Three Sigma Systems

People often ask why the work of W. E. Deming and his mentor, Walter Shewhart, figure so promintenlty in my thinking about the nature of human endeavor and the human enterprise as a whole. My answer is that these two men recognized that the human faculty for predicting the future is what sets we humans apart from all other creatures. Prediction is the bread and butter of our existence and the quality of our predictions determines whether we live or die. Deming and Shewhart understood that our principal aim in acting must be to reduce variation, and thereby, increase predictability.

Our penchant for prediction is more than a hobby, it is a genetically hardwired obsession that causes us to imagine patterns, cycles, and rhythms in all events related to our activities. To our minds, the regularities of events, real and imagined, are the keys to predictions by which we organize our actions along useful lines. We call these patterns “systems”.

Based on this understanding, Deming and Shewhart both concerned themselves with methods for recognizing useful and meaningful patterns and, given our limited powers, for reducing the variability of those patterns in order to enhance our ability to predict the outcomes of our activities.

Two articles in todays NYT deserve our attention. Both deal with instances in which we, who rely on predictability for our survival, have by our own misguided actions, increased variability and thereby reduced predictability.

In Weather Chaos, a Case for Global Warming

Double Dip? A Tipping Point May Be Near

Everything varies, but it is not the direction of change that matters most but rather, the range of change that threatens our survival as a species.

AP Story: Bernanke: Fed to hold off on steps to aid recovery.

There is a general consensus today that in the upcoming elections the economy trumps all of the cultural issues that have long divided liberals and conservatives. On one extreme of the debate are those who believe that in the midst of our economic crisis, we must commit to spending whatever resources we possess, even borrowing more as needed, in order to restore our economy to a balanced forward motion. On the other extreme are those who say that we must harbor our resources, cut our expenditures and bide our time so that the economy can restore itself to its natural balance and growth.

Let me recount an experience I had that might help you decide which course of action you should support.

As readers of this blog know, I am an avid and lifelong sailor. Sailing is all about balancing natural forces through a process of continuous feedback and control. It is like walking a tightrope in which the enormous and impersonal natural forces of wind and sea can be turned to the seafarer’s advantage by finding and managing a dynamic balance point between those forces that enables forward progress.

At sea it is the situation that determines how the sailor selects a strategy. When the boat is in balance, only very small adjustments are needed to keep it on course and safely moving forward, but once the system becomes unbalanced, the conservatism of small adjustments is no longer sufficient. and more dramatic tactics become necessary.

Some years ago I was doing a solo race that took me some miles off the coast of Santa Cruz, California and well out of sight of other boats. On the upwind leg of the race things worked quite well, but then came the time to turn downwind and set the spinnaker. I clipped into a safety line and as I moved to the bow to hoist the sail an unexpected wave struck the side of the boat and I was thrown overboard into the cold waters of Monterey bay.

Although I had given thought to the possibility of going overboard and had taken the precaution of using a safety harness that clipped me to the boat, I was unprepared for the chaos that ensued once I was in the water and no longer controlling a balanced boat.

At first I wasn’t very worried. I was firmly tethered to the boat. All I needed to do was to get back onto the boat, retake control, and start racing again. But it wasn’t as simple as I had imagined.

To begin with, the boat began to oscillate out of control. First it would right itself because of the weight in the keel. Once righted, the partially hoisted spinnaker would fill with wind and violently knock the boat down again. The effect of these uncontrolled oscillations was to produce a zig-zag motion that dragged me through the water.

My plan had been to use the step at the back of the boat to get back aboard, but each time a tried to use the step, the violent motion of the boat pulled me back down into the water. After several tries I realized that my exertions, along with the cold water, were quickly sapping my strength. I also knew that in the Monterey Bay waters, hypothermia would start killing me after about 20 minutes of immersion.

It then dawned on me that my plan for recovering control of my boat had become untenable. My conservative strategy would be to ball my self up to save my body heat in the hope that, given more time, some external forces would solve my problem. My liberal option was to carefully devise an alternate plan and expend my rapidly waning resources on one go-for-broke effort at self-rescue.

Obviously, I survived that day and now I leave it to you to figure out which approach I used.

In retrospect, my brush with death at sea was a learning experience.

1. I have stopped racing sailboats alone. There is risk enough in putting to sea in small boats.

2. I now have a better understanding the dynamics of being thrown overboard and have created controls that I hope will work better should I ever be in that position again.

3. I know that my mitigation of risk will help make me a safer sailor but I also know that risk can never be eliminated. Sometimes loss of control will create situations in which one must one must go-for-broke to avert disaster.

Solo risk taking, the idea that unmanaged external forces will keep things balanced, belief that you can always be in control, and belief that you can predict all eventualities and devise foolproof methods of self-rescue, are all symptomatic of the thinking that got us into our current economic circumstance. How to go about rescuing ourselves from our delusions is not a matter belief. It is a practical matter that requires a sober estimation of our current situation.

In his NYT column today, “The Renminbi Runaround“, economist Krugman complains that the Chinese are playing unfair currency games.

“China’s exchange-rate policy is neither complicated nor unprecedented, except for its sheer scale. It’s a classic example of a government keeping the foreign-currency value of its money artificially low by selling its own currency and buying foreign currency.”

I like Krugman as much as I can like anyone who subscribes to the nonsense called economic theory. But the fact is that Paul is lost the funhouse. China has learned from us that the way to win the game is to manipulate the vig. In a reality that places profit as the highest calling, why waste energy creating something of value when you can churn money and con the other guy into making you rich? A sense of fair markets has nothing to do with making a profit. Just ask any whiz kid working on Wall Street.

Memorial Day is just around the corner. It’s a day set aside for us to remember and to contemplate Americans who gave their lives in the service of American values. It’s a good day to think about just what it is that we Americans value most.

We all know that the media loves to whip Americans into a frenzy over the senseless loss of life that occurs when an airplane crashes, a mine collapses, or a psychopathic street thug kills. So why is its that, when more than when 30,000 Americans die violent and horrible deaths at the hands of other Americans, the media and the nation hardly take notice?

In 2009 who was responsible for the violent carnage that dwarfed all other blood-letting in America, and took its greatest toll among our youngest and brightest?

A. Military actions such as our wars in Iraq and Afghanistan?

B. Natural disasters like hurricanes, tornados, and earthquakes?

C. Drug crazed junkies and dealers?

D. Industrial accidents?

E. Murder and mayhem across our nation?

ANSWER: None of the above came close.

Click HERE for the data!

The murder of somewhere between 30,000 and 40,000 Americans year in and year out is just BUSINESS as usual, and that says something profound about American values, don’t you think?

There’s no mystery behind our economic, social, environmental, and personal crises. When  you build a house of cards you can be certain that it will always fall sooner or later. To avert disaster we must accept this one fact of life, and take it into account in our every action.

All living creatures behave in a manner that shapes the world about them to better suit their survival needs. Beavers build dams, termites build mounds, birds build nests,  and so on with all life. With the exception of human beings, these shaping behaviors are a product of evolution, in which the limits of each genetically determined variety of behavior is tested in practice. If a behavior does not work, its practitioners do not prosper and they and their potential progeny disappear form the face of the planet. Read more…

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men
Couldn’t put Humpty together again

May 16, 2010, NYT Article, “Fears Intensify That Euro Crisis Could Snowball“:

“the public finances in the majority of advanced industrial countries are in a worse state today than at any time since the industrial revolution,” Willem Buiter, Citigroup’s top economist, wrote in a recent report.

The ideology of free-markets prided itself on the notion that unfettered markets are self-regulating. Like Humpty Dumpty, if left to their own greedy dynamics of individual self-interest, they would sit atop the wall, cyclically tilting this way, then that, but always balancing themselves out over time.

For a long time now, there has been growing evidence that Humpty’s free-market gyrations have been growing evermore erratic as the winds of change have swirled more strongly about him. With each new gust, he has been titled ever closer toward a tipping point from which he cannot recover. We should rightly ask if Humpty is still on the wall, or if he has already fallen?

Some believe that Humpty can be sheltered form the winds of change and his balance restored or even improved, but there is a great deal of evidence that suggests that he is already fallen.

• Jobless economic “recoveries”
• Increasing polarization of national and global wealth
• The Euro meltdown
• Oil gushing unchecked into the Gulf of Mexico
• Endless warring over global resources
• Unbridled proliferation of guns and bombs
• Melting ice caps
• The return to the nuclear option for energy
• Mass extinctions and decreasing bio-diversity
• Ever-increasing environmental degradation
• Endemic hunger and deprivation

… the list goes on.

If Humpty has already fallen, we are wasting our time arguing about how to put him together again — “All the kings horses and all the king’s men can’t put him together again”. Maybe it’s time we be done with business as usual and start thinking about how we can survive and prosper in a post-Humpty Dumpty world.

Safety experts like to say that all accidents are preventable. This is of course, NONSENSE!

All accidents viewed in hindsight are preventable, but the very nature of those events we call “accidents” is that they are unforeseen in their specifics, but in general will always happen with absolute certainty — people will die in car wrecks, airplanes will crash, lightening will strike golfers, oil wells will blow-out, and nuclear plants will melt down. So long as we do these things, sooner or later, accidents will happen.

The business of estimating risk is often done in terms of probability —the lower the probability of an event occurring, the lower the risk. But this is not the whole story, and therein lies the rub. It is not just the likelihood of an event that should guide our decisions, but also the consequences of an accidental event, however unlikely.

In a typical car wreck, one or two people die and some repairable property is damaged.

In an airplane crash, a few hundred people die and some repairable property is damaged.

In an oil-well blowout 5000 feet below the surface of the ocean, a few people die, and the environment that sustains wildlife and the industry of a million or more people is despoiled, possibly irreparably.

In a nuclear power-plant accident, many people die and the affected environment is rendered uninhabitable for a thousand years of more, not to mention the similar long-term accident potential created by the storage of nuclear waste from plants that haven’t had an accident.

So the likelihood of an event occurring is of great interest, but the consequences of some events are of even greater importance than their likelihood. We must always ask what’s at stake. Some accidental events, no matter how unlikely, are not worth the risk.

The news tends to be a pretty bleak affair — earthquakes, storms, floods, and volcanos. On top of that, unemployment is high, home foreclosures are up, credit is tough, and interest rates are climbing. In the bleak landscape of death, destruction and misery, the only bright spot appears to be the steady ascent of the stock market averages and the improving fortunes of big banks.

Dow Jones Industrial Average - 1 year

As a general rule, good news is not news. As long as everything is ticking along as predicted, doing what we expect, there’s nothing “new”, but when things don’t go as predicted and all Hell breaks lose — well that’s called “news”.

There’s one notable exception to the “bad news is news” rule, and that’s the business of manufacturing the good news that routinely fills financial columns. Con artists are good news manufacturers who trade in predictions and provide observations that prove they are right. They loudly proclaim that they have a snake oil that will reliably and predictably cure all that ails you and, for a small fee, you can have a sip.

If you want it, here it is
Come and get it
But you better hurry ’cause it’s going fast

If you want it, here it is
Come and get it
Make your mind up fast

If you want it anytime I can give it
But you’d better hurry ’cause it may not last

“Come And Get It”, Paul McCartney

Watch out. Sometimes good news is bad news.

On 4/1/10 12:20 PM, Mr. Crow wrote the following question to members of the Deming forum:

> My question is “How would you change the system to drive a more long term
> approach that could enhance the ability of the U.S. to compete more
> effectively in world markets?” If “Optimization” is truly a win-win then how
> would you modify the system to get this result?
>>

At the risk of being branded a fool, I reply to Mr. Crow’s question dated, April Fool’s Day.

The mainstay of my career as an instructional design consultant tracked with the waves of deregulation in America — banking, transportation, communications, and energy. In the eyes of my clients, my assignment was to wean workers and managers from the teat of regulated markets and union sloth. The “theory” was that I would help to reignite the competitive spirit in the natural-born souls of workers and managers. The method was to organize work systems to produce a hellacious mix of fear and greed — pay for performance, performance measurement, re-engineering, lean, zero defects, TQM, and every man for himself in the meritorious pursuance of profits increasing at an ever increasing rate.

It took me quite a while to see the big picture and how my efforts were supposed to fit in. As things became clearer, I realized that my understanding of organizational systems placed my efforts at cross purposes with many of my corporate client-leaders. The collaborative systems I struggled to build in organizations were always torn down at the first opportunity, irrespective of the gains realized. Workers and managers were fired and hired, systems were subverted, and phony money-phony-time was the lingua franca. The culture of intimidation, lies, and deception ruled executive meeting rooms and the manufacturing floor.

When I first encountered Deming, it seemed clear to me that his advice to business leaders was under-girded by a far-reaching and deep counter-intuitive theory of enterprise. In an interesting and counter-cultural twist, I remember hearing him comment circa 1990, that deregulation and union busting were banes to the American project. As I recall, he did not dwell on the idea, but there it was. As one who was living it, I couldn’t have agreed more.

So allow me to offer some simple thoughts on how our system should be changed. I do not think these changes will produce a utopia, but they would allow the American enterprise to reverse direction, moving forward rather than backwards, as is now the case.

1. Institute an aggressive system of progressive taxation that favors the expansion of the middle class by redistributing wealth and opportunity.

2. Use the proceeds of progressive taxation to subsidize national projects including the creation of a cutting edge infrastructure, ecologically sound practices, and a social safety net that reduces fear and enhances the enfranchisement of all citizens.

3. Regulate market competition in a manner that encourages and rewards innovation in terms of product and service, and prevents and penalizes cheating the system in order to maximize profit.

4. Constantly update and improve our regulatory system in response to changing conditions, including those produced by the vagaries of markets, so that competitive playing fields are re-leveled. This is a necessary condition for employing PDSA to discover theory and method that works better, given our aims.

5. Build an educational system in which the entire educational enterprise is built upon a theory of knowledge, systems, the nature of variation, and the principles of conditional belief (SoPK) beginning at the pre-school level. Use teaching methods that foster curiosity rather than fear. Teach world religions, world languages, the development of mind, the creation of knowledge, the nature of change, the challenges of uncertainty, and statistical thinking. Continue thereafter, to teach our young to collaborate competitively to create new knowledge and new solutions in mind and in action, with the overriding aim to create a better world for themselves, their children, and their fellow human beings.

Step 5 is long-term but cannot succeed without using the stop gap measures suggested in 1-4.

The suggestions I make above are currently being debated in America, though the vision of those advocating change along the lines I list, is too politic, too confused, and too limited. The forces of reaction — moneyed interests and true believers — have numbed minds and muddled dialog to such an extent, that even the most modest attempts to turn the tide, are cast in Satanic narrative. Sadly, so long as the struggle of ideas for making a better world is cast in terms of angels and demons, truth and lies, good and evil, the prognosis for constructive change is not good.

It seems we have met the enemy and he is us.

Nancy Folbre, professor of economics at the University of Massachusetts Amherst, decided to run the numbers on the taxes we pay… in reverse! She explains what she found in her Economix blog post, “Tax Payback Year“.

According to her estimates, which do not include the indirect benefits we all realize from facilities dedicated to the common good, such as roads, national defense, sanitation, and law enforcement, the average American receives $208,552.00 in direct benefits between the day of their birth to age 21. After that, Folbre assumes that Mr. and Ms average begin paying back their debt to taxpayers by becoming taxpayers themselves. Assuming 3% interest on the 21 year loan, citizen average fulfills his or her obligation after about 17 years of gainful, full-time employment. We can assume that amounts paid out after that are applied to the substantial costs incurred by taxpayers in taking care of those of us who reach old age.

Outraged taxpayers just don’t get it, and their naive protests and political machinations only obstruct efforts to improve the system that operates below the threshold of their childlike awareness. Try to imagine what your world would be like without the services and facilities paid for by your taxes. Try to imagine if the only amenities available to us were granted or withheld by private entrepreneurs who only do what is profitable.

In a previous post, “Economic Transformations” I tried to demonstrate how the meaning of the concept “economic” is problematic. I suggested that the roots of the concept had to do with the “process” of husbanding and management of resources in order to optimize their production, distribution, and use among communities of people — family, tribe, organization, state, etc. The implicit aim of this process is to assure survival of the group in the long-term (sustainable).

Now I want to consider the above in terms of two ideas that are commonly used to mean different things: “value” and “values”. More specifically, we tend to think of “value” as an exchange measure — an accounting of the worth of things. We think of “values” as the meaningful guideposts that “should” take precedence over exchange “value” , and govern our actions in terms of our belief in what is right and good.

Start with Darwin and think about how some puny naked apes emerged out of the chaos of random genetic variation to spread across the planet in a very short period. As with all other living creatures, their behavior was rooted in a “will” to survive, at least long enough to procreate. (Darwin does not try to explain why the drive to reproduce exists, nor will I.) In their little nomadic tribes, some among them acquired the ability to communicate among themselves and thereby work collaboratively to form predictive theories, adopt and use methods, and revise those methods for hunting, in gathering, in distributing food and other resources, and in shaping their wanderings. These communicating predictive creatures were our ancestors. They were “selected for” based upon their ability to work more collaboratively, more theoretically, more able to accurately predict, than others, and so too, their offspring. Read more…

The following article was called to my attention by Dirk van Putten.

“Odds Are, It’s Wrong: Science fails to face the shortcomings of statistics“

The author claims that “…a mutant form of math has deflected science’s heart from the modes of calculation that had long served so faithfully. Science was seduced by statistics.”

Of course the author is wrong. It is not the statistics that lied, it is the misusers and abusers of statistics who have spread fallacious ideas, intentionally and unintentionally.

The fascination with numbers goes back a long way in human culture. Numerological correlations with observed events have been integrated with sacred mythologies as far back as we can see — the Egyptians, the Druids and the Mayan’s, for example. — but it was not until the secular revolutions of the 17th and 18th century that this numerology came to be accepted as the principal instrument of truth-saying with respect to the nature of “reality”. Read more…

In today’s NTY’s Technology section the cautionary article “How Privacy Vanishes Online” looks at the potential pitfalls of social networking on the Internet.

“Technology has rendered the conventional definition of personally identifiable information obsolete,” said Maneesha Mithal, associate director of the Federal Trade Commission’s privacy division. “You can find out who an individual is without it.”

Even if you carefully observe the rules about not publishing personal data online, the intimate details of your personal life are being exposed by stats geeks who can mine the data and infer your profile based on who you know and deduce you social security number based on who knows you.

Who I Knew and Who Knew Me

Many, many years ago, during my high school years and long before the Internet, I had a summer job at a local gas station. One night after closing, the gas station was robbed. One afternoon, several days later, the police came to my family’s home and invited me to talk with them. They told me that the robbery had been an “inside job” and that they “knew” I had stolen the money. I will never forget what they said.

“We know you took the money. All we want to know is how much is left and where it’s hidden?”

Petrified, I asked them why they thought I had taken the money. They said that they knew I was a friend of John Hartwig, who they explained, was a real “juvenile delinquent” with a record of similar robberies.

Guilt by association? I reached back into my memory and remembered John. He had been a classmate in the 8th grade, though we hardly new each other. I had no idea how the police had drawn a connection between John and myself. How could I know?

The police asked that I take a ride downtown with them to take a lie detector test. Being a kid, I agreed, figuring the “science” of lie detection would set things straight once and for all. They put me in the caged back seat of their squad car and drove me 20 miles to their downtown station. There they wired me up to this contraption and started asking questions.

“Is your name Marc?”

“Yes”

“Do you work at the gas station?”

“Yes”

“Are you a friend of John Hartwig?”

“No”

“Did you rob the gas station where you work?”

“NO!”

They unstrapped me from the machine and told me to wait in the next room. After a few minutes, one of the cops came in and I stood up and said, “So, we’re good now, right?”

He replied, “You lied. Now once again, how much of the money is left and where is it hidden?’

With my belly in a knot and my head spinning, I stood and cried out “This is crazy” and ran out of room, down the hall, and out the front doors of the station. I telephoned my mom, who was home from work by then, and asked her to pick me up.

On the way home in the car I told her the story and she yelled back in anger, “Never…. never… volunteer any information about yourself other than that you love your mother, apple pie, and the American flag!”

Silence.

My mother had come of age during the World War II years, and being a Jew, even in America, had taught her that just because you’re paranoid doesn’t mean they’re not out to get you. I came of age in a more innocent time, when the goodness of America and people in general, seemed self evident. A lifetime later, I have realized that things are not as benign as I once thought.

All of us are in one way or another, on someone else’s agenda. More often than not, they simply want to come between us and our money. Some may want to borrow our identity. And maybe, at some point, some will want even more.

In today’s world, there’s not much that we can do to stay under the radar. The information age has stripped us naked and exposed us to predation. In this new age, we cannot hide. The only way forward is to pull together to fend off the predators —- call them out and hold them to account.

Scramble to the Top

Everyone seems to agree that our educational system is not competitive on the global stage. It appears that the problem is more than our failing to keep pace, it seems that we are actually losing ground. Let’s stop for moment and take a look at how the Obama administration and their “experts” intend to turn this situation around by creating a “Race to the Top”.

It goes something like this:

1. States will compete with one another for a share of $4 billion in school improvement money. Those that conform to the administration’s criteria will get more than those that don’t.

2. Educators will teach to a set of national standards that set the bar higher than before.

3. The administration will not concern itself with how standards are met. That will be left to local agents.

4. Teachers will be paid for performance. Those that produce students with higher scores will get more money and those who produce students with lesser scores will get less money.

5. When a teacher’s performance does not measure up to prescribed standards, the teacher will get the sack.

6. Schools that do not measure up will be able to either fire all of their teachers in an effort to reshuffle the deck or the school may, alternatively, be shut down.

Obama has promised that a wide variety of performance measures will be used to determine which states, districts, schools, and teachers receive financial rewards or punishments, Examples of these include.

1. Student test scores on higher-bar standardized tests.

2. Graduation rates.

3. College acceptance rates.

4. Attendance rates.

5. Learning “climate”. (whatever that means!)

(It is likely that this list is longer and will continue to grow over time, but let’s start with the short list just to keep things manageable.)

Now put yourself in the place of a state bureaucrat, or a district administrator, or school principal, or teacher, and from that point of view, consider what’s at stake — your level of earning and your job. You know that working in the field of education was never a ticket to status or riches. As the saying goes, “Them that can’t, teach”. Now you are faced with a struggle to survive in which your pay-for-performance might go up or might go down — so don’t get sucked into a mortgage — and you might even get canned if you have a run of bad outcomes, for whatever reason. Read more…

Obama wants to rework G. W. Bush’s “No Child Left Behind”, which was itself a monument to stupidity. According to the NYT, Obama says that he will,

“…replace the law’s pass-fail school grading system with one that would measure individual students’ academic growth and judge schools based not on test scores alone but also on indicators like pupil attendance, graduation rates and learning climate.”

Because, said Education Secretary Arne Duncan,

“We’ve got to get accountability right this time,. For the mass of schools, we want to get rid of prescriptive interventions. We’ll leave it up to them to figure out how to make progress.”

So Obama’s “new plan” is no plan at all. It is just another way to measure outcomes being produced by unknown processes run by an anarchic cadre of do-it-yourselfers. With stupidity incarnate, the best idea Obama can up with is to try and change educational outcomes, not by working on the system and processes that produce those outcomes, but by hitting students and teachers with bigger hammers.

As a lifelong educator who spent more than a few years running a small public high school in the basement of a church and buying teaching materials using a portion of my meager salary, it seems to me that even a simpleton should be able to understand that, rather than hammering students, teachers and yes, even administrators, to produce more desirable educational outcomes by doing whatever it takes, we must work on the system and processes that produce those outcomes!

For starters, here’s what Obama’s new standards should look like. Read more…