My copy of Nicholas Taleb’s The Black Swan, a book about risk and uncertainty, was almost destroyed by a freak hurricane (at least it was freaky for a Brit who had then just arrived in the US). Almost, but not destroyed: I was able to use it to write my last post which concluded with Taleb’s advice that instead of investing in trying to predict the problems we may face in the future, we should invest in preparedness. Continue reading Raincoats & bad schools: organisations in the internet age
I started reading Nicholas Taleb’s The Black Swan in May last year. I took it to the Delfest music festival where we’d been promised bluegrass and sunshine. A hurricane tore down the camp and flooded the fields. The book sank in the swamp, was bravely rescued, and has since dried out. I started reading it again the other day.
Taleb’s central thesis is that we are much worse at predicting events than we think we are. In fact we massively overestimate our capacity for prediction. Continue reading Fat people & billionaires
1. A plummeting Coasean floor means we can do more things outside of traditional organizations like businesses.
Here’s a question that I try not to ask in earshot of my bosses. Instead of employing me on a salary, why don’t my firm put out a tender for every piece of work I deliver? In an open market, with other people competing to perform broken down chunks of my job, my company could end up paying less. Reassuringly for me, Ronald Coase explained why in The Nature of the Firm in 1937. It is because of the additional transaction costs that my firm would incur – in particular of finding a contractor and enforcing a contract for every piece of work I currently undertake. We can describe these kinds of costs as the cost of cooperating. Companies exist in order to manage these cooperation costs. They do things like employ managers and pay for HR departments – and create, for the most part, hierarchical organizational structures – because, for the activities that they’re engaged in, this is a more effective way of directing a workforce than an open market. But of course this management has a cost, much of it fixed. Firms exist, therefore, when the costs of employing and directing staff to undertake a particular activity are less than the potential gain from that activity.
But what if those cooperation costs exceed the potential gain of an activity? Continue reading These exponential times
Any company should by now have learnt that its customers can talk about them, to massive effect, without their permission. (As the HuffPo says here, it is kind of a leap of logic to think that United Breaks Guitars lost the company 10% of its market capitalisation, but it certainly wasn’t good for them.) But today we can also pretty effectively organise without their permission. Continue reading Stolen from the greatest HR policy PowerPoint ever made