IT

Corporate IT has had me scratching my head for years. For some odd reason it seems that just about everywhere I look corporate IT is fumbling and dropping the ball, leading to the obvious question of why is it so difficult to implement a rational and functional IT setup in an organization. There are so many dimensions to this, but if we scope the discussion to a tool perspective and put the end-user in the center, we can try to paint some type of a picture.

The common thing about all of the jobs I've ever held is that my main tool is my computer, which in my case has always been a laptop. A common policy in organizations is typically that the computer can be replaced once every three years (some more enlightened organizations may even allow cycles of only two years). But somehow it is not at all uncommon for organizations to provide their employees with laptops which are the cheapest money can buy. Or actually not. For instance I recently received a new laptop from work, which is an HP ProBook 4320s. It weighs very much, sports a relatively sluggish processor, a relatively bad battery life and worst of all it freezes more often than not. Apparently it costs somewhere in the region of 500 euros, give or take a bit. My personal preference at the moment is the new 13" MacBook Air, which I bought recently for about 1200 euros. Assuming that the machine is held for the typical three years, that means an extra cost of 233 euros per year, or about 19.44 euros per month. Of course that may sound a lot for the bean counters, but the device is better in every way I can measure: it is lighter, it is more powerful, it has a better resolution, it has an SSD drive (=it boots up faster, loads programs faster, ...), it has better battery life, it has OS X, and so on.

If we look at the boot up times, the MacBook Air boots up in, oh, 15 seconds. The HP boots up and runs through all of the associated startup procedures to get the system working in 3-5 minutes or so. Assume I work on 21 days in a month, with 3 minutes that's 63 minutes of boot time per month, with 5 minutes that's 105 minutes. With 15 seconds that's 5.25 minutes. So even with the low end estimate of 63 minutes for boot ups per month, if I cost more than 19.44 euros per hour or more to my employer, the rational option would be to go for the MBA. In fact, I would gladly pay 20e per month to my employer to be able to opt for an MBA over the HP.

The argument against high-specced machines has traditionally been that the average employee does not need the high specs because they only need to be able to use basic MS Office tools and such. But even in that case, it would be much more rational to look at e.g. netbooks or these days the new Chromebook-type computers. Acer's Chromebook is selling for about 300 USD, meaning that it significantly reduces the price when compared to the HP I was given. And I will venture a guess that that is a better machine than the HP. Of course in the Chromebook's case one could argue that it is more limited in functionality than a full-fledged PC. I haven't used one so I don't know, but I do know that the laptops leased by the NGO I'm working with are locked down so strictly that it is impossible for employees to install anything on them. And in that respect I think the Chromebooks would be more than comparable.

Now, the big question is why this sort of stuff is still going on in IT organizations and it's nearly 2012. This is just one part of the bigger puzzle of WTF. Other parts include "Why the heck is someone paying large amounts of money for email systems that don't work when GMail is free?"

Degree lengths

Continuing on the theme of education, unfortunately it seems that the politicians are also very much clueless in regards to education. A big problem that is often cited as the reason for stricter control over students is that the time it takes the average student to graduate from university has been apparently growing. So obviously the logic goes that this must be bad because if students are in school longer they must cost society more directly and also if they are in school, that must mean that they are not working and hence are also causing losses for the society in terms of lost tax income. That may be slightly simplified, but my understanding is that that's the crux of it.

But, if you actually think about it, coming from an IT background we've often been criticized for taking jobs during our studying and then forgetting to graduate. For some reason it seems that competent software people tend to be dragged out of school very quickly after they enter school. So if you think about the case where a student de facto drops out of school to get full-time employment writing software, you in fact have a situation where the student isn't causing costs for the school (s/he's not taking up the time of the teaching staff, no need for expending material resources, no subsidies, ...). And most likely ending up in software means that the person will be making a decent living, at least in the region of the median income in the country. So a productive part of society. Of course one could argue that the lack of degree may come back to kick the person in the ass later down the line because for some odd reason having a piece of paper makes you a better person. But again the world has changed so that in technology, for instance, the time horizons have shortened to such an extent that because I dropped off the bleeding edge of web development in about 2005-2006, I'm already an ancient dinosaur, degree or no degree.

One angle to think about this might be the per student costs. The current academic system relies still too heavily on mass lectures, which cost a fixed amount to produce regardless of the number of attendants. So if people drop out of school and aren't replaced with new students, the average cost of producing the lecture for a smaller amount of students goes up, despite the cost remaining constant in absolute terms. But again this can be tackled either by shifting away from mass lectures (which I never liked anyway) or then opening up the application process and enabling more students to enroll thus mitigating the effect of the disappearing students.

However, this still does not really explain why everyone is so grumpy about students taking long to graduate. One of the most central reasons, I believe, is that there is a constant game of resource allocation going on. The government runs the universities in Finland and despite recent attempts to change the system to set up universities as foundations and attract funding from the industry and other sources the raw truth is that to a great extent universities get funded based on the amount of graduates they are able to produce. So there we go, there may not be any concrete benefit for anyone in getting students to graduate quicker, but there is a very clear link to resource allocation. So if the resource allocation mechanism would be changed, I think schools would also change their attitudes and not care too much about the invisible and costless students hanging around as an entry in a student database.

Now, looking at the situation from the other perspective, there might actually be very many benefits for students and the universities to keep a link between each other for as long as possible. Reflecting on my own career and studies so far, it's quite clear that taking a job at a multinational was quite possibly one of the best decisions I've made during my studies. It gave a fairly solid and concrete link to the otherwise somewhat disconnected subjects from school. How do you expect a person to truly understand about strategy based on lectures and articles without actually providing the individual with an opportunity to be a part of a strategy process and see for themselves what these things are about. And on the other hand being in a company but also hanging around on campus enables the student-employee to actually go to professors to discuss about potential problems that the student is working on in his career and actually brings potential work to the university and may help in applied research.

This subject could of course be discussed at greater lengths and deepened a lot, but even at a fairly shallow level it's quite clear that the whole perceived problem of students not graduating fast enough is just silly.

Income inequality

It seems that an underlying driver in the dissatisfaction that the Occupy movement has stems from a certain level of inequality in regards to income and wealth. Hence the resentment towards the top 1% (which in the US nowadays means a yearly income of roughly 300-400k or total assets of 5-10M dollars).  There is actually a fairly interesting podcast which was published recently by EconTalk on the inequality and the top 1%, although one should bear in mind potentially biases considering its a fairly libertarian publication.

But that got me thinking in a tongue-in-cheek fashion. I was recently lectured to by some people who wished to save the world that inequalities are bad and they showed some very convincing-looking diagrams which apparently prove that social problems stem from financial inequality. Or at least that there is a significant correlation if not a causality link. Can't really argue with the data, but I think there may be more going on than a single snapshot in time can capture.

Anyway, if we accept at face value that inequality is bad per se, then obviously we should try to decrease inequality. I'm always slightly hesitant of taxing the hell out of people since that gives the politicians too much money to do silly things with. So if there is a natural way of decreasing inequality, it would be nice. And it turns out that there is. It's called the recession. We now have data from the last credit crunch and the years following which shows that inequality has decreased, which must be good. And apparently the recession and all the fuss is driving it. The conclusion then must be that to make the world a better place for everyone (by making it a more equal place), we must create a sustained state of recession whereby the financial inequality would sort itself out.

Now, the sharper sticks in the crowd will no doubt already start thinking about different types of scarcity effects which may emerge as well as innovation and its links to crisis situations. And of course there is a very real risk that something very innovative might come out of this. Unfortunately, however, innovations tend to get productized and someone may get very wealthy from creating something useful. This in turn will widen the gap between the haves and the have-nots, and this time the recession might have created this. So what the politicians could do is ensure that none of these heroes who might innovate themselves out of the recession can actually do so. And considering the track record of politicians in general, I feel very confident that they would be able to kill off all innovation.

So, there we go. Instead of worrying too much about reducing GDP numbers, prolonged recession or the fall of the euro, we should instead embrace all the chaos as it will reduce inequality and let's face it, inequality is supposedly the result of all evil. Ergo, the world will become a better place.

Tongue still in cheek.

Student subsidies follow-up

Since my latest blog entry, the Facebook group demanding the demolishing of income thresholds tied to student subsidies has more than doubled in size to about 60 000 members, which is increasingly worrying due to the blatant greed and self-centeredness which is obvious from the statements being thrown around. Anyway, my viewpoint was already presented in the previous blog entry and the entry from September 2010 where I did the math with a few example cases, so let's not get stuck on that anymore.

At the same time SYL, the National Union of University Students in Finland has also posted their stance in a blog entry. It is fairly encouraging that they also essentially say that while they to an extent understand why the discussion has erupted in this way, they view the student subsidies in a similar fashion as other social benefits: they should be aimed at the people who in fact need support and shouldn't be treated as "reward".

Another interesting point in their post were the costs they had calculated which will arise from various types of changes to the system. You can find the details from the post, but to give some perspective to the discussion, the overall costs arising from supporting students run in the range of 800 million per year. The demands that the students are now putting forth would cost an additional 300 million per year. To contrast this, more targeted changes to e.g. support students with children by increasing their allowance by 145 euros per month would cost in the region of 23 million per year. This type of change I can agree with as I can imagine that supporting a family with children during your studies is something which demands not only time, but also resources in a completely different way than being single.

A friend of mine also linked an interesting article from Canada, where some people had talked to the local Occupy movement. Combine this article with another one on how college has been oversold and a picture starts emerging. I recall I've previously blogged about how the education system will be in turmoil and how essentially inefficient it is to run a system to highly educate people who end up doing routine tasks which don't essentially need high education only to provide businesses with one criteria with which to filter applicants with. Of course it's nice to give everyone a university education, but ultimately I think people should put into perspective what the education actually is and what the impacts realistically will be on their lives. It's completely ridiculous to assume that merely obtaining a university degree will automatically guarantee bliss. There's always a certain amount of shoveling excrement involved in establishing yourself and your career and, let's face it, with the increased amount of uncertainty on every level in the world, chances of failing a couple of times are fairly high.

This in fact links back to the original discussion on income thresholds in respect to student allowances. The system is a social welfare system meant to ensure that people are able to survive. Think of it as an air bag. The intention of the system isn't to provide you with a comfortable setup with which you can cruise through life without having to compete and create value. The purpose is to ensure that if you crash, you stay alive and can get back up again. If air bags in cars provided a near 100% survival rate and also provided a very comfortable pillow, there wouldn't be much of an incentive to be too careful in traffic as the worst-case scenario would involve a comfortable nap after and collecting insurance money...

In fact, amusingly enough in Finland students are very risk averse and tend not to even finance their studies with debt or if they do, it is only to a very limited extent. This means that unlike the people in the Occupy protests, graduating Finns very often have little or no debt to speak of, so from that perspective as well I think what will happen is that the demands will not be met with on any level and that the silly movement of greedy students will gradually deflate when people hopefully realize how silly the bitching and moaning actually is. But that still leaves the question of what exactly is the value and use of university education today and how will it be repositioned as it is increasingly clear that the landscape has changed in such a drastic way that the old system is very much ill-positioned and the drift must be addressed in some way. Hopefully it will be done intelligently, but I'm not putting my money on the politicians being able to do anything good with it.

Here we go again... Finnish students feel that they are treated unjustly...

Oh dear lord, it's that time of the year again when the liberal arts students get their undies in a knot and decide that they're being treated very unfairly because they only get free education, free money, free healthcare, and to a fair degree the freedom to earn some money before the benefits begin to gradually get decreased as a function of income. A year or few back the cry was to adjust the allowance and housing subsidies upwards, and yes, to an extent there was a point in that: over a course of a decade or two the other social benefits given to poor had gone up but the students had been neglected. But that wrong was set right and the allowances were raised.

Now in the time of austerity measures and hell in the labor market the free-money loving (ok, who doesn't love free money...) students have decided that it is unfair that in some circumstances if they've earned too much, they are asked to return a part of the payouts handed to them in the form of allowances and housing subsidies (check out my post from September 2010 on financing studies for detailed calculations on how wealthy students actually can be before getting slowly cut off...). So a virtual mob of irrational (in a systemic sense, but on a personal level they are of course very rational for being greedy) students has showed up demanding various things. In fact the demands are not quite clear and in the good nature of Occupy Wall Street, it may have something to do with the fact that they are grumpy because they feel entitled to something and the universe has given them the middle finger. But unlike in the case of the Americans, in Finland the situation is ridiculously good for the students.

Apparently the demands are two-folded. Firstly the students feel that the limits for how much they can earn before they start losing benefits need to be raised. In practice the current situation is that you can live off of about 20k or so per year of income and benefits before you are cut completely off. To be honest, with that amount of money I don't frankly think that you should be subsidized. You're already given free healthcare from a dedicated foundation which focuses only on students and what is in practice a free university education. I think that after you are making 20k a year as a student, you can stand on your own two feet without the need for extra subsidies.

The second point which seems even more outrageous, and this seems to divide the students, is that they feel they are unjustly being punished in the form of taxes for working during the semester. I don't know who came up with this mind fart, but I don't think it needs any more countering. Of course it would be quite nice for me to abuse my unlimited (time-wise) student status and get my income tax-free for the rest of my life in Finland. Yeah...

Of course the Finnish student support system isn't bad, as can be easily proven by just looking at the amount of support and comparing it with other countries. That isn't to say that there aren't problems in the system. One valid point is that in certain cases students need to optimize their earnings so they don't go over certain threshold limits. In practice it is possible that by going over a limit by 200 euros on a yearly level will result in you having to pay back 500 euros. But again, this problem has nothing to do with the demands the students are making. This is merely a matter of having threshold levels instead of merely implementing a linear model of decreasing benefits, which I guess could be rather easily implemented.

Another problem is that the argument that life on merely the student allowance and housing subsidies is impossible in certain regions of Finland, e.g. Helsinki, where the housing costs are so high that only a small portion of the allowances are left to be disposed to non-housing related costs. If students actually take out a loan and/or do even a minimum amount of work on the side, the situation, however, isn't all that bad as can be seen from the calculations I referred to earlier. But if something must be done, I think it would potentially be ok to adjust the benefits at the lower end of the spectrum, i.e. give support to those who need it the most. But again, this is not what the students are demanding. They are demanding that they be rewarded for performing their studies.

Think about the logic of the demand a bit. It is essentially the same as saying that it is ok to cut social benefits from the lowest classes based on arbitrary criteria such as them having an alcohol problem and failing to show up for meetings but at the same time arguing that people who make, say 100k or more a year contribute in such great fashion to the economy and society that they should be given free money in the form of allowances and housing subsidies. That makes no sense at all and considering that people who are being educated at university levels in e.g. social sciences fail to see this flaw just begs the question of whether free education and all student subsidies should be cut altogether as apparently the years and years of state-subsidized education has still kept people at a, shall we say, intellectually handicapped level despite all efforts.

Sorry, I may have been quite harsh, but honestly I am disgusted by the blatant greed behind this.

Some more things to point out

• Stock markets aren't the economy. Getting the indices to go up slightly does not mean that it's clear sailing for politicians and that the problems have been solved. They shouldn't be used as proxies for that type of speculation.
• Regarding speculation, however, basically all of the trade done on stock exchanges is one form of speculation or another. There is plenty of discussion about whether investors are rational or not, but it is sufficient to say that when investing money, the investor must at least personally feel that the trade is good for him to proceed and ergo the equity is mis-priced. Due to the uncertainty in valuation, however, the positions are speculative by nature, regardless of the duration that the equity is held. Hence it is silly for politicians to think that "speculative" trading on exchanges should be curbed. And besides, short-term trading brings volume into the market and provides liquidity...
• ... however! There are certain things that should be kept an eye out for. When one leaves the realm of the real and tangible world and heads into the abstract world of derivatives, these are the more dangerous waters. It may be wise to look at derivatives trading where the derivatives aren't used to hedge real-world situations but are instead used as lottery tickets. Hence naked positions and complex chaining of derivatives may be something to look at regulating a bit more, at least until more about that world is understood.
• I'm also becoming more skeptical towards people whose jobs cannot be supposedly measured. Sure, we all live in a complex world, but you need to measure things to understand whether you're going in the right direction or not. Or whether you're even moving. Metrics can always be devised but creating good metrics may be difficult. But that should not mean that anyone should be allowed to hide behind the argument of "my job can't be measured because it is such a complex thing". If someone says that, then most likely they don't understand what it is that they are even doing.

Random thoughts

• We haven't even seen globalization yet; expats are still a minority and the inertia people face in relocating is still very large and a major part of international trade is done under the umbrella of big companies moving materials around and in accounts.
• What are often bemoaned as the failures of capitalism are in fact symptoms of corporatism and corruption, not capitalism itself.
• Capitalism shouldn't be unbounded and companies should be trusted to self-regulate; there are too many conflicts in interests, and besides, even in sports you always need someone to set and enforce the rules. I don't think there's an inconsistency here.

Evolution of technology

As technology builds on technology, an interesting proxy for seeing how different technological inventions relate to each other comes from looking at patents and their citations. The image above contains a visualization of all patents in USPTO patent classes 370, 375, 379 and 455 which have been cited more than 100 and have been granted between 1976 and 2006. So in essence that is the structure of the most central patents related to mobile phones. The coloring is arbitrary clustering of the patents, but what is interesting is that the green, blue, and brown clusters are in fact the 375, 455 and 379 classes respectively. The clusters at the bottom of the graph are essentially the patents from class 370.

Another interesting thing to do would be to create a time-lapse of the network's evolution over time as well as to dig deeper into the substance and see why the clusters exactly emerge. Also, using this data it will be interesting to see how exactly different companies fit into the picture.

Einaudi: Nuvole Bianche

Party in the CIA

VR: Redux

Ok, this is getting somewhat embarrassing already. Turns out I need to go to Kuopio in early November, so naturally I start figuring out what the best way to get there would be. And just to be fair, let's look at VR as an option. I punch in the trip details and I get the offers below. VR's ticket system does indeed seem to be very interesting as I understood that they have tried to imitate the airlines. One tip: if you imitate the airlines, at least do it properly so you'd maximize the profits. Screenshot below.

So, what we can see here is that VR has implemented three types of tickets. The "Perus" ticket, unlike the name might imply, is not only for the Perus Suomalaiset folk, but is the old 2nd class ticket, i.e. the regular train ticket. The "Joustava" ticket is the former business class ticket with added flexibility. And the new arrival is the "Ennakko" ticket for the early booker who can buy what is essentially a "Perus" ticket but with more limited options when it comes to making changes to the ticket. Now, why is the flexible economy ticket the most expensive? What's going on?

Additionally an interesting bit is in the trains themselves. I can leave Helsinki at 16:30 and arrive to Kuopio at 21:38 with the Pendolino and no need to switch trains. Or I can leave Helsinki at 17:12, make two train switches and arrive at Kuopio at the same 21:38 with the same Pendolino. The first two legs, however, are travelled with an InterCity 2 train and a regular, old train. So someone please tell me what the point of the Pendolino exercise was when the train that was supposed to improve travel times is actually operated at slower speeds than the older equipment.

Seriously, someone please put an end to this non-sense. Privatize the whole company as it appears that the government is impotent when it comes to making what is fundamentally a for-profit company work.

Edit: As a funny additional thing to notice is that the prices above are student prices. Blue1, a Finnish airline, is offering to fly me to Kuopio and back again for roughly the same amount of money that it would cost to get the Joustava student tickets. Oh, and the Blue1 tickets aren't student discounted...

Something wrong in the land of VR

Anyone who's been a customer of VR (Valtion Rautatiet, the Finnish nationalized railway monopoly) in the past few years can fairly easily attest to the fact that the company has gone to hell. The most recent episode has been their failure in implementing a new IT system that has reached epic proportions as of late. But let's start at the beginning...

Operating a railway company isn't really rocket science. There are multiple facets to it, but let's stick to the transportation of people from point A to point B as that is the service that I mainly use. From my perspective I pay the company a certain amount of money so that it gets me from one geographic location to another in a specific temporal window. I don't care what the method is exactly, but I imagine that teleportation would revolutionize this business thanks to the radical reduction of time of travel. But anyway, my train trips consist of essentially two fundamental components: ticket procurement and the actual transport. On both dimensions VR has been fumbling with the ball.

Starting with the actual transport, to my recollection VR was decently good at operating its trains within the schedules that they had a decade or so ago. But over the past few winters, the quality has deteriorated. I mainly use the Helsinki-Turku track and more often then not jump off at the Salo station roughly three fourths from Helsinki to Turku. The travel time is typically around an hour and 25 minutes. It is not uncommon for the train to be 50 minutes behind schedule on a trip like that, which already brings it closer to 60% behind schedule. And that is when the train actually materializes and gets on its way. It's not also entirely uncommon for trains to not even show up, which leads us to another problem directly related to the business of transporting me from A to B...

Communication is in essence very much irrelevant as long as you provide me exactly the service that you promised and I can trust you to perform. If I can look at the schedule and platform information and trust that it is true, I don't really need other forms of communication with the operator. But when a train fails to materialize, there is a problem. VR has been getting the stick as of late for its inability to transparently communicate situations to the customers. It's normal that every once in a while something happens and causes problems. But then you should openly communicate what the situation is, what is being done about it and most importantly what is the impact that I have to endure. If you tell me that the train broke down and it will take 45 minutes to arrange another train, that is fine. I can then use the time to go do something else; purchase a magazine or get a beer at the station. But when you don't tell me what is going on, I have to work with the assumption that a train might materialize at any moment of time and hence I can't do anything else asides from waiting next to the track. More annoyingly there have been some occasions in which they have communicated a delay of e.g. 20 minutes. In one case I decided to pop by a store at the station and get a soft drink, only to return less than 10 minutes later to barely catch the train which had indeed showed up and was about to leave only 10 minutes into the 20 minutes given. I understand that these two demands of communication, if interpreted at face value, lead to a situation where the company will tell you every three minutes that the train will be three more minutes late ad infinitum. But if you actually think about it, VR should be an expert on operating a train network and hence one would assume that they would have the ability to give educated estimates on how long it will take to fix something. I've lived in Helsinki now for eight or so years and I'm able to give fairly good estimates on how long it will take to get from A to B with public transport at a certain time of day, assuming that A and B are within the areas I often go to. So VR shouldn't have a problem assessing how long it will realistically take to rectify the situation.

Related to the operation of the train network, VR has also fumbled with the procurement of new vehicles. They purchased a number of Pendolino trains, but those have been nothing but a source of grief ever since they started operating them. On the Helsinki-Salo route the Pendolino is only 5 minutes faster than the regular trains, and even that is only due to the fact that the Pendolino skips one stop on the way. Which raises the question of why even operate the Pendolino on that segment, since the Helsinki-Turku journey is not any faster with it. It has its uses on the longer trips to up north which actually do receive a fair amount of time savings due to the increased speeds... That is when the Pendolino is working. It appears that the train is unable to function properly when it sees snow. Also, it appears that VR is having its fair share of trouble in general from the weather phenomenon known as winter. Winters in Finland aren't anything new, so it is somewhat amazing that a "wrong" type of snow can severe the operations of a company that was founded in 1862 and most likely does know that winters occasionally happen.

Then onto the procurement of tickets. I absolutely hate to interface with humans in simple transactions such as purchasing tickets. Airlines have done a brilliant job of ensuring that these days I can even check in via a kiosk or even online with my phone at best and not have to endure the impotence of humans behind the counter. VR has, amazingly enough, had a fairly functional online ticket system from which I could send tickets to my phone or print them out and not have to endure additional pain. Unfortunately as of late I've been put into a situation where I receive free (as in beer) train tickets. Unfortunately I can only get the tickets by queueing at the station and talking to the lady behind the plexiglass. Standing in the queue today got me somewhat annoyed and I started measuring times. The five people on front of me in line took over 35 minutes to be served. That is 7 minutes per person, on average. There is no reason why it should take this long. If you use the kiosks (which aren't, by the way, working as of now due to VR botching up its IT system) buying a ticket typically takes you 30-60 seconds. It shouldn't take much more to tell a person behind a plexiglass to do the same. So that leads me to think that a) the system that the lady behind the plexiglass uses is too complicated or slow or b) the lady behind the plexiglass is too incompetent and slow. That normally wouldn't really bother me as I would never interact with her, but due to these "free" tickets I now must interact with her. Ultimately the problem should sort itself out as companies tend to make things more efficient over time to save money and increase revenue and it appears that the lady behind the plexiglass is a severe bottleneck. So you either automate her or lay her off and replace her with a more productive individual, who might be able to reduce the transaction time from 7 minutes to something a bit more decent. But, in the case of VR this won't happen because...

... VR is in fact a state-owned monopoly. Because of this status, VR will of course be a responsible employer and instead of having to be accountable to its private shareholders and make as much profit as possible, it will attempt to serve the "public interest" (see previous blog entry) better and offer safe employment and whatnot. And because of the monopoly, there is not competitive pressure to keep VR improving itself. In fact, the only pressure comes from VR's incompetence and the fact that at some point people will just decide that it's a better idea to use a car rather than a train to go from A to B. In fact, factoring in the delays and incompetent people, airplanes may actually start being significantly faster on domestic trips... And at best they are also cheaper already when going to e.g. Lapland.

Recently VR has decided that it wants to be an airline. Or at least use similar pricing systems. That should be a relatively positive note for anyone who has a degree in applied mathematics as you've just received another potential employer who will now employ you to tweak the algorithms ad infinitum. The rationale for this is of course quite clear: certain trains are especially popular. Like the 5 PM train out of Helsinki to Turku. This is always very full and unless you've reserved a ticket in advance, chances are that you'll get to stand or sit in the corridors. At the same time there are routes which are operated with half-empty trains, possibly due to the fact that VR needs to perform a function that is in the public interest and hence operate routes at times which may at best be uneconomical. So naturally VR wants a system to encourage people who can travel at off-peak times to use those trains and then charge significantly more from people who want to travel at peak times. Nothing wrong with that per se. The issue I have with this is that because it is a state-owned company and technically looks to do the whole "public good" thing, then I have an issue with the pricing scheme. People who are willing to pay more do not get preferential treatment in Finnish public healthcare and neither should that be the case with VR, if we strictly interpret it. If you want to act like a profit-seeking entity and leverage these types of approaches, then I feel that we should inflict some competitive pressure on VR as well by opening the railway system up for other companies as well. You shouldn't be able to cherry-pick in this way.

However, this brilliant plan to switch over to dynamic pricing models and new IT systems in fact failed very visibly. The system VR bought turned out to not scale, meaning that the whole ticket system has been in a state of havoc as of late with the primary companion, our old friend Accenture, coming out into the public media and giving statements along the lines of "We have no idea what is going on." So, again the plague of the public sector, i.e. the incompetence of playing the role of customer in IT projects, has hit again. To be fair, many private sector companies also fail in these types of large operations, but fortunately then they feel the whole impact themselves. With the case of government-owned monopolies, it's the tax-payer who ultimately foots the bill for this type of ass-hattery. I wouldn't say it's so much a problem with Accenture as it is with VR. Accenture is a profit-seeking company which of course lies and cheats in the offers it makes and ultimately churns out endless amounts of billable hours. That is precisely why you want to be very much on top of things and keep your consultants on a very tight leash if you're the customer. Otherwise they will bend you over the table and let you have it. Additionally, what kind of moron doesn't stress-test a system thoroughly, and more importantly what kind of moron does a complete roll-out of a new system all at the same time? If there's one thing I've learned about IT systems, it's that you want to do rolling launches where you start with updates to certain parts and see how it goes from there. At any point of time if things go wrong, you immediately revert to the old system to contain and mitigate the impact of your incompetence. But how does the super-team of VR and Accenture go about it? Yes, in the same way as our other old friend, Danske Bank... Hilarity ensues.

I guess I could continue onwards with this, but as one final note, I truly enjoy the pain that the lady behind the plexiglass inflicts on me. After waiting for over 35 minutes, she tells me that the ticket voucher I have from the Ministry of Labor is not valid. It has been made invalid overnight with no type of grace period. Then when I decide to pay with actual money, she is unable to comprehend a simple statement such as "1 student ticket to the 7 AM train on next Monday from Salo to Helsinki". Then when she finally is able to produce the ticket and I tell her to just give it to me, she insists on printing receipts and then placing everything in a paper sleeve before giving the pile of paper to me. Which is rather interesting as VR brands itself as a green company. I merely want the ticket and nothing else: why do you insist on throwing so much paper at me which I anyway will throw away...

The Corporation and The Public Good

Just a quick note. I put the documentary film named The Corporation on and have been watching it out of the corner of my eye. I've seen it before, so essentially I'm just passing time and know that it is very much anti-corporation in its agenda. But one thing that jumped up was in the first part of the film how they clearly articulate that the primary purpose and responsibility of a company is to create profit for its shareholders. The continue by contrasting this to the public good by stating that profits surpass even public good in the priorities of a corporation.

But, what is public good? Can it be quantified or measured? What generates more public good and what less? If Finland supports the bailout of Greece, does that create public good for the Greek and does it reduce the public good for the Finns? Is it a net positive or net negative change? With a brief amount of thinking, I tend to feel that defining public good is very problematic. If public good as a concept was clear and everyone could subscribe to it, very many problems would be solved. So in this context I think contrasting the profit-driven nature of companies with something as hazy as the "public good" is somewhat problematic. Especially when you consider at the core what companies do.

Companies are profit-driven by nature and by legal requirements and obligations to its shareholders. Of course companies can engage in many nasty red ocean strategy tricks and be very cutthroat. But at the end of the day the company must provide a good or a service to a person or group who is willing to pay money for it. If a company is unable to perform this, it will soon go out of business. So, if a company produces a good or a service for an individual who buys it and which results in the decrease of "public good", is it the company's fault or the customer's? I don't think it's the TV network's fault that TV is full of reality shows: I think it's us as the consumers who are to blame since we (or at least some of you) seem to want to watch them. But maybe the customer is tricked and doesn't know better. Maybe the state should look out for the "public good" and tell the individual that reality TV in fact decreases "public good"? But I'm not sure that it does. The concept of "public good" is most likely very much tied to the context, the values of the perceiver, and whatnot. So more often than not an elite, typically a political one, is imposing their concept of "public good" upon me. Fortunately, at least in Finland, it is often enough the case that the results aren't significantly net negative and occasionally they might be net positive so that I don't have to storm to the streets.

The environment is often considered important. It is argued that it is in the interest of everyone to reduce pollution and save the environment. I guess at the end of the day the planet itself doesn't really care what happens to it as it will always survive in one form or another. Humans, however, may not if we pollute the planet we inhabit to an extent where life becomes impossible. So from the perspective of humanity, preserving the environment in a state that allows us to survive is very much net positive. I think nobody contests that. But how to get there? Recently nuclear power has been decided to be opposed to the "public good". The people who want to further "public good" have instead seemed to decide that fossil fuel based energy production methods are a better way to go, or at least less net negative than nuclear power. But strangely enough there is also a healthy amount of literature suggesting that nuclear is in fact much better than coal, oil, or gas. In this case, again, putting some metrics down and trying to assess via those which route produces more "public good" might offer some more support on decisions. Perhaps a structured way of defining "public good" in this context would be warranted. Unfortunately I haven't seen this being done (then again, I haven't looked that much, so please send me links to articles if you know of anything interesting). So far my limited understanding is based on following the research of a friend of mine who seems to take a relative engineering view of the problem and writes pieces which appear quite transparent and coherent. And based on that I think that while nuclear may not be the ideal way to produce power, it creates more "public good" than the alternative of fossil fuels (based on direct deaths, CO2 emissions, cost, ...).

Linking back to the original point, as it's very much unclear in the power discourse what is in the interest of the public, declaring that companies are bad for putting profits ahead of the "public good" seems somewhat childish, especially when it seems that very often these two in fact appear to correlate. Especially when you consider the alternative proposed, i.e. public ownership. For some strange reason a strong government tends to historically lead to increased centralization of power and hey, let's face it, nothing bad has ever come out of that. No government has ever oppressed its citizens. Sounds like a brilliant idea. Let's look at the shades of gray a bit more, shall we?

Stockholm Half Marathon 2011

Well, the first and most likely last half marathon of this season is over and what can I say... The Swedes definitely know how to arrange an event. The half marathon in Stockholm was in just about every way better than its Finnish counterparts, and not least because I've managed to run my best times there. Everything just seems to work there and the overall atmosphere was amazing.

Related to my last entry about measurements, I guess it's only good to present some measurements from this exercise as well. My target time was 2h00m00s (my previous time from Stockholm was 2h00m21s, or something thereabout). This means 7200 seconds or 341.26 seconds per kilometer (or 5m41.26s) for 21.098 kilometers. And the result? 1h57m36s according to my measurements (the official time was 2s better, but as I took measurements with my own watch and the kilometer times are based on those, I'll just use the 36s one for the review of the run).

The chart below is probably the most relevant one, considering that I wasn't able to get my heart rates due to some technical glitches. The diagram shows the per kilometer deviations from the target time and the red line shows the average deviation from the target per kilometer over the entire run. The biggest thing to note is the profile of the diagram, which I think has slightly improved when compared to previous events. My main sin, as shared with so many other runners as well, is starting too fast and then  tiring out when the going gets real. The positive bit is that I was able to keep the initial pace fairly well intact and at no point did I entirely collapse.

This time I was able to find the two hour pace runner and tagged along for the first eight kilometers. This resulted in the fairly accurate times for the first four kilometers after which the pace runners in fact sped up a bit. The seven kilometer blip is due to a drinking station hassle. The pace keepers started slowing down a bit at around eight kilometers to apparently adjust the pace back to the two hour target, but considering the relatively good feeling I continued going at my own pace and decided that as long as the pace runners don't catch me, I'll be very well off in respect to my target.

One thing that separates Stockholm from Helsinki is that the amount of entertainment along the course is significantly higher. I didn't keep exact count, but I think there were five or so DJs spread along the course and two or three live orchestras playing music. This was in fact very helpful in keeping up the pace and positive mood during the mid part of the event. During the 18th kilometer my run started dragging a bit as can be seen from the diagram. It turns out, however, that Prodigy's latest album is a very decent approach to keeping the pace at least somewhat reasonable after switching to defensive running and changing the focus from running as quickly as possible to ensuring that the original target is at least met. And of course the fact that the last kilometer or two of the track were surrounded by people cheering you on helped as well. Overall the run was surprisingly enjoyable, especially when compared to the HCR'10 and Espoo Rantamaraton fiascos of last year.

Finally, here are some of the official statistics from the organizers for my run:

Split	time	diff	min/km	km/h	place
5K	0.28.17	28.17	05.40	10.61	5869
10K	0.55.18	27.01	05.25	11.10	5280
15K	1.21.42	26.24	05.17	11.37	4843
20K	1.51.06	29.24	05.53	10.20	4937
Finish	1.57.34	06.28	05.54	10.18	5086

Overall there were about 10500 or so runners, so in that respect I'm also relatively satisfied that I finished in good mid-range territory ranking-wise. The next steps from here will be to try to solidify my running and try to be able to consistently run sub-2 hour times. I don't hold any serious expectations of being able to improve my time too drastically and don't really even hold that as a priority. For the rest of the winter I think my focus will be on learning how to swim. Additionally a classmate of mine also suggested taking up Savate, which I at least tentatively agreed to. So, essentially the goals for next year will most likely be to run at least one half-marathon with a target time of less than two hours (ideally matching 1h57m34s or faster) and to complete a sprint triathlon with no specific other target (if I'm not able to find a suitable triathlon from Finland to try, then I'll just test out the triathlon by myself to see how that feels). It may be also reasonable to revisit these targets early next year to see what the feeling then is and possibly revise them as needed, depending on e.g. how the swimming goes.

But for now I'm just going to kick back for a moment and try to get my legs back into shape again.

Measurements

One thing I've learned over the years is that I can't trust myself. We humans tend to be absolutely terrible at many things. Our yearning for causality and stories leads us to make conclusions which actually don't hold true under closer inspection. We are influenced by feelings of fear and greed and often succumb to hubris. So it's no wonder why it seems that the life of a typical person is very much a tragicomedy.

To tackle the above, I've been trying to impose some structure in my life via quick and easy exercises. In a separate blog I'm documenting the year of my life from a daily financial perspective: how do I spend money, are there any easily observable trends, and so on. In HeiaHeia I try to track my exercises. And recently Google Docs Spreadsheets combined with forms and linked to the home screen of my iPhone provides me with an easy, quick, and flexible framework to start tracking anything with relative ease. The point here is that gathering data is critical to be able to do any type of educated decisions. Having a hypothesis about what to change to improve a bit in your life is fine, but if you don't have any way to judge whether or not the results materialize and are what you wanted, it's relatively pointless to invest any effort into change.

On the other hand, gathering raw data and analyzing it also motivates you by giving very concrete and quick feedback with which to evaluate how you're moving along. Measuring the times of standardized jogging routes enables you to see how much faster you're able to run. Add a subjective measurement of how the exercise felt and you can start analyzing on a rough level what your strong points are and what are the potential shortcomings when running training for a half-marathon. Or tracking your spending enables you to find things such as how much money you spend on pointless things or in bars and how rigorous financial discipline is useless if you go splurge on an individual day every once in a while.

I guess ultimately this entry is merely a personal note to remind myself again that everything can be measured and just about everything should be measured. And once you start measuring things, you can start improving them. And that's good since at least for me happiness correlates relatively strongly with change achieved in a certain timeframe.

Patent citations

Interesting bit of the day: if you look at granted patents and calculate the age of the patents that the given patent cites and calculate averages, it appears that the selection of companies affects the value quite a bit. In my case the aggregate patents of about 120 companies involved in either high-tech/electronics and/or automobiles shows that on average newer patents are cited than in the case of all the patents. The timeframe has been the patents from 1976 to 2010. Diagram below, blue bars are the first group and green is the group with all patents.

More on education: incentives and linearity

I think I've written about education on multiple occasions, but let's revisit the topic again. So to briefly recap, the western education system is out of control. On one hand the fees universities are charging are growing rapidly, excluding the possibility of higher education for the masses. At the same time, the level of education when adjusted for the cost is questionable as MIT and Stanford are giving away lectures and materials online for free. This means that ultimately the student is merely paying for the stamp of approval that the prestigious university with its reputation is able to provide. Less reputable universities thus cannot charge as high prices as the elite universities. And in Finland all of this is moot as the government subsidises studies and the main problem here is how to get students to graduate as quickly as possible so they can start making money to pay taxes (i.e. become productive cogs in the system) and minimize the economic impact of their studies via costs.

Ultimately there is a crisis afoot here, namely because more people strive for higher education based on the assumption that higher education will give you higher salaries. Along with cost of education, unemployment is also on the rise meaning that for the benefits from potentially increased salary take longer to materialize. And at the same time we are straying very far away from the questions regarding what the purpose of education is, to the society, to the academia and to the students.

Reflecting on those points, I keep getting this feeling that the linearity of my studies is counterproductive. I'm selected at the age of 18 to start studying towards a MSc (Tech) without really any concept of what this stuff is about, what sort of skills I might need and the only way I can keep track of where we are going in e.g. mathematics is trying to tie the concepts down to concepts I already know. And then eventually further down the road I might notice that some of the things are in fact useful (e.g. it is nice to know the basics of matrices, eigenvalues and eigenvectors if you want to figure out which trends are central in generating and sustaining violent conflicts in the Middle East) and then you need to revisit the issues. But alas due to the linear fashion of studies, you already went through the "basic" courses years ago and revisiting the courses and asking more intelligent questions (as you now have a better understanding of applications, etc.) is looked down upon as you are merely wasting more resources.

So, to tease out what the problem is, we can cite Warren Buffet's partner Charlie Munger, who told us that to understand why things are the way they are and to predict where they are going, you need merely look at the incentives. And none of the larger institutions at the current stage really have incentives to actually teach the students anything real. It's only if the students pursue an academic career that they might with a certain degree of probability need the basic skills taught in Masters programs. And even then it's still most likely cheaper to teach the skills at the later stage again than to spend enormous amounts of effort in the earlier stages to make sure that the entire class understands the ideas and concepts in class.

Another point is the cyclicality: something should be done about that. The reason why Finnish engineers have traditionally been fairly good is mainly due to the fact that at a very early stage of their studies, the students often already go to the industry to work on real issues. Their work naturally gives them problems to think about, which they can then bring back to school and try to work out, creating a tighter linkage to their studies by giving more motivation that the things being studied are actually useful. It also benefits the industry because they get relatively cheap labor which also is very rapid in adapting and learning things due to the close link to the university and the framework behind the students which supports learning. So while bearing this in mind, it seems very counterproductive for the state to demand quicker graduation times from students, as that would wreck this dynamic. But on the other hand if education costs were shed upon the shoulders of students in the form of tuition fees of say 10 000 euros per year, this is also quite a high opportunity cost for having a support network you can potentially tap, especially when considering that a person who goes to say 20 courses a year actually generates more costs for the university than a student who merely takes, say, three courses a year. So this should also ideally be addressed when redesigning the education systems.

Sorry again for not having any real tangible solutions at this stage, but I thought it worth ranting about these subjects just for the record and for future reference when I go through these entries at later stages.

The reason for the unrests in London?

It's the same as the reason for many problems: people don't think things through. Even people who think they have nothing to lose have many things to lose. They just haven't thought it through...

Swimming briefs or not?

I am increasingly convinced that doing a triathlon next summer is a good idea. The exact variant is yet to be determined, but I'm starting to think that maybe a sprint distance at 750m swimming, 40km cycling and 10km running is a good way to get acquainted with the sport. So, why triathlons? The rationalized answer is because practicing the three different sports may in fact be more healthy in the long run when compared to only running, which itself puts a fair bit of pressure on joints and whatnot when running around the pavements in the Helsinki area. But that's not the real reason. The real reason of course is because I seriously want a new roadbike and what better way to rationalize the acquisition than to state that I absolutely need one for a triathlon.

Anyway, cycling and running should not be too difficult. The thing I'm slightly worried about is swimming and the fact that it's about a decade or so since I've last done any swimming. I'm just not that into the whole water business and I've never really liked spending time on beaches and such. You just get sand everywhere and you can't even dress like a human since it's too bloody hot and typically there aren't even shades around. But yeah, swimming is quite relevant from the perspective of a triathlon and fortunately enough it's also the first part of the shebang, meaning that if I happen to drown, at least I didn't waste effort in cycling and running. Fail fast, if you will.

So, swimming then needs to be tackled and naturally you need the appropriate attire to swim, namely the swimming suit. And oh joy, here we stumble on the age old argument about whether or not men can wear swimming briefs ("Speedos") or not, and of course I can't let a fight like this slide by without taking a stance. And of course the answer is that the only appropriate way to dress is with swimming briefs, or "Speedos". Period. End of story. It's as simple as that.

If you think about it, it's in fact quite obvious and I don't understand why there even is such a big fuss about the topic. First of all, swimming is exercising and when exercising, your attire is based on functionality. When training, it doesn't matter if you look stupid or not, the point is that you must dress in a functional fashion. I'm always baffled when you see women in polo shirts and sporting nail polish show up in gyms and pretend to work out. I go to gyms to work out and get sweaty, ergo I dress appropriately and don't really care whether it fits my sartorial image or not. And in terms of swimming, the appropriate and functional way to dress in in swimming briefs: they offer better movement ability and the fact that they are not a tent (unlike the things the Americans wear) you can actually swim more efficiently. And when you're done and leaving the swimming pool, they also dry fast and don't take as much space.

Now, someone will of course start bitching and moaning about the fact that they look ugly when you're on the beach and women will never like you if you wear "Speedos". Those just demonstrate prejudice and small mindedness. And besides, the point is moot since there is absolutely no reason why a civilized person would go on the sand to grill themselves in the first place. So that point is purely hypothetical anyway. Instead of being chavs, civilized men instead will spend their summers doing something productive, like sailing or playing sports, and dress appropriately. And when just lounging around, they shall anyway wear long trousers (preferrably linen or some other lightweight fabric) and polo shirts to look reasonable.

So there you go, the whole argument about briefs or not briefs when going swimming is hereby solved once and for all.

Decoupling and deconstruction

One of my pet theories is that the increasing level of infrastructure (security, transport, capital, ...) will decrease the size of companies. This summer it appears that the oil and gas industry is experiencing a trend of spin-offs and splitting of companies, without even regulator involvement. First Marathon Oil spun off Marathon Petroleum and in today's Financial Times ConocoPhillips announced its intention of splitting itself into two. Interestingly enough after yesterday's announcement the markets rewarded ConocoPhillips with and increase of 7.5% in valuation. So whereas nuclear scientifically fusion energy seems to often fail to materialize in the corporate world, fission certainly seems to have worked in this case.

But of course some caution should be applied before we dive into the theory of infrastructures and company sizes. Without being an expert on oil and gas, my guess is that the industry in itself is in the midst of a turmoil and from an investor perspective I would be careful as my common sense says that peak oil will have most likely already happened and that the industry, at least in terms of oil, will is already declining and buy-and-hold strategy will at this point would only result in tears in a matter of years. But another driver may be increased competition in declining markets and the inability for a large organism to adapt rapidly enough, further held back by the immense amount of effort wasted in internal communication and other functions which spin out of control as a function of company size.

It will, however, be interesting to keep an eye on what is happening and whether or not the benefits of these fission exercises will be sustainable, or whether the markets merely rewarded the companies for making any type of effort.

Don Quijote and EU's fight against credit raters

Amusingly enough EU seems to have been caugh with its trousers down by the credit raters, who have in the past weeks downgraded a couple of more EU members into the junk bond category. And as appears to already be typical for the eurocrats, the approach now is to focus on the annoying smoke by attacking the credit raters instead of addressing the real problem, namely that of the horrible state of competitiveness and finances of its member states.

As part of the latest news today, a couple of EU commissars have been making interesting statements. Firstly there is supposedly a cartel of the top three credit raters, according to Viviane Redding. Well, judging by the past few years, the level of competence demonstrated by the raters in regards to e.g. evaluating the credit worthiness of subprime mortgage CDOs and the whole shebang, one would assume that entry barriers for a new rater wouldn't be very high. That is assuming that a new entrant could provide more credible ratings. I'm not an expert, but I fail to see how a cartel would actually work here. Perhaps I'm mistaken, but in any event I do agree that maybe more competition would be better, but rushing out and calling cartel without credible proof seems somewhat weird.

Secondly the fact that raters will change ratings has apparently caught another commissar by surprise. Well, you know, assessing the situation and changing ratings accordingly is precisely what raters do, as surprising as it might be. And even more surprising undoubtedly is that if raters don't see improvements in the actions and the expected outcomes of the actions, ratings will drop. Perhaps raters could talk with the parties that are being rated about different things, but ultimately I understood that the whole point of having third parties perform ratings was that investors who want more information on which to act could get a somewhat reliable, unbiased and objective assessment of the situation. Interestingly enough, however, it appears that historically the raters, e.g. in the subprime case, may have had conflicting interests and biases towards rating subprime mortgage CDOs higher than they should have, which I think then comes back to the whole situation where I personally would like to see raters remaining somewhat detached and distant from the parties who are likely to gain or lose basing on the ratings.

But all of this is ultimately very much moot as the fundamental issue still remains: the EU has made a total hash of things and it should now focus on fixing the core causes of the whole trouble, i.e. increasing the competitiveness and entrepreneurial activities while decreasing the corruption and inertia in the troubled member states. If this isn't done, then ultimately arranging bail outs and negotiating loan terms is pointless as the loans will never be repaid unless the countries actually get their financial growth back on track. And while this is going on, maybe EU shold resist the temptation of lashing out at windmills...

Mobility and performance

Traditional view holds that from the perspective of an individual the best approach to career development is to move positions every three to five years. Less than three years and you will come across as an organization climber who will most likely have not had enough time to actually pick up the experience or the skills of the previous position. Or worse yet, fast moving individuals may move fast because they get canned as soon as it becomes apparent that they are little more than hot air.

But stick around in a position for much more than five years and very often development on a personal level grinds to a halt. I had the pleasure of serving two steps underneath a brilliant boss for a while and he held the view that you should do a single thing three times; on the third time your performance will peak. The rationale is simple. On the first round you have no clue what you're doing. The second time around you have some clue and can formulate a more educated plan. But it is on the third time around that you are able to truly refine the process and will have become increasingly adept in what you are doing. But on the fourth time people tend to get lazy, if we put it in a simplistic fashion. Efficiency and output quality may begin to deteriorate.

So extrapolating from those viewpoints, it is thus fairly logical that it is both in the individual's as well as the organizations' best interest to have individuals move around. But I recently read some interesting bits about why taking this approach too far is also very counterproductive. In a recent article the Economist talked about Barca, the football team, and how it has achieved success while emphasizing on local values and growing its own players, as opposed to using big money to attract high-fliers. The article continues and cites studies which show that successful individuals on Wall Street will very often suffer deteriorating performance when they switch to other organizations. This would then suggest that it may in fact be in the organizations' interest not to necessarily go along with the rapid ascent of individuals.

So, where then is the balance between acquiring fresh blood and new ideas versus cultivating a strong internal culture and values? The counterargument to the culture and value argument is that very often when organizations grow old and large, they tend to begin to detach themselves from the "real" world; they gather inertia, organization builds on top of organization and performance deteriorates. Amusingly enough literature is full of these cases. Just look at any piece of cutting edge management literature from a decade back and skim over the examples of successful firms. My hunch is that most of them will have succumbed and are either in trouble or have already folded. Of course if a company is able to keep its well functioning culture and cultivate it appropriately, superior performance should ensue. But take for instance Google. The question is that has Google already peaked? It may still continue and churn out very hefty profits, but has the rapid recruitment drive already hampered what originally was the coveted Google culture? Have large numbers of employees already lowered the average performance of individuals; has mediocrity taken over the company yet? If not, chances are good that it will in a while. Because examples of this type of dynamic are plentifully around.

Riddle me this...

If every company only hires (according to HR, anyway...) the top-of-the-class, top 1% of the population types, why isn't the unemployment rate at 99% yet?

Eras

Change is strange. It's sort of like an untrue, even dreamlike feeling booking meeting rooms and meetings with agendas such as "Debriefing/handover of responsibilities" and "Exit practicalities".

More random thoughts

• Capitalism and free markets aren't the problem. Big corporations and the fact that there are no free markets is the problem. Confusing capitalism with corporatism is a mistake that leads to many problems and incorrect conclusions.
• If we're optimistic, the drivers of individualism, education, and technology, amongst others, will drive the decline of large corporations and return the system to a functioning competition-based free market. This will be because the friction and missing infrastructure bits that big corporations were able to get past when small companies couldn't will be reduced.
• To enable the above, one must decide what type of a mechanism should be used to revitalize the system. Competition law and regulators are an obvious choice, but this requires the regulators to act more decisively and more intelligently in the future.

Random thoughts

• Most disruptions can be taken apart into smaller pieces, which in turn often are merely small linear, evolutionary steps. Just like the metaphorical boiling frog if you look at only the small delta, you miss the big change that can make things really hot for you.
• Flexibility and adaptability is crucial for survival. Interestingly enough people seem to cling onto ideologies even in situations where the pragmatic option would be to change your stance. Like in martial arts, fixing yourself into one stance will again land you in a tight situation when the circumstance changes.
• An offshoot of the previous and originally from some smarter person: communism for 20-somethings stems out of passion, but communism for 40-somethings stems out of idiocy.
• "I'd rather be a shareholder than a customer of [insert any bank here]." Because of incentives, banks tend to take better care of shareholders than customers.

Told'cha, ya shoulda killed me last year!

Why PS-accounts aren't selling?

Hmm... Could it have something to do with the unpredictable tax regime of Finland and the fact that the current climate seems to suggest that not only will taxes be going up but every succeeding government seems to aggressively change pension legislation. So excuse me while I don't see any point in locking my assets up for over 40 years with a product that very efficiently ties me to a Finnish banks, tax authorities, and government. If someone, however, offered good productized solutions for small investors to spin their savings into a offshore fund so that the government couldn't constantly kick your teeth. That I could be interested int.

Money

Many small, and large, companies have been ruined with too much money. --Jorma Ollila

Home ownership

One thing I've never understood is why the government absolutely feels that it is highly important to get everyone their own home. The latest subprime crisis in the US, which has its roots firmly tied to governmental practices of encouraging banks to lend to more and more people is a good example of what can ultimately happen (of course there were quite a few other factors in play as well, but the last couple of administrations have essentially shoved home ownership down the throat of just about everyone).

In Finland it may not necessarily be so blatant, but the government clearly encourages home ownership. Home loan interest is tax deductible to a certain point, first-time buyers get preferential treatment in the form of government backed loans, protection from increasing interest rates, and so on. And the profit from selling your home is exempt from taxation. With all these factors in play, is it really that strange that housing prices in Finland are what they are? Or is it that strange that in the past years news have emerged of individuals purchasing homes with little (less than 10%) or no own capital?

I talked about this issue at work with some people, and the general consensus that people appeared to have was that all of this is entirely acceptable. Buying property is very safe, prices nearly always rise, etc. Seriously. Only a few years have passed since we saw what this type of thinking can potentially bring about and already the lessons have been forgotten. Not too many people make the largest investments of their life with a leverage of over 9:1 in respect to their own capital. Especially in a market which appears to be a bubble that is being sanctioned and built by the government.

Based on this I'm having a terribly hard time seeing myself investing any of my wealth into Finnish property markets: 30-year-loans and state subsidies smack of a horribly bad idea. But I hope that if and when the bubble bursts, this time around we won't encourage moral hazard by bailing out any of the people who have voluntarily put their heads in the guillotine.

And what about home ownership in general? You are of course free to buy your home. But only if you can afford it. As of now, I don't feel that I can afford to purchase a home for myself and thus I will not buy one. Despite the fact that the banks would be more than happy to provide financing for just about any type of apartment.

Some ideas

I was listening to Simon Cole give a presentation earlier today about value creation in the media industry these days. Overall I think the message was very much in line with intuition, but the two items that I thought worth picking out from there were related to inertia and to democratization.

I've often talked about inertia and I'm increasingly confident that in the longer run the negative aspects of inertia will outweigh the relative benefits of being big once the basic infrastructure for companies matures and does not penalize for smallness as much as it used to. In respect to dinosaurs attempting to rejuvenate themselves, Simon cited the interesting anecdote about how Disney sets aside money to a fund from which some employees can request capital to launch their companies that aim to kick Disney underneath its belt. The assumption naturally is that if you succeed in doing that, Disney will own you and thus learn from it and potentially embrace the disruption you either identified or triggered. As an idea that is brilliant and I think more companies should actively try to spar themselves with these types of initiatives. The most recent example to come to mind is of Mark Zuckerberg making an investment in Diaspora.

The second thing was Simon's comment on how Sky News gives first priority to the time-to-market of news whereas BBC emphasizes qualitative issues and will spend time to double-check stories before running them. The interesting bit here is if you think about how this actually is another situation where the underlying dynamic is that of democratization and giving the people responsibilities and freedom, or in this case that the consumer should do the editorial bit of the news process themselves. Not surprisingly with everything that's floating around on the internet, I guess most are becoming very information-savvy and are, hopefully, able to do basic fact checking and apply common sense to weed through the news. So interestingly this links back to the dynamic where things are getting chopped up into smaller pieces and individuals are becoming more empowered and free.

Amusingly enough I guess neither of these points directly related to the topic at hand, but then again, weak ties are often the source of the most interesting things.

Progression

Considering that progressive taxes seem to be all the rage right now, I would in fact like to propose a very holistic approach to all of this: instead of using currencies like the EUR, we could instead move to percentages. A bottle of milk would cost 0.1%, for instance. In practice this means that regardless of income, the individual would pay 0.1% of their monthly income for the product.

This type of solution would permanently resolve these pesky issues of some people earning more money than others by ensuring that regardless of the amount of money that a person makes, they will still be able to get the exact same amount of goods or services as any other person.

You learn something new every day

For a while now I've been somewhat annoyed with the performance of ETFS Crude Oil (CRUD). With the Middle East Revolution Football league (sorry for stealing this) in play and the oil prices rocketing, CRUD has trailed by a fair bit. So what's the problem? Essentially the problem was that by buying it from Germany with a euro denomination, I ended up coupling the oil price to the EURUSD exchange rate. In retrospect my flaw was underestimating the correlation between the two: it appears that every time the oil peaks, people get jittery about the fact that the US is still heavily dependent on the stuff and thus USD dives and eats away at my position.

Having held onto the position for a while, I finally decided that enough is enough and took the small 20% profit and ran. The learnings? With oil, try to decouple the currency from the instrument so you have freedom to time the currency exchanges in the most beneficial way.

(As a side-note, there may as well be other factors in play. I guess I'll need to do some more reading as homework to check out if the phenomenon of contango is in play again with these derivative-based instruments...)

The ultimate overcoat

I absolutely must have someone tailor me a similar overcoat for next winter.

On politicians and companies

The parliamentary elections are upon us again, which certainly explains the amount of point gathering that is going on in the press again. Of especial interest to me are the comments that politicians are throwing around about the state of Finnish high-tech industries. They are certainly right: something needs to be done about it if we ever hope to become a world leader in the arena. Because we sure as hell aren't leaders, nor have we truly been leaders.

So, with the latest strategy change done by Nokia, which was widely publicized yesterday, many Finnish politicians are rushing in to say how they will mitigate the amount of unemployment that will arise from these changes, as it is obvious even when observed with your forehead that there are just too many people in the company doing the wrong things. Additionally the center party has been heard to say that they have "started investigating about how this type of structural change (or even crisis) in high-tech sectors can be turned around." Perhaps that's good, but the track record of politicians understanding what's going on and what needs to be done has been so appallingly bad, that I'm not entirely convinced that it's a good idea to have them anywhere near this situation.

What, then, should be done? The politicians seem to think that the software industry should be strengthened and that there will be an ample supply of engineers being freed up from Nokia which can create the software sector. But if we actually look at the situation, we will find that most of the problems that the company has faced over the past decade have been due to software. So I'm sorry if I sound a bit pessimistic, but pray-tell, what are the chances that this bunch is in any way actually competent with software.

The politicians aren't too worried about this. They have also figured out that education always helps, so they have thought up of a brilliant plan of devising new educational venues at which people can be trained in the skills of software. Ugh... I have a bit of a background in software development, even prior to receiving any formal education on it. I tend to agree that higher education in software will widen your thinking, but in actual software business, the best way to learn is by doing it. You don't need formal training for it. Instead, with software I believe that you absolutely need a passion for software: if you never felt like writing software on your spare time or just playing around with code, don't bother wasting precious resources on schooling yourself in software. 9-to-5 coders often end up making more problems than they are able to solve as they easily engineer themselves into a corner, introduce fatal flaws and bugs, and so on.

Then there is the slight problem regarding geographic region: the Finnish market is small and it is so far away from where things happen that it's not even funny. This means that any company wishing to actually grow will need to go abroad, and fast. For a startup this means packing your most extroverted guy in a plane and sending him to London with a suitcase and orders not to come back for the next couple of years. Oh, and the budget, as with startups typically, is shoestring. So it's not a picnic. Combine this with the hostile environment towards entrepreneurial activities in Finland: high taxation, tough labor laws, stigma associated with bankruptcy, difficulty with gaining access to capital (lack of angels and VCs), and the list goes on.

So yes, the politicians can do something, but it is more involved with changing laws and taxation to encourage entrepreneurial activities. The world is already so complex that you cannot merely say that "we will train more software developers!" and hope that the problem is solved. Instead you must carefully craft the boundaries of the system to encourage a certain type of behavior. Shoveling out government resources in the form of cheques to small businesses if they are able to navigate a maze of paperwork is also not good: it's not only one or two startups that I've heard about which have gotten fairly confused regarding who their customer is. In these cases the company has yet to sell anything real to a customer, but the government keeps subsidizing it and giving it more money. This isn't doing anyone a service: if the business plan isn't working out, it's in everyone's best interest to fail fast and move to the next idea. That's what entrepreneurship is about.

And as an interesting side-note, I'm actually starting a process of preparing a paper about these things during the Spring, so hopefully I'll be able to make a clearer argument about what I think the problems are and what should be done about them.

Can you say... Bubble...

Amusingly enough it's been over three years since this video was made. But with the social buzzword still churning on strongly, can you say... bubble.

Equality

With the elections just around the corner, the politicians and aspiring politicians are again at their favorite pastime: dividing and distributing other peoples' money. And one of the key themes again this time around is financial inequality, or how money should be moved from the top to the bottom. An interesting thing to think about here is what exactly the problem is and what do we want to solve. Gini coefficients have begun popping up in more international publications, but I can't really recall a single Finnish article mentioning them. Anyway, the basic idea is that a coefficient of 1 implies that 1 person gets all of the income and 0 means that every gets the same amount. With this metric, the inequality in certain regions has increased, but on a global level we've become more equal.

But which is more important: that we all earn the same amount or that the people worst off are supported enough that they are able to survive. I of course have my own strong biases and tend to feel that equal opportunities always beat equal outcomes, i.e. meritocracy is the way to go as long as everyone gets to jump from the same baseline. So in this regard I don't necessarily see high equality as something that is absolutely valuable, as long as everyone is kept in the same boat and not thrown out.

Related to this, another interesting aspect in this is that according to the Economist's recent article, in the US the inequality in the bottom 99% hasn't increased since 1993. This in essence means that what is happening is that the rich are getting richer, but at the same time the poor are also getting richer, although slightly slower. If we also think about the longer term trends, overall the world seems to be slowly becoming a fairer place, as a very significant portion of today's wealthy elite has in fact made their own fortune. And that, in my opinion, is a lot fairer than being wealthy because of the fact that you just happened to have been born into nobility or royalty. What more, the wealthiest people then tend to eventually give most of their money back to society in the form of charitable donations or in other cases by becoming angel investors and pouring their money into high-risk ventures which might otherwise not happen.

So, the name of the game isn't to optimize the Gini coefficient to 0. What more, there is even hardly any solid facts one way or another as to whether equality is that important. And as previously stated, I understand the welfare state as a system which inherently does not take a stance on anything else but ensuring the welfare of the citizens. But welfare shouldn't necessarily be defined to include everything and the kitchen sink, but instead enough to allow a person who has stumbled to still continue living, despite health issues or sudden changes in employment status, or similar situations.

Hope

Something rotten in the land of Den^W... HR

There will be no prizes for knowing the three fundamental factors of production, which of course are land, labor, and capital. My background is in software, which as an industry differs mainly from other industries in the sense that it is greatly immaterial, and with the democratization of IT systems, also the capital-related entry barriers have fallen. The implication is clear: anyone with a laptop and a shed can get into the software business, assuming enough competence. This essentially means that out of the three factors above, labor is most crucial. And within labor, one could use the term of human capital as the thing to focus on: you need highly competent and specialized people in order to ship great software.

The above naturally raises human resources to a pedestal and would seem to justify the whole Human Resources discipline, which itself is barely half a century old in the academic sense. Many pure software companies, i.e. companies with their roots firmly in software development, seem to acknowledge this these days. But then there are the other companies. Based on empirical evidence as well as many discussions with friends who have either been part of HR or who have suffered from bad HR in different companies, the conclusion is clear. Something is still fundamentally wrong with how human capital is managed these days in companies.

So, what is the purpose of HR. A quick googling will give us a Wikipedia definition:

... an organization's human resource management strategy should maximize return on investment in the organization's human capital and minimize financial risk. Human resources seeks to achieve this by aligning the supply of skilled and qualified individuals and the capabilities of the current workforce, with the organization's ongoing and future business plans and requirements to maximize return on investment and secure future survival and success.

It thus seems that HR would need to have a fairly good understanding of not only the current, but also the future needs of the company. So HR must be tightly linked to all other functions in a company: business (the bread'n'butter execution stuff), research, corporate-level stuff, etc. This just gives HR a view of the current situation. But the above definition states also that HR should have an intrinsic and very thorough understanding of the corporation's strategy and future directions, so as to be able to pre-emptively attempt to facilitate the future moves of the company and make them as smooth as possible. But let's face it, many HR employees seem to be very detached from business; some even have a certain proudness associated with the fact that they "don't need to understand that nerdy stuff." So unfortunately I remain ever so slightly skeptical of how well a large HR would truly be able to grasp the present, let alone the future, of a business.

One thing that isn't mentioned in the above definition is that HR should attempt to ensure that all employee-related issues are performed in a legal way. Meaning that when team leaders from other units recruit and manage their employees, HR should be there to support and address the needs of the leaders so as to keep everything legal. That is also why strangely enough when layoffs are about HR seems to stroll a nice and neat line of specialists to sit by the table to ensure that everything goes according to protocol. But very often HR also enforces various policies and to an extent restricts the movement of leaders, not because of legal issues, but because of company policies. Which again is fine, as long as the policies are good and can be justified. But as with every other organism, HR tends to have to fight for its survival: it must have a raison d'etre, lest it be relieved of its own headcount. So the incentive to create artificial work and enforce strange policies is there.

But surely HR must have a good deal of role in recruiting new employees? Perhaps, but my hunch is still that it is fairly limited. In interviewing candidates, I just cannot understand HR's role: as was established above, more often than not an HR person has simply no possibility to credibly judge whether someone has the required competences to survive and succeed in certain tasks. The best they can often do here is match the required buzzwords of recruiting leaders to that of the buzzwords in potential candidates' CVs. But this again may be counterproductive: I would much rather interview people whose CVs I personally selected as I am fairly capable of seeing from a CV whether a person might fit the profile regardless of the fact that they might have missed some key buzzwords.

Fortunately these issues have been acknowledged and I've heard of multiple projects where HR has attempted to devise various types of taxonomies for understanding what types of competencies are needed in different roles. My personal favorite story is of a position which required competence number 123: Humor. The person who came up with that certainly had a fair bit of humor. ;)

So yes: human resource management is an important field and the possibilities there are endless. But no, it is very often not done correctly. And in fact in many larger companies Human Resources units are ridiculed for been hives of bureaucracy, inefficiency, and for creating artificial work and hoops through which people must jump. Hopefully a new breed of HR will slowly emerge in the future. A breed that actually understands that human capital is a very critical asset and potentially a great source of competitive advantage. Because as of now, many HR units are merely destroying the competitive advantage...