Our traditional institutions, leaders, and experts have shown to be incapable of understanding and accounting for the multi – dimensionality and connectivity of systems and events. The rise of the far-right parties in Europe. The disillusionment of European Parliament elections as evidenced by voter turnout in 2009 and 2014 (despite spending more money than ever), the Brexit and now the election of Donald Trump as president of the United States of America. In short, there is little reason to trust experts without multiple data streams to contextualize and back up their hypothesis.
How could experts get it wrong? Frankly, it’s time to shift out of the conventional ways that we try to make sense of events in the political, market and business domain. The first variable is reimagining information from a cognitive linguistic standpoint. Probably the most neglected area in all of business and politics – at least within the mainstream. The basic idea? Words have meaning. Meaning generates beliefs. And beliefs create outcomes, which in turn can be quantified. The explosion of mass media, followed by identity driven media, followed by social media, and alternative media. We are at the mercy of media systems that frame our reality. If you doubt this, reference the charts below. Google trends is deadly accurate in illustrating what is on people’s mind the most, bad or good, wins – at least when it comes to U.S. presidential elections. The saying bad press is good press is quantified here. As is George Lakoff’s thinking on framing and repetition (Google search trends can be used to easily see which frame is winning BTW ).
Within this system, there is little reason to challenge one’s beliefs and almost nothing forcing anyone to question their own. Institutions and old media systems used to be able to bottleneck this, they were the only one with a soap box and information was reasonably slow enough. To outthink current systems there is a need for a combination of sharper thinking, being able to quantify unorthodox data such as open source intelligence (OSINT) and creativity that traditional systems of measurement and strategy lack. Business, markets, and people strive, to a fault, for simple, linear and binary solutions or answers. Unfortunately, complexity doesn’t dashboard into nice charts like the one below. The root causes of issues are ignored due to a lack of context, which in turns create a large window for false assumptions on what affects business initiatives. These are approaches are for the most part only helpful at the superficial level.
I know this may feel like a reach in terms of how all that is mentioned is connected so more on OSINT, data, framing, information, outcomes, and markets to come.
While investors were in shock, open source signals such as Google trends pointed to “Leave” being predominate the majority of the time, illustrating expert and market biases. Perhaps they should work on how to integrate these unconventional data streams better (sorry couldn’t help it). The UK’s decision to exit from the EU is part of a larger global phenomena that could have been understood better with open source, not just market, data.
The world is growing more complex. Information is moving faster. Humans were not evolved to retain or understand this mass output of (dis)information in any logical way. As a response, a retreat to simple explanations and self-censorship towards new ideas, that might challenge one’s frame, are ignored and become the norm. Populist decisions are made and embraced, often times reactionary towards the establishment or elite. Multi-national corporations and elites will need to step outside of their bubble and take note of nationalist, albeit sometimes isolationist, such as Donald Trump, Bernie Sanders, President Erdogan of Turkey, Marie Le Pen’s Front National of France, Boris Johnson – Former Mayor of London and Brexit backer (good chance he take David Cameron’s place), Germany’s AFD and the 5 star movement in Italy gain in both popularity and power.
In addition to the more media coverage, people were associated more with the leave campaign, which is an advantage. During a political campaign choices and policy lines are anything but logical, they tend to fall on emotional lines, so it’s important that institutional communications have a noticeable figurehead, especially in the age of media. It says something when the top people that are associated with remain are Barak Obama, Janet Yellen and Christine Lagarde. Note that David Cameron is more central with leave. None the less the pleas by political outsiders and institutions such as the IMF and World Bank for the UK to remain in the EU, potentially caused damage to the “Remain” campaign. UK voters seemed to not want to hear from foreign political elites on the matter. This is illustrated by the connection and proximity of the “Obama Red Cluster” to the French right wing Forest Green cluster (and the results) below. The “Brexit” could lend credence to the possibility of EU exit contagion. There are very real forces in France (led by the Front National) and Italy (led by the 5 Star movement (who just won big in elections) that are driving hard for succession from the EU and or potentially the Eurozone.
- Seeking shelter from volatility, banks (especially European ones) are fleeing to the gold market. While this is to be expected, dividend based stock, as well as oil, would be attractive to those seeking stability as well.
- Thursday’s referendum sent global markets into turmoil. The pound plunged by a record and the euro slid by the most since it was introduced in 1999. Historically, the British Pound reached an all-time high of 2.86 in December of 1957 and a record low of 1.05 in February of 1985.
- Don’t count on US interest rate hikes. Yellen has expressed concern for global volatility on multiple occasions. The Brexit just added to that. The Bank of England could follow the US Fed and drop interest rates on the GBP to account for market uncertainty.
- If aggressive, European uncertainty could be an opportunity for US companies to gain on European competitors. Due to the somber mood within Europe, companies could either be more conservative with investment, leaving them vulnerable.
- Alternatively, the Brexit may trigger more aggressive U.S. or global expansion by European Companies while Brexit ramifications are further understood.
- The political takeaway is the remain campaign was relatively sterile, having no figurehead or clear policy issues directly relating back to the EU. This was reflected by the diversity in associated search terms related to the “Leave” campaign, in addition to Angela Merkel, not an EU leader such as European Commission President Jean-Claude Junker, once again as being seen as the defacto voice of Europe.
Technology has increased access to information, which in turn has made the world more similar on a macro and sub-macro level. However, despite increased similarity, research shows business models are rarely horizontal, emphasizing the importance of micro-level strategic consideration. Companies routinely enter new markets relying on knowledge of how their industry works and the competencies that led to success in their home markets, while not being cognizant of granular details that can make the difference between success and failure in a new market. Only through machine driven intelligence can companies address the level of detail needed in a scalable and fast manner to remain competitive.
Furthermore, machine intelligence and information has led to the rapidly diminishing value of expertise, in addition to eroding the value of information. The level of expertise needed to out-run or beat machine intelligence has exponentially increased every year. Over the next one to two years the most successful companies will come to accept the burden of proof has switched from technologies and A.I. to human expertise. Furthermore, machines will come to reframe what business and strategy means. Business expertise in the future will be the ability to synthesize and explore data sets and create options using augmented intelligence – not being an expert on a subject per se. The game changers will be those that have the fastest “information to action” at scale.
A residual of that characteristic makes a “good” or “ok” decision’s value exponentially highest in the beginning – and often times much more valuable than a perfect decision. To address this trend, organizations will need to focus on developing process and internal communication that foster faster “information-to-action” opportunity cost transaction times, similar to how traders look at financial markets. Those margins of competitive edge will continue to shrink, but will become exponentially more valuable.
How are businesses harnessing AI and other technologies to lead the way ?
Studies show experts consistently fail at forecasting and traditionally perform worse than random guessing in businesses as diverse as medicine, real-estate valuation, and political elections. This is because traditionally people weight experiences and information in very biased ways. In the knowledge economy this is detrimental to strategy and business decisions.
Working with machines enables businesses to learn and quantify connections and influence in a way humans cannot. Rarely is an issue isolated to the confines of a specific domain, and part of Walmart’s analytics strategy is to focus on key variables in the context of other variables that are connected. This can be done in extremely high resolution by taking a machine based approach to mine disparate data sets, which ultimately allows for flexibility and higher resolution KPIs to make business decisions with.
What are the effects of digital disintermediation and the sharing economy on productivity growth?
Machines have increased humans ability to synthesize multiple information streams simultaneously, while connecting communication, this could lead to a higher utility on assets. It’s likely that businesses in the future will have to be more focused on opportunity cost and re-imagine asset allocation with increased competition due to lower barriers on entry. Inherently intelligence and insights is about decisions. A residual of that characteristic makes a good or ok decision’s value exponentially highest in the beginning – and often times more valuable than a perfect decision. To address this trend, organizations need to focus on developing process and internal communication that foster faster “information-to-action” transaction times, much like how traders look at financial markets.
Is this the beginning of the end?
Frameworks driven by machines will allow humans to focus on more meaningful and creative strategies that cut through noise to find what variables that can actually be controlled, mitigating superficial processes and problems. As a result, it is the end for people and companies that rely on information and routine for work. And the beginning for those that can solve abstract problems with creative and unorthodox thinking within tight margins. Those that do so will also be able to scale those skills globally with advancements in communication technology and the sharing economy, which will speed up liquidity on hard and knowledge-based assets considerably.
Recently I’ve been thinking of ways to detect bias as well as look into what makes people share. Yes understanding dynamics and trends over time, like the chart below (Topsy is a great simple, free easy tool to get basic Twitter trends), can be helpful – especially with forecasting. None the less they reach their limits when we want to look for deeper meaning – say at the cognitive or “information flow” level.
Enter coordinates and networks. The advantages are not possible to do with a tradition KPI’s like volume over time. Through mapping out the a network based on entities, extracted locations and similar text and language characteristics it’s possible to map coordinates of how a headlines, entities or article exists in space within the specific domain. And this happens to deadly representative of the physical world.. especially since more information is reported online everyday.
When put together (shown below), I found a way to detect bias. Using to online news articles and Bit.ly link data, I found articles with less centrality to their domain, which denote variables being left out (of the article), typically got shared the most on social channels. In short some bias = more sharing… Interesting – although more research is needed.
Germany is without question the most powerful and important member state in the EU. Everything rides towards, through and with Berlin. With that in mind, and since Germans have been typically disengaged in EU Affairs, I decided to take a quick look at European Parliament election hash-tags (#EP2014, #EU14 and #EU2014) to see which member states are engaging and which ones are not.
A few years back I worked for the EPP Group, Europe’s largest political party. The future power of Germany was obvious at the time since it was right in the middle of the shit-storm of the Euro-crisis. I started to see how the EPP efforts to communicate with the Germans were going. I found out from an analysis of online media that Germans weren’t at all engaged with the EU or their MEPs. The French actually commented on German EPP MEP media more than the Germans. When it came to French EPP MEPs, Germany didn’t return the love. Who did? Believe it or not the people in the US, keeping a close eye on the global markets, accounted for about 49% of French EPP MEP content comments. Who says US citizens are close-minded? I felt at the time, and still do, that comments were a pretty decent KPI to show some interest and engagement, especially since it took a bit more effort at the time – online and social media wasn’t as widely adopted. Below is the actual chart I showed my colleagues at the EPP about 3 years ago. This was prior to the “big data” hype machine.
Seeing the data, the EPP Group should have focused on changing this deficit in an aggressive, coordinated manner. You just can’t have a strong EU with out an engaged Germany.
Fast-forward 3 years. The EU Parliament elections are coming up. The EU institutions are being questioned, and referendums to withdraw have become focal points in the UK. And there’s lots of money backing this idea. Is this completely because of a disengaged Germany? Not at all. Some of it is just far-right jargon inherent to a bad economy which leaders actually have very little control over, but it still makes a big difference when the most powerful member state is apathetic and disengaged.
In present day 2014, not much has changed. Although hash-tags are probably not the most precise KPIs and leave a bit to be desired (I needed something quick), the data shows that in proportion to German MEP market share, Germany is still the most disengaged country when it comes to mentioning on EU election-specific hash-tags. What was really telling was that the little country of Greece had just 62 less mentions than Germany, despite Germany being about seven times the size. In fact, only five member states were a net positive (including Greece). Belgium ranked first, obviously because Brussels is home to most of the EU institutions. The “Brussels Bubble” is alive and well, even though this time it was supposed to be different.
In politics, getting people mad often drives engagement. This sometimes drives voting rates to the parties that many deem to be unreasonable (Vlaams Belang, Front National etc) . For example, we see Mr. Farage’s Euro skeptic party UKIP has utterly dominated communications compared to the other European Parliament political groups. This isn’t a good thing if you note that most of the time the winners have more mention volume . Surely Europe is stronger and more competitive together than it is fragmented. Nonetheless, if mainstream parties can’t even figure out how to communicate and run a proper campaign, why should they be trusted with leadership?
These deficits could have and should have been addressed years ago. You could see them coming from miles away, yet those in power ignored the data or just made half-hearted and superficial efforts to save face. It’s not always easy to lead and no one expects it to be, but at some point you have to make bold moves, seek out candor and take a look in the mirror.
For this post, I decided to remain old school and mainly rely on search data. It’s pretty basic, but typically offers a great view of what people are interested in. Google’s market share is around 90% in Europe and it’s the most visited site in the world. In my opinion, Google Trends is the largest focus group in the world.
First I looked at the overall interest in Germany between Angela Merkel and Peer Steinbrück, as well as their political affiliations – the CDU and PSD. Initially, I was curious as to how party identity interest compared to interest in the politician. To anchor this chart I did the same with US presidential campaign (the chart below). I have a hunch, and the data seems to be telling me thus far, that the more media-oriented politics becomes (along with everything else in the world), the more important celebrity, authenticity, and individuality becomes. Take a look at this recent brand analysis done by Forbes. Chris Christie wins, having the highest approval rating of over 3,500 “brands” according to BAV (awesome company) at 78%. For those that don’t know, Christie is probably the most straight forward tell-it-like-it-is politician in the country.
So what can we learn from the Google search interest shown below?
- Politics is still about sheer volume and name recognition. For those that think being novel and unique achieves victory over blasting away nonstop in a strategically framed and coordinated way, think again. People tune out if they aren’t interested. Irrelevance is almost always worse than bad PR or sentiment (excluding a case like Anthony Weiner). You simply don’t win if you don’t interest people. If people aren’t talking about you, you’re not interesting. Merkel had more search interest than Steinbrück and over the course of the year probably got 10,000 times more airtime, both good and bad, due to her large role in the euro crisis. In short, repetition is king.
- Framing and consistent language strategy is vital. Volume can be shown to equate with recognition of a person, but this can easily enough be analogized to a policy or issue. Give me a choice between a clever social media strategy or consistent language strategy, meaning all the key issues are repeated by the party and coordinated as much as possible, and I’ll take the language strategy any day. It’s amazing how just being consistent in political communications is overlooked by companies and political leaders in Europe. Social media tends to be a framing conduit, not the reason people mobilize or have opinions.
- The world is growing ever more connected. Look at how global the reporting of the German election was. Obviously, its importance was higher due to Germany’s rising influence, but none the less the amount of sources from all over the world is impressive. A note for the upcoming EU elections: don’t forget to target the USA and other regions to influence specific regions in Europe. A German constituent might read about a policy from the Financial Times, a Frenchman the Wall Street Journal or an American based in Brussels, who knows Europeans who can vote, Bloomberg.
I decided to throw in Twitter market share of the candidates from August 21st to September 21st, the day prior to elections. I found it interesting to see how closely Belgium and the United State reflect Germany, probably because these countries are looking at the elections from more of a spectator view. Meanwhile, southern Europe, which had a vested interest in the election, was pretty much aligned. France, Spain, and Italy seem to report a bit more, and in a similar way, on Merkel – probably due to sharing the same media sources. Unfortunately, I don’t have the time to look into this pattern too much at the moment, but it’s something I’ll continue to think about in the future.