VCZealots

Solving the Peter Principle? One Word: "Darts"

Fri, 03 Jul 2009 17:19 GMT

There is a fun new working paper out from some Italian scientists that models the Peter Principle. The principle says, of course, that people climb in an organization until they reach their level of maximum incompetence.

How would that happen? Well, the authors argue it should be expected in any organization where the following two conditions hold:

The best member are rewarded with promotions
Competence in a new position is not highly correlated with competence at a prior level

The authors simulated the preceding in a pyramidal organizational form using a mathematical agent model. Here is the outcome:

Here we show, by means of agent based simulations, that if the [above two conditions] actually hold in a given model of an organization with a hierarchical structure, then not only the "Peter principle" is unavoidable, but it yields in turn a significant reduction of the global efficiency of the organization. [Emphasis mine]

Granted, this shouldn't be surprising news, one would think, to anyone who has spent any time around large organizations. A disproportionate number of the positions always seem filled by people who elicit a WTF? reaction from reasonable-minded observers.

So, do we just live with it? After all, we can hardly get around elevating the best people, and it isn't unreasonable to think that one's experience in a former position doesn't adequately prepare for the new one.

Not necessarily, according to the authors:

...the best strategies to improve, or at least not to diminish, the efficiency of an organization, when one ignores the actual way of competence transmission, are those of promoting an agent at random or of randomly alternating the promotion of the best and the worst members. We think that these results could be useful to guide the management of large real hierarchical systems of different nature and in different fields.

Whoa, it turns out calling someone's promotion "random" is a compliment. Who knew darts could be so handy at promotion time?

Source:

The Peter Principle Revisited: A Computational Study
Authors: Alessandro Pluchino, Andrea Rapisarda, Cesare Garofalo

When is a Failure Not a Failure? When It's an Iraq Oil Auction

Fri, 03 Jul 2009 17:00 GMT

The failed Iraq oilfield auctions this week have become a litmus test for Iraq, for oil analysts and for the ever-nervous global oil market. Iraqi officials refuse to see the disappearance of most bidders and the completion of only auction (with a single bidder) as a failure. Instead, they are hawking the crowd-pleasing idea that multinational oil companies are greedy mouth-breathers that balked at the hard bargain being driven by righteous Iraqis who control so much valuable, marginal oil supply.

For their part, of course, oil companies think that the Iraqi oil auctioneers are nuts. The proffered risk/reward premium for exploration, development and production in an unsafe country with minimal infrastructure and maximal political flux was near zero. But in their zealotry to demonstrate resource nationalism to an uneasy electorate, Iraqi officials scared off most sane bidders, making the only successful buyer in this first round a bid backstopped and subsidized by the Chinese government -- and one that still required a huge price concession.

Here is a nice summary snippet from IHS on where this means the sorry process goes from here:

Without Iraq offering a better risk/reward ratio to investors it will have to undertake all investment and development itself—a process that will be slow, laborious, and under-funded, and will result in volumes nowhere near those targeted and years from their hoped-for schedule.

Iraq needs to look not only at the reward side of its offering, however; it can make significant progress on lowering the investor risks. The government needs to direct its attention to passing a national hydrocarbons law in order to lay down a clear legal framework for the deals and give them greater political legitimacy than what is just—effectively—a mere pledge of contract allegiance from the currently serving ministers. This would also lower the political risk in Iraq, as the law in itself would require some form of broader political understanding between the leading factions and thereby to some extent bind much of Iraq's political forces into taking responsibility for long-term hydrocarbon policy.

More here and here.

QOTD: Sampling the Future

Fri, 03 Jul 2009 16:05 GMT

The following innocuous sampling theory comment from Andy Gelman set me thinking in a bunch of dimensions today. The question had to with how to handle statistical analysis when your sample population is the entire population, and Andy's answer is important and instructive:

So, one way of framing the problem is to think of your "entire population" as a sample from a larger population, potentially including future cases.

Precisely right, and a point that many naive hypothesis-generators might keep in mind, whether in financial markets or elsewhere.

More here.

Farmworkers: Go to New York City, Young Man

Fri, 03 Jul 2009 15:59 GMT

I've been messing about with this tool that tries to compare supply and demand for various jobs by geography throughout the U.S. You have to be careful how you interpret it, as the following chart suggesting farmworkers (and animals (sic.)) should race to New York City and San Francisco shows, but it's still interesting.

Watching People Come of Age

Fri, 03 Jul 2009 15:38 GMT

One of the most satisfying parts of what I do is getting to work with people over a long period of time, starting early in their careers. It’s one of the things I love about TechStars, but it’s not limited to that as I have many other relationships with young and first time entrepreneurs.

Last night, at Ignite Boulder 5, I had a permagrin on my face as I thought about the amazing job Andrew Hyde was doing. I first met Andrew a few years ago when we started TechStars – he basically volunteered to hang out with a video camera for free all summer to film stuff and learn. He was so hugely helpful that it was easy to bring him on board the TechStars team in year two as the community manager (things like TechStars.TV are Andrew’s creation.)

I attended Ignite Boulder 2 and had a great time. But last night – #5 – just blew me away. 700-ish people in the Boulder Theater, enormous energy, endless laughter and brain stimulation, and just a very good time. Andrew organized a phenomenal show and really shined as the organizer / MC.

But TechStars and Ignite Boulder are not the only things Andrew does. He also created Startup Weekend (I was at the first one in Boulder) and he was one of the founders of Boulder.me. And – with Matt Emmi of One Button -created the hilariously creative VC Wear t-shirt line (my favorite: “I went down on Sand Hill Road”.)

But wait, there’s more. Andrew is everywhere in the Boulder startup community while managing to travel all over the world sharing his brand of entrepreneurial passion. I don’t ever think I’ve seen Andrew without a smile on his face, and he’s even gracious when he kicks my butt in ping poing.

It’s been awesome to see Andrew come of age as a key driver of our local entrepreneurial community. Good job man!

Wells Fargo Gives California July 10 Drop-Dead Date

Fri, 03 Jul 2009 14:50 GMT

Nice to have a firm date for when California must have a budget and stop shopping IOUs. Here is Wells Fargo from a release yesterday:

Wells Fargo & Company (NYSE:WFC) said today it will accept registered warrants issued by the State of California from its retail and business customers for a limited time. It will begin accepting the registered warrants for deposit on July 2, 2009 and stop accepting them no later than July 10, 2009.

“We’re very disappointed, as are many Californians, that California has taken the unfortunate step of issuing IOUs in lieu of its payments to some businesses and individuals,” said Lisa Stevens, head of Community Banking for Wells Fargo in California. “Wells Fargo has a long history of taking extraordinary measures to help our customers and will accept registered warrants from our customers, but only for a limited time, to allow them time to make other arrangements. We are reluctant to take this step, but are doing so to help our customers who are not at fault and with the expectation that the Legislature and Governor will complete the budget within days. We join all Californians in urging our Legislature and our Governor to take the appropriate steps as soon as possible to resolve this budget crisis.”

[Emphasis mine]

Gnip Is Hiring Software Developers

Fri, 03 Jul 2009 10:07 GMT

Yesterday I posted that Trada is looking for a Test Engineer. Gnip is also looking for software developers – three in fact:

If you are Boulder-based and fit the qualifications, email Jenny-Lynne Elledge.

Trada is Hiring for a Test Engineer + Support

Thu, 02 Jul 2009 22:34 GMT

Trada, one of our portfolio companies in Boulder, is looking to hire. They’re looking for a tech-skilled individual who thinks they can do just about everything, because they might be asked to. Primary role is testing their online advertising app but there’s a huge opportunity to contribute much more. There’s dev work; cloud systems admin; operations tasks; end-user support; and customer facing account management tasks that can be added to the mix for the properly skilled (and properly motivated) individual. While still in stealth these guys are already rocking. Interested – contact Michael Lawless at mlawless@trada.com.

The Unbearable Stupidity of Some Patents

Thu, 02 Jul 2009 17:17 GMT

If I told you that I had just filed a patent for “a system to sell equity in domain names”, I’d expect you to laugh at me. I haven’t ranted and raved against software (and business method) patents for a while because I got bored of doing it. The PTO has gotten so far behind on responding to patent applications that the whole notion of a four year cycle to get a software patent approved just underscores how ridiculous the whole thing is given the pace of innovation in software.

But – today’s silly patent popped up somewhere and I just couldn’t resist poking fun at it. Go Daddy has filed a patent for a method of selling equity in domain names. I can’t wait to see what the SEC has to say about this one.

I sure do hope the new regime in Washington D.C. has the balls to address the software patent issue this time around and end this madness.

Readings

Thu, 02 Jul 2009 14:16 GMT

There is some good stuff in the current issue of Foreign Policy:

Thing again about Asia’s inevitable rise (Source)
The end of finance is the end of macho (Source)
The 2009 Failed States Index (Source)
The collapse of the Baltic states (Source
Why birth rates matter (Source)