“Nothing substitutes for thinking”, as Munger and Buffett have said, and someone has also said that “not everything that counts can be counted, and not everything that can be counted counts.”

Taleb’s book “The Bed of Procrustes” is full of aphorisms, allegories, metaphors and whatnots. In a sense his entire body of work is about the dangers of false empiricism & science, and poor knowledge of, well, everything. And yet we select below just a few aphorisms that apply to this case.

“Suckers problems: when the map does not correspond to the territory, there is a certain category of fool, the overeducated, the academic, the journalist, the newspaper reader, the mechanistic scientist, the pseudo-empiricist, those endowed with what I call epistemic arrogance, this wonderful ability to discount what they did not see, the unobserved who enter a state of denial, imagining the territory as fitting his map.”

More attentive readers will remember our “map allegory” in our Q3 2008 report, a time of extreme market turbulence:

“At IP, we are lucky to be able to draw on a simple “map”, which we take off our pockets on each and every occasion. Or better: it is usually more efficient in moments such as now, when the rationality of a battered and bruised market simply wanes.

Independence. Rationality. Patience. Discipline. Conservativeness. Long-term horizon. And the mandate to buy stakes in good businesses that have honest and competent managers, requiring a discount, a significant safety margin compared with its value. It can’t get any simpler.”

The good news is that this map also works in good times.

Other quick Taleb quips:

“They think that intelligence is about noticing things that are relevant (detecting patterns); in a complex world, intelligence consists in ignoring things that are irrelevant (avoiding false patterns).”

“Randomness is indistinguishable from complicated, undetected, and undetectable order; but order itself is indistinguishable from artful randomness.”

“To bankrupt a fool, give him information.” — Absolutely fantastic!

Finally, the long article on Edge.org (it is rather redundant to use the word “long” before mentioning an article on Edge.org). Emanuel Derman was the Head of the Quantitative Strategies Group, in the Equities Division of Goldman Sachs. If tempted to distill the article into two paragraphs, they would be:

“Theories deal with the world on its own terms, absolutely. Models are metaphors, relative descriptions of the object of their attention that compare it to something similar already better understood via theories. Models are reductions in dimensionality that always simplify and sweep dirt under the rug. Theories tell you what something is. Models tell you merely what something is partially like.”

and

“Given that finance’s best tools are shaky models, the best strategy is to use models as little as possible, and to replicate making as little assumptions as you can.” — This particular sentence is in the last part of the text, section 9, and immediately after this quote Mr. Derman lists a few great tips for those of us who have to use models – in summary: make it simple, don’t over-reach, and most of all don’t idolize neither the model nor the process of modelling.

Transitioning from old to new, we have the healthcare sector – and how one start-up is trying to bring transparency to a sector that is as obscure as it is immensely relevant for all global economies. Then we go entirely new and show you a company that is making huge money – US$ 20mm from one “product” – in mobile hardcore gaming, a sector that didn’t exist until the iPhone. How far can it go?

London Business School’s Global Leadership Summit 2011 and “Business Leaders – interviews” are two LBS-related posts here on Leadership. The interview format is interesting and they have been known to extract a bit more “personal” opinions and stories from executives.

Carlos Brito is a great example of leadership through incentives and cultural reinforcement, and his talk at Stanford is a must-see. Actually we’re sorry for taking your your time, but you should actually watch all the videos in this post. They’re very good and the results these execs have achieved over the years speak for themselves. Will they always get it right? Probably not. But that doesn’t mean the frameworks and mental models aren’t valuable.

This December 2009 post on “action-oriented entrepreneurs” also raises more questions than it answers, strengthening the “leadership vs. beauty” comparison in the quote above.

In a June 2010 post called Ulysses and Fiscal Responsibility, we highlighted a 1952 managerial training course inside Bell Telephone that sought to open up the minds of high-potential people at Bell. They felt they needed more people capable of leading the company in bottom ladders, and that required a more general formation. One of the tasks was to read and discuss James Joyce’s Ulysses.

Back to the study, whose abstract can be found here: they also looked at >45,000 NCAA (US college-level basketball) games and found the same effect, albeit smaller.

The hypotheses to explain these findings were loss aversion and diminishing sensitivity: that is, losing by 1 point made teams seek to reverse the situation and losing by a “lot” made teams care less or subjectively try less hard as those losing by 1 point, tied or winning. The researchers then devised a “game” to test subjects’ motivation in similar situations and they did find that those losing by little increased their efforts.

Even more interesting is the finding that people with higher confidence in themselves increased their efforts more than those with less confidence. In the article’s own words: “Being slightly behind won’t increase motivation if you think you’re not capable of turning things around. And, similarly, a large deficit might also be motivating if you think you’ve got what it takes to stage a glorious comeback.”

Motivation isn’t an easy issue – not even as a study field – so it’s only natural that it seems so hard to instill it in oneself and/or others. When you mix the issue with confidence, it’s hard to know what comes first – this study seems to say that confidence is the fertile ground for motivation.

(Note: we don’t provide the link to the interview because it won’t be available until April 15th for non-subscribers. When we do link to it, it will be in Portuguese…)

The alternatives are:

1) You keep that hammer but seek out only the problems that actually are nails – by the way, the wrong way to look at it is to equate this proposition to Buffett and Munger’s “circle of competence”. What we wrote in 1) is limiting and invites obsolescence, while Buffett and Munger do numbers 2) and 3) below;

2) You dedicate yourself to actively and relentlessly seek out new tools, frameworks, mental models, skills, experiences – whatever it takes – to improve your “toolkit”;

3) You seek to associate with people whose “toolkit” complements yours.

The best option is, of course, 2 and 3 together – even better if you can make it so the efforts behind 2) and 3) are aligned with a bigger-picture strategic plan/ vision, and that the team interaction is healthy and productive.

Yes, it’s hard to find an environment like this. If you don’t have it, try to make it happen – and if it does happen, make sure you do everything you can to nurture it. If it’s not possible, the effort you put into 2) will still be worth it.

Carl Icahn is returning all outside money in his hedge fund, according to Bloomberg and DealBook stories. While he’s clearly uncomfortable with the markets and sees the possibility of a “dislocation” ofsorts, the most likely factor is that his age and bank account makes him far less prone to accepting shareholders’ “fear and greed” cycles. His own funds are more than enough for Mr. Icahn to continue shaking up Corporate America, and we’ll always keep an eye on him.

On a completely different subject, Seth Godin highlights the limits of evidence-based marketing – or debate, for that matter. His evangelism of online/social/content marketing of idea spreading via inspiration is his bread-earner and should be taken with that in mind, but it’s still interesting.

Finally, an attendee at TED 2011 blogged about the TED Fellows program. It’s easy to forget this piece of the TED puzzle, but this effort to nurture promising people – albeit by TED’s standards, which are one way of looking at it – is really quite interesting. First, it gives them an audience they couldn’t ever hope to reach. Second, it gives them tutoring and access to a network of highly influential and probably brilliant people. Third, it stimulates “leverage” by strongly suggesting that each Fellow spread this “gift” in his own community. Finally, by “rotating” the fellows every year (or 2 years if they are Senior Fellows), it allows for an ever-increasing community of people and stimulates those who apply to keep trying. Learn more about the program, including about how you can help it, starting in this page and following the links (don’t miss the video).

It’s also bound to teach the interested reader a thing or two about time management: this page alone, called “reading packet“, would take some time to digest…

About John Brockman, here’s an interesting interview on March 2011 Wired UK magazine.