Saturday, November 24, 2007

No Man is an Island

Imagine the first fax machine: A machine of which we know the capabilities today. What about the first one, though? What is the usefulness of this machine that can send a facsimile to other fax machines…when there are no other fax machines?

The point of a single fax machine is moot.

Now…add another fax machine. What is the usefulness of your fax machine now? Common sense indicates that it would double. This isn’t exactly true: The effect of these two fax machines is directly proportional to the number of fax machines—instead of being an arithmetic proportion, it is a geometric proportion. In other words the net result of the utility of these two fax machines is not 1+1, but rather 2^2, or 2 squared. The increase is so great because each user can either send or receive a document instead of the fax machine offering just a single purpose in relation to each other fax machine in the world.

In fact, there is a mathematical formula depicting this relationship: n * (n − 1) / 2 whereas n is the number of fax machines in the network.

Network. Networking. Networks. Thirty years ago this word meant much less than it does today. The man behind the power of this simple word, Robert Metcalfe, was half the man behind the technology called Ethernet. Ethernet, in short, is the largely the technology behind our home and business networks and the entire connectivity of the “wired” portion of the Internet (in contrast to the “wireless” portion). In selling his wares, Metcalfe grasped to his background as a trained engineer and businessman to inform his customer of the simple economies of scale involving his new networking peripheral. While their work may be able to take their businesses to a certain point, in order to grow past this point of critical mass, they would need something revolutionary—a force multiplier—to realize any newfound value.

This brings us to a more generalized definition of the network effect. From Wikipedia: A network effect is a characteristic that causes a good or service to have a value to a potential customer which depends on the number of other customers who own the good or are users of the service. In other words, the number of prior adopters is a term in the value available to the next adopter. One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good — for example by purchasing a telephone a person makes other telephones more useful. This type of side-effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities. The resulting bandwagon effect is an example of a positive feedback loop.

How does this apply as wisdom? Think about applying such economics to your daily life. As I’ve said before, we can each consider ourselves a good wishing to perform services with other people (some more than others, sure) and from whom we look to offer our services—exchanges in the free market economy of life. Just as the 17TH century poet John Donne wrote “no man is an island, entire of itself,” as individuals we have little value to anyone but ourselves, if that is to be of any real value at all. When we are able to offer our services to another, then our value as an individual increases because we are able to both offer of ourselves and receive what things of value the other person in this exchange can offer. The more people that we have in our lives, to whom we are able to offer something of value, the more we are able to use the networking effect—those things which we can accomplish, thusly, can grow as a square of the people in our lives with whom there can be reciprocating value.

At a glance, it might seem like a complex concept, but think of it in this way: It is often said that a fraction of total jobs available in a given market are advertised through traditional sources—newspaper, Internet, radio, job service, etc; whereas most jobs are assumed through “connections” that a person might have. This is a direct result of the networking effect.

Ever get a tip from a friend? Can you say that you’re a better person because of the people in your life? How about what you are able to offer to other people?

This falls in line with a quip of wisdom I’ve held for several years. Take two ice cubes: One in the shape of a cube, the other with the same amount of mass in the shape of a thin sheet. Which will melt first? Why? Certainly the ice sheet will melt before the cube because it has more surface area exposed to the environment. If we make the assumption was the preferred result of this process, wouldn’t your preferred result of your life be the success that you’d like from it? Increasing your “surface area” to the world, that is to increase the potential for interactions which you have, can thus increase your potential for reaching critical mass and, with help of the networking effect, geometrically grow into and past your hopes and dreams.

Wednesday, November 21, 2007

Warren Buffet Quote

He's been called "The Oracle of Omaha," but by many accounts his personality is just that of a farmer or other tradesman from the Midwest. Money has not inflated his ego at all. For a man who has been as liberal as he has, though, he certainly has a fiscally conservative view. Interesting.

I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die.

Tuesday, November 20, 2007

Ever think that you might be better than most others on the road? You might be right.

A recent test administered GMAC Insurance indicates that most people wouldn't pass a driving test if they had to take it again.

• Drivers 35 and older were more likely to pass

• Illinois, Georgia, Washington, D.C., Pennsylvania, New York, New Jersey, Rhode Island and Massachusetts were the least knowledgeable states overall, with average scores under 75 percent

• Fifty-five percent of the respondents didn't know how many feet before making a left or right turn to activate their turn signals

• The national average score was 77.1 percent


Attack of the Monkeys!

Monday, November 19, 2007

Competence and Confidence

In our daily lives we tend to encounter all types of individuals. Some of them know what they are doing, some of them do not; others have the allusion of knowing something with great degree, but don’t necessarily have any competence to back it up.

The world is filled with all sorts of people with varying degrees of competence and confidence. Have you ever stopped for a moment to think of the relationship between these two things, though?

Competence: “The quality of being adequately or well qualified physically and intellectually.”

Confidence: “Assurance: Freedom from doubt; belief in yourself and your abilities.”

From our youngest years we either have skills forced upon us (learning to fold towels, clean our rooms, or take out the trash, for instance) or we actively seek them out (putting things together, taking things apart, drawing, etc). When I was in the military I became acquainted with the government model of assessment of one’s competencies: Knowledge, skills, and abilities; known simply as “KSAs.” The theory, I gathered, was that various bits of knowledge built upon one another towards the end of developing skills, combining to form greater abilities: The knowledge, for instance, of such things as telephony fundamentals work together to form the basis for skills to work with telephone platforms, switching equipment, and the like. These skills cohesively bind to form the ability to maintain, troubleshoot, and repair these systems.

In human resources the term “skill set” is thrown around to describe just that—particular sets of skills that go into various job domains or career fields. We seek education, training, and our own versions of the school of “hard Knox” to acquire the various skill sets which each of us possess.

Well, most of us, at least. Let’s look at the other side of the coin.

Confidence, as described above, is a function of assurance in oneself. Following this to a logical conclusion of “what happens if you have confidence, but no competence” we are left with a simple, glaring truth: Arrogance.

In a book in which he speaks about MBA graduates and their successes, Henry Mintzberg writes “confidence without competence breeds arrogance. In this article he goes on to describe the relationship between confidence and competence:

Imagine a 2 x 2 matrix of confidence and competence. The effective people have both, the sad ones neither. The unfortunate people have competence but lack confidence. They are worth worrying about, however, because a small boost in confidence can have great benefits. The dangerous people, especially in this hyped-up society, are the remaining group: those whose confidence exceeds their competence. These are the people who drive everyone else crazy.

I couldn’t have said it better myself.

If you think Mr. Mintzberg has some good ideas, you can pick up the book here!