Thursday, November 19, 2015

Whose data analysis is correct?

We in advanced data-driven analytics believe that the patterns in the data do not lie.  Yet, our biases drive what features we feel should be key to the interpretation of data, pick the pattern that invokes the anomaly we want to detect, etc.  This experiment detailed in the Nature here by Dr. Raphael Silberzahn, Assistant Professor, Department of Managing People in Organizations, IESE Business School, Barcelona, Spain (bio and research here) and Dr. Eric L. Uhlmann, Associate Professor, Organizational Behavior, INSEAD, Singapore (bio and research here), highlights that today accuracy in data analytics must comprehend more than one method and more importantly group of data scientists before drawing conclusions.

"The experiment Last year, we recruited 29 teams of researchers and asked them to answer the same research question with the same data set. Teams approached the data with a wide array of analytical techniques, and obtained highly varied results. Next, we organized rounds of peer feedback, technique refinement and joint discussion to see whether the initial variety could be channelled into a joint conclusion. We found that the overall group consensus was much more tentative than would be expected from a single-team analysis."

In the near future, I hope that machines will simply consume data, and extract and raise the anomaly above the noise.  Though, we make the machine, so will the machine be biased?

The data set:

"All teams were given the same large data set collected by a sports-statistics firm across four major football leagues. It included referee calls, counts of how often referees encountered each player, and player demographics including team position, height and weight. It also included a rating of players' skin colour. As in most such studies, this ranking was performed manually: two independent coders sorted photographs of players into five categories ranging from 'very light' to 'very dark' skin tone."

The article concluded:

"Of the 29 teams, 20 found a statistically significant correlation between skin colour and red cards (see 'One data set, many analysts'). The median result was that dark-skinned players were 1.3 times more likely than light-skinned players to receive red cards. But findings varied enormously, from a slight (and non-significant) tendency for referees to give more red cards to light-skinned players to a strong trend of giving more red cards to dark-skinned players. After reviewing each other's reports, most team leaders concluded that a correlation between a player having darker skin and the tendency to be given a red card was present in the data."

Khosla on IT today

Via good friend Mr. Vish Mishra, article in the Business Insider, "Billionaire investor Vinod Khosla: IBM and Dell haven't had 'one new idea over the last 30 years'".

I had an awesome time in late 80s and all through the nineties building computer systems, writing software and firmware, building enterprise systems that scaled to 100s of millions of users... till the early 2000s. At that point I left IT because it was commoditized in every sector I stepped in.  Some sectors leveraged advanced Information Technology well, such as Finance and Banking, Consumer Product Goods and Retail, while some were adopting it slowly like Healthcare and Utilities.

Today I work in a Oil and Gas sector where I find myself fascinated by the inability (on average) to comprehend the power of advanced IT, let's pick one thing, the cloud.  Some of the players look like they reside in a mud hut with candle lights in comparison to other sectors, the most entertaining of (nonsensical) common wisdom being that the cloud is unsecured.  Another area is advanced data-driven analytics.  O&G is a deeply physics based sector, yet data analytics is able to drive solutions in places where physics needs complementation, where physics cannot be applied, or where complete system understanding does not exist to apply physics.  Yet, the stolid mindsets persist.

And this is where the opportunity for exceptional growth and next level of productivity exits.  Mr. Vinod Khosla's comments are a foresight as I translate them for O&G that it could look to the IT future being created by Google and Amazon to solve problems in new ways.

"Speaking of Dell, EMC, and IBM, he said, "They've not introduced what I consider one new idea over the last 30 years....Mostly they've spent their last few years engineering financials.""

"So what is Khosla looking for when he invests? "Who's inventing the future that's dramatically changes the world.""

Read the article here.

Saturday, November 14, 2015

Globalization and the Middle East

I have always found it interesting how regions East of Europe are branded, more akin to the storied regions of Lord of the Rings; Near East, Middle East, and Far East.  Schumpeter of The Economist writes an excellent piece; discussing the facts of doing business in and with Middle East and companies there, respectively, to realities of ethinicity; from areas of growth in Middle East based on commodities to the region's multinationals attempting Western style management for productivity and efficiency.  Schumpeter states:

"... the problems are mind-boggling—and they are not the sort that an MBA course prepares you for. It is one thing to study “political risk”. ..."

Read the complete article here.

Thursday, November 12, 2015

Oil and gas has $500 billion for M&A

I recently wrote an article on how large firms continue to grow through M&A here.  A recent article in World Oil reinforces my claim that this is the season for M&A:

"Exxon Mobil Corp. tops the list with a total of $320 billion for potential acquisitions. Chevron is next with $65 billion in cash and its own shares tucked away, followed by BP Plc with $53 billion, according to data from corporate filings compiled by Bloomberg."

Read the complete article here.

Sunday, November 8, 2015

Rethinking power generation

Excellent article on reinventing generators for using ocean currents for power generation here.

Tuesday, November 3, 2015

Next generation multinationals

Schumpeter in The Economist states, "The golden age of the Western corporation may be coming to an end."

"The golden age of the Western corporation, [McKinsey Global Institute] argue, was the product of two benign developments: the globalisation of markets and, as a result, the reduction of costs. The global labour force has expanded by some 1.2 billion since 1980, with the new workers largely coming from emerging economies. Corporate-tax rates across the OECD, a club of mostly rich countries, have fallen by as much as half in that period. And the price of most commodities is down in real terms."

The world is flattened a la Mr. Thomas Friedman. The results have been corporate growth of existing multinationals to new ones from emerging markets growing fast:

"Two things in particular are shaking up the comfortable world of the old imperial multinationals. The first is the rise of emerging-market competitors. The share of Fortune 500 companies based in emerging markets has increased from 5% in 1980-2000 to 26% today."

The power of technology, and its democratization has been the other significant change:

"The second factor is the rise of high-tech companies in both the West and the East. These firms have acquired large numbers of customers in the blink of an eye."

The article offers a solution for the current multinationals, based on the concept that all innovation is preceded by invention:

"How can Western companies navigate these threats to their rule? MGI advises them to focus on the one realm where they continue to have a comparative advantage—the realm of ideas. Many companies in labour- and capital-intensive industries have been slaughtered by foreign competitors, whereas idea-intensive firms—not just companies in obvious markets such as the media, finance and pharmaceuticals, but in areas such as logistics and luxury cars—continue to flourish. The “idea sector”, as MGI defines it, accounts for 31% of profits generated by Western companies, compared with 17% in 1999."

Unfortunately, the larger the corporation, the lesser it is capable of creating and nurturing "ideas".  Ideas require a desire "to be something" more in the future, and then nurturing them, allowing them to fail.  Rare is a corporate that is capable of such, handcuffed to quarterly earnings.  Tools of the corporations to capture innovations versus "creating" via M&A, divestures for streamlining and growing the balance sheet, etc.

Yet, does a new model emerge for the ones who will last?

"The cult of quarterly earnings may lose more of its following. A striking number of the new corporate champions have dominant owners in the form of powerful founders. They are willing to eschew short-term results in order to build a durable business, such as Mark Zuckerberg at Facebook, the Mahindras and other assiduous families in India, and private-equity firms. Gibbon’s great work was a tale of decline and fall, as classical civilisation gave way to barbarism and self-indulgence. With luck, the tale of the relative decline of the Western corporation will also be a tale of the reinvention of capitalism as new forms of companies arise to seize opportunities from the old."

Monday, November 2, 2015

National productivity

From The Economist:

"The productivity gap, an indicator of a country’s output capabilities, is the ratio between the productivity of a benchmark country (such as the United States) and that of a less developed economy. The latest Latin America Outlook from the OECD, a think-tank, compared the productivity gaps of selected countries in the region with those of economies in Asia. In general, productivity gaps in Asian countries have narrowed significantly over the past three decades. America’s productivity in 1980 was 125 times that of China; by 2011 the gulf had come down to 17 times. In Latin America and the Caribbean, however, not only was there a much smaller reduction, in many cases the gap had grown."