive (like counting calls completed by a call center rather than customer satisfaction). The work of our IC Rating network is actually all about non-financial measures.

However, we should not ignore the measures that we do have-including intellectual capital investment. I think that we would accomplish a number of things if this kind of measurement would become popular. First, it would help managers and boards of directors to face up to the fact that they are already investing a lot in intangibles. This would force them to recognize the need to develop intangibles management capabilities. It would also help all of us learn more about the dynamics of intangibles management. Right now, no one can say what a “normal” level of investment is in systems or training or external relationships.

But Jim is right to ask about the next step: We can measure cost but can we measure return in a traditional, mathematical way? The short answer is no. Much of knowledge work occurs inside of people’s heads and, for the foreseeable future, our heads will not have gauges on them to show how effectively we are thinking. The path from cost to return goes from tangible to intangible and back to tangible, when the business process makes money or not.

I like to use the analogy of the fact that intellectual capital expenditure is like pouring money into a closed tank or a black box. You cannot see what is going on inside the box and you hope that money will come out the other side. It is our job as managers to learn how to discern what is going on inside the box, improve it and increase the flow of money out of the business.

We like to use stakeholder interviews (inside and outside the company) to determine whether the investments made are getting the desired results. Stakeholders are in a good position to, as Jim suggested, “evaluate” or assess the strength of the underlying intangibles. Some of the ways that they can be assessed include current performance, readiness for the future and risk. Thanks to Jim and Henrik Martin for their input-keep the conversation going!


by Mike Neuenschwander ~ August 25, 2008

Karl Giberson wrote a piece for Salon a few weeks ago entitled “What’s wrong with science as religion?” The piece was largely in reaction to antics by PZ Myers, including his “great desecration” of a Communion wafer. But Giberson avoids being goaded into the “whose is bigger” contest of religionists and instead explores whether science can offer a suitable replacement for religion.

It’s a topic I’ve written on before (most recently in discussing Denise Caruso’s book, “Intervention”), but Giberson boldly goes where I didn’t dare in suggesting that “Science … has the raw material for a new religion.” But then he asks some hard questions of a scientifically rooted religion:

What would this new religion be like once it became institutionalized? After all, if religion fills a genuine human need, something has to fill the hole created by its passing — something that appeals to billions of people.

Could we be sure, for example, that this new scientific religion would not give rise to the extremism and aberrant behavior that plague conventional religions? Would concern for the diversity of life, for example, inspire vegetarians to blow up slaughterhouses, and run the local butcher through his or her own meat grinder? Would reverence for the cosmos reinvigorate astrology? Would appreciation for natural selection bring eugenics back out of the closet? In other words, if science dismantles the traditional religious content that people use to satisfy their impulses — many of which are quite passionate — will we really be better off?

Great questions. The questions remind the reader that religious exercise isn’t just about getting the facts. They suggest that those who insist on literalism in religion miss the point, as if strict literalism among a group of human beings is either possible or desirable.

So rather than attacking religions, I’d prefer to see biologists (such as PZ Myers) and other scientists approach religion as an evolutionary phenomenon. Clearly, religion is itself an important evolutionary adaptation for the survival of our species. The religions in the world today exist because they are the ones that enabled cultures to survive. Religions have been successful in coordinating activities and building foundations for trust for millions of people across the globe. And they have done this without requiring the laity to have Ph.D.’s or IQ’s over 150. Whether the stories today’s religions tell are “true” in the scientific sense is irrelevant; what can’t be disputed is that these religions have enabled cultures to survive and civilizations to thrive where others have failed.

Religions will continue to evolve, but they won’t follow a rational or scientific path. Religions are also unlikely to completely overpower the human propensity for “extremism and aberrant behavior.” So before rushing off to take scientific communion, consider this: if survival in nature depends on making rational, scientifically founded decisions, how did we ever come to be?