Why Averages Are Misleading

© Pix4free

"The average investor buys high and sells low."

--Ray Dalio

The chairman of Vector Economics, Sam Savage, shares the story of a statistician who drowns while fording a river that he calculates is, on average, three feet deep. "If he were alive to tell the tale, he would expound on the 'flaw of averages,' which simply states that plans based on assumptions about average conditions usually go wrong." 

Mr. Savage, who also lectures at Stanford and Cambridge on risk modeling, says, "This unseen flaw shows up everywhere, distorting accounts, undermining forecasts, and dooming well-considered projects to disappointing results."

A problem with averages

A former client, Brad Hewitt, then CEO of Minneapolis-based Thrivent, first brought the problem of averages to our attention. He recently explained it this way:

"I was a math (statistics) major in college. One part of that coursework was a section on how to tell if someone was lying using statistics. It was eye-opening, and averages were among the best ways to mislead. A professor would say, 'If you put one foot in ice cold water and the other foot in boiling water on average, it would be just right.' 

"Averages  (means, modes, arithmetic, etc) are valuable, but one must look carefully at what they say. Unfortunately, people often have a point of view, and statistics are simply a way to prove their point, not help them gain insight into data," Hewitt concluded.

What specifically should concern us about averages?

The problem with averages is that they can easily obscure the reality of the situation. 

"While averages can provide a simple summary of complex data, they can also distort reality, hiding important variations and nuances with the data," writes Reagan Pannell, CEO of Leanscape. "Averages can be useful for providing a quick snapshot, but they mustn't be the sole metric relied upon for decision-making or understanding a situation," he adds. 

Some examples

Think of baseball batting averages, which Sabermetrics considers a weak performance measure. On-base plus Slugging (OPS) may be a better way to judge a batter's value to their team, but do fans know what that stat means? Do they even care?

Consumers rely on average annual rainfall amounts from their local meteorologists (54 inches in Florida) because they are simple to compute and understand. Yet those averages are only sometimes reliable, failing to account for inconsistent patterns within a year (like hurricane or dry seasons).

Average is a mathematical term, and research suggests it should be so confined. You can't average people (only numbers of people) or concepts or opinions. One person suggested using the word "typical" as an alternative. 

Does that mean the average person is a myth?

This is likely since that definition relies on a single 'average' value and can ignore individual differences and complexities. 

Beware these conditions

Circumstances to avoid:

• Using averages to compare different groups. 
• Applying group behavior to individuals.
• Allowing extreme results to influence averages.
• Fixating on a single number--which is an oversimplified view of reality.  

One way around these pitfalls is to consider probability distributions instead of single numbers. A histogram is a simple way to view a distribution. (linkedin.com/pulse/deceptive-art-using-averages-unveiling-statistical-tricks)

What can we learn?

Consultant Pennell believes we should look beyond averages.

"Consider data distribution, the outliers, and other measures like median and mean. Understanding the range and variance can also provide insights into the spread and inconsistency of data."

Pennell balances the scale:

1. Averages are not inherently bad. They do offer a quick snapshot of data and simplify complex datasets.

2. Use averages as a starting point, but explore other statistical measures.

3. Beware of outliers, as they can significantly skew your average and create a misleading data representation.

4. Tools like AI can provide valuable insights beyond the average, though you should never remove the human mind when analyzing data.

Coin of the realm

Sam Savage, whom we quoted initially, is also the author of The Flaw of Averages. Instead of saying, "Give me a number for my report," he believes every executive should say, "Give me a distribution for my simulation."

If followed, Savage's advice could improve planning and outcomes and establish a more credible standard of leadership. 

Strategist.com

© Bredholt & Co. 

 

Keeping Middle-Class Philanthropy Alive

(C) MYRA

"The charity that is trifle to us can be precious to others." 

 —Homer

Who are the most generous financial givers? 

The short answer is individuals. 

Giving USA's Annual Report on charitable contributions, published in June of this year (for 2023), shows that of the $557.16 billion given, 67 percent, or $374.40 billion, came from individuals, an increase of 1.9 percent over 2022. 

Next are foundations, which gave 19 percent, or $103.53 billion, up 1.7 percent from the previous year. Bequests, at 8 percent, or 42.68 billion, gained 4.8 percent, and finally, corporations, with 7 percent, or $36.55 billion, increased by 3.0 percent over 2022. 

These are current dollars as overall inflation-adjusted giving declined 2.1 percent for the year. Individual giving as a share of disposable income was only 1.9 percent—close to the all-time low of 1.7 percent in 2022. 

The top three recipients were religion*, which received $145.81 billion; human services, $88.84 billion; and education, $87.69 billion. 

In 2023, an outpouring of generosity produced record-high giving from resilient but changing donors. 

Generosity—an expression of faith

"In study after study, says Karl Zinsmeister, author of The Almanac of American Philanthropy, "religious practice is the behavioral variable with the strongest and most consistent association with generous giving."

Here are Internet headlines from the past few years that underscore that point:

"The Gospel of Generosity: Study finds Scripture-engaged Americans are among the most generous"

"People who attend church regularly are more likely to donate to charities"

"The more people go to church, the more they give to church, study shows"

While those stories reflect American findings, Gallup surveys conducted from 2005 to 2009 in 145 countries revealed that these same religious practices held true internationally. 

In an article in Philanthropy, Zinsmeister offers the following insights:

• Among Americans who attend services weekly and pray daily, 45% had volunteered during the previous week.
• Two-thirds of people who worship at least twice a month give to secular causes, compared to half of non-attenders.
• Seven of ten weekly church attenders told Pew Research they consider "work to help the needy" an "essential part" of their faith. 
• Religion annually contributes an estimated $1.2 trillion of socio-economic value to the U.S. economy. That total is more than the combined revenue of America's ten biggest tech giants and the total economy of all but 14 nations.

A new study by Indiana University and the University of Notre Dame found that charitable giving fell by about $20 billion in 2018 after the Tax Cuts and Jobs Act was passed by the U.S. Congress. 

However, according to that same study, the TCJA's increase in the standard (vs. itemized) deduction, which 90 percent of filers took in 2021 and is being raised for the 2024 tax season, had little to no effect on giving to houses of worship. 

In another article, "Less God, Less Giving?" Karl Zinsmeister notes:

"It's clear that America's unusual religiosity and extraordinary generosity are closely linked. As faith spirals downward, voluntary giving is very likely to follow. An obvious question for philanthropists is whether the causation arrow can be reversed." 

Blinking lights

What's happening in charitable giving over the donor spectrum, particularly middle-class philanthropy? 

1. Giving is increasing because of large gifts from wealthy donors. Smaller and mid-level donors are slowly disappearing across the broad range of nonprofits. This impacts local charities like food pantries, YMCAs, and libraries. Large gifts tend to go to medical centers and museums. (See Dr. Ruth Gottesman's $1 billion gift to the Albert Einstein School of Medicine, Bronx, New York.)

2. The number of giving households is decreasing from all economic strata. Volunteerism is also in decline. 

3. One-time donors giving less than $500 and $100 are collapsing. These are 98 percent of all givers.  

4. Retention rates are declining among all donor categories.

5. Inflation is a thief but doesn't completely explain certain sectors' decline. Last year, considerable sums were spent on consumer goods, travel, and entertainment in the U.S. 

6. The percentage of Americans who gave to religious causes is decreasing with attendance at worship services. 

The Great Recession (2007-2009) made it difficult for some younger Americans to establish a habit of giving. Only one-third of households aged 40 and under gave to charities in 2018. 

What factors motivate them to give, especially if they don't attend worship services or belong to networks encouraging giving?

Communicating well

Some observers believe that decreases in giving are often attributable to communication lapses and ineffective messages, as donors are looking for reasons to give.

"People give to causes they consider important regardless of their income and expenses," reports the American Bible Society in their annual study of giving. "The spirit of generosity in the U.S. remains strong," said Michael Tomlinson, president of the BDI Fundraising Agency.

How do those with expertise suggest improving donor relationships and successfully sharing the worthiness of your cause? 

By doubling down on building trust with donors and inviting others into the fold. Transparency and accountability are paramount.

Demonstrating the impact of donor investment.

Crafting content with engagement in mind. What would that look like?

Telling great stories and harnessing technology to support people in need. The premium is on stories that speak to the heart and mind. 

When it comes to bequests, don't overlook smaller or mid-size donors, as they may be able to make a larger gift someday. 

And don't forget to say "thank you" for even the smallest contributions.

*Giving to religion, as defined by Giving USA, includes churches and mission organizations.

Sources: Indiana University Lilly School of Philanthropy; BDI; Mission Wired; The Chronicle of Philanthropy; Philanthropy Roundtable; New York Times; American Bible Society; Boomerang; and The Wall Street Journal.  

Strategist.com

© Bredholt & Co.

Every Organization Is Sinkable

(C) Strings Magazine

"Contrary to popular mythology, Titanic was never described as 'unsinkable' without qualification until after she sank."

—Richard Howells

Did an iceberg in the North Atlantic cause the RMS Titanic, the world's largest vessel, to begin sinking around 11:40 p.m. on April 14, 1912, off Newfoundland? Less than three hours later, the ship plunged 12,500 feet or 2.5 miles at a speed of 35 to 40 knots (40 to 46 mph), leaving an impact on the sea floor that is still visible today.

Of the 2,224 passengers and crew, nearly 1,500 died in that preventable tragedy. 

Damaged from the inside out

Or maybe it was something else, such as a broken organizational culture at Harland & Wolf, the Titanic's Belfast builder, or the White Star Line headquartered in Liverpool, England, which owned and operated the luxurious ocean liner.

"The Titanic was doomed from the start due to a flawed corporate culture," concluded Darry Wright, a senior global executive with EY Canada who studied the accident. 

"It was not the iceberg that led to the downfall of the ship; rather, it was a culture of overconfidence, narrow-mindedness—and a lack of balance between innovation and risk. Leaders who did not acknowledge the intrinsic flaws (rivet failure and open portholes) in the ship's design," Wright added.

How dangerous is it to overestimate our abilities or knowledge when needing more expertise in a particular area? Very. (Dunning-Kruger effect)

The Titanic's crew and modern management have this in common—the practice of ignoring legitimate warnings. 

On April 14, 1912, a British merchant ship, the SS Mesaba, sent a radio warning about an ice field with large icebergs and heavy icepacks. That message never reached the bridge. At 10:55 p.m., the SS California radioed the Titanic, saying it was stopped and "fully surrounded by ice."  The Californian's crew later misinterpreted Titanic's calls for help.

Before leaving Southampton, Captain Edward Smith knew the drift ice field was larger and further south than in previous years. 

At the time of the accident, the Titanic was sailing at 22 knots (25 mph), two knots below its maximum speed.

The Titanic Syndrome lecture links an overreliance on past success to the night's complications. The captain and crew were experienced at sea under normal sailing conditions. But how can a spotter see afar with the binoculars missing in the Crow's Nest? Or what does a captain do after hitting an iceberg with insufficient liferafts onboard?

Organizational icebergs

The International Ice Patrol says an iceberg is a piece of freshwater ice over 15 meters or 16 yards long that has broken off a glacier or ice shelf and is floating freely in the water. Icebergs vary considerably in size and shape. 

According to the Polar Times, the largest iceberg on record was sighted by the USS Glacier on November 12, 1956, west of Scott Island in the South Pacific Ocean. At 335 by 97 kilometers (208 by 60 miles), it was larger than Belgium. A study by The Ohio State University suggests that about one-tenth of the volume of an iceberg is above water and follows Archimedes' Principle of Buoyancy.  

Two of the biggest icebergs threatening businesses and nonprofits are the absence of mutual trust among colleagues and an inability to recognize emerging internal and external realities. Both contribute to strenuous transitions when changes are needed with people, products, or services. 

Broken cultures sink strategies. 

MIT research shows that it takes more than a narrative to repair cultures, as there is often a gap between what is said and what is done. That study says 88% of employees report a lack of organizational preparedness in facing new challenges. 

Repairing the damage includes finding the glue to hold everyone together, clearing out the noise overtaking vital communication, and clarifying what is unique and special about the enterprise. 

Saying it, talking about it, and writing it down doesn't make it so.

Small holes—sizeable destruction

A 1996 exploration of scientists and engineers underwritten by the Discovery Channel found six thin openings across the Titanic's starboard hull, which were likely the cause of its physical demise. The total area of damage is 12-13 square feet or less than the area of two sidewalk squares. 

"It was not the size but the placement of the openings across six watertight holds," says William H. Garzke Jr, a naval architect. "Everything that could go wrong did. Those half-dozen slits let in 39,000 tons of water, sinking the Titanic," the investigators wrote.

Would there have been less damage at slower speeds? The experts say yes. 

Under the right conditions, any ship can sink.

Paying respects

On June 18, 2023, a month before our Transatlantic Crossing on Cunard's Queen Mary 2 from Brooklyn, New York, to Southampton, England, the Titan submersible imploded while on an exploration of the Titanic site. All five on board were killed. Stockton Chase, CEO of OceanGate, Titan's owner, was among those who lost their lives that day. 

Warnings about the Titan's safety were widely shared but not addressed. 

As the QM2 approaches the coast of Newfoundland heading eastbound, the Titanic site is displayed on a screen in the cabin. Captain Andrew Hall announced on this trip that the QM2 would sail north of the Titanic site. The horns will blast to pay respects to those whose lives were lost on that fateful voyage 111 years ago.

At the Sunday worship service sponsored by the QM2, the congregation sings the British hymn, "Eternal Father, Strong to Save." Written in 1860 by William Whiting, the anthem was inspired by the dangers of the sea described in Psalms 107.  

The last word

The BBC reported that one of the Titan submersible crew's final messages was, "All good here."

The surviving second officer on the Titanic, Charles Lightoller, was quoted in the film A Night to Remember as saying, "We were so sure."

This is a tale of two unique vessels, one very large and the other very small, whose fates were determined not from the outside but from the inside out. 

As you go about your work, keep that life-saving lesson in mind.

www.strategist.com

©  Bredholt & Co. 

 

When Customers Leave and They Don't Say Why

Getting Images

"The true test of business's customer service fitness is not when things are going right--but rather what it does when things go wrong."

--Steve Ferrante

One of the more overlooked aspects of growing a business is retaining customers, especially in competitive markets like retail, dining, and travel. A good way to achieve that is to pay attention to what Dr. Albert O. Hirschman calls "repairable lapses."

Every company, nonprofit organization, professional services firm, and house of worship sometimes needs to catch up.

Yet, the goal is not perfection but consistency, honesty, and integrity in our dealings on both sides of the counter. That behavioral trio is essential for trustworthy relationships and loyalty. Best efforts are like an insurance policy for when bad days happen--and they do.

Let's say upfront that viability and profitability require new and retained customers. It's not one or the other, but both. However, the September Post is about the work needed to build customer satisfaction by keeping products or services in good order and fixing them when they fall below acceptable performance levels.

That means when something goes wrong and is brought to management's attention, even by associates, action should be taken to get things back on course as soon as possible. Sometimes, it's as simple as apologizing and making matters right--on the spot. Ritz Carlton Hotels gives frontline workers the authority to do just that. Well-managed restaurants do the same with servers. 

Expressing sincere regret with concrete steps is an effective way to disarm unhappy buyers. Immediate responses help restore reputations as positive word spreads among business, social, and family networks.

This principle of repairability is important because it allows corrections within a reasonable period and cost. As with health, the point is not to let small problems become life-threatening through neglect. 

Departure closes the door

Dr. Hirschman, author of Exit, Voice, and Loyalty (Harvard University Press), suggests a reliable way to identify operational decline is through "exit." Customers leaving, especially in measurable numbers, are sending a message. 

Walking out quietly, though, makes it difficult to always know exactly what that message is. Exiting customers also give up an opportunity to make better what they don't like.  

How can those losses be reversed? 

"Management must find ways to correct whatever faults have led to these exits," Dr. Hirschman says. That's why feedback is necessary for organizational health. How are we doing, and where can we improve? 

Even with inflation now at 2.9%, down from 9.1% in 2022, changed shopping habits are in place for many households.

If doable, exit interviews shed light on disengagement, providing insights into what it might take to get someone back in the fold (i.e., faith communities). Resolving problems should be a priority, as finding new clientele is time-consuming and hard. 

Research by Frederick Reichheld, inventor of the net promoter score, shows that increasing customer retention rates by 5% increases profits by 25% to 95%. 

Keeping the right customers is of great worth to enterprises, big and small.

Speaking but not too loud

The complement to exit is "voice," although consumers can speak and still leave. Voice gives rise to advocacy by remaining in a system. The book suggests that what causes us to choose voice over exit is loyalty, which, unfortunately, is a diminishing value. 

Customers or members may express their objections to anyone they believe cares. "Voice is effective up to a point and can be overdone," says Dr. Hirschman. Voices alert management to failings but must give management time to respond to the pressures brought to bear," he adds. How much time it takes for remedial action to take effect depends on the situation's complexity. 

Take the recent Crowdstrike-Microsoft crisis, which caused the largest IT outage in history.  

A Crowdstrike software update failed, causing flight delays, broadcast disruptions, and blue screens on corporate PCs worldwide. Crowdstrike's founder and CEO, George Kurtz, has publicly apologized. "I want to sincerely apologize directly to all of you for today's outage. All of CrowdStrike understands the gravity and impact of the situation." 

He reiterated the company's earlier message that the incident on Friday, July 19, was not the result of a cyberattack.

Not all airlines use Crowdstrike. Of those that do, Delta claims it was more affected than others. From July 19 to 25, it canceled 7,000 flights, affecting a half-million passengers due to the IT outages. 

"I want to apologize to every one of you who have been impacted by these events," Delta's CEO Ed Bastian told customers. "Delta is in the business of connecting the world, and we understand how difficult it can be when your travels are disrupted."

Loyalty is a two-way street

Delta's passengers voiced their anger through social media and the press, as flyers were stranded in airports and sleeping on floors. Most affected travelers, including Sky Miles members, will stick around as they have little choice. Delta's slower recovery from the outage follows an earlier J.D. Power survey showing the airline as the best in first-class and premium coach satisfaction. *   

The U.S. Transportation Department, which has received more than 5,000 complaints, has opened an investigation into Delta's response. Delta has retained famed litigator David Boies and is suing Crowdstrike and Microsoft to recover a projected half-billion cost; both companies denied fault. 

Some passengers use their collective "voice" through a class action lawsuit to exert legal and political pressure on Delta's top management to reach financial settlements. 

How does a business repair that kind of damage? As quickly and transparently as possible. 

A Delta spokesman told The Wall Street Journal that the company has processed thousands of refunds and reimbursement requests. "The airline is working tirelessly to make this right for customers." 

After suffering severe turbulence, how will Delta land safely? 

One way is remembering what Scottish novelist J. M. Barrie said: "Life is a long lesson in humility."

* The author is a Delta SkyMiles member.  

Strategist.com

© Bredholt & Co.

See You in September

 "The summer night is like a perfection of thought."

--Wallace Stevens

Vicksburgmi.org

See You in September

"The summer night is like a perfection of thought."

--Wallace Stevens

Vicksburgmi.org

See You in September

"The summer night is like a perfection of thought."

--Wallace Stevens

Vicksburgmi.org

There's No Such Thing as a Cheap Piano

"Buying cheap to save money is like stopping the clock to save time. Neither works."

--Napoleon Hill

(C) Cable-Nelson

Sometime in the late 1950s, my Mother purchased a Cable-Nelson spinet piano and enrolled me at the Edward Cullinan Studios in Benton Harbor, Michigan. 

While less well-known than Yamaha, Bösendorfer, and Steinway & Sons, Cable-Nelson was a successful manufacturer who built well-made instruments. They survived the Great Depression and manufactured various brand names until the 1980s.  

Although I was unaware then, Lydia Bredholt, a pianist, taught me the importance of quality products (Cable-Nelson) and people (Edward Cullinan). Over time, I also learned that high values and culture are obtainable, no matter one's status in life. 

In 2004, that same Cable-Nelson piano was loaded on a rented trailer in Florida and carried away to our daughter Jordan's home in Virginia. Later, our grandchildren will play, too--nearly 60 years after its original purchase.    

More than weekly piano lessons and practicing (who likes to practice?), our Mother knew that attempting to play Swans on the Lake or The Man in the Moon from John Thompson's Modern Course for the Piano (First Grade) opened the door to a world of creative expression that would provide a lifetime of enjoyment. 

That includes composing and orchestrating songs for our grandsons and granddaughters with the help of arranger Jerry Nelson.

"Without music, life would be a mistake," said Friedrich Nietzsche.

Cheap can be expensive

Recently, it was decided to replace the Cable-Nelson piano. A decade-old digital baby grand was found online, and it happened to be owned by someone nearby. Looking for a good buy, the price was agreed upon, and the piano was delivered to our home. 

However, it only took a short time for a $400 instrument to become an $800 transaction. The keyboard needed work, and the electronics were updated. The piano's computer system will require additional upgrades, the cost of which remains to be determined. 

Nevertheless, our 10-year-old grandson, Andrew, visited and admirably performed the theme from Star Wars. Additionally, the ebony piano is an attractive piece of furniture in our living room. 

So all is not lost. 

Piano lessons

Buying a piano is like buying a used car--it's a challenge for anyone.

LivingPiano.com says, "You can buy a piano cheap or get one free, but the amount of work you have to put in them varies greatly."

"Choosing the cheapest option may mean sacrificing quality, which can lead to additional costs in the long run," writes Matt Heller, who advises on these purchases.

The conclusion is that we will pay now or later (as I am doing), but we will pay.

Everyone likes a bargain--especially the well-to-do. But sometimes, within reason, paying the price to get what we want is necessary. Buying fewer but nicer things makes that possible.

May is a month of commencement and a time to reflect on the generosity of those who cared for us most. While they pass, their legacy lives.

As the Swedish group ABBA sang, "I say thank you for the music, for giving it to me."

Strategist.com

©  Bredholt & Co.

The Rule of Holes

"Everyone makes mistakes. Everyone fails at something."

--David Gemmell

(C) Deposit Photos

The "Law of Holes" adage first appeared in the Washington Post in 1911. 

The first rule's original iteration--"Nor would a wise man, seeing that he was in a hole, go to work and blindly dig it deeper ..."

The contemporary version reads like this: When you find yourself in a hole, stop digging.

It's a philosophy of learning to let go. 

Here are seven more rules to keep in mind:

2. Holes happen. They can appear out of nowhere, full-blown. One minute, they're not there; the next thing you know, you're in one. A wise person always carries a ladder.

3. Climb out of the hole as soon as possible. 

4. After you have climbed out of the hole, don't fall back in or dig yourself a new hole.

5. Holes come in a wide variety of types and sizes, all of which have the potential to cause you trouble. Sinkholes, the Black Hole of Calcutta, and the hole in the ozone come to mind. A hole in the water into which you pour money is called a boat. There can be holes in your story, your pocket, your glass, your résumé, your memory, your shoes, and your soul. 

6. Sometimes, holes can be your friend, for instance, in a storm. But it's important to know what kind of storm is coming. Holes are suitable in a tornado; they are not so good in a flood.

7. Bottomless holes are called pits, as in throwing good money into one. But "bottomless-ness" is a physical impossibility. The money just takes longer to get there before it finally disappears.

8. Regardless of all the Horatio Alger motivation, no matter how hard you try, you can never build a hole starting at the bottom and working up.

Source: H. Martin Moore, Jordan Rothstein, and the Internet. 

Strategist.com

© Bredholt & Co.

The Hacking of Organizational Systems

"There are only two types of organizations. Those that have been hacked and those that don't know it yet."

--John Chambers

(C) Contract Works

Comcast said nearly 36 million U.S. Xfinity accounts were compromised after hackers accessed its systems through a vulnerability in third-party cloud-computing software. The breach occurred between October 16 and October 19, 2023.

On Sunday, February 18, 2024, at the Munich Security Conference, FBI Director Christopher Wray said China's cyberattacks on U.S. infrastructure are "unprecedented." 

AT&T announced that the cause of its 12-hour nationwide outage on February 22, 2024, was the "execution of an incorrect process," not a cyberattack. In simpler terms, the company admitted to human error.

What's the difference between cyberattacks and hacking?

Cybercriminals hack and infiltrate computer systems with malicious intent, while hackers supposedly seek new and innovative ways to use a system, good or bad. (Micro Trend)

According to Security Magazine, there are over 2,200 attacks daily, which breaks down to nearly 1 cyberattack every 39 seconds.

On average, 1.4 billion social media accounts are hacked every month.

All systems are vulnerable

In A Hacker's Mind--How the Powerful Bend Society's Rules, and How to Bend Them Back (Norton), a book worth your time, Bruce Schneier defines hacking as "an activity allowed by the system that subverts the goal or interest of the system." 

Anything from medical records to the U.S. tax code can be hacked.

"Hacking is how the rich and powerful subvert the rules to increase their wealth and power. It's not that the wealthy and powerful are better at their hacks; they're less likely to be punished for doing so," adds Schneier, a fellow at the Berkman Center for Internet and Society at Harvard. 

As F. Scott Fitzgerald observed, "The rich are different from you and me." 

Schneier says that hacking is not the same as cheating. "Hacking targets a system and turns it against itself without breaking it. It's gaming the system and occupies a middle ground between cheating and innovation. A hack follows the letter of the system's rules but violates their spirit and intent," he concludes.

Systems evolve through hacking, especially when less critical and on a smaller scale. They might actually benefit from hacking as a way to improve their functionality and security. A breach shows where to patch, as it's impossible to think of every susceptibility when designing a system. 

Here are three stories illustrating different types of hacking--

-Johann Tetzel, a 16th-century Dominican friar, hacked the Catholic system of indulgences, intended to promote charitable giving by offering sinners the chance to buy forgiveness from the church. 

-In 1729, Voltaire got together with close friends to hack a French lottery. Since the payout exceeded the value of all the available tickets, he and his cohorts bought up the whole supply.

-A decade ago, Goldman Sachs was accused of manipulating the price of aluminum, calculated in part by its availability. The firm shifted its aluminum supply to different warehouses, trucking it around to other locations every day for years. Because it was moving, it was harder to get--a ruse that cost consumers an estimated $5 billion. After years of legal battles and appeals, the case against Goldman--and J.P. Morgan Chase--was settled in 2022. 

Who has access?

The focus in A Hacker's Mind moves from IT to organizational systems. For hacking to occur, a system of rules, such as corporate policies, must be hacked. And policies are plentiful.

The author explains that it's "one short step from hacking computers to hacking economics, politics, and social systems," as they are just as vulnerable to hacking as technology. 

Protecting the integrity of any system is rooted in the character and values of those in charge. Hiring decisions, which are extremely important but imperfect, are often a door ajar. To quote one observer, "People are honest most of the time but become dishonest in some situations when they perceive there is an advantage to be gained from it."

The book's critical point is that not all systems are equally hackable. Complex systems with many rules are the most vulnerable because there are more possibilities for unanticipated and unintended consequences.

Schneier makes clear: "Complexity is the worst enemy of security."

Questions to ask--

• What are the non-technological vulnerabilities in your system? 
• Who has access to the system? 
• What is at risk if the system is hacked? 
• How to patch a system?

If you are responsible for an enterprise, know it can and will be hacked (rules bent or ignored, boundaries stretched, goals subverted). Therefore, keep policies and procedures simple to reduce security risks. 

Cognitive hacking is powerful

Schneier wants everyone to know that any time something can alter information, choice, and agency, it represents a danger to the human mind.

"If you can hack a mind, you can hack any system governed by human action," he writes.

Can AI machines think?

AI, or artificial intelligence, is defined in A Hacker's Mind as (a) computers that can generally sense, think, or act and (b) as an umbrella term encompassing a broad array of decision-making technologies that stimulate human thinking.

An example of that last point is how specialized AI is designed for a specific task, like controlling a self-driving car. 

Tech writer Andy Kessler says, "Computers win in realms with defined rules, but humans have free will and make choices."

The AI insight:

• Data goes in one end, and an answer comes out the other. It is challenging to understand how the system reached its conclusion. 
• Human decisions could be more explainable. While offered, they're more after-the-fact justifications than actual explanations. 
• AIs don't solve problems like humans do. Their limitations are different than ours. They'll consider more possible solutions than we might.
• Remember that humans control AIs. All AI systems are designed and bankrolled by humans who want to manipulate other humans in a particular way for a specific purpose.

A corporate plan 

Steve Durbin, Chief Executive of the Information Security Forum, recommends that AI be viewed from the lens of corporate strategy and risk. 

"Before you can chart an AI strategy, develop a thorough understanding of its potential, its current usage across the organization, and the security challenges and threats that lie ahead," he emphasizes. 

At the corporate level, there is a need to integrate ethical considerations into policy and procedures. "Fairness, transparency, accountability, and privacy are the most ethical considerations surrounding AI," Durbin concludes. 

In the AI gold rush (Nvidia and OpenAI), programming and security are the next frontiers. Bringing untold financial gain, higher-than-average risk, and opportunities for hacking systems previously unconceived.  

Strategist.com

(C) Bredholt & Co.

 

 

Africa's Aspiring Future

"The eye never forgets what the heart has seen."

--African Proverb

(C) The Engineer

In 2050, one-quarter of all people will be in Africa--a sprawling continent larger than China, Europe, India, and the U.S. combined. Its fifty-four countries will have the youngest, fastest-growing population on Earth. (N.Y. Times) 

The continent's population is currently 1.4 billion and is estimated to be 2.5 billion in 2050.

Africa had 8% of the world's population in 1950. It will account for one-fourth of humanity a century later, with at least one-third of all young people aged 15-24. By 2040, it will have one in every five children living on Earth. (United Nations)

The median age of Continental Africa is nineteen; India is twenty-eight; and China and the U.S. are thirty-eight. 

What else lies beneath "the boundless African sky?"

Africa's landscapes are as breathtaking as its statistics. Yet, with all the beauty and mystery, what makes the "Cradle of Mankind" special is its warm and friendly people. 

The disparities

Our first trip to the continent was in 1987 to the Republic of Côte d'Ivoire, West Africa. Sometimes known as Ivory Coast, the country identifies two capitals: Yamoussoukro (political) and Abidjan (economic). Despite a history of political instability, the economy is stable and growing; the thirty million population enjoys a relatively high-income level compared to other countries in the region. (World Bank)

If you like chocolate, it's worth knowing that Côte d'Ivoire's economic strength derives from being the world's leading exporter of cocoa beans. 

Travels in subsequent years to the Republic of South Africa and the Republic of Kenya in East Africa made diverse people, economies, governments, and material resources visible. The continent's burgeoning cities (eleven with more than five million in population), filled with traffic jams, are never far from poverty. 

For example, with a birthrate of five million people yearly, Nigeria, a country slightly bigger than Texas, is expected to double in size in the next 26 years, overtaking the U.S. as the third most populous country. (Business Insider)

Nigeria boasts the largest economy in Africa. Yet two-thirds of its people live on less than $2 a day. Life expectancy is fifty-three, nine years below African averages. 

An income threshold of $2.15 per day for low-income economies means an estimated 460 million sub-Saharan Africans are living in extreme poverty. Limited access to food, famines, the COVID-19 pandemic, and war contribute to those staggering numbers. (World Bank, Outreach International, World Food Programme)  

"Some 34 million Africans are migrants, and the majority are workers crossing borders to search for decent work--jobs that pay a living wage, offer safe working conditions and fair treatment," says a report from the Solidarity Center for Labor Migration. "Many workers find employers seeking to exploit them--refusing to pay wages and forcing them to work long hours for little or no pay," the Center adds.

Vast resources

Africa is home to 30% of the world's mineral reserves. It has the largest cobalt reserves, diamonds, platinum, and uranium. It's also a major source of gold, generating a quarter of the world's output, 870 metric tons in 2021. 

Almost 8% of the world's natural gas and 12% of oil reserves are on the continent. Add 65% of the total arable land and 10% of the planet's internal renewable freshwater source. 

Minerals for EV batteries, such as cobalt, lithium, manganese, nickel, and graphite, are available in the Democratic Republic of Congo, Zambia, South Africa, Madagascar, and Mozambique. (Africa Development Bank) 

The world's automakers, wanting non-Chinese sources in their supply chains, are attracted to South Africa as the second-largest refiner of manganese.

Natural resources' financial and social benefits have only sometimes reached the people who work to extract them and the villages where they live. Will the push for green energy materials be different?  

Political influence

The magnitude of Africa's populace and resources draws attention from world powers. Even as the continent's countries strengthen ties, China, Russia, Turkey, and the Gulf Petroleum States have a presence there. India intends to become Africa's most significant trade and investment partner. (Brookings.edu)

With funding through the Belt and Infrastructure Campaign, China is deepening African relationships through industrialization and modernization of industry.

Meanwhile, U.S. involvement is growing on the continent with significant food and health investments, two-way trade deals, digital projects, and infrastructure upgrades like the recent rail freight services in Angola. The federal government in Washington, DC, is promising more support. 

Enterprising spirit

With a need to improve skills and digital tools for private industry and government, education is assuming greater importance in Africa. Studies show that 44% graduated from high school in 2020, up 27% since 2000. And 570 million people use the Internet. 

The struggle is finding good jobs. Thousands of doctors, nurses, and skilled migrants continue to flee the continent. 

Learning, reducing out-of-school children, and youth with apprentice skills are priorities for all countries, especially in sub-Saharan Africa.

Business schools are behind much of the change and transformation. A new generation of entrepreneurs is providing hope for economic solutions. With a ratio of four young people for every position available, starting businesses and creating jobs is critical. More outside help is needed to ensure those newly minted enterprises know what it takes to survive and thrive. (The Engineer)

Africa's heart

There are an estimated 660 million Christians on the African landmass, more than on any other continent. (Center for the Study of Global Christianity) The frequency of worship attendance and prayer among the world's Christians is highest in sub-Saharan Africa and lowest in Western Europe. (Pew Research Center)  

Africa's 240 million Catholics comprise 19% of the global Catholic population. (PillarCatholic.com) 

Christianity is the major religion in numerous African countries. The top five with 90% or more Christian population are São Tomé and Príncipe, The Democratic Republic of the Congo, Angola, Rwanda, and Seychelles. (World Atlas)

A BBC documentary describes Christianity in Africa as an "agent of change." It destabilized the status quo, bringing new opportunities to some and undermining the power of others. With Christian missions came education, literacy, and hope for the disadvantaged. 

The World Religion Database reports that sub-Saharan Africa was home to 230 million Pentecostals and charismatics, or 35.6% of the global total in 2020. Those numbers are expected to reach 450 million and 43.6% in 2050.

Unlike the Western world, religious competition is transforming Africa, according to a report in The Wall Street Journal published in June 2023. Now 42% Muslim, sub-Sarahan Africa is expected by 2037 to have more Muslims than Islam's historical heartland of the Middle East and North Africa. (Pew Research Center)

Based on the Journal story, Christianity and Islam are the most practiced religions in Africa. 

Unlocked future

What needs to happen for Africa to realize an aspiring future? Research points to the following:

• Make additional investments in human capital to improve health and reduce poverty.
• Include young people in decision-making and give them appropriate education, work, and innovation opportunities.
• Hold leadership accountable in all sectors--business, government, and nonprofits.
• Keep growing intra-country trade and diversification of exports that meet current demands.
• Continued religious freedom.

Overheard 

"What advice do you have on where to explore," asked the traveler.

"If you only visit two continents in your lifetime, visit Africa--twice," was the reply. (R. Elliott)  

Strategist.com

© Bredholt & Co