The Lighter Side Archives



 



Q3 – Q4 2015      Previous Quarter     Latest
 



To celebrate the weekend, MBE digs up an interesting piece of finance trivia each Friday, looking at the lighter side of...

Christo

LEAN.. a lesson in Op Ex from the ship-builders of Venice

18th December 2015

Because it's the last Friday before Christmas, this week's Lighter Side is a bumper edition, including a story and a bonus Lean concept guide! 

It is a well-known fact that Henry Ford and later on Kiichiro Toyoda are perceived to be the creators of Lean, but the actual foundation of Lean can be traced back to 1100 during Venice's republican era.

The Venetian Arsenal could also be described as the first mass production complex.

Venetians developed methods of mass-producing warships in their Arsenal, including the frame-first system to replace the Roman hull-first practice. This new system was much faster and required less wood. In Lean language, this means shorter time-to-delivery, while doing more with fewer materials. At the peak of its efficiency in the early sixteenth century, the Arsenal employed 16,000 people who were able to produce nearly one ship each day, using a production-line basis not seen again until the Industrial Revolution. This is in stark contrast to the rest of Europe, where the production of a similar sized vessel took months.

The layout of the Arsenal itself was modified to enable minimal handling of materials during the stages of production. Which, in Lean terms, means that the spaghetti diagram was improved, 5S was in place and the pull system, rather than push system, was applied. The Arsenal also saw the use of standardised, interchangeable parts, meaning Standard Operation Procedures (SOPs) were in place and variability was reduced.

Perhaps the most revolutionary aspect of the Arsenal was its employment of the moving assembly line.

In 1593, Galileo became an external consultant to the Arsenal, advising military engineers and instrument-makers and helping to solve ship-builders' problems, mainly relating to ballistics. He was also responsible for creating some major innovations in the production and logistics of the Arsenal. Today we use problem-solving, capacity planning and other tools to improve the process and gather new ideas.

Lean overload?  Not to worry!  We have put together this handy table to explain some of the concepts mentioned above:


Vibeke

Happy Holiday

20th December 2015

From all at MBE, we wish you and your family a safe and festive holiday season! We look forward to continuing to lighten up your Fridays in 2016.


Gorillas IV

RESEARCH... LOLZ may be the best medicine after all

11th December 2015

Ask anyone who has ever laughed at an actuary joke and they will confirm that humour is in the eye of the chuckler…in other words, what we find funny is completely subjective.  But new research begs to differ.  Scientists say they've come up with a quantifiable theory of what's funny – at least when it comes to words which give us the giggles.

Author Chris Westbury has conducted experiments to investigate his hypothesis that it is possible to use a word’s entropy (a mathematical measure of how ordered and predictable its structure is) to draw general conclusions about the sorts of words that people find funny.  It was found that made-up words with lower entropy (i.e. words that are statistically less probable or less like real words, like snunkoople or hablump) were perceived as more amusing.

"So if you look at a Seuss word like yuzz-a-ma-tuzz and calculate its entropy, you would find it is a low-entropy word because it has improbable letters like Z," Westbury said. The idea that humour correlates with incongruity and surprise isn't new, but this study claims to be the first quantitative test of German philosopher Arthur Schopenhauer's 1818 theory that humour results from violated expectations.

"The most important finding was not just that some non-words are funny and they're weird when they are, but that there's actually a consistent relationship between how funny they are and how weird they are," Westbury said. "We showed there was a linear relationship."
The study, "conducted out of pure curiosity," according Westbury, nonetheless could have implications for detecting how those with brain damage or mood struggles experience humour. The research could also inform product naming.

Basically Westbury has only confirmed what we actuaries have known all along – everything, even humour, can be explained by a mathematical formula. QED.

Read more about Westbury’s paper, Telling the world’s least funny jokes: On the quantification of humor as entropy here.


Criticality

CRITICALITY... The path more travelled

4th December 2015

This week MBE talks about something critical!

In Project Management there is a tool that called the Critical Path. The Critical Path is the longest sequence of activities in a project which must be completed on time in order for the project to complete on its due date. An activity on the critical path cannot be started until its predecessor is completed. If it is delayed for a day, the whole project is delayed for a day, unless the activity is completed a day earlier. To draw attention to the importance of these activities, a project team at Apple Inc. puts a stuffed gorilla on the top of the cubicle of the person who is currently working on the critical path.

Sometimes project managers or project teams are confused about the tasks on the critical path; they assume that it is just as the name suggests: the CRITICAL activities. But it is not always the difficult tasks that cause delay. Sometimes a simple task that no-one thinks about can be deemed critical - even growing grass!

Frank Adderman, Executive Project Director at Walt Disney Imagineering, stated at a conference that growing grass for the Walt Disney Animal Kingdom Park was a critical task. The 500-acre park required special grass for its animal inhabitants, which took years to grow!

So, when it comes to Project Management, sometimes it’s not a bad thing – in fact, it may even be critical – to let the grass grow under your feet. 



Thanksgiven

SHOPPING... Black Friday and the stock markets

27th November 2015

Thanksgiving, which takes place on the fourth Thursday of November each year, is an important day for a lot of businesses, particularly those in the food industry (nearly 90% of Americans buy and eat turkey on Thanksgiving). Stock market trading, however, is more affected by the day after – Black Friday.

Black Friday is the shopping day on which many retailers have traditionally made enough sales to put them in the black (i.e.in a profitable position) for the year.

Since many retailers consider Black Friday to be crucial to their business' annual performance, investors look at Black Friday sales numbers as a way to gauge the overall health of the entire retail industry – in fact, Black Friday could be considered a leading indicator for the markets. Economists, based on the Keynesian assumption that spending drives economic activity, view lower Black Friday numbers as an indication of slowed growth.

Many analysts, however, don’t buy into the notion that Black Friday has any real predictability for the markets as a whole. Instead, they suggest that it only causes very short-term gains or losses.  An analysis conducted in 2008 concluded that there was no correlation between a Black Friday bump and Q4 performance.

The stock market may, however, be affected by having extra days off for Thanksgiving or Christmas. The markets tend to see increased trading the day before a holiday or a long weekend, known as the holiday effect.

The more tangible results of Black Friday have been regular reports of violence between shoppers: since 2006, there have been 7 reported deaths and 98 injuries throughout the United States.  Even in the UK, during Black Friday sales in 2014, police forces were called to stores across the United Kingdom to deal with crowd control issues, assaults, threatening customers and traffic issues.

Whether it affects the stock markets or not, indulge in some retail therapy this Black Friday…as long as it doesn’t cause injuries requiring therapy of a different kind later!


decisions

DECISION-MAKING... why you should always go out in groups

20th November 2015

Cognitive biases are tendencies to think in certain ways that can lead to systematic deviations from a standard of rationality or good judgment, and are often studied in psychology and behavioural economics.

We often hear about the famous ones, like confirmation bias or hindsight bias, but today we’ve summarised some of the lesser-known more colourfully-named biases which may be affecting your decision-making ability – in finance and in life.

The cheerleader effect: The tendency for people to appear more attractive in a group than in isolation.

The identifiable victim effect: The tendency to respond more strongly to a single identified person at risk than to a large group of people at risk.

The IKEA effect: The tendency for people to place a disproportionately high value on objects that they partially assembled themselves, such as furniture from IKEA, regardless of the quality of the end result.

Not invented here: Aversion to contact with or use of products, research, standards, or knowledge developed outside a group.

Pareidolia: A vague and random stimulus (often an image or sound) is perceived as significant, e.g., seeing images of animals or faces in clouds, the man in the moon, and hearing non-existent hidden messages on records played in reverse.

The rhyme as reason effect: Rhyming statements are perceived as more truthful. A famous example being used in the O.J Simpson trial with the defence's use of the phrase "If the gloves don't fit, then you must acquit."

The well-travelled road effect: Underestimation of the duration taken to traverse oft-travelled routes and overestimation of the duration taken to traverse less familiar routes.


Holistic solutions

CERTAINTY...a taxing history lesson

13th November 2015

The word “tax” is derived from the Latin word taxo (“I estimate”), which itself evolved into another word taxa, meaning “charge.” (As an aside, taxa is also the root of the word “taxicab”, which derived from “taximeter cabs”: fare-charging vehicles that were introduced in London in 1907).

Fast forward a few centuries; it turns out that wars don’t only cause death and destruction, but they are also to blame for the introduction of modern tax systems – both in the US and the UK.
President Lincoln needed a way to fund the American civil war and pay the interest on the war bonds. So in August 1861, the first income tax imposed a 3 percent tax on annual incomes over $800.  In the UK, William Pitt the Younger first implemented tax in England in December 1798 to pay for weapons to prepare for the Napoleonic Wars.

And speaking of the UK tax system, ever wondered why the income tax year runs from 6 April to 5 April?  The tax system was based on a tax year ending on Lady Day, which ended on 25 March when the Gregorian calendar was adopted in September 1752. Because the new calendar differed from the Julian calendar by 11 days, tax authorities didn't want to lose revenues from those 11 days. So the start of the tax year was moved to 5 April, but then later changed to April 6th in 1800.
If we know nothing else about tax, we’ve all heard the quote, “In this world nothing can be said to be certain, except death and taxes.” But Benjamin Franklin offered this wisdom in a wider context. The complete sentence that Franklin wrote in a November 1789 letter to his friend Jean-Baptiste LeRoy, a French scientist who studied static electricity, goes as follows: “Our new Constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”  Sad, but apparently true.


Origins

ORIGINS... the wall of Wall Street

6th November 2015

Ever wondered what Wall Street is named after? Probably not. But, just for the sake of Friday trivia, we’ll tell you. It was, strangely enough, named after a wall.

The wall was erected by Dutch settlers on the southern tip of Manhattan Island in the 17th century. During this time, a war between the English and Dutch threatened to spill over onto the island's American colonies, so the Dutch erected a defensive wall on the southernmost part of the island. Although this wall was never used for its intended purpose, years after its removal it left a legacy behind in the name Wall Street.

The area only became famous for being America's financial centre at the end of the 18th century, when 24 of the United States' first and most prominent brokers signed an agreement that outlined the common commission-based form of trading securities. Occurring under a "Buttonwood" tree, this marked the beginnings of the investment community of Wall Street and the creation of the New York Stock Exchange.

On a similar note, did you know that the Dow Jones industrial average is named after real people?

Charles Henry Dow and Edward Jones met while they both worked for newspapers in Providence, R.I. Dow left to take a job as a reporter at a financial news bureau on Wall Street, and the bureau hired Jones on Dow’s recommendation. In November 1882, they started their own financial reporting firm (Dow, Jones & Co.) in the basement of a sweet shop, publishing a two-page summary of the day's financial news called the “Customers' Afternoon Letter.”

And the rest, as they say, is history.


history drachma

HISTORY... a drachma for your thoughts?

30th October 2015

The actuarial profession is a rather old one, but the concept of insurance goes even further back…  

The idea of a pension for life is recorded as early as 582 BCE in the story of Jehoiachin, King of Judah. In the Bible (2 Kings 25, 29-30) it’s mentioned that he was released from prison in his 37th year of exile in Babylon, and “lived as a pensioner of the king for the rest of his life”.

Around 400 BCE Lysias, a Greek orator, protested vigorously when he found that his State pension was discontinued. He had been granted the pension when years earlier, possibly because of war injuries. The reasons now given for its cessation were that he was able-bodied and not classed as disabled, was skilled in a trade, could mount a horse, and was well-off financially. Sounds a lot like permanent health insurance…
As far as non-life insurance goes, it started as a hedge against loss of cargo during sea travel. In one case quoted by the ancient Greek, Demosthenes (who was born about 384 BCE), 3000 drachmas were advanced in respect of a cargo of wine. The earliest records of an official non-life insurance policy come from Sicily, where there is record of a 14th-century contract to insure a shipment of wheat. In 1350, Lenardo Cattaneo assumed "all risks from act of God, or of man, and from perils of the sea" that may occur to a shipment of wheat from Sicily to Tunis up to a maximum of 300 florins. For this he was paid a premium of 18%.

As the motto of the Institute and Faculty of Actuaries goes, e peritia ratio (reason from experience) – which means that actuaries should be one of the most reasonable breeds around!


Numbers

NUMBERS...quantifying the qualitative

23rd October 2015

Isopsephy (from the Greek words meaning “equal” and “pebbles”) refers to the practice of adding up the number values of the letters in a word to form a single number. The early Greeks used pebbles arranged in patterns to learn arithmetic and geometry.

Isopsephy is related to Gematria, the same practice using the Hebrew alphabet, and the ancient number systems of many other peoples.

Most early examples of isopsephy are found in graffiti at Pompeii, dating from around 79 AD. One reads Φιλω ης αριθμος Φμε , "I love her whose number is 545." Another says, "Amerimnus thought upon his lady Harmonia for good. The number of her honorable name is 45." Suetonius, writing in 121 AD, reports a political slogan that someone wrote on a wall in Rome:

"Nero, Orestes, Alcmeon their mothers slew. A calculation new. Nero his mother slew"

In Greek, Νερων, Nero, has the numerical value 50+5+100+800+50=1005, the same value as ιδιαν μητερα απεκτεινε (idian metera apekteine) - "He killed his own mother", (10+4+10+1+50) + (40+8+300+5+100+1) + (1+80+5+20+300+5+10+50+5). A famous example is 666 (the number of the Beast) in the Biblical Book of Revelation (13:18): "Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six" (The word rendered here "count", ψηφισάτω, psephisato, has the same "pebble" root as the word isopsephy).

On that note, MBE wishes you a 66 63!


Procrastinate

Life Hacks... for now... or lateri

16th October 2015

"Procrastinate now, don't put it off." - Ellen DeGeneres

We all procrastinate sometimes, some more than others.  This week's Lighter Side looks at some simple ways for you to control your inner procrastinator.

Give (10+2)*5 a try - Let's start with a classic but very effective hack called (10+2)*5 created by Merlin Mann, author of 43Folders.com.  The (10+2)*5 simply means 10 minutes work + 2 minutes break multiplied by 5, completing 1 hour.  It is crucial to stick with the time limits and not skip work and break schedules. The point of this is for you to create a jam-packed routine of work and break schedules.

Become productively lazy - Instead of finding all sorts of ways to unproductively procrastinate, like just watching television or surfing the internet, use your habit to look for shortcuts and new ways to finish your tasks. For example, master the 3-second t-shirt folding technique.

Prepping the night before - Preparing essentials for your tasks tomorrow will only take 15 minutes in the evening, which will give you more time in the morning to enjoy your coffee.

Use technology to prevent technology overuse - Social media is the procrastinator's dream come true. Luckily there are some applications in existence to help you control the urge to check out that photo of a cat your neighbour shared online. Check out Coldturky and Vitamin R, for example.

Now that we've provided you with at least two minutes of Friday procrastination (about procrastination), it's back to work!


Time vs money

The time value of money... and the monetary value of time

9th October 2015

If there is one quality that really exasperates the Lean fiend in each of us, it’s tardiness.  The colleague who strolls into a 09:00 meeting at 09:10, butty in hand, has wasted not just 10 minutes of their own time. Multiply those 10 minutes by the number of people who arrived on time (say, 8) and one begins to realise how much productivity can be lost each time someone is late.

But while this behaviour is decidedly rude, it doesn’t mean that your perpetually unpunctual friend/colleague/relative is doing it on purpose – there are several psychological and even physiological components that can contribute to being late.

Diana DeLonzor, author of Never Be Late Again, has conducted research on people who are always late: "[For many] it started in childhood, and they're late for not only things that have to do with other people, but things that will only hurt themselves." They'll show up to the gym, for instance, 10 minutes before it closes, or they'll be late for job interviews.

The issue might have something to do with fundamental differences in the way we think, according to DeLonzor. She’s found that late-arrivers tend to actually perceive time differently than their punctual peers. She wrote in her book (as reprinted on her website):

Part of my research included a test to measure the differences in how timely and late people perceive the passage of time. The test I devised is a simple one you can try yourself. Choose three or four pages in a book, mark the time, and start reading. Stop reading when you think ninety seconds have elapsed, then check your watch to see how accurate you were. I found that early birds, almost without fail, stopped reading before ninety seconds had passed, while lateniks put their books down well after the ninety-second mark.

The researchers at Cleveland State University also included a time perception test in their study, this time using stop-watches. Interestingly, their results were similar to mine, with late people consistently underestimating the passage of time.


Through her work, DeLonzor has identified several different types of late people, as well as how they can gain control over their punctuality (read more here).  If you identify yourself as one of these types, don’t worry – the early bird may catch the worm, but it’s the second mouse that gets the cheese…


Cheese

Spurious Correlations... How cheese can get you an engineering degree

2nd October 2015

Causality is the relation between an event (the cause) and a second event (the effect), where the first event is understood to be responsible for the second.

In common usage, causality is also the relation between a set of factors (causes) and a phenomenon (the effect). Anything that affects an effect is a factor of that effect. A direct factor is a factor that affects an effect directly, that is, without any intervening factors. The connection between a cause and an effect in this way can also be referred to as a causal nexus.

Correlation does not imply causation is a phrase used in statistics to emphasise that a correlation between two variables does not necessarily imply that one causes the other. Many statistical tests calculate correlation between variables.

The counter-assumption, that correlation proves causation, is considered a questionable cause logical fallacy in that two events occurring together are taken to have a cause-and-effect relationship. This fallacy is also known as cum hoc ergo propter hoc, Latin for "with this, therefore because of this", and "false cause".

There are many interesting, or shall we say cheesy, examples of spurious correlations. Here are some courtesy of tylervigen:


Achilles

Limits... Achilles, the tortoise, and flawed logic

25th September 2015
Zeno of Elea (c. 450 BCE) is credited with creating several famous paradoxes, the best known of which is that of Achilles and the tortoise.

The anecdote goes that the tortoise challenged Achilles to a race, claiming he would win as long as Achilles gave him a small head start.  His argument was that, whatever head start the tortoise was given (e.g. 10 metres), Achilles would first need to cover half the distance (5 metres). Then he would need to cover half the remaining distance.  Then he would need to cover half of the new remaining distance…and so on ad infinitum. The consequence is that Achilles would never catch up with the tortoise.

What this actually does is to make all motion impossible: before I can cover half the distance I must cover half of half the distance, and before I can do that I must cover half of half of half of the distance, and so on, so that in reality I can never move any distance at all, because doing so involves moving an infinite number of small intermediate distances first.
Now, since motion obviously is possible, the question arises, what is the "flaw in the logic?"
The solution is as follows: suppose I needed to cover a distance of 1 metre.  I could see that 1 metre as the sum of an infinite number of small distances:

1 = ½ + ¼ + 1/8 +1/16 +1/32…

…which looks a lot like an infinite series which gives a finite sum, and actually makes sense intuitively as well: if I can divide up a finite distance into an infinite number of small distances, then adding all those distances together should just give me back the finite distance I started with!

So back to Achilles: it would take him some fixed time to cross half the distance of the head start, say 2 seconds. To cross half the remaining distance would take half as long—only 1 second. Covering half of the remaining distance (an eighth of the total) will take only half a second. And so on. And once he had covered all the infinitely many sub-distances and added up all the time it took to traverse them? Only 4 seconds, at which point he would have overtaken the tortoise.

So, it would seem that slow and steady does not win the race after all!


dark side of easter

Spreadsheets... the dark side of Easter Eggs

18th September 2015

Developers of Microsoft’s early products often included Easter Eggs in their Office applications.  An Easter Egg is an inside joke, hidden message, or feature in a computer program, video game or DVD menu screen, intended to delight or amuse the user that discovers them.

Some examples include a Microsoft mascot teddy bear tucked away in Windows 3.1, a pinball game in Word and a Magic 8 Ball toy in Access.  Our beloved Excel has had all manner of novel Easter Eggs, including a flight simulator and a racing game.

Not all the Easter Eggs stashed into Excel have been so light hearted, however. The website, howtogeek.com, describes that “In Excel 95, there was a strange Easter Egg where in entering the proper commands into Excel would open up a tiny window with a Doom-like 3D game in it. The entirety of the little mini game, labeled “Hall of Tortured Souls”, was a series of unsettlingly empty rooms including a secret room with photos of the developers on the walls.”

And you thought the scariest thing about Excel was the spinning wheel of death…


Morality

Mortality...d(Boyz II Men)/dt

11th September 2015

The ‘accident hump’ in a mortality curves refers to the virtually universal observation that, for males in early adulthood, mortality rates spike to similar levels as their middle-aged counterparts.  It’s no coincidence that this spike coincides with the peak of male hormone production; in other words, the age at which males start doing stupid things.

A 2011 study by Joshua Goldstein provided evidence that boys are maturing faster than ever before – a fact that has been known about girls for a while – by looking at male teenage death rates.  It seems that the accident hump has been shifting to earlier and earlier in life, at a rate of about 2.5 months per decade.  As Goldstein put it, “being 18 today is like being 22 in 1800.”

But while we’re maturing faster physically, we’re also delaying many of the hallmarks of adulthood: getting married, having children, and achieving financial independence are all tending to happen later and later in life.

“The biological and social phases in the lives of young people are drifting apart ever stronger”, says Goldstein. “While adolescents become adults earlier in a biological sense, they reach adulthood later regarding their social and economic roles.”

This implies that “important decisions in life are being made with an increasing distance from the recklessness of youth.” Definitely an argument to bear in mind the next time you hear a disparaging comment about the ‘youth of today’!

Click here to read more about Goldstein’s study.


Regret

Regret...Hindsight is 20/20

4th September 2015

They say the best time to plant a tree was 20 years ago…the second best time is today.  Hopefully this will ease the regret you may feel for not having invested in the 10 best-performing stocks over the last 10 years (according to the Russell 1000 US equity index), listed below:

Company / 10-year total return
10. Pharmacyclics / 3 498%
9. Alexion Pharmaceuticals / 3 263%
8. Newmarket / 3 319%
7. Monster Beverage / 3 500%
6. Illumina / 3 679%
5. Priceline / 4 886%
4. Netflix / 4 765%
3. Medivation / 5 744%
2. Keurig Green Mountain / 5 996%
1. Regeneron Pharmaceuticals / 7 650%

One takeaway from the list above is the emergence of biotechnology. Half the top 10 are biotech stocks. On the other hand, the list also shows that it's not absolutely necessary to be part of a high-growth industry to put up eye-popping returns.

Another takeaway is that with a few exceptions, today's big stars are absent from the list. Apple, for example, had a total return of 2,184% over the last decade, but that didn't allow it to crack the top 10.

The lesson there is that the best-performing stocks of the future are likely to be names no one's heard of or cares about now. So why not take a risk on an unknown stock today – it’s never too late to start!

(Click here for the original article.)

   

Crashes

Insurance… market crashes of the literal (and artistic) kind

28th August 2015

As if adolescence isn’t hard enough already, a few days ago a 12 year old Taiwanese boy tripped at a museum and punched a hole through a $1.5 million 350 year old oil painting.

The world of insurance once again saved the day – the Paolo Porpora artwork was insured and the boy’s family was not asked to pay restoration costs.

The boy joins a cringe-worthy art fumblers club: in 2006, a man tripped over his shoelace in the Fitzwilliam Museum in Cambridge in the UK and smashed three 300-year-old Chinese vases. In 2010, a woman at the New York Metropolitan Museum of Art fell into a Picasso, causing a 15cm tear.
Casino mogul Steve Wynn, elbowed Picasso’s 1932 masterpiece Le Rêve. Wynn still managed to sell the painting in 2013 for $155m.

In 2012, a Dublin man was given a six-year prison sentence for damaging a Monet painting in Ireland estimated to be worth €10 million. It took 18 months to restore the Monet painting, which is now back on display at the National Gallery.


Organisation

Organisation... working from home (in a good way)

21st August 2015

Everybody knows that being an actuary is very glamorous, but actuarial knowledge probably doesn’t have that many applications outside the office.  Fortunately, MBE is also a provider of Operational Excellence services, and this week we bring you some practical ways of benefiting from Lean Six Sigma discipline at home.

Use a Kanban system for groceries
Kanban is a Japanese term that means “board” or “card” and indicates some form of signal within a process.  Keep a notepad on the refrigerator door with a grocery list.  Anyone who notices that an item is running low puts that item on the list. The next person to do the grocery shopping will take the Kanban list to replenish supplies, ensuring that you never run out.

Apply visual management to storage systems
Put pictures of gloves or hats on the boxes containing you winter accessories, or store Christmas decorations in red and green containers.  Save time by never reaching for the wrong storage unit.

Use a tennis ball as a Poka Yoke in the garage
Poka Yoke is a Japanese term (poka: mistakes; yokeru: avoid) that means to mistake-proof a process.  Attach a tennis ball to a piece of string and hang it strategically from the garage ceiling.  When driving your car into the garage, you will know to stop when the tennis ball hits the windshield – no more heart-stopping crunches or mangled bicycles!

Now that you have some tips to improve efficiency at home, call us to find out how Lean Six Sigma can benefit your business as well.


Zombies

Zombies...they're alive! They're alive! Not 

14th August 2015

A zombie company is a company that is neither dead nor alive: it is so riddled with debt that all cash generated is used to pay off interest without ever actually reducing the debt.  This means that there are no funds for the company to grow or invest.  On the flipside, the company is not really losing money on an operational basis, so it does not need to make further redundancies.

In early 2014 there were about 103 000 zombie companies in the UK battalion of the corporate walking dead.  They are undesirable in the economy as they take up market share and lock in talent that could be better used in more promising firms.  The main reasons for the rise of this attack of the zombies are low interest rates, banks being reluctant to call in loans due to new liquidity rules and the HMRC not being tough on companies that are building up tax liabilities that they are unlikely to be able to recover.

Beware – some zombies walk among us as household names! Blockbuster, Avon and Kmart are all in zombie limbo.  Could these companies, and thousands more, find a way to reduce their debts and come back to life?  This is a question that Dr Frankenstein himself might not be able to answer.


Recessions

Recessions...the upside of a downturn

7th August 2015

Believe it or not, there is a silver lining to the dark cloud of a recessionary environment: some ideas and business models actually thrive in troubled economies, for example:

Group Buying
The idea with companies like Groupon is that everybody wins: the business is promoted, the group buying company makes a cut of the sales, and the consumer can save – often a significant portion of the regular price – in times when household budgets are stretched.

Accounting
What’s not to love about an expert who can help make the most of your tax return?

Law
In recessionary times, people are fired, business deals go bad, employers are sued, and who would be in high demand in all these scenarios?  Lawyers, that’s who.

Entertainment
Although belts are tightened in tough economic times, entertainment can be a surprisingly lucrative business – the Walt Disney Company and the WWE were started during recessions and weathered several more.  When people are under a lot of pressure to find or keep a job, a bit of escapism can be a necessity.

Other examples of businesses which thrive range from crowdsourcing and online retailing to education and self-improvement.  In short, if you can help solve the problems businesses or people face in dark economic times, you may be able to see the lighter side after all!


Jargon

Corporate Jargon... it is what it is

31st July 2015

When last did you leverage buy-in to unlock synergies and pick the low-hanging fruit?  Did you open the kimono in order to arrive at the optimal solution, or was it all blue sky thinking? At the end of the day, if this paragraph has not assaulted at least one of your senses, you too are a perpetrator of one of the most nerve-grating practices across the piece of the twenty-first century office environment: business speak.

Business speak, or corporate jargon is the jargon often used in large corporations, bureaucracies, and similar workplaces. According to Wikipedia “it may be characterised by sometimes-unwieldy elaborations of common English phrases, acting to conceal the real meaning of what is being said. It is contrasted with plain English.”

Not serious enough to warrant disciplinary action, but definitely annoying enough to cause rifts in the workplace, the most realistic hope of squashing the rise of corporate jargon usage is probably to raise awareness, in the hope of preventing the integration of these phrases into the everyday vocabulary of ordinary employees.

In 2012 Forbes did their bit by setting up a tournament featuring 32 abominable expressions.  Each day readers voted on the most annoying word in a matchup of two.  The goal?  “to identify the single most annoying example of business jargon and thoroughly embarrass all who employ it and any of these other ridiculous expressions.”

Head over to the Forbes “Jargon Madness” website to find out which phrase came out top (or bottom, depending on which way you look at it).

Surveys have shown that business speak is not only annoying, but counter-productive too – even more evidence that this infectious trend needs to be eradicated.  And that’s the bottom line.


Null Hypnosis

The Null Hypothesis…one person's trash is another person's treasure

24th July 2015

Do objects have intrinsic value?  Why do some works of art sell for £10 and others for £10 million?  Why are some shoes more expensive than others if they serve the same basic purpose?  In 2006, New York Times Magazine columnist Rob Walker decided to find answers.

He conducted an experiment to test his hypothesis that “narrative transforms insignificant objects into significant ones,” i.e. the value isn’t contained in the objects themselves, but in the story or meaning that the objects represent to the owner.

The method involved the experiment’s curators buying cheap objects from thrift stores and garage sales; true castoffs with little or no intrinsic worth. Participating writers were then paired with objects, and asked to write a fictional story, in any style or voice, about the object.  The objects were posted for sale on eBay, with their narratives taking the place of factual descriptions.

The result: $128.74 of “worthless” trinkets were sold for $3,612.51 – that’s around a 2700% increase in value!  A $1 jar of mayonnaise sold for $51, for example.  So the answer to his question was a resounding yes – giving an item human context and meaning (by attaching it to an original story, in this case) is what makes it valuable in the eye of the buyer.

Next week on the Lighter Side: a moving story about the old appliances gathering dust in my garage (eBay links to follow)…

(Full details about the experiment may be found on the Significant Objects website)


Market highs

Market highs… when the opiate of the masses was... opium

17th July 2015

China’s drug addiction started off innocently, as they all do, but became powerful enough to launch wars and contribute to the toppling of a dynasty!  Opium had been taken orally in limited quantities in China for more than a thousand years to “relieve pain and tension”.  Then, in the 17th century, the practice of smoking tobacco spread from North America, and opium smoking soon became popular throughout the country.  Opium addiction increased rapidly, and along with it, the demand for importation of the drug from western countries (whose industries grew it cheaply in India).

By 1729 the nation's drug habit had become such a problem that the emperor prohibited the sale and smoking of opium; and, when that didn’t work, opium importation and cultivation were outlawed too.  But, where there’s a drug-enforced will, there’s a way, and the opium trade continued to flourish, largely due to the West, which made use of smugglers along the Chinese coast to exchange opium for gold and improve their trade balance with China.

The opium boom was so significant that it eventually caused the balance of payments to run against China in favour of Britain for the first time in the 1830s.  But while Britain reaped the benefits, opium addiction in China grew so high that it began to affect the imperial troops and the official classes.

The efforts of the Qing dynasty to enforce the opium restrictions resulted in two armed conflicts between China and the West, known as the Opium Wars, both of which China lost and which resulted in various measures that contributed to the decline of the Qing.

Opium addiction remained a problem in China well into the twentieth century, when it was eventually eradicated by the Chinese communists. Ironically, it was the famous communist thinker, Karl Marx, who declared that “Religion is the opiate of the masses”; a metaphor that might have been lost on the opium-hooked masses of his Chinese counterparts.


Falacy

Fallacy... when everything you (think you) know is wrong

10th July 2015
In mathematics, certain kinds of mistakes are illustrations of the concept of mathematical fallacy, specifically in the proof of equations.  The difference between a simple mistake and a mathematical fallacy is that in mathematical fallacies, there is some concealment in the presentation of the proof. For example, the reason the proof may be invalid is a division by zero that is hidden by algebraic notation. There is an overarching characteristic of the mathematical fallacy: typically, it leads not only to an absurd result, but does so in a crafty way. Although the proofs are flawed, the errors are quite subtle, or designed to show that certain steps are conditional, and should not be applied in the cases that are the exceptions to the rules.  This makes them a useful device not only in an educational setting, but also during the conversational lulls at dinner parties…

For example, can you prove, or indeed, disprove, that 1 = -1



In case you didn't get it, the fallacy here is that is generally only valid if both x and y are positive, which is not the case here. Now next time you find yourself suffering through an awkward silence, you can impress those around you with this little piece of mathematical trivia!


Growth

Compound growth… ‘penny stocks’ as you've never seen them

3rd July 2015

In 2012 a one cent copper coin from the earliest days of the US Mint sold for a record $1.38 million at a Florida auction.

The coin was made at the Mint in Philadelphia in 1793, the first year that the US made its own coins.  What added to the coin’s value was its (ahem) mint condition – neither the image of Lady Liberty on the face, nor the chain of linking rings on the back, nor the lettering showed any signs of wear.

But is this apparently astronomic price really so amazing?  What would have happened if that coin had been invested in the stock market for the 219 years between 1793 and 2012?  What annual rate of return would need to be achieved to warrant the 2012 value of $1.38 million? A simple Goal Seek exercise reveals a solution of just under 9%, which, conveniently, is not out of line with what stocks have produced historically.

Something to think about the next time you walk past a discarded coin on the ground…penny for your thoughts?


Read more of The Lighter Side from our archives:  Q3 – Q4 2015   Q1 – Q2 2016