What is Intelligence Amplification?

Principia Cybernetica definition

Tribute to W Ross Ashby by George J. Klir

Tribute to W Ross Ashby by Roger Conant

BBC and Hutton

Sequence of events. Secret meeting between an unidentified government scientist and a BBC journalist. Inaccurate reporting by the journalist, apparently quoting the scientist as impugning the integrity and honesty of Government and one named adviser. Major row between Government and BBC. Government scientist identified, publically interrogated, committed suicide.

Independent investigation under Lord Hutton found serious flaws in the procedures of the BBC. Chairman and Director-General resign. BBC enemies privately rejoicing. Question mark now hanging over the renewal of the licence fee.

What’s this got to do with the subject of this blog? It is a classic story of management controls failing to protect the viability of the organization, of journalists and senior managers alike making quick instinctive judgements without carefully checking their facts.

Competition and Peer Pressure

Why do people not strive for excellence? There are sometimes social pressures involved. Think of stroppy gangs of schoolchildren, and the social pressures that sometimes militate against excellence in many schools. Parents fight to get their children into "hothouse" schools, where pupils compete for academic excellence - although the psychological pressures in these schools can also be damaging - even for the ones who get top exam results and good university places.

That's what came into my mind when I read Bill's piece yesterday about the Escalation Phase. Executives compete with one another for recognition, the best jobs, the plummest directorships - but it's often a rather closed world in which the greatest risk is to be cut off from your peers. There are some covert rules of behaviour, which may inhibit genuine excellence.

One of the purposes of the Baldrige and EQA is to create a kind of corporate hothouse, in which some self-selected companies compete for a prize. Obviously not everyone can win. There have been some studies of the corporate success of past winners; it would also be interesting to know about the other entrants. (It is possible that competing in such a competition might cause a misdirection of management attention and an excess of organizational stress. There is always a downside risk of competing - you might lose.)

The fact is, however, that the vast majority of companies do not consider that such competitions are for them. Instead, the executives sit at the back of the class, whispering to one another, throwing ink pellets at the class swot and ignoring the teacher.

Boy have they got a shock coming ...

Blog Structure (Strawman)

Comments anyone?
blogstructure.ppt

Alerts, Alarms and Algedonic Signals

Trevor writes

The SEC, FSA or whoever can receive automatic alerts if anything odd is going on ...


Some houses have burglar alarms, linked to the local police station. Many people have car alarms loud enough to wake the street. Smart burglars may simply go around creating events to trigger the alarms, thus generating enough apparently false positives to subvert the social system on which the effectiveness of the alarms depends.

Trevor may be able to demonstrate the technical integrity of some monitoring and alert system, but Aidan's point refers to the social system in which this is embedded.

And it is the wider social system that should judge what counts as "anything odd" in the first place. Following the argument of this blog, this judgement should rest on some evidence-based system of appreciative enquiry and not just a bureaucratic application of some simple rules.

Stafford Beer once proposed a technical mechanism for gauging social satisfaction, which he called the Algedonic Meter, but at the same time he pointed out the limitations of such a mechanism.

http://www.globalideasbank.org/BOV/BV-448.HTML

The Old Guard

Aidan talks about the possible perversion of the system by "old purposes".

One converse of POSIWID - when you find a purpose surviving, look for the system whose purpose it is. Existing power bases will obviously look for ways of preserving power. The Old Guard.

So there may be two or more different systems in play, each attempting to exploit Trevor's mechanisms to different ends. The broader question is then - what emerges from the interaction between these systems.

We should certainly not expect the Old Guard to give up without a struggle - and we know the Old Guard don't play by our rules - that's the whole point.

New Reporting Models for Business

Bill's latest message talks about the Baldrige award. This US-based award is approximately equivalent to the European Quality Award, administered by the EFQM.

The Institute of Chartered Accountants (England & Wales) has produced a discussion document on various alternative reporting models. It can be downloaded from the following URL (pdf format).

http://www.icaew.co.uk/viewer/index.cfm?AUB=TB21_59349


This document certainly raises some of the right issues, but there are some real problems with the approach. I think we could usefully come up with a short position statement in relation to these issues, and maybe set up some meetings for Bill when he's over here.

Global accounting problems

Excellent article by John Plender in the Financial Times Thursday 22nd January

http://search.ft.com/search/article.html?id=040122000023

Complexity: Devious Management and Investment Risk

A common feature of much recent malfeasance is the construction of highly complex corporate structures, apparently beyond the legitimate demands of Requisite Variety.

Complexity – whether requisite or otherwise – adds to investment risk. Dodgy management practices may cause a continuous erosion of corporate value, or they may trigger a sudden collapse of value (Enron, Parmalat). Some companies have a sufficiently robust business model that they remain viable even with a certain level of malfeasance. Other companies turn out to be merely pseudo-viable – only remaining solvent thanks to dodgy accounting. Some investors may be willing to tolerate erosion, but do not wish to be confronted with sudden collapse.

Complexity is (or should be) a warning sign. The purpose of complexity is what it does. If it doesn’t serve a legitimate purpose, then it is surely reasonable to assume it is there to serve some other agenda.

Using the theory of complexity, we should be able to construct geological maps of the corporate world, showing (probabilistically) where it might be worth drilling for the next accounting black hole.

For example, it now seems that Parmalat was non-viable, only sustained in pseudo-viability by paper cashflows from a non-existent bank account. But such transactions can only be concealed by having lots of apparently genuine intra-company transactions. There is therefore a control mechanism that forces complexity onto the company at the operational level, and a higher level mechanism that manages the smoke and mirrors. It might not be easy to detect the fraud by looking at the operational company alone; it may be the existence of the control mechanisms that gives the game away.

Conversely, if a management is obliged to construct and present evidence of its bona fides, this evidence needs to include a properly grounded account of the control mechanisms, including a justification of the degrees of complexity and intracompany coupling.

Update

See new Squidoo lenses on Complexity and POSIWID

Independent Vision

Bill writes

When you tire of this looping exercise of the intellect in foresight v hindsight, you must select one operating platform or the other. Go for "judgment" or go for "evidence." A combination is forbidden, don't bother.

I disagree with this Either/Or. What's wrong with Both/And. One of the most important lessons in systems thinking I got from reading Bateson was the necessity of having several independent sources of information.

The point about audit always was that it was supposed to provide an independent view, not an alternative view. As we now know, it has failed to deliver.

If I don't trust managers, maybe I don't trust machines either - especially if the machines are fed by the managers. But if machines provide an independent corroboration of human judgement, then perhaps I'm slightly reassured.

SEC 404

Would someone kindly provide a summary of Section 404. Is there a convenient URL for the whole thing?