The worship of differentiation
Praise for mediocrity
Cemeteries are full of companies that didn’t understand the power game.
From Business Insider (november 11, 2019):
One of the biggest draws of Disney+ is the huge library of Marvel movies and exclusive new shows you can watch. Classics like "Iron Man" as well as new shows like "Loki" and "WandaVision" will all be in one place for unlimited streaming.
More than 10 million people signed up on the first day of its launch. Analysts predict that 18 million will sign up by the end of 2020, and Disney execs project anywhere from 60 million to 90 million global subscribers by 2024.
The superhero is selling well. The biggest box office of all time is that of Avengers Endgame (nearly $2.8 billion), a cocktail of superheroes, released in 2019. Not only is the superhero selling well, but it is also selling better and better, taking up the box office. We are witnessing a superheroes bubble, revealing our society:
The superhero has two main attributes:
an intrinsic weakness. For example, Iron Man is cardiac, Spider Man is awkward, Daredevil is blind,
something special, differentiating, that makes him achieve exploits. In the X Men, Professor Xavier is a telepath, Wolverine can regenerate, Magneto controls terrestrial magnetism,
The superhero reflects our globalized societies that impose the criterion of differentiation as the supreme value. No wonder the superhero is global too! Every individual and every company are considered under the same prism: their ability to contribute something unique, a necessity for social integration. We are thus defined by our strengths and weaknesses and we must work on these two poles: correcting weaknesses, strengthening what distinguishes us. There is no middle ground: you are strong or weak but you are not ordinary, mediocre. When everyone is looking for the same thing, we must ask ourselves: isn't the search for differentiation a dead end? What if it's better to work on our mediocrity?
The genesis of the differentiation paradigm
Adam Smith introduced the theory of absolute advantage into his seminal work Wealth of Nations published in 1776. The starting point is the individual, the pater familias to introduce his concept and then extends it to the factor of production of a country: "which is careful in the conduct of each family in particular, can hardly be foolishness in that of a great empire". The absolute advantage is the one we have over another (individual or country) when, with the same production factor, we produce more. There's this little something special in the absolute advantage. The theory of absolute advantage only takes into account the strength of one individual or nation in relation to another. It poses a problem: there is only one winner takes all. David Ricardo then added his weight to the picture by inventing the theory of comparative advantage: a country is seen as a mix of strengths and weaknesses (like our superhero). What matters is the relationship between the strength and the weakness. A country A may be higher at any point than country B, but if its A/B ratio is higher than that of country B, the latter will produce what is its weak point while the former will produce what is its strong point. Relative strengths and weaknesses are all that matters: to trade, you must be either the strongest or the least weak. David Ricardo published his theory in 1817 in Principles of Political Economy and Taxation. A little later, Charles Darwin extended these theories to the whole of nature by theorizing the principle of natural selection in 1859. Nature is presented as a battleground where optimal species survive. According to Wikipedia:
Darwinism is a theory of biological evolution developed by the English naturalist Charles Darwin (1809-1882) and others, according to which all species of organisms are born and develop through the natural selection of small hereditary variations that increase the individual's ability to compete, survive and reproduce.
Nature pushes for specialization and the acquisition of optimal traits to win the competition. Nature joins the economy. It makes no room for mediocrity, for the common, the ordinary... These theories developed with the industrial age and completely permeate our values. The superhero is the one who embodies them perfectly, both in his strengths and weaknesses. It does not evolve alone but in the midst of other heroes (the Xavier Institute): their respective comparative advantages allow them to live together and cooperate to bring down the super-villain, the inhuman, the all-mighty
Optimum and specialization
The theory of natural evolution is based on the idea that nature pushes each organism to find by elimination the optimal qualities to survive and develop. There is no soft belly, usually, the competition is there to eliminate them. The Darwinian world is made up of local optimums, each with its own niche. Nature knows what it does, it is the invisible hand... Daniel Milo in a remarkable book: Good enough: the tolerance for mediocrity in nature and society, showed that the theory of natural evolution cannot explain the industrial quantity of mediocrity that surrounds us, waste, waste, etc.. Milo argues that natural selection is not the only or even the most common mechanism in evolution, and that other mechanisms that have nothing to do with optimality or the "struggle for survival" play a more important role. Life is full of neutral and useless traits, and excess, waste and mediocrity due to the non-selective forces of genetic drift (random genetic mutation), geographical isolation and founding effect (when a species creates a niche and survives, not because it is optimally adapted but because it is good enough not to die). Darwin does not really differentiate between natural and artificial selection. He comes to caricature the work of nature to bring it closer to that of a neoclassical version of capitalism. Capitalism is easily perceived as a machine for making the optimum and specialization. Today's society is a caricature of it.
The function overrides the object
Usually, everyday objects fulfil several functions: a car allows you to transport children, go shopping, go to work, go on holiday, show your success. The world of software, the cloud and applications are trying to break this grouping of functions to individualize them and respond optimally. This is how Uber answers the function of moving, Amazon Prime Now the function of shopping, etc. Traditional television is also exploding with Netflix for entertainment, YouTube for learning, ESPN for sports. The company's IT is divided into optimal functions: Okta for security, MongoDB for the database, Twilio for communication, Zoom for video conferencing... The argument of the cloud is precisely the superiority of hyperspecialization, as made possible by AWS which supports everything ordinary. Here is what Andrew Jassy says about the AWS database offer at the latest Keynote AWS reinvent:
When you think of this collection of specialized databases, you won't find it anywhere else. When you have a company that says, "No, you don't need so many databases, I have a relational database and it can handle all this for you", you should nod and say, "Hmm". And then some companies say, "I have a non-relational database, and it has a very good key value, and it documents very well, and it does very well graphs, and it does very well time series", you should listen, you should be polite, and you should be very sceptical.
The Swiss army's knives are almost never the best solution for anything other than the simplest tasks. If you want the right tool for the right job that gives you differentiated performance, productivity and customer experience, you want the right database specifically designed for that job. We firmly believe within AWS that there is not a single tool to govern the world. You should have the right tool for the right job in order to spend less money, be more productive and change the customer experience.
Innovators specialize in the optimum and bring down the imperfections of the ancient world...or so it seems. Because the quest for the optimum plunges us into a theoretical, rational, logical, mathematical world that is not our own, that of a world marked by complexity and uncertainty. For example, Waze will give us the time we have to leave to catch our train. There may be imponderables: a demonstration that changes our itinerary and blocks our way or an empty tank. Waze does not take this into account, nor does he integrate the consequences of a failed train. Can be a trip to a contest or a vacation. The man is better than Waze at knowing about what time to leave. And he doesn't need an algorithm for that. As Keynes said: It is better to be precisely right than precisely wrong. Uber Eats is great to get us our dinner quickly but what happens when their server is down? The application does not offer an alternative solution and we are still hungry. With specialization and excellence comes the risk that a link will jump, which implies for the management of judgment, a good old-fashioned ordinary quality of man.
The ordinary is what allows us to be there again
The ordinary is what allows us to keep the distance. Consider marriage: it is built in everyday life, not by exceptional qualities. Being a model does not guarantee the duration. The ordinary is our imperfect nature made up of a certain number of psychological biases that are a priori irrational, probably inherited from evolution, which guide us in our decisions. Rather than denying them with the help of logic, we must invest in them and use them. Everyone is equipped with this baggage, which is what makes it ordinary, but it is it that allows us to make satisfactory, if not optimal, decisions, those where we even unconsciously consider the risks and their consequences. Broadly speaking, differentiation refers to the expectation of gain while the ordinary focuses on variance and chooses the acceptable minimum. Our brains are programmed for the good enough, the satisfycing, because it allows us to avoid the worst. A few examples:
The main function of a brand is not to indicate that the product is the best, but that it is consistently correct. Mac Donald's doesn't offer the best meals, but we know exactly what to expect. Running the three stars, we feast until the day we poison ourselves.
The notification systems found at Amazon, for example, make it possible in principle to find the best and cheapest products. There is a priori enough to destroy brands, except that (Retail Brew, 29 November 2019):
Online product reviews are supposed to help buyers choose the best high-speed mixer or 120-inch flat panel display - especially Black Friday, while American consumers are expected to spend $7.5 billion on Adobe Analytics. But many online reviews are not reviews at all. These are advertisements wearing a Moira Rose wig.
False comments about products are multiplying online. Nearly 40% of online reviews are false or unreliable, according to BestSEOCompanies data.
A study conducted by the Fakespot review site found that 30% of Amazon's reviews were false or unreliable.
Fakespot also estimates that 52% of the opinions published on Walmart.com are "inauthentic or unreliable".
Physical stores can resist e-commerce for the same reasons: a store has little space and plays its reputation on the quality of the products that occupy that space. The fact that the trader always occupies the same space is a sign of the quality of what he sells. We internalize this reasoning when we shop in stores rather than online
We follow signals: it may seem incongruous, not rational but it prevents disappointments. TV advertising works because it sends the signal of its cost, and therefore its quality. What is not expensive can also be of quality but this is rarely the case, our mind makes a shortcut that can avoid disappointments. Banks, by being in beautiful premises, send the signal that they have succeeded and are therefore safe.
Investing in an ETF for an individual does not seem to be the work of a genius. We'd rather look like Jim Simons. However, this makes it possible to avoid disasters and beat 90% of managers (provided that you do as Ulysses did and keep your ears shut on the news)
Investing in an ETF rather than in a managed fund seems logical for an institutional investor since it beats 90% of managers. It is ignoring the pressure of the group (the board of directors, etc.) that will push you to trade on this ETF, depending on what the newspaper says, and generally lead to very poor performance. Logic is challenged by reality.
Rory Sutherland in his book Alchemy sums it up well:
"I don't think it takes a huge amount of intelligence to look at the world from different angles. The difficulty lies in the fact that you have to simultaneously abandon four or five hypotheses about the world. That's probably what makes it difficult."
"I like to think that I am involved in the process of indecision (...). The first way to add value is to say, "Don't assume it's like that, maybe it's like that. "
And the first hypothesis to question is that mathematics are the solution to all our problems. "Software is eating the world" is the main responsible!
Mathematics are eating the World
Computers are machines for making cheap arithmetic. When the price of something very useful drops sharply, demand explodes. The invention of the transistor, then of integrated circuits and the microprocessor in the 1960s led to this collapse in prices. Here is what the authors of Prediction Machines have to say about it:
Arithmetic was such an important element in so many things that, when it became cheap, just like light before, it changed the world. Reducing something to its cost dimension alone is a way to reduce media hype, although it does not help to make the latest and most efficient technology exciting. You've never seen Steve Jobs announce "a new addition machine" when that's all he did. By reducing the cost of something important, Job's new add-on machines have been transformative.
By the magic of zero marginal cost (software), computing has invaded our entire lives. The images are arithmetic, the sound is arithmetic, etc. Cheap arithmetic is now attacking an area that is dear to us: prediction. To predict is to use information you have to find information you don't have. The cost of artificial intelligence is drastically decreasing, leading to the adoption of AI everywhere. Prediction is the basis of economic activity, so we should expect to be even more overwhelmed by mathematics.
Mathematics has that exact side that brings us out of our mediocrity, our illogicality, our uncertainty. They are reassuring because they allow us to optimize the resources at our disposal to find The Solution. And yet, they only solve narrow problems, which can be dangerous in the real world.
Convergence between mathematics and differentiation
Mathematics can solve narrow problems almost perfectly. The AI learns to define a rule based on the observed result. This rule only works for a specific result: for example, is it a dog or not? Should the car brake or not? There is no general AI, just a series of narrow AI automatisms that can create illusions (Ok Google, Alexa, Siri). The problem is our difficulty in recognizing it: according to the adage, for a man with a hammer, every problem appears as a nail. The use of mathematics is immoderate in the business world: if you make a mistake using a model, it is an imponderable; but if you make a mistake using your intuition? You're fired... That's how mathematics invaded finance with its procession of Greek letters. Risk is mathematized, it becomes volatility. In a perfect collective madness, everyone agrees on the use of these mathematical criteria to optimize the portfolio. It is not surprising that index management is finally gaining ground!
Mathematics, by providing an optimal, unique solution, encourages differentiation and specialization. They join Adam Smith and Darwin: if two of you come to the same solution for a problem (any company responds to a problem), one of them is too many. Everyone must therefore find their narrow niche, their particular talent, their gift as superheroes.
Everything converges to make us live in a world where our ordinary is denied in favour of our special gifts: economic theory, the invasion of computers into our lives, social pressure... Let us resist and be interested in our ordinary nature, understand it and take advantage of it our resources.
Exploiting its ordinary nature
Our (ordinary) strength is to have a broad vision of problems while our environment pushes us to have a narrow vision. It is not necessary to make exploits but just to ask the right questions, those that broaden the dimensions of the problem to make its resolution more effective. David Epstein in his book Range: why generalists triumph in a specialized world describes two athletes: Tiger Woods and Roger Federer.
By the age of three, the first one was scouring the golf courses, trained by his father and scored an 11 above par on a 9-hole course. At the age of 8, he was already beating his father, an athlete nevertheless. When he arrived in Stanford, he was famous. For his father, he was the chosen one...
The second one flirted throughout his childhood between different sports (squash, skiing, swimming, skateboarding, basketball, tennis, table tennis, badminton, football). He liked ball games, no matter what they were. Unlike Tiger Woods, his parents had no plan for his career, did not seek to push him, on the contrary. When he started playing tennis more seriously as a teenager, he refused to join a professional group so he could continue to play with his friends, listen to music, etc. At the age when he left other sports, the others had long been specialized and trained by a cohort of coaches, psychologists, doctors and nutritionists. And yet, despite this apparent delay, at 38 years old Federer has won 20 Grand Slam tournaments and remains one of the best players in the world (number 3 in the ATP ranking). David Epstein draws two lessons from this:
Tiger Woods was able to break through because golf is a sport whose narrow rules favour specialization (just like chess or go game).
Roger Federer had to fight in a complex physical, psychological and tactical game where his ability to kiss wide was more than enough to compensate for his delay in the start.
Tiger Woods is the very example of the superhero, the specialist member of the more than 10,000 hours of intensive practice club. Roger Federer has hit on his ordinary side, his ability to make connections between different ball sports to dominate tennis. To make a comparison with AI, Tiger Woods solved a problem of narrow intelligence, such as automatism, while Roger Federer defeated with general intelligence. David Epstein concludes:
The declared need for hyperspecialization is the core of a vast, powerful and sometimes well-intentioned marketing machine in sport and beyond. In fact, Roger's path to sporting fame is much more widespread than Tiger's path, but the stories of these athletes are much more discreet, if ever they are told. You know some of their names, but you probably don't know their origins.
The majority of problems in life and business come out of broad intelligence and it is thus through our ordinary ability to connect wires that we must respond. In practice, it is better to be Roger than Tiger.
How to use our ordinary nature
If we consider that our ordinary nature represents a good 90% of our personality, and therefore that of others as well, why not position ourselves in this field which makes it possible to solve 90% of 90% of problems. Asking the right questions allows us to broaden the problem and attack it from the perspective of our human nature: Rory Sutherland in Alchemy: the power of ideas that don’t make sense is fascinated by the way train problems are solved: the prism of engineers is to try to make trains ever faster. In particular, he complains about the High Speed Train project to link London to Manchester and Leeds, which initially cost £57 billion and has recently risen to £88 billion. He explains that engineers have a narrow view of the problem (that of the man with a hammer) and that the right question must be asked. Why do the journeys seem so long?
When you take the train, you have to integrate the transit time from your home to the departure station. Transit time is generally very long because you are afraid of missing your train. Solving the anxiety problem would already significantly reduce the overall duration of the trip. It proposes an application system that would allow you to board earlier if necessary or the next train if you miss your train. The time saved would be important, the time perceived as even more so because it is a time of stress that counts as double.
If you were sitting well, with legroom, a working wifi, large windows, the travel time would seem much shorter. Rory Sutherland explains that it would be much cheaper to recruit models to control tickets than to increase the speed of the train...
Solving perception problems is often more effective and much less costly than measurable problems. However, this is often unpopular because it does not require specialized expertise that clearly shows, with figures, its differentiation. The example of High Speed shows us that using the ordinary remains the solution to survive (according to the Guardian, September 3, 2019):
The completion of the first phase of the HS2, between London Euston and Birmingham, could be delayed by five years until 2031, the government announced, and the cost of the high-speed rail network has risen to £88 billion.
Secretary of State for Transport Grant Shapps told Parliament that the completion of the entire northern section of the HS2, bound for Manchester and Leeds, would probably be delayed by seven years by 2040.
Man's characteristic is to anticipate, to project himself. It was the prediction of a better world that led to the first migrations and allowed us to fill the planet. Prediction is based on observation. AI is able to observe and predict for simple problems, complexes will remain in our domain for a long time. That's why it's so important to learn to observe. It is not a special gift acquired after 10,000 hours of work, but just a state of mind. Let us take again the example of transport. What do current progress in this area tell us? The cost of transport will drop drastically and comfort will improve. From this observation, we can draw a forecast on the organization of cities. The increase in road traffic and the pedestrianisation of the centre has given the city centre back its lustre, with prices rising year after year: we do everything on foot, we buy in local shops or online. Last mile delivery is made easier by the density of the centre, allowing deliveries in 1 hour, or even better for restaurants. Let's now look to the future of autonomous vehicles and drones: the lower delivery cost makes it possible to deliver less dense areas. In addition, autonomous car journeys will seem shorter: the possibility of working or having fun during the journey. Finally, the journeys will actually be shorter because the traffic flow will be organised by IA. From then on, a return to pleasant suburbs with greenery and large houses is a real possibility. This can have consequences in many areas. Observation then allows us to make connections through our creativity. To strengthen it, there is nothing like changing the subject, walking well, it can be much more effective than using the services of a consultant, a specialist in the field.
In a world polarized by specialization and the resulting optimization (the risk of ending up at zero), observation can give us a head start. Finally, tapping into our ordinary nature can simply lead us to be in the "early adopters". It doesn't require us to have a particular gift, just to be in the first wave. Today, you do not need to be an engineer or coder to be interested in AI, to observe carefully and deduce certain changes in our lifestyles and the consequences at the business level.
Because AI gradually supplants human short-circuits that make us satisfied with the good enough, it relegates our minds to the most complex forecasts, which require close-ups, context and judgment. The intrusion of AI into our lives will significantly reinforce the importance of our ordinary qualities. These are the qualities you need