Savvy Avi

Piles of business and policy books are published every year. While almost any book has something worthwhile in it, only a small fraction are good. And for every profound idea there is a load of simplifications, unbiased assertions, after the fact reasoning and hype. When considering what to read I know what to avoid. For starters, I’d avoid anything with a title similar to this blog title – anything with a number in it: “365 days of success”, “8 new roles of money” (from the Kiyosaki who brought us rich dad poor dad) or “101 ways to turn your business around”. I also avoid biographies and autobiographies. They tend to present a simplified view where the fortunes of companies and nations are over attributed to one person. This view is misleading and even dangerous when people start believing in saviors and messiahs . Autobiographies have all the flaws of biographies and they are also biased and are too often just pure narcissism. Finally, I won’t read a book about a company written f...

Engineering System D ivision (ESD) at MIT hosted a talk this Tuesday about the financial crises with Charles Ferguson, director of Insider Job . Ferguson identified the securitization chain as a major cause of the 2008 meltdown. A while back, the issuer of a loan held it to maturity and bore the risk. More recently, risk bearing moved downstream from the issuer to the investment bank and on to investors and insurers. Faculty members in ESD deal more with fighter jets and supply chains than finance. However, system thinking and system engineering methods are great tools for investigating financial systems. The securitization chain acts like a physical supply chain and the meltdown happens to be a bullwhip effect just like in any supply chain. Using System Dynamics is also a powerful tool. Risk assessments of mortgage backed securities were faulty because the risk models had narrowly-defined boundaries. Cash incentives for short term gains, deregulation, shorting on one’s ...

TNS, a market research firm, conducted an extensive research on the use of mobile, internet applications and social media around the world. What's really cool about it, more than the findings themselves, is the way the findings are presented. Sometimes, visualization is what matters most. http://discoverdigitallife.com/

It seems that agile is the predominant methodology in software development, especially in shrink-wrap software and web. It certainly stands behind some mammoth success stories of late. However, agile is not a fit-all method, in many software domains it just won’t work well. More than that, agile seems more like a philosophy, a way of thinking, than a complete methodology. Software is a new field and it is going through some phases. Agile is one of those. Let’s look at the language used in new wave development methodologies. Programmers are action figures; they are “cowboys” or “ninjas” or simply “heroes”. Programming is a dangerous, masculine, activity like rugby (scrum) or an extreme sport (extreme programming). Planning is a poker game, specifications are paper in an electronic paperless world and all we need is dialog (agile manifesto). Could it be that this juvenile lingo is a product of an engineering field that is in its adolescence? When considering what methodology to use...

AA stands for Attention Allocation not Alcoholic Anonymous. Sorry for the deceiving eye catcher. PTT presentation is work I did in 2005 in the purely abstract edges of Operation Research. I uploaded a PPT presentation. The presentation is lighter and more colorful than the actual article. Warning you have to be a bit of a geek to press the link above. For the super geeks I put a link to the full article. It’s called “Attention Allocation to Partially Observable Heterogeneous Customers – with Imperfect Treatment”, Catchy? Full AA Problem article

Another System Design and Management certificate program started this summer. The event ended with a robot design challenge which I managed along with Hamid and Kandarp. With just three organizers there was lots of work but it was a rewarding experience. This is a part of an article that appeared in the SDM alumni newsletter: “Certificate students spent the last two days of the workshop completing the Design Challenge (DC) Competition. SDM Fellows - Kandarp Bhatt, Avi Latner, and Hamid Salim - designed this challenge using the latest LEGO Mindstorm NXT kit with several stages of events having increasing difficulty. A primary premise of this particular exercise was that the events stressed different (sometimes conflicting) performance requirements, forcing teams to perform critical design tradeoffs. This year's teams exhibited outstanding inter-team collaboration during the long hours of the DC process. First place Design Challenge winners were: Nick Biersdorf, Brad Hitchler, ...

A thesis is one of the advantages System Design and Management has over other professional degrees such as MBA. However, it is not structured like course work and it can take a lot of work to get started on the right thesis. There are three key decisions to a thesis: a topic, an advisor and a company (optional). Since you’ve got to start somewhere I started by choosing a topic and then pitching to professors hoping they would use their connections to find a company. It didn’t work. After several iterations I changed strategy and started with a company. Getting a company to collaborate wasn’t easy, but once that was done the other pieces fell neatly into place. Another option is to work without a company. An advantage to this approach is that you are more independent. Keep in mind that an independent thesis must rely on publicly available data sources. In engineering most of the data isn’t public but the front end of systems (finished product, website, mobile apps, standards, ...

Service companies use branches, phone, kiosks and web as direct channels to customers. In recent years service companies added a new channel - the smart phone application. Smart phones differ from PCs in screen size, ease of typing and input, connection speed and use context. Keeping these changes in mind, mobile apps shouldn’t be a replica of their online counterparts. One difference is that the mobile app has to be leaner. Another difference is that mobile apps should have unique features, such as location based features, taking advantage of mobile capabilities. As a case study, I compared the online website and mobile app of Citibank ’s card services. As shown below the mobile app has fewer pages (17 vs. 84) and has fewer levels (4 deep vs. 6 deep). Companies rushed to create iPhone and android apps often not doing it “right”. Mobile operation system defragmentation and rapid market changes make doing it right all the more challenging. That may be the reason why Citibank’s iPhon...

Dan Ariely a behavioral economist from Duke mentions System Design and Management in his new book “The Upside of Irrationality”. In his book, a sequel to the New York Times bestseller “Predictably Irrational”, Ariely intertwines research with personal stories including stories of his time as a “lowly assistant professor at MIT”. The story begins with “here is a story of a time when I lost my own temper” and describes a dispute between Ariely and a revered professor of finance, a former dean of Sloan, code named Paul, over a scheduling conflict of SDM classes. SDM students are described as curious and, reportedly, Ariely enjoyed teaching them. This story is just an anecdote used as a preface to a chapter on fleeting emotions followed by impulsive acts. Ariely and his fellow behavioral economists construct amusing research to expose how we humans continuously fail to behave rationally. In these experiments subjects fold origami frogs, build Lego robots, put their hand in close to b...

Jay Forrester , the founder of System Dynamics, a man regarded by many as a legend, was a guest lecturer in SDM ’s System Design class. At 92, Forrester is still relentless at finding the true implications of public policies through system dynamic simulations and working to correct policy. His work in the 70’s and onwards on the limits to growth led him to believe that people are consuming and growing beyond the world’s capacity and that disastrous consequences will follow. The implication of this belief is harsh; humanity should stop striving for growth and instead maintain a net growth of zero. Most extreme opinions are a product of dichotomous “black and white” thinking. This case is entirely different. Extensive research, innovation and his boldness to face an unpleasant revelation created this extreme view. Forester realizes that it is futile to lobby for such changes. Policy makers cannot radically change the direction of policy without a strong support of constituents. T...

eMbrace venture which I am a part of started as a project in Product Design and Development class. It is mentioned in the last SDM pulse in an article by the class's professor Qi Van Eikema Hommes: “one team in this year’s class started out with a technology—an RFID tracking device—rather than a need. Team members wanted to design a web-based system to track everything from documents to parts and information. In class, the students were urged to find out why the world would want their system. Using techniques learned in class, they interviewed and observed people, ultimately identifying a need among parents who sometimes lose their young children in busy areas. The team felt that these parents would like anyone who finds their child to be able to contact them quickly. Based on this need, the students developed an attractive RFID bracelet for kids and a companion web-based tracking system. The team is now exploring the possibility of collaborating with Verizon to produce such a sy...

Molded after the popular Sloan experimental courses (e-Lab g-Lab) SLAM lab (System Leadership and Management) is a course offered only to SDMs. Students consult Cambridge technology firms with strategic decision making. The course, offered in fall, has a summer preparation course adequately called pre-SLAM lab. During the summer course, the class is presented with cases about MIT spinoffs: E Ink, A123 Systems, Ember. All the cases have been written by Harvard Business School. I think I have spotted a pattern: MIT incubates companies and HBS writes case studies about them. Professor Michael Davies, who teaches the class, is the most charismatic lecturer I have had so far at MIT. Pre-SLAM class is always entertaining but when class ends I am not always sure what I’ve learned. One lesson I did pick up is that even very smart people can make stupid decisions. People are ‘prisoners’ of their own history and tend to bias strategic decision with emotional ‘reasoning’. I have seen it in poli...

As a blog writer I am interested in viewing who, if at all, is reading my blogs. I installed a tracker. I use tracemyip.org but Google analytics and probably many other sites provide similar services. So now I know a lot about you. I don’t know your identity but what I can tell is your approximate location, through IP address, the links or search words you used to get into my blog and even your browser, OS and screen resolution. I was surprised to find out that in several months I had a few hundred readers. In a typical day I have two or three readers one of which is a first timer. 70% of the readers come through SDM, which for me means more of my blogs should be SDM related. Other readers either come from Google search with searches related to my latest post title (“up on the bridge”, “performance based bonuses”, “credit defaults” are some examples), from LinkedIn or from looking me up directly (probably family and friends). The last category of entries to my blog is crawlers; the we...

Performance based bonuses (PBB) is an effective management tool but quite often it causes unintentional effects. PBB are supposed to improve productivity by compensating employees according to their contribution to productivity. However organizations are complex systems and it is impossible to measure an employee’s contribution accurately. Companies are forced to use performance models that are a simplification of reality. As a result, employees are focused on maximizing performance under the model which not completely aligned with the benefit of the company. In banking, for example, the bonus models underemphasized risk, causing a worldwide catastrophe. Leaving the financial crisis aside, there are other common pitfalls. It is simple to construct performance-based contribution for sales representatives. The more they sell the more they earn – simple. It is much harder to construct a model for back-end functions, say an IS developer. This is where it gets messy. Measurement by schedul...

As engineers, many of us at some point contemplate founding a start up. For most, it is nothing more than a thought and for a sound reason – we know the start up success rate. However, if you are anything like me a dormant entrepreneurial seed lingers in the back of your brain. Product Design and Development, a foundation course in MIT’s System Design and Development program, encourages experiments in that direction. The course reviews the product development process starting with deriving user needs and on to designing a concept and prototype. Interesting guest lecturers come to speak to class such as industrial designer Matt Kressy who talked about rapid prototyping and Yoav Shapira a startup VP who talked about agile development. Class teaching is followed by a semester long project to come up with a new product. Each group receives $800 to create a prototype. At the end of the course there is a competition and the winners receive a small budget to continue with the product devel...

Another nail to the coffin There is much hustle in Brussels as the EU market commissioner proposes steps to curb swap trading. The German chancellor presses for tighter EU regulations on hedge funds. In the UK, we are told, regulators seek tools to “burst dangerous asset bubbles before they are built”. Four banks, including JPMorgan Chase my employer, face trial over sale of derivative to Milan municipality, allegations that echo the role investment banks had in fueling Greek debt. It’s interesting that in the Greek and Italian stories the banks are cast as villains and public sector as a defenseless simpleton. But what is really amazing is that all these stories are reported in just one Financial Times edition. Things are moving at a dizzying pace. Financial policy is going through an overhaul. Aiming at the wrong target Meanwhile in the US, where the villains are the same but the simpletons are the homeowners, there is talk of a new regulatory body, the Consumer Financial Prote...

The thesis is one, of several reasons, that made me choose the System Design and Management program and not an MBA program. I have been looking forward to it with much anticipation. Now that I have started the thesis seminar, I quickly found out what’s the hardest thing about starting a thesis. It’s not finding a subject. Ideas come easily, every week I think of a new idea that gets me hipped. It’s not finding an advisor. There are plenty of experienced professors willing to advice. Unless the research subject is theoretical or not case-specific, which is not my desired direction, the hardest thing is connecting to a company that is willing to share data for research. Sponsored students are lucky (not just because of money) they have an established relationship with a supportive company. No worries, with patience and persistence even hard things reach a successful conclusion.

I am taking the first spring semester as a long distance student in MIT's System Design and Managment (SDM) program. The long distance option, which I am grateful for, poses some challenges. A month into the semester, I am still trying to improve the interaction with the classroom, faculty and fellow students and maintain a balance between school and work. Setting up a work station I am using my home office (/living room /dining room/ guest sofa) from which I connect to the ‘bridge’. I find it useful to work with two screens. One displays the class, the mike controls and my video (I want to see how I appear to people looking at me from the classroom). The other displays the presentation slides and notebook (OneNote). The webcam is positioned above the main screen and when I look at the other screen, I am not facing the webcam. Class participation The video and sound quality are good. Material is always available before hand on the web. So keeping up with the studies is eas...

This blog is about management, technology and finance. And when the muses strike about art. Most of what I will write about would not be completely original, rather it would be contemplation about and reviews of publications, books and articles. After all between a job, studies, family and other activities who has the time to come up with original thoughts - only the very lucky ones: philosophers, writers and columnist. As an MIT student of System Design and Management (SDM), I also hope to write some insights about the program. I need some perspective in order to organize my thoughts and so it will probably take a few months. Another aspect of being a business (& eng) student is that I find myself reading case studies instead of the things I would normally read. Case studies will probably not be much of an inspiration, I hope they will at least be educating. I also hope that the change in my reading habits would not “dry” up my blogs.

Until reading James Rickards ' FT article (need to be a registered FT user to view) about the financial crises in Greece I had a feeling there is something fundamentally wrong with CDS trade, but I didn't understand exactly what. Other columnists say that derivative trading increased risk because: 1. they gave institutes the false sense of security in risk handling - relaying pseudo science mathematical models, as if they were the absolute truth. 2. They increased interconnection between financial institutes strengthening the domino effect 3. They made the investments more complex, harder to understand and thus less transparent. While all the above-mentioned reasons are true Rickards introduces a simpler flaw with CDS. A regular insurance has a insurable interest . An insurance company giving a person life insurance has an interest in keeping the person alive since that way they will not have to pay the insurance. CDS traders, on the other hand, have an interest to exa...