PROGRESS AND FALL OF DIGG

27 December, 2014 0 No tags 0

How digg step to be worth 200 million dollars to be worth 500,000 dollars. This is another example of how structures are formed randomly, and as if not identified correctly, you can not realize its potential.

Digg is a news network (www.digg.com) that allows users to vote to give more or less importance to the news and so position itself more visibly.

Like so many projects started out modestly, until Google in 2008 reached 200 million offer for the company, but Kevin Rose, the owner said no.

In 2010, people start to forget about Digg. Facebook and Twitter have managed to capture more attention from users. Digg traffic collapses. Its potential value as well.

To date the value is ascribed to Digg not in any case exceed half a million dollars, and that’s being generous.

If you look the pattern that lies behind all cases is the same. Is a positive random structure, at any given time changes, and it becomes negative.

The difference between the case of Tom and Kevin’s case is that the draft of Kevin still has some value. Also Kevin never wagered more than he could lose, which has prevented him end up living under a bridge. I just let pass the opportunity to get rich because he thought he was king of the world and disregard the random component. He did not understand that their work had led him to add probabilities of success (to be in the right place at the right time) but the next spin of the coin would be the cross.

A lucky fool (an real case)

20 December, 2014 0 No tags 0

I chose this story because the examples of property market are well understood. It is a true story, from when I was involved in developing areas of marketing and sales for property developers during the boom years. It is a story that begins in 1994 and ends in 2012.

Tom (real name) a promoter, and a promoter as any. Begin modestly developing small projects during the nineties. In the mid- nineties, Spain still crawls, recovering from the impact of the crisis of 92, we pay spree late eighties. In this crisis environment our promoter works hard building garages. He didn’t have yet economic capacity, or neither can he access funding streams to undertake projects of larger size, such as housing developments or industrial buildings.

During these years, Tom works hard, selling is hard, but he was able to sell some, and got profit. The year is 1997, and our country we finally begin to recover from the crisis, the credit starts and begins to encourage consumption. Tom begins to access credit for the promoter and begins developing its first residential developments. These do not take a long time to be sold with acceptable benefits. This begins to create a virtuous cycle that involves our hero. Banks end up queuing outside your door to offer credit with which to finance their purchases of land and property developments which are sold within a minute. Tom is on the top. A Tom is getting face in every shoot of the coin. He is the king of mambo. We are in 2006.

In 2006 Tom is a small potentate, lives in a three billion € in a luxury development. Do not miss anything. This year Tom asked me what else he can do. I reply that the best thing to do to stay in the property market is to sell everything and go home a few years (I’m trying to say back to square one voluntarily). I replied to him part of the success was luck. Accumulating many lucky rolls, and you are betting more than you can lose (then its debt is already creepy). He looks at me like I had gone mad.

  • Look, all I have achieved is thanks to my efforts, hard work and my vision – he told me – If I’m here is because I’ve worked, I’ve earned it .

I reply that I do not doubt about it, but it has also been fortunate to be in the right place at the right time, I repeat that in addition to hard work has had an ounce of luck (the small difference that makes when you throw a coin air the percentage of heads or tails is not 50%). That may seem beyond logic, it is best to sell everything now, retire, and buy it back for a tenth when spending a few years (which I do). In short, it is too long getting face on each shoot.

He would replied me that this has nothing to do with luck. That luck does not exist, and that his life has no place the fate. I think it is a lucky fool.

  • It’s all about hard work and vision – he told me. He immediately rescinds my contract (He thought I was an asshole). I am loosing this client.

Fall 2008 Lehman Brothers bankruptcy. 2009 all explodes. It caught me sitting comfortably on my couch watching the show. Tom, on the other hand went bankruptcy in 2011. He did not understand anything and he pay for it. Now bemoans his luck. Now it seems that luck exists, but only in one direction, just bad luck.

Note: The story of the lucky fool can reproduce professionals in other sectors, and most prominently in the financial sector. Sector with glut memos. In fact what Lehman and the whole financial system is the same story, we must only change bricks with credits, and banks with property developers.

Obituary: It is almost impossible for Tom to return to square one. Its debt level was stratospheric. He risked more than he could lose, and literally popped out.

Experiment Part 2: No one survives

13 December, 2014 0 No tags 0

Let’s push the boundaries of the experiment, we are going to continue progressing over a few years and see what happens. Look at the table.

Year CEO´s universe Probability (50%) Survivors CEO´s Not survivors CEO´s (the cemetery)
1 10.000 2 5.000 5.000
2 5.000 2 2.500 2.500
3 2.500 2 1.250 1.250
4 1.250 2 625 625
5 625 2 313 313
6 313 2 156 156
7 156 2 78 78
8 78 2 39 39
9 39 2 20 20
10 20 2 10 10
11 10 2 5 5
12 5 2 2 2
13 2 2 1 1
14 1 2 0 0

The conclusion is scary. Ultimately, no one and nothing survives. All end up sending us to the cementery sooner or later. No one is safe, neither good nor evil, neither the regular … So what’s then?

The important thing is to keep the option to go back to square one. In order to return to the initial list of 10,000. No matter how often you succeed, the clue is that if you take a single failure it shouldn’t be too expensive (burst).

We have to assume that throughout our lives we will have to go back to square one on more than one occasion (Almost nobody goes face throughout their entire lives). The question is to do it consciously, understanding what happens if something goes wrong. Regardless of whether the return to the initial square is forced or voluntary.

Note: This experiment is of universal application and works with people, products, services, and whatever comes to mind.

One important thing: for a positive fate structure to reach you, you have to be there, working and investing. We have to build the likelihood for good things to happen. To be among the top five of the year once, you have to be able to have entered the list of the ten thousand. Training is important, education is important, the work is important, but much of the time is not decisive for success *. We have to assume that the success / survival has a random component that escapes our control.

We have to assume failure after a success, as it is often caused by a fate structure change. Only by understanding how fate works, we can understand and take the degree of fate (luck if you want to call it this way) that is part of our successes. This will allow us to understand that if the degree of fate (luck) is large, we must jump ship long before it starts to sink.

If many of the developers of the world, have understood and accepted that its huge success was the result of being in the right place at the right time, they would have sold their businesses in time. I have done following reasoning: I am where I am thanks not only to my efforts, but also through a series of circumstances promoted by fate. So before that decomposes random structure (luck is over) I will sell everything, and get back to square one voluntarily and controlling the situation.

* How do I understand success: Achieving the goals that each of us mark to ourselves.

 

 

Experiment Part 1: Luck and skills

6 December, 2014 0 No tags 0

In the previous post, I commented how common is in our world to confuse luck with skills, and how living under the influence of this misunderstanding, may be catastrophic.

We often have the mistaken impression that a decision is a good decision when we reach the desired results. Of course, luck had nothing to do with it, it was our vision, our painstaking calculations, our impeccable strategy and way of doing. But when we do not achieve what we wanted, we always say the same thing: we had bad luck, impossible to foresee that or the other.

Let’s see how we are able to explain what cannot be explained. This is a sample study in our laboratory. The sample will be 10,000 CEO ‘s.

The rules of the experiment are as follows: we assume that those CEOs who achieve the objectives of that year, will remain on the market. Those who fail will exit the market, will be dismissed. To determine whether a CEO has achieved the objectives we will launch a coin, if heads it will determine the objectives were achieved. If tails, will determine that the objectives where not achieved (as we are in a lab assume that the probability of getting heads or tails we flip the coin is 50%).

Since the probability is 50%, the first year it will be on the market 5,000 directors, who will be those who have achieved both. And another 5,000 will leave the market, which will be those who have not achieved the objectives. And so on. This is going to make for ten years, where we will get the results shown in table one.

Year CEO´s universe Probability (50%) Survivors CEO´s
1 10.000 2 5.000
2 5.000 2 2.500
3 2.500 2 1.250
4 1.250 2 625
5 625 2 313
6 313 2 156
7 156 2 78
8 78 2 39
9 39 2 20
10 20 2 10

As we see in the table, the tenth year, ten directors will remain on the market. Ten survivors. To continue the experiment we will bring the real world to the ten survivors. These ten types, types that are considered successful, brilliant professionals, who hold the offices and positions that have, due to their superb training, outstanding strategy and careful education. Some perhaps, even write blogs, articles and teach classes in any business school.

In fact, if we could interview them or talk to them, we would be able to explain in detail how they have come to occupy or maintain their current positions. We describe in detail its magnificent strategies, their careful management, and unparalleled vision. In fact it’s what they do. This shows that we are able to build magnificent (and false) retrospectives stories. We are able to fully explain past events. The only thing they would not want to accept is that they are where they are because of luck.

We can continue the experiment by a new roll. The following year, the eleventh year, will be half (five directors) as shown in table two.

Year CEO´s universe Probability (50%) Survivors CEO´s
1 10.000 2 5.000
2 5.000 2 2.500
3 2.500 2 1.250
4 1.250 2 625
5 625 2 313
6 313 2 156
7 156 2 78
8 78 2 39
9 39 2 20
10 20 2 10
11 10 2 5

Once you have reached the eleventh year, back to the real world again. We will meet again superb explanations of how the five directors are no longer on the market. How did not meet its objectives. They will explain the type: “success made him to trust … “, ” they had slacked off …”, etc.

From this experiment we can obtain three conclusions:

First conclusion: very few people are able to recognize that fate influences your career and business. In fact, as we have seen, there are professions in which fate is decisive.

Second conclusion: the higher the number of professionals in the field, the greater the likelihood that there are some with great success as a result only of luck.

Third conclusion: this actually has a huge bias, the dead do not talk, have a look:

Year CEO´s universe Probability (50%) Survivors CEO´s Not survivors CEO´s (the cemetery)
1 10.000 2 5.000 5.000
2 5.000 2 2.500 2.500
3 2.500 2 1.250 1.250
4 1.250 2 625 625
5 625 2 313 313
6 313 2 156 156
7 156 2 78 78
8 78 2 39 39
9 39 2 20 20
10 20 2 10 10
11 10 2 5 5

We have now added something you have not realized before, the column of the cemetery. The non survivors (of the dead on duty). If you look at the column no survivors, they are there, but you do not see them. And is that the dead do not talk. They have no voice, no visibility, and no nothing. And therefore they cannot tell the other side of the story. And they were at the beginning of the game in the same conditions as others, were one of the 10,000. But one day they just came out the other side of the coin and will it be the end of story?

One is the end of the story if you’ve popped out, if you will bet more than you can lose. If you bet more than you could lose means you will not be able to return back to square one. If you bet what you were willing to lose, it means that only you have bled, that you have not been busted yet and you can get up again, you can go back to square one. You can go back to try again. In fact, you can even decide to voluntarily return to square one:

  1. You can sell your business and start again with another project.
  2. You may decide that you’ve lost what you had to lose; you do not want to be popping out. This gives you the possibility to return to square one as you’ve recovered.