Three Brain Topics: Biology, Cause and Effect, and Love

I occasionally skew a little off topic on this blog and write about the brain. It fascinates me. Plus I try to validate those entries by somehow connecting them to education

The Whole Brain Catalog is a great movie of the inner workings of the brain. The music is great too, especially as it shows an electrical pulse crossing a synapse. The point of the movie is to show the great value in connecting the different researchers together and share what they have about the mouse brain. Together they can accelerate the knowledge base.


Tonight I did an experiment. I asked my two year old to say “EEEE” to see what would happen. She smiled. Olivia Judson of the Wild Side writes about the affects different sounds has on us. The sound “eeee” causes the corners of the mouth to curl up slightly, which is very much like a smile. Well, there is something in the brain that enjoys smiling, so sounds like “eeee” inevitable lead to smiling… at least in the English language. Judson is curious about other languages as well. Here’s an excerpt:

But here’s what interests me. As anyone who has tried to learn a foreign language will know, different languages make you move your face in different ways. For instance, some languages contain many sounds that are forward in the mouth; others take place more in the throat.What’s more, the effects that different languages have on the movements of the face are substantial. Babies can tell the difference among languages based on the speaker’s mouth movements alone. So can computers.

Which made me wonder: do some languages contain an intrinsic bias towards pulling happy faces? In other words, do some languages predispose — in a subtle way — their speakers to be merrier than the speakers of other languages?


My third entry is more philosophical in nature. The video below is about a 6 year old girl.


As we learn about the brain and see the synapses, we will never understand things as precious as these notes. Her enduring love for her parents motivated her to do something that is only explainable by an emotion – love.

Extension Cords, Cash Flow, and Entrepreneurship

The NY Times has a blog called You’re the Boss. It’s an entrepreneurship based blog. What I like about it most is it’s practicality. For instance, anytime you read about what the pitfalls of small businesses and start ups are the list always starts with cash flow. It is the life blood of any company, but especially those with limited credit profiles. But in the entry titled Eleven Easy Ways to Destroy Your Company by Jay Goltz the number one answer is extension cords. Number two is receivables (cash flow). I recommend the entry and the comments too. Here is an excerpt:

1. The lowly extension cord. People get cold feet.They get a space heater. They plug it into a two-pronged extension cord. They forget to unplug it when they leave work. That night, while you are sleeping, your entire business burns down. Your brilliant marketing plan, your three-year projections, all of your records, your new product samples … . You get the idea. This is not something that most business owners think about, but insurance companies know that extension cords and space heaters are major fire hazards. It is good practice not to allow any extension cords in your business that aren’t three-pronged.

2. Bad receivables. Let’s assume that you are using good judgment as to which customers get credit and how much. Even so,it is very easy to get into a business-life-threatening situation because of a big customer that goes broke. Months before the bankruptcy filing, the following statements will be made to you: “I’m not going anywhere. We’ve been short on cash before, and we always come out of it. You have my personal word.” And you will respond: “We’ve been doing business together for 30 years. I’m not worried about it.” Bad things happen to good people. Good and honest intentions do not always result in getting paid. It is very painful and difficult to cut off an old customer, especially when you need the business. But many companies go broke because of bad receivables.

8. Insurance. I asked my insurance broker what the three biggest small-business insurance failings were. His response: 1)understating insurance to value; 2) not having employment-practices insurance; 3) not having business-income replacement coverage to replace lost revenue until the company is up and running again. It isno secret that the insurance companies are in a much bigger hurry to settle a claim when they are paying out money every week to replace that income.

9. The wrong accountant. Many accountants just do tax returns and are not qualified to act as an outside voice and keep an eye on the health of the company. I have seen more than one company fail because the owners didn’t know what they didn’t know.

Working Thoughts 10/28/08
For Some People Climbing the Corporate Ladder is the Goal

Using a Multiple as a Compensation Distribution Model

The US Federal Government has a person called the Pay Czar. In the wake of the financial turmoil of the last 18 months, there has been a justified interest in making compensation fair. How is it possible for companies that needed a bailout to survive are able to pay a bonus? Tax payer money shouldn’t be used for compensation. As a result, the Pay Czar has capped pay at the firms that needed bail out money.

I don’t agree with this tactic. The obvious recourse is that if you want these companies to rebound then you need good people to make that happen. By capping their pay, you are signaling to the talented employee to leave the industry. This could create a vacuum of talent. Another aspect to this discussion is the idea of “bonus.” A bonus to most people is the extra left over after a good period. But in banking, the term “bonus” is really a stand in for variable pay. It isn’t the extra left over at all.

What I was hoping to see come from this was a compensation distribution model where the top tier couldn’t make a certain multiple more than the lowest employee. I find this important because the current model makes it seem like certain performers are doing it single handedly. Just about all people who are successful are that way because of a great support structure. When you take someone out of a situation where they excelled and drop them into another situation, rarely do they achieve the same heights.

For the sake of the US economy, having a compensation distribution model of something like a 150 multiple cap would be great. Suppose someone at the bottom of the company makes a yearly income of $24,000. If you cap the highest person at a 150 times that number then that means they are paid $3,600,000. That is still a lot of money, but if they want to make more then they have to raise the tide for everyone. For instance, if this same executive wanted to make $4,000,000 then the lowest paid employee would have to earn $26,666. As the pay at the top is slowed, the pay in the middle and bottom swells. This is because of the sheer number of people at a slightly higher pay grade. These same people would buy more goods and services, as well as be taxed on this improved income.

Unfortunately, what we got was a knee jerk reaction. And the people being punished are the same people we want to lead. We should have focused on broad reform and not a bullying.

Working Thoughts 10/23/08
Privilege is a distinction that each of us can decide to enjoy or not

Working Thoughts 10/23/07
Does College have a Future?

US Values have Changed, but the Change is Subtle

I had an ah-ha moment this weekend. I was reading a recent Wired magazine I got in the mail and it has an article about products and services being simply good enough. Its called the Good Enough Revolution.

Here’s the premise: people don’t want complicated, jack of all trades gadgets and gizmos. They want easy to use, accessible, and cheap. And here is where the value part comes in, they are willing to deal with imperfection if those parts of the offering are taken care of. That isn’t a remarkable overview, smart businessmen have been saying that for a long time. However, knowing that and having the convictions to follow through on it are not the same thing. Just go to Best Buy and look at the number of printers, cameras, and phones. There are high end products, mid tier options, and low end.

In the recent past, companies tried to do two things – exceed customer service expectations and delight. These often went hand in hand. But many companies are now doing analysis of what it costs to do these two things and they are coming away with the strategy to cut ties with expensive customers or not even bothering to go after the segment in the first place. It just costs too much to keep these customers happy. But a hypothesis evolved: these same customers are the ones buying in the mid tier.

I noted in this blog in October of ’07 the change in consumer spending. I titled the post Peanut Butter and Pasta. Well, this change in spending was inevitable, but no one was quite sure what the long term impact would be on the US consumer. At first there was a observation of a new dawn of savings. Savings are up, that is true, but thrift isn’t a lasting characteristic. The 1990s gave everyone a taste of the good life, now there’s no going back. People just want to make sure they are covered if something bad happens – in the near term. Plus, high inflation is going to make saving a bad deal in a few years (unless interest rates and CDs go up in value).

The real change is in what people will buy. Consumers will spend, if the product or service is straightforward, cheap, and a problem solver or if its a luxurious item. The mid tier offering is now economically obsolete.

Consider the success of the Flip camcorder, the Redbox DVD rental system, and flu shots in airports. If someone wants to record their child’s first steps, get a movie while picking up milk, become vaccinated while waiting a flight, it is available to them. But to be successful the design has to be right. Less is more. The iPhone is a masterpiece in design. It’s sales are through the roof and it’s a luxury item. It’s more than good enough, but you pay for it.

As the US slowly moves out of the recession, the rebound will benefit offerings that are cheap, accessible, and easy to use. People are now impressed with simple and that’s good enough.

Working Thoughts 10/21/08
The Next Stimulus Package Must be a Job Creator

Education, Games, and Peer Learning

I was on this weekend looking at some reading material and in my recommendation area pops up Drive: The Surprising Truth About What Motivates Us from Dan Pink. It’s out toward the end of December. That visual prompt made me bop over to Dan Pink’s website, just to see what’s up. There are several good entries on the blog but one really pulled me in. It’s a video of James Paul Gee, a professor at Arizona State.

A program called Edutopia asked him to speak on several topics on the future of education. He describes many of the ideas that I run through this blog: kids aren’t necessarily falling behind in education, reading and writing are increasing, and adjustments can reap huge returns (the kids are ready for it). But Edutopia was new to me. It’s a George Lucas (Star Wars fame) foundation which provides many great resources to teachers and students. I’ll check it some more and share any unique ideas. In the interim, check out this video of James Paul Gee.

President Obama, Leverage, and Energy Decisions

The US energy policies that get the most attention tend to be the ones related to the auto industry. There are others, but it makes sense because everyone can relate to paying for gas. I mean, who hasn’t coasted down a hill with their gas tank indicator well past E?

Energy is one of the four areas I see as the future of the US economy (Health Care, Information, and People are the others) so I pay attention to different developments that occur. President Obama during the campaign to be elected was a big proponent of renewable energy and improving the market for such technologies. Since the election though, he’s been deal making to get health care reform passed. The biproduct of this deal making is satisfying states with many coal ties. Coal, as much as oil, has a lot to loose with renewables becoming a market force.

I was delighted to see an article on called Will Obama bypass Congress on climate rules? by Maha Atal. The President has been acting as if he’s still a Senator with limited leverage. As the President he’s in a position of power for negotiations. What he needs to think about is how to not take advantage of that position. President Bush (43) did a great job of getting his ideas through and he didn’t enjoy the advantages that President Obama has.

Back to the article, President Obama has indicated to Congress that he will use his agencies, specifically the EPA, to institute regulation standards if Congress isn’t able to get their act together. Here’s an excerpt about how the EPA will handle Green House gases:

The agency’s first target as it moves towards that future? Detroit.Under the new guidelines, by 2016 automakers must reduce their fleet’s average emissions-per-mile to 250 grams. This is in addition to the familiar fuel-mileage standards set by the National Highway Safety and Transportation Authority (NHTSA).

Since there are about 9,000grams of CO2 produced by burning each gallon of gas, automakers will be able to hit the EPA’s requirements in 2016 simply by raising fuel economy to the 35 miles per gallon levels NHTSA has already ordered for the same time period.

So meeting that 2016 deadline won’t be too challenging. But after 2016 something interesting happens. With conventional gasoline technology, improvements in fuel economy move in lockstep with drops in emissions.

But conventional technology maxes out 35 mpg, which means getting lower CO2 emissions beyond thatpoint will require new technologies like electrics, hydrogen fuel cells or biofuels.

If I’m an auto industry engineer and an innovator, these last two lines are where I see $$, a new market for products and more importantly services. These areas will require knowledge workers as well as blue collar workers. If Congress wants to protect coal and oil, it is losing a great opportunity to develop markets. And it isn’t an either/or proposition.

Working Thoughts 10/14/08
Waiting in Line will Prevent another Great Depression

Nobel Prize for Economics

My last entry was about how transaction costs and some organizational forces are causing my job of changing a work environment very difficult. The reason is that the change will incur costs, and not one time change costs either. These costs will be ongoing. And even though its true, the costs on the other side of the exchange will be significantly less. I need to emphasize this discrepancy in the communication channels, so the decision making includes the real costs.

And it is this decision making that is so interesting. All kinds of financial analysis is performed between option A and option B and comparative tests, but often is the case that the answer is predetermined or it doesn’t factor in some of the harder to measure nuances. People have complex jobs and making decisions is tough. I’m not surprised when simplification occurs.

Peter Tingling of Octothorpe Software reached out to me this weekend. He has a startup that helps in the decision making process. I’m going to read some of his work and probably talk about it some in the future. Coincidently, as he and I are thinking about these costs, the Nobel committee for economics gives out the 2009 prize to Elinor Ostrom, the first woman to receive the prize, and to Oliver E. Williamson. Williamson has written several papers on transactions costs and how organizations deal with them. I’m very intrigued and I will pursue his ideas.

So Congratulations to Oliver E. Williamson and Elinor Ostrom. And Thank You.

When Something is Cheap, but Really Expensive

My day job has me thinking a lot about costs lately. That probably isn’t a shock to anyone. But I’m not talking about cost of goods sold or the price of tea in China. I’m talking about transaction costs. These are the costs of conducting an exchange.Wikipedia says there are three main ones:

  • Search Cost – The effort required to find and validate the good or service is available on the market and at a price.
  • Negotiation Cost – The effort required to agree to terms of a deal or contract.
  • Agreement Enforcement Cost – The effort required to ensure the parameters established in the contract are adhered to.

In my day job, I’m pushing a solution that on one side is going to increase operating costs, particularly in one time changes. To over come the reluctance to initiate this work, I have to show a reduction in cost, particularly for the other side. Unfortunately, the other side’s costs are very low as well, except for the risk they are taking on. What I realized is there are two forces that are making what should be highly costly activities cheaper. Those forces are Habitualization and Institutionalization.

  • Habitualization is the ability to make parts of a difficult task and decision routine. It’s a means of cutting corners to save energy for the part of the work that is taxing. But often times the corner cutting invades the difficult parts too.
  • Institutionalization is the known concepts, norms, values, and modes of behavior that develop within organizations. Parts of institutionalization make it hard for people to identify habitualization because everyone does it and it appears to be normal.It isn’t a purposeful action, just the way things are.

For me to do my job I have to call out these factors and show how when they are combined a very wasteful system for doing things sets in. I’m going to measure the Search costs in terms of time, but I’m not going to measure Negotiation or Agreement Enforcement. The reason is because they currently don’t explicitly happen. So simply having them increases costs. In the long run these agreements will lead to better offerings, but in the short run they don’t.

Ultimately, I’m going to illustrate the relationships between these factors. Its valuable to show how when one goes down it dramatically affects another area and forces it up. But until I thought this through, none of these impacts were considered. We just knew it was not a good way of doing things.

Funny Bit About High Frequency Trading

A few weeks back I read an HBR blog which talked about the difference between thick value and thin value. The author theorized that the US was becoming too reliant on thin value. One example of thin value is something called High Frequency Trading. It basically makes money on the spread between the bid and the ask of the equity. The problem is that because its ultra fast it puts them at an advantage to realize what the bid and ask are. The other advantage is that these traders are usually market makers as well. This means that without their volume of deals there probably isn’t any market to trade in. Seems like a sucker game to me.

Anyway, here is Comedy Central bit on it. It isn’t completely accurate, but funny none the less.

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Cash Cow – High-Frequency Trading
Daily Show
Full Episodes
Political Humor Ron Paul Interview

September 2009 Jobs Report and Wages

Here are the job market and compensation numbers for September 2009 (based on the job report):

loss of 263,000 jobs in the month (revised to a loss of 219,000, revised to a final loss of 225,000)

  • Analysts expected a loss of 175,000
  • Twenty-one straight months of job losses
  • August was revised to loss of 201,000 jobs (and again revised to a loss of 154,000 jobs from the originally reported number of 216,000, revised to a final loss of 211,000)
  • A benchmark revision is underway as well. This means the horrible numbers reported in the spring were actually worse by an accumulated 800,000 lost jobs
  • 5.4 million people are considered long term unemployed, meaning they’ve been without a job for longer than 27 weeks
  • This jobs report is probably higher than it will revised to. The reason is that both health care and government employment performed worse than they have over the last few months. These numbers will get improved.

Unemployment rate declined to 9.8%

  • Analysts predicted a rise to 9.8%
  • Highest since 1983
  • It’s estimated that this number would have hit 10% if some people didn’t fall out of the count and were eligible
  • The U-6 report, which is a broader group, reached 17%
    • The highest since this has been recorded (1993)

Specific Segment Job numbers:

  • Manufacturing lost 51,000 jobs
  • Construction lost 64,000 jobs
  • Retailers lost 39,000
  • Leisure and Hospitality Services lost 9,000 jobs
  • Government sector lost 53,000
  • Health care grew by 19,000 jobs

Wage (can be revised):

  • The average weekly paycheck (seasonally adjusted) is $616.11 – a loss of $1.54
  • The average hourly earning (seasonally adjusted) is $18.67 – up 1 cent
  • The average hourly work week dropped to at 33.0 (from 33.1)

Bureau of Labor Statistics

Job Report Stats Summary