Tag Archives: education

Big Pharma: Heroes or Villains?

What is ‘Big Pharma’?

Many people have argued that alternative and complimentary medicines are suppressed because they threaten the status quo for ‘big pharma’.  Before we accept this claim, let’s unpack the idea of big pharma a little to understand the incentives at play and when it may be right not to trust big pharma.

Let me start by making it clear – big pharma, as a label for the largest pharmaceutical companies, deserves a healthy dose of outrage; but before we toss the baby out with the bathwater, but lets see when – and why.

Big pharma is just another name for ‘big business’: a big business is an organism that has grown beyond the people that founded it, such that rather than having emotions, conscience or guilt, it has KPI’s like turnover, cashflow and return on investment. Big pharma is in the business of making money and as such should generally be expected to default to that option unless constrained by law. The collective conscience of shareholders only tends to kick in when dirty laundry is put out on show. Ok, so firstly, I think we can agree, a business is not a charity.

Next we take this lack of compassion and combine it with size and complexity – we see we now have an organism susceptible to plain outright crookery – from the white collar sort, like insider trading – to the very tangible – such as the dumping of toxic waste. These practices usually require the corruption of people – but not always – it is very easy for companies to do bad things without any individuals having malicious intent; it could simply be negligence or incompetence, or it could simply be that profit sometimes comes before fairness.

Take for example the problem of selling DVD’s in the world market. They are small and lightweight and easy to ship worldwide. This usually means that the price would be similar worldwide, if dealers in one country were to raise prices, residents would simply import the product. However, the enormous wealth differentials that exist between, say, the USA and Mexico, mean that the company could set a high price to extract maximum value from the US market, but then essentially price themselves out of the Mexican market. If they lowered the price, they would sell more product but with much reduced profit margins.

This problem is thrown into stark relief in the case of drugs, where the most profitable option is often to cater to the richer countries. This is sound business – set your price high, keep your factory trim, reduce shipping costs, keep high margins. However, if the drug can radically improve health outcomes, this policy could be seen as unethical.

This is the sort of problem big pharma face routinely; they are not selling entertainment, they are sometimes selling life itself, and often find they need to play profits against ethics in they way I describe above. It is thus hardly surprising that the general public have a distrust and general suspicion toward Big Pharma. In addition to drug import controls, there are many other situations where governments have had to step in to ensure the pharmaceutical companies ‘do the right thing’, such as the case with antiretroviral drugs (for HIV) coming into Africa.

Now think for a moment on this thought experiment: what would happen if a small publicly traded company discovered a cheap and easily reproducible cure for cancer? Would they really be able to hold on and extract full value for their shareholders? History actually suggests they wouldn’t – the drug would become public property, or would simply be nationalised if the company tried to resist. Inventions like the major vaccines and the first antibiotics were often not patented, and we see if we look at the pharmaceutical industry that their biggest profits come predictably not from miracle cures but from drugs that cater to the maladies of the richer classes. The top targets are heart disease, heart-burn, stroke, mental health and asthma. Once you  add disorders like diabetes you have accounted for the most profitable chunk of the industry.

This trend raises fresh concerns, because there are many severe ailments that are simply not attractive to profit making operations, the poster-boys being malaria, TB and HIV/Aids. Drug companies can be bullied into doing work in these areas, but it tends to fall to governments and charities to fund research in the afflictions of the poor, or on the so-called ‘orphan diseases’ – ailments that affect too few people to ever make a profitable market.

Economists will also argue that profit making businesses, being creatures under the strict control of incentives, will be unlikely to aim for ‘cures’ because cures are ‘one-offs’. While this criticism has some sad validity (in the board-room if not in the clinic), we have to remember that the big drug companies only exist because they make profits; in an imagined world where the first dollars were always spent on the most dire diseases and we only get to do botox and erectile dysfunction once those are all solved we would have no private industry at all, so far fewer trained scientists, far less public knowledge and certainly no map of the genome. We have to remember that to some extent at least, the aging american taking their cocktail of pills every day for the last 50 years has in some sense subsidized the field doctor in rural Africa. Yes, they also subsidized Wall Street excesses, but perhaps it’s a deal worth making.

Publication Bias

Another area where drug companies increasingly in need government intervention is in drug trials; specifically, they are presently allowed to pick and choose what to publish; this sounds OK at first, because, surely, you assume, the drug company has to make a bulletproof case before the drug is licensed? Well, if you do 100 trials, you may well find 50 good results, and publish those, and simply sweep the duds under the carpet. What’s more is those duds could have revealed possible side effects or interactions that could actually turn out to be real issues later on down the road. This is going to be a big one in the next few years.

The Big Picture

When criticizing the pharmaceutical industry it is easy to get caught up in the weeds, for there are weeds, but let’s also try to remember that this century has seen unparalleled improvements in life expectancy world-wide, and the improvements in child mortality in the third world do owe a lot to the sometimes cold-hearted business models intrinsic to western medicine.

Before I move on, and being a scientist, I wanted to make another point about big pharma. While it’s true that big money is involved, we have to remember that the Pareto principle applies here too – the majority of the profits come from the minority of the research. There are legions of perfectly good people, motivated by no more that the desire to help people in distress working in healthcare all around the world. Drugs are highly integrated with other therapies at the clinical level and the people actually running trials ‘in the trenches’ face-to-face with the patients (and often dealing with terrible trauma)  are rarely shareholders in big pharma, and many would not even think for a second they are part of what people would call big pharma. Yet it is they who have gradually built up our current understanding of the human body, not the men in suits.

Conclusion

To me, the idea of executives at the top 5 drug companies has become conflated with the idea of the ‘canon’ of western medicine. The idea that the whole world of ‘proven medications’, the result of countless years of hard graft (and the learnings from millions of deaths), can be dismissed because it’s under the control of ‘fatcats’ is a sick tragedy. Western medicine is simply a name for ‘what has been statistically been proven to help’, and the idea that even a tiny fraction of the scientists who developed it would be working to suppress good ideas from outside the ‘fold’ sounds frankly paranoid. Yes big pharma has some warped incentives that cause it to focus on the wrong things and leave the poor out in the cold, but all for-profit publicly-traded businesses do that! Ask yourself for a minute – even if a cure for heart disease were found that threatened the profits to Pfizer and friends, could they really recruit a worldwide network of conspirators who think a cure for cancer is something worth selling their very souls for to suppress?

It hard enough to run a real business, let alone running one so effectively in complete secrecy in the face of so much scrutiny. If they have that much skill and power, they should go legit, they would make a real killing!

Musical Notes Explained Simply

Have you ever wondered how the musical notes we use were chosen?

I mean when I was growing up I was learning one thing in music class  (do-re-me-fa-so-la-ti-do!) and another in science class (440Hz) and never the twain did meet…

So what gives? I always suspected the musical community were being scientific, but their language was all Greek to me.

Years passed and only rarely did I get the chance to wonder at this question – and meantime my science education was getting the upper hand – I learned how sounds travel through the air and how the ear works – how deep, low notes are the result of compression waves in the air, perhaps a few meters apart, while higher pitched sounds where compression waves much more tightly packed, perhaps millimeters apart. I also learned a note could have any frequency, and so no reason to pick out any ‘special’ frequencies.

However,  just recently I realized, in a flash of light, that with an infinite number of notes to choose from, musicians had very deliberately selected only a few to make music with, and I suddenly wanted to know why. Was it arbitrary? Was it the same in different cultures? Why did some notes seem to go together and others seem to clash? And of course, as The Provincial Scientist, I wanted to know if our early musicians had done well in their choices.

As it is now the era of the internet I set about to find out more and thought it was so interesting, it would be a crime not to report what I learned on my blog. So here is what I learned…

In Search of Middle C

The best place to start is probably a vibrating string. The vibrating string is clearly key to pianos, harps, guitars and, of course, the entire ‘string’ section of an orchestra. If you stretch a string and pluck it, you are starting an amazing process – as you pull on the string, you create tension, you literally stretch the string and store energy in the fabric of the string. When you let go, the string shrinks under that tension, which pulls it straight. Alas, when its straight it has picked up some speed and the momentum keeps it going until the string is stretched again – thus the string swings back and forth – and it would continue forever were it not for frictional losses – energy is lost in heating the string, but some is also lost in buffeting the air around the string. The air is pushed then pushed again with each cycle creating compression waves that ripple out into the room – and into our ears. Thus we hear the string.

You can see the vibrating string doing it’s magic here:

You can see in the video that the string swinging back and forth is an awful lot like a wave moving up and down the string! Indeed it is!

The speed at which the wave moves (or string vibrates back and forth) – and thus the note we hear – is determined by a few simple factors – the tension in the string, and the weight of the string and the length of the string. The greater the tension, the greater the force trying to straighten the string, but the greater the weight, the more momentum there is to make it stretch out again.

It is therefore easy to get a wide range of notes from a string, start with a long, heavy wire and only tension it enough to remove all the slack. The note can then be gradually increased by decreased the length or the weight of the wire, or by increasing the tension. These are the tricks used in pianos, guitars and so on.

So far so good. But if you have several strings to tune up, what notes should you pick – from infinitely many – to make music with?

The human ear is an amazing device and can hear notes ranging anywhere from 20 to 20,000 compressions per second (the unit for per second is called Hertz or Hz for short). That is a lot of choice!

As I am sure you guessed, the key is to understand why some notes seem to ‘go together’, and the answer lies back in the vibrating string.

Overtones of Overtones

Firstly, it turns out that when you pluck a string, you actually get more than one note. While the string may swing back and forth in one elegant sweep, it may also get shorter waves, with half or a third or quarter the wavelength hiding in there too. This video shows how one spring can vibrate at several speeds:

Although the video shows the string vibrating at one speed each time, it is actually possible for a string to carry more than one wave at a time (this amazing fact deserves its own blog posting, but we will just accept it for now).

So when a string is plucked, the string ‘finds’ ways to store the energy with vibrations – it finds a few frequencies that carry the energy well, these are called ‘resonant frequencies’, there will be several, but they will all be multiples of one low note. As these higher notes are all multiples of a single low ‘parent’ note, they also have consistent frequency relationships between one another, 3/2, 4/3, 5/4 and many many others.

String Harmonics

So clearly, once you have one string, and you want to add a second, you could tune the second string to try to match some of the harmonics of the first string. The best match is to pick a string whose fundamental note is at 2x the frequency of the first string. This string’s fundamental note will match the first string’s 2nd harmonic (also called its first overtone). The second string’s harmonics will also perfectly match up with pre-existing harmonics from the first string. The strings are what is called consonant, they ‘go together’.

Now although the second string will have some frequencies in common with the first string, it turns out that there is an even stronger reason why these notes will go together – it is because when you play several strings at once, you are no longer just playing the strings, the instrument you are playing is the listener’s eardrum. The eardrum will vibrate with a pattern that is some complex combination of the wave-forms coming from the two (or more) strings. When you add two notes together, it is like adding two waves together and you get an interference pattern – the interference may create a nice new sound:

If we add a low note (G1) to a note one octave higher (G2) we get a totally new sound wave.

If, as in this example, one string vibrates at exactly twice the frequency of the other, the two notes will combine to make a handsome looking new waveform, with ‘characteristics’ from both the original waves – but if the frequencies are not a neat ratio, you will get something a bit messy:

This waveform may not repeat, and is unlikely to be consonant with any other notes you may care to add.

Sometimes, when your second string is fairly close in frequency to the first (say 1.1 x the first string’s frequency) then a second phenomenon rears its head, beating. This leads to the creation of entirely new (lower) frequencies that the ear can hear [click here to listen to a sample]. The sum now looks like this:

Beating can sound awful, though of course, the skilled musician can actually use it to create useful effects.

Beautiful Ratios

We have seen that once you have selected one note, you have already greatly reduced the ‘infinite’ choice of other notes to use with it – because only some will be consonant. Although the best consonances are at exactly 2x the first frequency, we see that once you have picked two strings, the choice for the third string is more limited. Should you be consonant first the first string or the second? Can you be consonant with both? You can be fairly consonant with both, but only by being 2x and 4x their respective frequencies. If you picked all your strings as multiples of the first string, the ‘gaps’ between the notes would be very big, akin to playing a tune with only every 12th key on a piano. So how can we fill in the gaps?

Well, early thinkers quickly realized that you can’t actually select a perfect set of notes – some combinations will mesh well, others will be just a little bit odd. This realization was probably a bitter pill for early musician-scientists to swallow.

In the end, they came up with many competing options, each designed  to maximise the occurrence of good ratios  – a good example is the just intonation scale:

Note: C D E F G A B C
Frequency ratio to the first note: 1 9/8 5/4 4/3 3/2 5/3 15/8 2

Here, the musician picks two notes that are consonant (C and the next C one octave higher) and then divides the gap into seven steps. Each note is a special ratio of the lower note – we get neat ratios of 5/4, 4/3 and 3/2 showing up which is good, however the ratios between adjacent notes are much less pleasing!

Aside: You will also see that the steps from B to C and E to F are rather small! Now take a look at your piano and note these notes correspond to the white keys on the keyboard that have no black keys between them! This is no coincidence…

Is the ‘just intonation’ division perfect? No, the notes are not all consonant! Remember than with 8 notes in this group, there are 7+6+5+4+3+2+1=28 ratios (or note pairs), and there is no known way to choose them to all be consonant. That is why, although most musical cultures divide their music notes into ‘octaves’ (nicely consonant frequency doublings), there have evolved many different ways to make the smaller divisions.

Western music has tended to divide the octave into 7 notes (the heptatonic scale) , you could really use any number. Let’s stick with 7 for now.

Another popular way to divide the octave is the Pythagorean tuning:

Note: C D E F G A B C
Frequency ratio to the first note: 1 9/8 81/64 4/3 3/2 27/16 243/128 2

This scale is based on prioritizing the 3/2 overlap of harmonics and moves three notes very slightly.

It is key to remember there are dozens of ways to do this, depending on what you are trying to optimise – do you want to match the greatest number of harmonics, or some smaller number of stronger harmonics? It may even be that personal taste could come into play.

The Wonderful Piano

Have you ever wondered why you hear someone is playing something in C-minor or F-major? What is the deal there? Well, these are also ‘scales’ – alternative ways to cut up the octave, but from a specific family that lives on the piano.

You see, the piano could also divide the octave into 7 notes, and indeed it was once so divided, but with time musicians realised they could open up more subtlety in their music by adding in more notes. So they decided to add the ‘black notes’, the extra black keys on the keyboard!

So in addition to the 7 notes A,B,C,D,E,F & G, they added C#, D#, F#, G# and A# – they called them ‘half tones’ or accidentals. Of course, there are already two half steps (B-C and E-F) which is why there is no B# or E#. These extra notes gave us 12 smaller steps, and of course choosing 12 consonant notes was even harder than choosing 7!

So, after some hard thinking by scholars including  J.S. Bach, a very sensible decision was made – to divide the octave into 12 ‘equal’ steps, which gives us the so-called ‘equal temperament‘, the most popular way to tune a piano. To do this, each note is 21/12 or 1.05946… times higher in frequency than the last one, such that twelve steps will eventually give you a doubling.

However, our musical notation is older than the piano and generally only allows for 7 notes per octave, so how do you write music for 12?

Despite that there are 12 notes, composers have tended to still feel some combinations of 7 notes ‘go together’ better than others and so have persisted to write music using only 7 notes, though of the many hundred’s of ways you could choose the 7 notes, they have selected 12 combinations, the 12 “Major scales“:

The Major Scales (down the left). Each uses only 7 of the 12 notes on the piano keyboard. The shaded vertical lines correspond to the black keys on the piano.

Personally, realising what these scales were was a breakthrough for me. Looking the above map helped me to realize several things:

  1. Many long pieces of music will completely ignore nearly half (5/12ths) of the keys on the piano! To play a tune based on a certain ‘scale’ is sometimes said to be played in that ‘key‘.
  2. The scale of C-Major ignores all the black keys, and is probably the oldest/original scale.
  3. Each scale is displaced 5 ‘steps’ from the previous scale (there is a #1 beneath each #5)
  4. The empty squares occur in vertical groups of 5, and move up 5 spaces each time you move a column to the right.

Aside: Note that there are also the 12 “minor scales“. These scales actually use the same 12 subsets of keys as the major scales, but are ‘shifted’  – they have a different starting point (base note, or ‘tonic‘).  This may seem a trivial change, but because the gaps (steps in frequency) are not all evenly sized in these scales, the major and minor scales have their two ‘small’ steps in different places, which is supposed to change the feel or mood of the music (or even the gender!)

The Number 5

The number ‘5’ in the pattern we saw above was noticed by musicians long before me, and it shows up in other places too.

For example, we saw in the ‘just intonation’ scale above, that the note G had a frequency ratio of exactly 3/2 with the note C. This means that when you hear both together, every third vibration of the higher note will coincide with every second vibration of the lower note. They are thus highly consonant – and they are 5 steps apart on the stave.  This relationship is called the ‘perfect 5th‘. It is again no coincidence that the 5th note of each scale is the base note (tonic) of the next scale. Stepping in 5’s (ratios of 3/2 in frequency) 12 times takes you through exactly 5 octaves and eventually back to the first scale.

Of course, the scales repeat for every octave, so you don’t really need top go up 5 octaves! This cycling behavior allowed the invention of a learning tool called the ‘circle of fifths‘, which helps us to understand  the relationships between the scales.

Yet another aside: The ‘perfect fifth’ is called perfect if it is truly a ratio of 3/2 – but recall that pianos have their 12 notes ‘evenly spaced’ (a geometric progression) so the ratio of G to C on the C-Major scale will not be exactly 3/2 – it is actually 0.113% off!

But What About Middle-C?

Ok, so we have seen how some notes ‘go together’, and how once you have one note, you have clever ways to find families of notes that compliment that note – but that leaves just one question – how do we pick that first note?

The leading modern convention is use the note A that comes after (above) middle-C, and to set it at 440Hz exactly.

The question is, why?

Well firstly, I shall point out that the 440Hz convention is not fully accepted. For example, anyone who wants to hear, for example, the Gregorian chants the way they originally sounded, would need to use the conventions of the time. Thus there are pockets of musical tradition that do not want to change how their music has always sounded.

However, when it comes to performing a concert with many instruments, it is useful if they all adopt the same standard. The standard is thus sometimes called the concert pitch, and though 440Hz for A is common, this number has been seen to vary from 423Hz to as high as 451Hz.

So the short answer is, there is no really good reason; the choice of 440Hz really just ’emerged’ as a more common option, and when they standardized they rounded it off. While this answer is ultimately trivial, I find a little amusement in the fact that all the music we hear sounds the way it does for no particular reason!

Conclusion

Before I go, there is a video I want you to look at. I think it shows beautifully how 12 different frequency oscillations can exhibit some beautiful harmony (or harmonics!)

All Done! Ready to Read Some Music?

The next step is to learn to read musical notation – luckily someone has already written an excellent tutorial with pretty pictures.

All I can hope is that the weird things they teach you in this tutorial will be a little less weird now we have covered the baffling origins of the notes!

Jarrod Hart (Los Olivos, CA, October 2011)

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A couple more useful references:

http://www.mediacollege.com/audio/01/sound-waves.html

http://www.get-piano-lessons.com/piano-note-chart.html

http://www.thedawstudio.com/Tips/Soundwaves.html

Exceeding the Speed-Of-Light Explained Simply (and the Quantum riddle solved at no extra cost)

It has recently been in the news that some particle may have exceeded the legal speed limit for all things : 299,792,458 metres per second.

Of course, this will probably turn out to be a bad sum somewhere or perhaps waves ganging up, but the whole hubbub has raised my hackles, and here’s why.

Because Albert Einstein at no time said what they say he said (see here for example). They misunderstand relativity! Things can move at any speed we want, and I will try to explain the fuss now.

So let’s get to it!

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First, we have to consider the way space warps when we move.

The problems started when people realised that light always seems to have the same speed, regardless of the speed you were moving when you saw it. This seems to be a contradiction, because surely if you fly into the light ever faster, it will pass you ever faster?

Well the tests were pretty clear, this does not happen. The speed is always c.

For several years, people were unsure why – until they were told by Einstein in 1905. In the meantime, another ponderer of the problem (Lorentz) decided to write down the maths that are required to square the circle.

The so-called Lorentz equations show, unequivocally, that space and/or time need to warp in order for relative speeds of c not to be exceeded, even when two items are going very close to c in opposite directions to one another.

So something needed to give, and it was space and time!

So, newsflash! it was not Einstein that first published on space and time warping. His contribution (along with Henri Poincaré and a few others) was to explain how and why. His special theory showed that because there is no ‘preferred’ frame of reference, a speed limit on light was inevitable. The term ‘relativity’ come from this – basically he said, if everything is relative, nothing can be fixed.

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Ok, so we have some nice observations that nothing seems to go faster than the speed of light  – and we have a nice maths model that allows it. So why do I persist in saying things can go faster than the speed of light?

Let me show you…

There is a critical difference between ‘going’ faster than light and being ‘seen to be going’ faster than the speed of light, and that is where I am going with this.

So lets take this apart by asking how we actually define speed.

If a particle leaves point a and then gets to point b, we can divide the distance by the time taken and get the mean speed (or velocity to be pedantic).

The issue with relativistic speeds are that the clock cannot be in both point a and point b. So we need to do some fancy footwork with the maths to use one or other of the clocks. So far so good. This method will indeed never get a result > c.

The nature of space forbids it – if the Lorentz transformations that work so well are to be taken at face value, then for something to exceed c by this method of measurement, is much the same as a number exceeding infinity.

So all is still well. Until you ask, what about if the clock is the thing that travelled from a to b?

In this case, the transformations cancel! The faster the movement, the slower time goes for the clock, and you will see its ticks slow down, thus allowing its speed to exceed c.

The clock will cover the distance and appear to have tavelled at c on your own (stationary) clock, but the travelling clock will have ticked fewer times!

If you divide the distance by the time on the travelling clock, you see a speed that perfectly matches what you would expect should no limit apply. Indeed, the energy required to create the movement matches that expected from simple Newtonian mechanics.

The key point here is that while the clock travelled, the reader of the clock did not. If you do choose to travel with the clock, you will see it tick at normal speed, and see the limit apply – but see the rest of the universe magically shrink to make it so.

Some have argued that I am not comparing apples with apples, and that by using an observer in a different frame to the clock I am invalidating the logic.

To those who say that, I have to admit this is not done lightly. I have grown more confident that this inference is valid by considering questions such as the twin paradox over and over.

The twin paradox describes how one twin who travels somewhere at high speed and then returns will age less than his (or her) stationary twin.

Now if we consider a  trip to Proxima Centauri (our nearest neighbour) the transformations clearly show that if humans could bear the acceleration required (we can’t) and if we had the means to get to, say, 0.99c for most of the trip, that yes, the round-trip would take over 8 years and no laws would be broken. However the travellers themselves will experience time 7 times slower (7.089 to be precise). Thus they will have aged less than 8 years. So, once they get home and back-calculate their actual personal speed, it will exceed all the live measurements.

This has bothered me endlessly. Although taken for granted in some sci-fi books (the Enders Game saga for example) this clear ‘breakage of the c-limit’ is not discussed openly anywhere.

Still uncertain why people were ignoring this, I read a lot (fun tomes like this one) learned more maths (Riemann rules!) and also started to look at the wider implications of the assertion.

On the one hand, the implications are not dramatic, because instant interstellar communication is still clearly excluded, but that whole issue of needing a 4 years flight to get to Proxima Centauri is just wrong. If we can get closer to c we can indeed go very far into the universe, although our life stories will be strangely punctuated, just as in the Ender books.

But what about the implications for the other big festering boil on the body of theories that is physics today – quantum theory?

Well, if one is bold enough to assert that it is only measurement that is kept below c and not ‘local reality’, then one can allow for infinite speed.

In this scenario, we are saying measurement is simply mapping reality through a sort of hyperbolic lense such that infinity resembles a limit. Modelling space with hyperbolic geometry is really not as unreasonable as all that, I don’t know why we are so hung up on Euclid.

With infinite speed at our disposal, things get really interesting.

We get things like photons arriving at their destination the same tme they leave their source. Crazy of course… but is it?

Have we not heard physicists ask – how is it the photon ‘knows’ which slit is blocked in the famous double slit experiment? It knows because it was  spread out in space all the way from it’s source to it’s final point of absorption.

If you hate infinities and want to stick with Lorentz, you can equally argue that, for the photon, going exactly at c, time would stand still. Either way, the photon feels like it is everywhere en route at once.

If the photon is indeed smeared out, it probably can interfere with itself. Furthermore, it is fitting that what we see is a ‘wave’ when we try to ‘measure’ this thing.

A wave pattern is the sort of thing I would expect to see when cross sectioning something spread in time and space.

Please tell me I’m wrong so I can get back to worrying about something useful. No, don’t tell me – show me – please! 😉

Energy Drink Misinformation

Zero calorie ‘energy’ drinks piss me off. Why?

A zero calorie energy drink is a flat-out contradiction. 

Think about it. What is a calorie? If you don’t know, look it up. Yes, exactly, it is a measure of… energy content! WTF?

What I want to know is this: how come we let big business redefine our language to their own greedy ends? I mean the people who make low-calorie energy drinks know they have no energy in them, so why are they called energy drinks?

I think its because energy is a misunderstood concept and they are taking advantage of this.

Understanding what energy is (and more importantly isn’t) will allow people to more accurately decide things correctly – like whether it’s a good idea to try hike 100 miles across a desert armed only with zero calorie energy drinks.

So for background, please take a look at my article on energy designed for people with too little time to read a whole book, or even a pamplet.

Now, the specific issue here is that people are confusing energy sources with stimulants. Sure, the sugary versions do actually supply some energy, but no more than a can of Coke – but these guys are not charging those absurd prices for sugar – those prices, and claims, are for the drugs. Compounds like caffeine affect our nervous system and interfere with our built-in protection systems, systems that make us feel tired after effort, mechanisms that force us to get the sleep we need in order to rest our muscles and reboot our brains.

The issue here is that the word stimulant is not as easy to sell as ‘energy’, and the English language does allow us to mix up feeling ‘energetic’ with feeling alert and ready for action.  The nerdy scientific truth issue here is that tired people actually still actually have plenty of energy (especially if they are prosperous about the middle) it is just their inclination to use that energy that changes.

So next time you feel tired but need to keep going, by all means get a ‘so-called’ energy drink but remember it is mainly just a drug. The next time you hit a wall 20 miles into a marathon, remember to get some real energy.

 

 

Postscript

So is messing with you body’s tiredness systems bad? Not necessarily! We must also resist overreacting and committing another crime – resorting to the naturalistic fallacy that messing with nature is fundamentally a bad idea. I quite like it when medical science messes with natural things like smallpox and malaria for example. Stimulants are not all bad, keeping alert can keep us safe when driving, and used in moderation can actually help us focus through tedious study or exams.

Confirmation bias: confirmed as bias.

I have this theory that ‘confirmation bias’ is a load of BS, so I looked on the net and found, after careful search, some people who clearly agree with me. Most don’t, but they must be idiots.

:

Air Fresheners Exposed!

Ok, so I know its not a conspiracy to take over the world, but my inner nerd has been provoked.

Have you ever wondered how air fresheners work?

Let’s take a sceptical look.

Nanobot

This cool pic is from hybridmedicalanimation.com

I’d love to think that AirWick / Glade / {insert preferred brand here} consist of an army of nano-bots that round up and deport any molecules without the right paperwork.

Although we aren’t there yet, it’s actually not too far from the truth!

Although many cheap deodorisers do simply mask the truth by overpowering our senses, I really like to give credit where credit is due, so I am happy to disclose that there are indeed certain substances that can detain odours – such as zeolites and silica gels, and there are also organic molecules that will react with a wide array or hydrocarbons rendering them odourless. These ideas are in fact used by several big brands today.

Hurrah!

But that’s not the whole story, is it?

No, because none of that really means the substance (or it’s source) is ‘gone’; all they have done is disabled our ability to detect all that foreign matter around us!

The last time I looked, our sense of smell, just like our sight and hearing, was there to help us survive – to detect when there is something unsavoury in the vicinity and force us to deal with it. If your bed or sofa stinks, you should probably take it outside and try to remove to 5 lbs of skins flakes and  other sundry bodily oozings rather than spray the bed with an extra long burst of febreze.

You wouldn’t season rotten meat in curry then serve it to your in-laws, would you?

Now, to be fair, the purveyors of these products do not intend for you to use their product to allow you to live in filth disguised with the scent of lavender, and their scientists are smart people – however, there marketing departments do need to be brought to book for giving a few misleading impressions.

The world ‘fresh’ for example is used universally. I don’t know about you, but to me this should mean clean, pure and new. It may certainly allow for some sweet floral aroma, but it certainly doesn’t include ‘complex organics we cannot smell’.

Some solutions – like Resolve carpet cleaner, where an absorbent powder is applied liberally then hoovered up, deserve a break – but, as far as I can see there are the exception – most odour control is still in the form of the old “cover up”.

What we have to remember is that in order to claim a product is ‘absorbing’ an odour, one only need prove it absorbs ‘some’ odour – not necessarily the majority and very rarely “all”. Thus it can be that it absorbs 2% of the odour and the other 98% of the odour is still there but overwhelmed by the scent of a pine forest. The same is true with biocidal deodorisers (like Lysol) which may kill bacteria – a common source of odour. These products can actually kill germs – however the impression that a quick spray will effectively sterilise is falsely reassuring.

—-

I sign off now by pointing out that the best way to avoid odours is by good hygiene, though not too good: remember that we humans co-evolved with this slimy little planet!

Parenting: is giving unfair advantage fair when it comes to our kids?

Is equality worth fighting for? Should everyone have the same opportunities in life?

Of course!

Then why is it that so many of us bust our butts to fight for the complete opposite?

Of course, as the title suggests, I am talking about parenting. It seems that while we are happy to claim equality as a goal we work so fervently to create advantage for our kids? When it comes to our little angels, we suddenly forget our high-minded ideals, and act with a favoritism that would be illegal if it were based on colour, religion race or creed.

This may sound like a trivial point when you first think about it, but hold on two ticks and give it a little think.

How will society ever become equal if every parent is hell-bent on giving their kid every advantage they can?

Would I not try to get my kid into the class with the best teacher, or the school with the best record, or the college with the most prestige?

Would I not work hard to pay for ballet classes and piano lessons and school trips to DC and all the things a kid needs in order to be equipped for the high life? Would I not wish for them to inherit a fortune and thriving family business?

How can I compete in a meritocracy with my only aim being to give my kids an advantage in the next leg of the race?

The meritocracy is no meritocracy if you can inherit advantage, and if you can pass on no advantage to your kids, then what is the point of the fight?

It seems the very concept of a fair system where reward is based on individual effort is unstable as we all strive to pass on generational advantage.

It also seems to me that people’s fortunes do not depend on their own merits as individuals, but rather on the merits of their “node” in the web of society – where opportunities depend on connections. As the sayings go – no man is an island and it’s not what you know, but whom.

These realisations suggests to me that equality or even the idea of the meritocracy are mirages – good to aim at, but don’t go too close as they will recede, or worse still, vanish.

Death by KPI. The unintelligent design of the modern company… and what to do about it.

KPI!

A beginner’s guide to KPIs…

Background, Context and all that…

Some of you luckier readers will be wondering what on earth a KPI is. Alas, many of my readers will know, and rarely will they have a happy tale to tell about them. Let me tell you mine.

You see, to me the story of the KPI is none other than the story of the modern trend to remove the human element (that most fallible of elements) from big business. I propose that there has crept up upon us, starting when we came down from the trees and now coming to its final fruition with the industrial revolution, a situation in which the workings of our society, our organisations, governments, armies or companies, are simply too complicated to be designed or managed by any one person, whatever force his or her personality might possess.

No, the time of the one big man, the head honcho, the brain, scheming away in his tower, is over – and we enter the era, nay the epoch, of the human hive.

For now we see that in order to achieve great things, it is the ability to sort and organise mankind, rather than the ability of each man on his own, that matters most.

I could wander from my thesis awhile to describe a few side effects, for example, to point out the age of ‘middle management’ is here to stay, or to philosophize about the world where no one is actually ‘driving’ and the species is wandering like a planchette on a Ouija board and how this explains why no one seems to be able to steer us away from the global warming cliff just ahead…

But no, I will not be pulled off course, I will return to our good friend, the KPI.

So it seems we have these complex organisms, such as the venerable institution that is the company, that have evolved to survive in the ecosystem that is our global economy. Money is the blood, and people, I fancy, are the cells. And just as no particular brain cell commands us, no particular person commands a company. Just as the body divides labour among cells, so does the company among its staff. We train young stem cells into muscle, tendon and nerve. We set great troops of workers to construct fabulous machines to carry our loads just as our own cells crystallize calcium to make our bones.

Having set the scene thus I must move on, for where are the KPIs in all this?

As clever as the cells of our bodies may be, to choose depending on the whims of circumstance to turn to skin or liver or fat, that is but nothing compared with the cleverness with which the cells are orchestrated to make a cohesive body, with purpose and aim,  with hopes and dreams, and of course sometimes even the means to achieve them. And the question is: how is that orchestration achieved?

Being a devout evolutionist, its is clear to me that it was by no design, but rather by the constant failure of all other permutations that led to the fabulously clever arrangement, and so it is with the organism that is the company.

It is this conviction that leads me to claim, contrary to the preaching of many business schools, that good companies are not designed, but evolve, and by a process of largely unconscious selection. Like bacteria on a petri dish, companies live or die on their choices, and by every succeeding generation, the intelligence of these choices is embroidered into the DNA of the company.

Yes, I am saying that the CEO of Microsoft, or Rio Tinto of Pfizer, is no more sure of his company’s recipe for success than any one cell in your brain is at understanding how it came to be that you can read these words. Ok, maybe that is unfair. They probably have a good shot at reproducing success in other companies, but they only understand how the company works, not why.

It is well to remember that very few of the innovations present in a modern successful company were developed within that company – the system of raising money from banks or through a system of stocks and shares, the idea of limiting liability to make these investments more palatable, of development the of modern contract of employment to furnish staff; nay the very idea that a group of people can actually get together and create the legal entity that is the ‘company’ has been developed over centuries.

Even within the typical office we see many innovations essential to run a business that could never have been ‘designed’ better by single mind – the systems to divide labour into departments – finance, marketing, sales, R&D, logistics, customer service; the reporting hierarchies and methods for making decisions; the new employee checklists, the succession plans, the new product stage-gate system, the call-report database, the annual budget, the balance sheet, the P&L – these are all evolved and refined tools that incorporate generations of brain power.

Whether it is the idea of share options or the idea of carbon copies, the list of machinery is endless and forms the unwritten DNA of the modern company. The company of today has little in common with the farmstead of 300 years ago, and indeed, just like the bullet train, it would not work too well if taken back in time 300 years. It only works in its present setting. It is part of a system – an ecosystem.

Now a business tool that has been evolving for some time, slowly morphing to its full and terrible perfection is the Key Performance Indicator or KPI.

The Key Performance Indicator

There is a saying in engineering circles: you cannot improve what you do not measure.

This philosophy accidentally leaked to the business community, probably at Harvard, which seems a great place to monetize wisdom, and so there is presently a fever of ‘measurement’ keeping middle managers in their jobs, and consultants on their yachts.

This sounds reasonable – but let’s pick at it a little.

When the engineer installs a sensor in a reactor to measure its pressure, it is usually just one element in a holistic system of feedback loops that use the measurement in real-time to control inputs to that reactor. Thus we can see that measurements in themselves are not enough, there needs to be an action that is taken that affects the measured property – a feedback loop.

Likewise any action taken in a complex system will tend to have multiple effects and while you may lower the pressure in a reactor, you may raise it somewhere else, thus the consequences of the action need to be understood.

And lastly, if the pressure in the reactor is now right, the value of the knowledge has diminished, and further action will be of no further benefit.

So just like a body, or a machine, a company needs to be measured in order to be controlled and improved, and it occurs to me that these key measurements, the KPIs, need to fulfil a similar set of requirements if they are to be of value.

A few years ago I decided to write a list of KPI must-haves, which I present here:

  1. the property measured must be (or correlate with) a company aim (eg profitability)
  2. measurements need to taken to where they can be interpreted and acted upon, using actions with predictable effects, creating a closed loop
  3. the secondary effects of that action need to be considered
  4. repeat only if the benefits repeat too

Now let’s take a look at some popular KPIs and see if they conform to these requirements.

Production KPIs

There are a multitude of KPIs used the ‘shop floor’ of any enterprise, be it a toothpick factory, a bus company, a florist or a newspaper press. Some will relate to machines – up-time metrics, % on time, energy usage, product yield, shelf life, stock turns – indeed far too many to cover here, so I will pick one of my favourites.

Availability” is a percentage measure of the fraction of time your machine (or factory or employee) is able to ‘produce’ or function. If you have a goose that lays golden eggs, then it is clear that ‘egg laying activity’ will correlate with profits, so point #1 above is satisfied, and measuring the egg laying frequency is potentially worth doing. If you then discover that your goose does not lay eggs during football matches you may consider methods to treat this, such as cancelling the cable subscription. A few trials can be performed to determine if the interference is effective, proving #2. Now all you need to do is worry about point #3; will the goose fly away in disgust at the new policy?

What about #4? Indeed you may get no further benefit if you continue to painstakingly record every laying event ad infinitum. KPIs cost time and money – they need to keep paying their way and may often be best as one-off measures; however, what if your goose starts to use the x-box?

So that is an example of when the KPI ‘availability’ may be worth monitoring, as observing trends may highlight causes for problems and allow future intervention. So surely availability of equipment is a must-have for every business!?

No. There are many times when plant availability is a pointless measure. Consider for example an oversized machine that can produce a year’s supply in 8 minutes flat. So long as it is available for 8 minutes each year, it does not matter much if it is available 360 days or 365 days. Likewise, if you cannot supply the machine with raw materials, or cannot sell all the product it makes, it will have forced idle time and availability is suddenly unimportant.

The simplest way to narrow down which machines will benefit from an availability or capacity KPI is to ask: is the machine is a bottleneck?.

For other types of issues, let’s look at some other KPIs.

Quality KPIs

Quality KPIs are interesting. Clearly, it is preferable to ship good products and have happy customers. Or is it?

In any production process, or indeed in any service industry, mistakes will be made. Food will spoil, packaging will tear, bits will be left out. It is now fashionable to practice a slew of systems designed to minimise these effects: to detect errors when they are made, to re-check products before they are shipped, to collect and collate customer complaints and to feed all this info back into an ever tightening feedback loop called ‘continuous improvement‘.

KPIs are core to this process and indeed KPIs were being used in these systems long before the acronym KPI became de rigueur. To the quality community, a KPI is simply a statistic which requires optimization. The word ‘Key’ in KPI not only suggests it represents a ‘distillation’ of other numerous and complex statistics, but implies that the optimising of this particular number would ‘unlock’ the door to a complex improvement.

Thus, a complex system is reduced to a few numbers, and if we can improve those numbers, then all will be well. This allows one to sleep at night without suffering  nightmares inspired by the complexity of one’s job.

The reject rate is a common quality KPI – it may encompass many reasons for rejection, but is a simple number or percentage. It is clearly good to minimize rejects (requirement #1) and observing when reject rates rise may help direct investigations into the cause thereof satisfying requirement #2.

However, from rule #2 we see that this KPI is only worth measuring if there will be follow-up: analysis and corrective action. This must not be taken for granted. I have visited many plants that monitor reject and when asked why, they report that head office wants to know. What a shame. Perhaps head office will react by closing that factory some time soon.

The failure to use KPIs for what they are intended is perhaps their most common failure.

Another quality KPI is the complaint rate. Again, we make the assumption that complaints are bad, and so if we wish to reduce these we should monitor them.

Hold the boat. How does the complaint rate fit in with company aims? We already know that mistakes happen, but eliminating quality issues is a game of diminishing returns, so rather than doggedly aiming for ‘zero defect’ we need to determine what complaint rate really is acceptable.

So here is another common KPI trap. Some KPIs are impossible to perfect, and it is a mistake to set the target at perfection. Think of your local train service. Is it really possible for a train system to run on time, all the time? The answer is an emphatic no!

The number of uncontrolled inputs into a public transit system – the weather, the passengers, strike actions, power outages and the like will all cause delays, and while train systems can allow more buffer time between scheduled stops to cater to such issues, this type of action actually dilutes other aspects of service quality (journey frequency and duration). Add to that finally the fact that a train cannot run early so losses cannot be recovered.

The transport company will of course work to prevent delays before they occur, and lay on contingency plans (spare trains) to reduce impacts, but the costs and practicality mean that any real and meaningful approach needs to accept a certain amount of delays will be inevitable. A train company could spend their entire annual profit into punctuality and they would still fall short of perfection.

So it is with most quality issues, the law of diminishing returns is the law of the land. Thus the real challenge is to determine at what point quality and service issues actually start to have an impact on sales and cashflow. This is another common pitfall of the KPI…

The correlation between the KPI and profitability is rarely a simple positive one, especially at the limits.

Some companies get no complaints. Is this good? No, often it is not! This company may be spending too much money on QC. The solution here is to work with and understand the customer – what issues would they tolerate and how often? If you did lose some customers by cutting quality, would the financial impact be greater than the savings?

However, and on the other hand, don’t make the opposite mistake: once a reputation for poor quality is earned, it is nearly impossible to shake.

Financial KPIs

As companies become bigger, there is a tendency to divide tasks according to specialized skill and training. Thus it can happen that the management of a big mining company may never set foot in a mine, may not know what their minerals look like, nor may they know how to actually dig them up or how to make them into anything useful. In other words, they would be useless team members after a nuclear apocalypse.

However, this is no different from our brain which is little use at growing hair, digesting fat or kicking footballs.

It is thus necessary that the organism (the company) develops a system to map in a flow of information from its body to its mind and then another mapping to take the decisions made in that mind and distribute them to the required points of action.

Indeed to blast in a quarry, or to kick the football are indeed best done by organs trained and capable and no less important than the remote commanders in the sequence of events.

And just as our bodies have nerves to transmit information about the position of our lips and the temperature of the tea to our mind, so the company has memos, telephones and meetings. And KPIs are the nouns and subjects in the language used.

Furthermore, some KPIs need to be further distilled and translated from the language of the engineer (Cpk), the quality manager (reject rate) or the plant manager (units shipped) to that of the accountant (revenue) , the controller (gross margin) and eventually that of the general manager and the shareholder (ROI). This is perhaps the main duty of middle management, bless their cotton socks.

Unfortunately, the mapping of everyday activities to financial KPIs is fraught with danger. The biggest concern comes from the multiple translation issue. That is to say, KPIs can suffer from a case of Chinese whispers, losing their true meaning along the way, resulting in the worse result: a perverse incentive.

Yes, ladies and gentlemen, this does happen.

Let’s say you want to improve your cash situation. You may choose to change the terms in your sales contracts for faster payment, in essence reducing the credit you allow your customers. This may have the desired effect, lowering the KPI  called “receivables” and this looks good on the balance sheet – but let’s look at requirement #3 in the KPI “must have” list. What are the ripple effects of this move? It is clear this will not suit some of your customers, who, considering recent economic trends, probably also want to improve their cash situation; thus you may lose customers to a competitor willing to offer better terms.

And so we see the clear reason for perverse incentives is the consideration of KPIs individually instead of collectively. There has to be a hierarchy upon which to play KPIs against one another. Is revenue more important than margin? Is on-time shipping a part-load preferable to shipping “in full” a little late?

So we see again that the systems used to distill company indicators the choice of which decisions are centralized and which are localized need to be developed and constantly refined using an iterative process. The art of translating the will of shareholders into a charter or mission statement and then translating that into targets for sales, service and sustainability is a task far too complex to perfect at first attempt.

KPI Epic Fails

While on the subject of KPIs I cannot resist the opportunity to bring to mind a few fun examples of KPIs gone badly wrong.

The Great Hanoi Rat Massacre

The French administration in Hanoi (Vietnam) were very troubled by the rat population in Hanoi around the start of the last century, and knowing as they did about rat’s implication in the transmission of the plague, set about to control the population. A simple KPI was set – “number killed” and payments were made to the killers on this basis. There was immediate success with rats being brought in by the thousand and then the tens of thousand per day. The administration was pleased though somewhat surprised by the sheer number. There surprise gradually transformed into disbelief as time wore on and the numbers failed to recede.

You guessed it. The innovative residents of Hanoi had started to breed rats.

The Magic Disappearing Waiting List

Here’s a more recent example from the National Health Service in the UK (the NHS).

A health service is not there to make a profit, it is there to help the population, to repair limbs, to ease suffering, to improve the length and quality of life – and to do this as best it can on a finite budget. So the decisions on where to invest are made with painstaking care – and needless to say, KPIs are involved. Not only big picture KPIs like life-expectancy, or cancer 5-year survival rates, but also on service aspects, such as operation or consultation waiting times.

It will therefore not be surprising to you to learn that the NHS middle management started to measure waiting times and develop incentives to bring these down, or even eliminate them. This sounds very reasonable, does it not?

Now ask yourself, how do you measure a waiting time? Say a surgery offers 30 minute slots – you may drop in and wait for a vacant slot, but as the wait may exceed a few hours it is just as well to book a slot some time in the future and come back then. So one way to measure waiting times is to measure the mean time between the call and the appointment. This of course neglects to capture the fact that some patients do no actually mind the wait and indeed may choose an appointment in two weeks time for their own convenience rather than due to a lack of available slots. Lets put that fatal weakness aside for the minute as I have not yet got to the amusing part.

After measurements had been made for some time, and much media attention had been paid to waiting times, the thumb-screws were turned and surgeries were being incentivized to cut down the times, with the assumption they would work longer hours, or perhaps create clever ‘drop-in’ hours each morning or similar.

Pretty soon however, the results started coming in, the waiting times as some surgeries were plummeting! Terrific news! How were they doing it?

Simple: they simply refused to take future appointments. They had told their patients: call each morning, and the first callers will get the slots for that day. This new system meant nobody officially waited more than a day. Brilliant! Of course it is doubtful the patients all felt that way.

How The Crime Went Up When It Went Down

If you work for the police, you will be painfully aware that measuring crime is difficult. And so it is with the measurement of many ‘bad’ things – for example medical misdiagnoses or industrial safety incidents.

Let’s look at workplace safety; while it may be fairly easy to count how many of your staff have been seriously injured at work, it is much harder to record faithfully the less serious safety incidents – or more specifically, the ones that might have been serious, but for reasons of sheer luck, were not. The so-called ‘near-misses’.

Now to the problem. Let us say you are a fork-lift driver in a warehouse and one day, it a moment of inattention, you knock over a tower of heavy crates. Luckily, no-one was around and more luckily, no damage was done. So what do you do? Do you immediately go to the bad-tempered foreman with whom you do not get along and tell him you nearly killed someone and worse, nearly caused him a lot of extra work? Or do you carefully stack the crates again and go home for dinner?

The police suffer a similar predicament. The reporting of a crime is often the last thing someone wants to do, especially if they are the criminal. Now let’s say you are an enterprising young administrator just starting out in the honourable role as a crime analyst at the Met. You want to tackle crime statistics in order to ensure the most efficient allocation of funds to the challenges most deserving thereof. Do bobbies on the beat pay for themselves with proportionately reduced crime? Does the ‘no broken windows‘ policy really work? Does the fear of capital punishment really burn hot in the mind of someone bent on murderous revenge? Such are the important questions you would wish to answer and you have a budget to tackle it. What do you do?

You set out to gather statistics of course, and then to develop those tricky little things, the KPIs.

Now let’s say a few years pass, and after some success, you are promoted a few times and your budget is increased. Yay! You have always wished for more money to get more accurate data! Another few months later and the news editors are aghast with the force. Crime is up! Blame the police – no, blame to left – no blame the right! Blame the media! It’s video games – no, it’s the school system!

No, actually it’s a change in the baseline.  The number of crimes recorded most likely went up because the effort in recording them went up. The crime rate itself may well have gone down.

The opposite can also happen. Say you run a coal mine and you will be given a huge bonus if you can get through the year with a certain level of near misses. Will you really pressure your team to report every little thing? I think not.

So the lesson here is: watch out for a KPI where you want the number to go one way to achieve your longer term aims, but where the number will also depend on measurement effort.

The Profit Myth

Most KPIs are dead dull. The very mention of KPIs will elicit groans and be followed swiftly by a short nap. The ‘volume of sales’ KPI is no different. The issue with the volume KPI is probably made worse by the clear fact that actually thinking about KPIs is a strong sedative. Surely selling more is good? Well, if you can fight through the fog of apathy, and actually think about this for a second, it is easy to see this is often not so.

To see why, it is important to understand price elasticity. It if often true that lowering price will increase sales, so an easy way to achieve a target ‘volume’ (number) of sales is to drop price. That way to can make your volume KPI look good, as well as your revenue KPI, and so long as there is still a positive margin on all the units sold your earnings KPI (aka profit!) will see upside. There can’t possibly be any downside, can there?

Of course, astute financial types can find this fault easily, and perhaps the question of ‘how’ would make a good one for a job interview. It turns out more profit is not always good (seriously!). Whether more profit is really worth taking depends on the ratio of the increased earnings to the increased investment that is needed to make them.

There is another KPI I mentioned earlier the “ROI” or return on investment. When I discussed it I implied that it was only of interest at the GM level, but really the reason only the GM tends to see this KPI is because it is difficult to calculate, and often only the GM has the clout to get it – but it should be considered by all. To me, it is the king of KPIs for a publicly listed company. And it turns out the ROI may actually go down with increasing profit.

If making more widgets requires no further investment, then the maths is easy, but that is rarely true.

The question is this: is it better to have a large ‘average’ business or a smaller one with higher profit margins? It turns out, from an investor’s perspective, that the latter is fundamentally preferable.

The ROI treats a business a bit like a bank account: asking what interest rate does it offer? The business should be run to give the highest interest rate‘(%), not the highest interest ($). It is always possible to get more interest from a bank account – just put more money in the bank.

Translating a Mission Statement into company KPIs

I mentioned above that the ROI is a pretty darn good KPI – so can we use it alone? Of course not. Recall that the KPIs are mere numbers we measure that try to tell us how we are doing against the company mission statement, and while the company mission statement may unashamedly describe vast profits as a goal, this is almost universally not the whole story.

The organism that is the modern company has one particular need besides profit today, and that is profit tomorrow. The ROI does not capture this need, so more KPIs are required, and trickier ones – ones that capture sustainability, morale, innovation and reputation (brand value). This is the turf of the mission statement.

Even though the more cynical of my readers will know the mission is usually ‘make lots of dosh’, and anything beyond that is window dressing, I would venture that the mission statement is the first step to figuring out which KPIs to put first.

Let’s dissect a few examples. In my own 2-minute analysis I decided they fall into four types:

  1. To appeal to employees:
    McGraw Hill:
    We are dedicated to creating a workplace that respects and values people from diverse backgrounds and enables all employees to do their best work. It is an inclusive environment where the unique combination of talents, experiences, and perspectives of each employee makes our business success possible. Respecting the individual means ensuring that the workplace is free of discrimination and harassment. Our commitment to equal employment and diversity is a global one as we serve customers and employ people around the world. We see it as a business imperative that is essential to thriving in a competitive global marketplace.
  2. To appeal to customers (aka the unabashed PR stunt)
    A recent one from BP:
    In all our activities we seek to display some unchanging, fundamental qualities – integrity, honest dealing, treating everyone with respect and dignity, striving for mutual advantage and contributing to human progress.
    I couldn’t leave this one out from Mattel:
    Mattel makes a difference in the global community by effectively serving children in need . Partnering with charitable organizations dedicated to directly serving children, Mattel creates joy through the Mattel Children’s Foundation, product donations, grant making and the work of employee volunteers. We also enrich the lives of Mattel employees by identifying diverse volunteer opportunities and supporting their personal contributions through the matching gifts program.
  3. To appeal to investors. This is usually a description of how they are different or what they will do differently in order to achieve big dosh.
    CVS:
    We will be the easiest pharmacy retailer for customers to use.
    Walt Disney:
    The mission of The Walt Disney Company is to be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world.
  4. For the sake of it – some companies clearly just made one up because they thought they had to, and obviously bought a book on writing mission statements:
    American Standard’s mission is to “Be the best in the eyes of our customers, employees and shareholders.”

Now a great trick when analysing the statement of any politician, and thus any mission statement, is to see if a statement of the opposite is absurd. In other words, if a politician says “I want better schools”, the opposite would be that he or she wants worse schools, which is clearly absurd. Thus the original statement has no real content, it is merely a statement of what everyone would want, including the politician’s competitors. Thus to judge a politician, or a mission statement, it is important to look not at what they say, but at what they say differently from the rest.

Mission statements seem rather prone to falling into the trap of stating the blindingly obvious, and as a result become trivial, defeating the point. Such is the case with American Standard. Of course you want to be the best. And of course it is your customers, employees and shareholders who you want to convince. Well no kidding!

So discounting those, we can see that a good mission statement will focus on difference. If we look at CVS, their mission is to be easy to use. This may seem like a statement of the obvious, but I don’t think it is – because they have identified a strategy they think will get them market share. Now they can design KPIs to measure ease of use. This is the sort of thinking that led to innovations like the ‘drive-thru’ pharmacy.

If we look at Disney, you can go further. “…[To] be one of the world’s leading producers and providers of entertainment…” OK, so they admit being #1 is unrealistic, and if you want to be taken seriously, you need to be realistic. But if you are one of many, how do you shine? “Using our portfolio of brands to differentiate” They realise they can sell a bit of plastic shaped like a mouse for a lot more than anyone else can. There is a hidden nod to the importance of brand protection. So KPIs for market share and brand awareness fall right out. They finish off with “the most creative, innovative and profitable entertainment” Well you can’t blame them for that.

Very rarely, you see a mission statement that not only shows how the company intends to make money, but may also inspire and make pretty decent PR. I like this one from ADM:

To unlock the potential of nature to improve the quality of life.

I have no idea how to get a KPI from that though!

Summary

In this article I have tried to illustrate how measuring a KPI is much like taking the pulse of a body – it’s a one-off health check, yes, but more importantly it can be a longer term measurement of how your interventions are affecting company fitness in the longer term.

I also try to describe some common pitfalls in the use of KPIs and presented four simple tests of their value:

  1. the KPI must correlate to a company’s mission
  2. the KPI must form part of a corrective feedback loop
  3. perverse incentives can be avoided by never considering any single KPI in isolation
  4. repeat the treatment only if the benefits repeat too

I have personally used this checklist (with a few refinements) over the years to some good effect in my own industry (minerals & materials) and though I am confident many of my readers will have more refined methods, I live in hope that at least one idea here will of benefit to you.

Reality: a hard sell

I can’t help but wonder if doggedly debunking all spewings from the purveyors of woo is somewhat a fool’s errand.

There are a number of pseudo-scientific disciplines whose concepts are inherently highly attractive and contagious to the average Joe, saying things that make him feel good and making him want to pass on the good news. Think of how easy to sell these messages are:

  • organic food – frolicking chickens, steaming compost, happy farmers, healthy food – a return to basics, back to a purer time when humans actually had roots in the earth and cared for it; you too can go organic!
  • complimentary medicine – age-old wisdom, so long suppressed by big pharma is unlocked just for those open-minded enough to look. Are you open-minded! Yes? Here are your keys to healthy prosperity!
  • astrology – our fates, entwined with the universe, form a beautiful unity; enigmatic scholars have acted custodian to its cipher through the ages. Are you a spiritual soul? You too can share time’s secrets!
  • parapsychology – our minds are more powerful than science knows, and we all have potential beyond our wildest dreams! But hold on! Only those willing to break free from the trappings of conventional science will ever see the light…
  • and of course the big kahuna, religion – imagine for a minute the greatest most wonderful thing in all the world, and that is but nothing compared with the joys that await the believer, and for all eternity too!

It is little wonder the bible I had as a kid said “Good News” on the cover.

The issue is that the logical shredding of these pieces is often a sobering dose of reality that fills most people with instant sleepiness:

  • organic food is not always kinder to the planet and claimed health benefits are of the ‘hard to verify’ sort
  • alternative medicine actually does work, but only the level one would expect from getting time, care, attention and the placebo effect
  • the laws of physics do allow marvellous things (x-rays, computers, holograms) but it takes serious study to understand why they don’t allow for the positions of stars and planets to have predictable effects of the day-to-day ongoings in suburbia.
  • the mind is indeed fabulously clever and poorly understood, but those tedious laws of physics, and indeed dry, cold logic, are annoyingly sticky when it comes to clairvoyance, ESP, psychokinesis and precognition.

So YAWN! Boring!! Logic and analysis mean effort, work, thinking things through, totting up totals, cross-checking claims, testing, questioning and doubting. Pretty much the opposite of nice & easy. Accepting we are not all-powerful, we are not immortal and that we will all be forgotten someday is just no fun. These are not messages that will go viral, that will breed missionaries, that would generate a manic fervour. More like manic depression.

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So the deck is stacked. Pseudo-scientific ideas persist because they are tenacious memes, and they are almost impossible to kill. They are contagious and sticky, and lovely and easy, and fighting them off requires not just the will, but also the ammunition.

And that is why it worthwhile to continue to fight the good fight – to keep trying to debunk poor thinking – to provide the ammunition to that small number, those that may be on their own, surrounded by superstition, but with that gift in their heart that is that first inkling of doubt.

I will do it for those that think they are alone as I once did.

We live in a time of unprecedented opportunity – people have better access than ever to the tools to arm themselves to achieve a new sort of ideal: to make life choices with full access to all the facts. We are after all free to choose to believe anything, the problem only comes when we are not given the choice. No information, no balance, no choice.

Hysteresis Explained

Hysteresis (hiss-ter-ee-sis). Lovely word. But what on earth does it mean?

Hysteresis is one of those typically jargonny words used by scientists that instantly renders the entire sentence if not lecture lost on its audience. Sure, you can look it up on wikipedia, but you may die of boredom before you get to the point, so I am going to explain it here.

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Hysteresis on the way to school

Let’s go for a walk. Let’s say we are ten years old and we are walking to school. The route is simple. The school is a few hundred yards down the hill on the other side of the road. Now consider the question: at what stage do we cross the road? Immediately? Or do we walk all the way to opposite the school before crossing – or somewhere between?

Assuming there are no ‘official’ crossing points, I bet you cross immediately, then walk down the far side of the road.

How can I make this prediction? Well, I assume that crossing the road requires there to be no traffic, so if there is no traffic as you start the journey, it is a good time to cross. If there is traffic, you just start walking down the road until a gap appears, then you cross. This strategy allows you to cross without losing any time. If your strategy had been to cross at the school there is a real risk you will need to wait, thus losing time. So it turns out the best strategy to avoid any waiting is to cross as soon as you can.

So now picture your walk home. Again, it makes sense to cross early on. The result is that the best route to school is not the same as the best route from school. This is an example of hysteresis – or a ‘path dependent phenomena’.

Hysteresis  everywhere

The dictionary will drone on about magnetism and capacitance and imaginary numbers. A much nicer example is melting and freezing of materials – some substances actually melt and freeze at different temperatures. This shows that the answer to the question: “is X a solid at temperature Y?” actually depends – on the path taken to that temperature. Just like what side of the road you are halfway between home and school will depend on whether you are coming or going.

It seems to me that falling asleep and waking up also bear some of the hallmarks of hysteresis; although they could be considered a simple state change in opposite directions, they feel very different to me – I  seem to drift to sleep, but tend to wake to alertness rather suddenly.

Now think of a golf club in mid swing. As the golfer swings, the head of the club lags behind the shaft. If the golfer where to swing in reverse, the club head would lag in the other direction – thus, you can  tell the direction of movement from a still photograph. We can therefore say the shape of a golf club exhibits hysteresis – and again you see see why it is so-called “path dependent”.

This logic can be taken further still – wetting is not the opposite of drying and likewise heating is rarely the inverse of of cooling. Let’s imagine for example that you want to make a chicken pie warm on the inside and cool on the outside. This is best done by warming the whole pie and then letting it cool a little. The temperature ‘profile’ inside your pie thus depends not only on the recent temperature but has a complex relationship with its more distant temperature history. This particular point is somewhat salient at the moment as we ask the question: is the earth heating up? 

So what?

Good question. I’m not a fan of jargon, and hysteresis is not a word I hope to need to use in my smalltalk. However, you can see that it encapsulates a rather specific and increasingly important concept that is pretty hard to replace with two or three simpler words; thus it passes my test of “words a scientist should understand that most don’t”. Please let me know your own additions to such a list!