This book analyzes product development processes from a lean perspective. The
author starts by introducing the concept of a “design factory”, which shows the
differences between lean principles applied to manufacturing and lean principles
applied to creating new innovations. The key differences include information
arrival processes and the repeatable versus non-repeatable.

One key takeaway from reading this book is that the goal of creating new things
is not to reduce the variability of creating them. Having waste is actually
often the most effective way to create something new because the “waste”
generates information, which has value. If you are doing something that has a
known problem statement and a known solution, you are essentially turning the
design crank. Seek to increase throughput and increase flow before eliminating
waste.

Much like Goldratt’s book, The Goal, Reinertsen focuses on viewing the company
profitability as the lens to view business decisions through. He advocates
modeling of projects and their intended ROI, preferring simple and useful models
over opaque ones. He discusses many subjects from the perspective of how to
optimize for development expense, unit costs, performance, or speed of
development, which are mostly at odds with each other.

He has an interesting explication of queueing and information theory, and how
these impact product development. One takeaway from the information theory
topic is that information is inversely proportionate to the probability of an
event occurring. This coincides with my views on generating models (similar to
Popper’s views on the subject.) Essentially, tests should be written to have
the maximum value if they fail. I believe Reinertsen would be a proponent of
high level tests. He also contends that if your tests would cause a
competitor’s product to fail, you are likely testing too much.

Overall, I found this book to be a compelling read with insights clearly stated
and a strong overall theme.

Full outline

Original article: Review: Managing The Design Factory

Stallings – Operating Systems – Fourth Edition
Friedman, Wang, Haynes – Essentials of Programming Languages – Second Edition
Cooper, Torczon – Engineering a Compiler
Elmasri, Navathe – Database Systems – Fourth Edition
Angel – Interactive Computer Graphics – Fourth Edition
Bishop – Computer Security
Ghahramani – Fundamentals of Probability with Stochastic Processes – Third Edition
Strang – Introduction to Linear Algebra – Third Edition
Gittleman – Advanced Java: Internet Applications – Second Edition
Russell, Norvig – Artificial Intelligence: A Modern Approach – Second Edition
Grimaldi – Discrete and Combinatorial Mathematics: An Applied Introduction – Fifth Edition
Weiss – Problem Solving using Java – Second Edition
Varian – Intermediate Microeconomics – Seventh Edition
Sipser – Introduction to the Theory of Computation – Second Edition
Gardner – Games for Business and Economics
Kingston – Algorithms and Data Structures – Second Edition

Original article: Textbooks For Sale

Of the books that I have read recently, this one seemed to be a contentious one. I discussed this book with a friend who is in sales, and we came to completely different conclusions on the book’s premise. His idea was that the book contained a bunch of ways to manipulate people to get what you want, whereas I felt like the book provided methods to better understand, empathize, and work with people.

Throughout, Carnegie displays quite a bit of humor and wit, and gives memorable anecdotes to drive the points he makes home. Some things are trite on the outside, but they are quite useful once internalized. Here are some of the major points.

Carnegie starts out by talking about why he wrote this book. He had been searching for “a practical, working handbook on human relations,” but could not find anything. So he looked through history and tried to figure out how influential people in the past worked with the people in their lives, and wrote this book. Carnegie talks about research done that showed that “even in such technical lines as engineering, about 15 percent of one’s financial success is due to one’s technical knowledge and about 85 percent is due to skill in human engineering — to personality and the ability to lead people.” I thought this was interesting, and personally agreed.

The most important theme that Carnegie emphasizes is that no one thinks that they are wrong. Everyone, even a criminal, acts rationally based on his or her world model. Hence, criticizing people or arguing with them will only serve to harden their resolve and make them less likely to want to be around you. Seek to understand and empathize, and you can see where they are coming from.

The only way to get someone to change their ways or do something you want them to do is to have them want to do it. Giving honest and sincere appreciation and being “hearty in your praise and lavish in your approbation” are two great ways to show someone that you do like what they are doing. However, people have a great skill in seeing through baloney, so the praise you give must truly come from the heart.

Carnegie asserts that you must never complain. No one likes a complainer. He states that there is no better way to ruin a marriage than to constantly nag your partner. I can’t speak from experience, but that seems correct.

Avoid arguments and telling people they are wrong. If you must, do it constructively and explain how you have made the same mistake in the past and that it should be easy to correct. Good people aren’t going to mess things up on purpose. Sometimes it’s just a misunderstanding, and you should be quick to point out when you are or were wrong. If you are to point out shortcomings, call attention to people’s mistakes indirectly and in a private venue.

When someone has complaints, let them vent until they have nothing left to vent about. Show them that you care about their concerns and let them know what you are going to change to fix those concerns.

My friend in sales was somewhat right. There is importance in being able to sell, and this book can help do it well. Although you may not be in sales in the conventional sense, every day you are selling your ideas and opinions. Those who have good ideas and present them well are more respected, those that can’t fall by the wayside. You want to win people over to your ideas, and this book gives concrete ways of doing this.

Original article: Review: How to Win Friends And Influence People

After taking two quarters of statistics and two of probability, I wasn’t sure that I would learn much by reading The Drunkard’s Walk. Fortunately, the history of the evolution of thought regarding chance and the ramifications of randomness on everyday life were explained to the point where I gained new insights into this area. It reinforced and clarified existing views that I had as well.

The most important point that was made is that there are a large class of things that humans typically see as being based on skill but are more likely based a great deal on luck. While CEOs and Hollywood film producers are paid top dollar for their skills, there seems to be little correlation with actual skill for their positions. Many events that involve human decision are unpredictable to the point that they can be considered random. I enjoyed the discussion of reversion to the mean presented throughout the book. Essentially, we tend to praise someone and see them as smart or skilled when they succeed, and then tend to disparage the same person when they do not appear to succeed. Mlodinow explains that our approval or disapproval often has little to do with someone’s next attempt because often the performance in the event is somewhat random. When I yell at someone, it is likely that they will do better than before. When I praise someone, it is likely that they will do poorer than before. Likewise, a mutual fund manager is likely to be lauded when she does well, and given the boot when she does poorly, even though picking stocks is a mostly random process.

The book discusses famous probability paradoxes such as the Birthday Paradox, Boy or Girl Paradox, and the famous Monty Hall Problem. These examples highlight how our intuitive grasp of probabilities does not necessarily accord with the actual probabilities. Understanding these better allows us to use reason instead of trying to us intuition, which is ultimately inferior in this realm.

In my opinion, this is similar to how people in economic experiments behave “irrationally”, or out of line with predicted economic theory. Examples of economic paradoxes can be found in books like Thaler’s The Winner’s Curse: Paradoxes and Anomalies of Economic Life. One of the tenets of traditional economics is that people are rational agents attempting to maximize their happiness. However, I feel that this assumption is flawed because that people do not always act rationally even when given perfect information.

I appreciated hearing about the history of thinking about probability because it was a perspective that I had not encountered in prior learning. The mathematics were nice as a refresher of probability and statistics.

One thing that the author talks about considerably is cognitive biases. Brains are essentially pattern-finding mechanisms, so they are bad at determining when something has been produced by a random process. People tend to spot clusters in dots that are sprinkled randomly because that is their instinct. Patterns may appear from stochastic processes, and conversely, we may not be able to detect patterns in deterministic processes. We also continually suffer from the myopia of confirmation bias.

The most profound implication for my life is that the best way to ensure that you succeed is to keep trying. Although I had a general idea that it is important to be persistent, this book reinforced the idea that trying multiple times is the only reliable way to boost your chance of success. Mlodinow states randomness is “why successful people in every field are almost universally members of a certain set–the set of people who don’t give up.”

A huge caveat of this view is that it assumes that the event that you are trying to have success at is random or that you do not learn from past experiences. It seems like in certain cases there is not an accurate model for agents to determine what will cause success or failure (stock market, predicting blockbusters from scripts.) I had some problems accepting that people are not successful based on their ability, but almost solely on luck. But if the results starting a company or creating a new product are somewhat random, why not try doing it many times? It should work out in the long run.

Overall, was an interesting read.

Here is an outline of the chapters.

Original article: Review: The Drunkard’s Walk

Overview

With the current state of the financial system, I was looking for a book to make sense of it all. I had been reading about the decline of the dollar, the poor state of the financial sector, and the huge deficit the United States is running, and thinking that there were still some people out there who thought that things were going to get better in the very near future. Although I don’t have all that much in long-term savings yet, I was wondering how to keep what I had in there and what markets might be nice to invest in given the current state of the US economy. In the introduction, Schiff states: “The goal [of this book] is to help you preserve and enhance wealth that can be reinvested in America after fundamental economic reform takes place.”

Context

The book was written in early to mid-2008 after Schiff’s book Crash Proof. That book accurately predicted what happened in the last year or so, even though various pundits scoffed at his work. I was excited to read something that contained timely information. One thing that Schiff did not talk about was a potential government bailout plan, although that is probably a subtext with inflation and other government manipulation. He does talk about the 2008 elections and how they might influence policy, and plugs Ron Paul because of his Austrian economic roots and the desire to return the gold standard. He correctly observed that the “smart money” was on Obama, and he indeed won.

Some of the ideas that Schiff presents are quite far out of the mainstream, but contrarian views seem like a good bet when no one else seems to be getting it right. He consistently paints a pessimistic view of the economy, but as he points out in the book, there are numerous entities that benefit from making the system appear rosier than it actually is.

Major Points

Schiff recommends adjusting your current portfolio first by getting out of things backed by the dollar (cash and bonds) and staying out of US stocks for the next three to five years. One reason is that the market is weak and you are not getting much return after real inflation. He then talks about investing abroad in emerging countries and growing markets, and especially in commodities since they will keep value and possibly rise with the effects of strong growing economies in Brazil, Russia, India, and China. He also discusses finding a job that is stable, and states that all service-based jobs will likely suffer since people will have less money to pay for the services. He even makes the claim that health care costs will go up so much that people in the health care industry will see cutbacks. This was a significant thing that I did not expect. He also mentions emigrating to save money and avoid possible political turmoil, which seems like a bit of a stretch. But while reading the book, it seemed like a reasonable consideration based on what he was saying. If you do, Mandarin might be a helpful language to learn. Schiff also advocates investing in gold and silver.

Biases

I especially enjoyed Schiff’s discussion of the biases present in the various institutions that are associated with the economy. Wall Street has an incentive to make it seem like the market is doing well or has bottomed out so that people keep investing so that they get a share of their money. So they encourage people to invest even when they should not encourage them. A mutual fund manager’s priority is to maximize quarterly profits, but this is not the same as maximizing long-term profits.

One of the major points that Schiff hits on is the fact that the US government will likely erode the purchasing power of the dollar further by creating inflation. This seems all the more apparent after seeing the bailout plan, which is essentially an attempt to inject money directly into the financial system through the banks, and support them in other ways financially. This is in direct contrast to the relief checks that Americans got earlier in the year to attempt to increase consumer spending to give more liquidity to the system. Since the dollar is no longer linked to gold, the government can do this transparently. It is basically a tax on everyone that is not well understood, so they can get away with it with less political backlash.

The government has incentive to create inflation for political reasons (stimulate economy, prevent normal, but unpopular, downturns), and also for financial reasons. Government debt becomes more manageable when using inflationary dollars, you can force people into higher tax brackets, and you can finance entitlement programs without resorting to tax hikes. I liked that Schiff talked about how the government tries to focus discussion on taxes instead of inflation. “By focusing attention on a red herring, the government is deliberately diverting attention away from the real rate of inflation and its role in creating it.” The government has this power because they directly influence the money supply through the Federal Reserve.

The government also misrepresents inflation by using bogus indexes to make it appear that inflation is lower than it really is. Plus, the GDP itself is a pretty shaky figure. For example, the GDP goes up when a building is destroyed and then rebuilt, even though there was not a net value gain. It just represents spending. Schiff states: “Uncle Sam is using GDP growth as evidence that a weak, dangerously overextended economy is strong, healthy, and growing, and that Americans should therefore keep spending.”

So what’s Schiff’s bias? For one thing, he’s owns an investment bank that specializes in foreign investments and emerging markets. One thing that I saw that was interesting in his Wikipedia article is that his father has served many years in prison for being a tax protester. This might lead to some of his negative views on government.

Experts Only

There were many strategies presented in the book that I have neither the time, attention, money, or knowledge to perform. I could have safely skipped various parts of the book. Schiff even points out that managing certain assets is a little like day-trading. You can get rich, but it takes a lot of time to pick winners, and the downsides are also large at times.

Worst-case Scenario

Toward the end of the book, Schiff paints a rather apocalyptic picture of how the standard of living in the United States is going to go down. He recommends stockpiling goods before inflation gets worse so that you can barter with goods or at least consume them at less cost. Consider a package of cigarettes that goes from $3 to $4. If you purchase it and then consume it, you saved quite a bit of money. This would be a better rate of return than you would get with most investments.

Accuracy

One assumption that seems to be inaccurate (at least in the short term at the time of writing) is oil prices rising through the roof.

I will say that I disagree with Schiff on some points, and don’t fully understand others. But overall, I felt that he made a compelling case, and based on the information that I have, much of it seems to be pretty smart. At the least you can say that he is a realist, which should go far in a post-bubble economy. There was a lot of history, and for that alone this book was an informative read. I liked reading this book, but it’s not for everyone. You definitely need to have a filter on when reading, and there are some parts that aren’t really that relevant to the average investor.

Some further notes I took are available here.

Original article: Review: Bull Moves in Bear Markets

I highly recommend this book to anyone who has to negotiate with others. So basically — everyone. On a daily basis, you probably negotiate with your spouse, coworkers, landlords, potential employers, business owners, labor unions, and foreign governments. This book explains several principles of negotiation that are applicable to all of these relationships.

The book first discusses the problems of bargaining with positions, arguing that the optimal result rarely occurs because people dig themselves in and see the problem as a battle of wills. As an alternative, the book presents a method of approaching negotiating conflict from a few different perspectives. One part of the method is the ability to separate the people from the problem. In other words, being able to attack the problem with the other person instead of making the other person part of the problem is an important first step in successful negotiation. Another tenet is that one should focus on finding interests, both common and differing, that the parties involved have. Without understanding the interests that people have behind their stated positions, it is difficult to come up with agreements that are optimal. The book next focuses on methods of generating interesting solutions given the interests of the parties. Finally, the book goes into sections about when not to negotiate and how to avoid negotiation traps or pitfalls of a varied nature.

I can definitely see two reasons to read this book. One is for internal relations. Let’s say someone reviews your code and there are two differing opinions on how something should be implemented. Using the techniques of the book, you can get at the heart of the problem much easier. The other reason is for external relations. If you are discussing requirements or project scope with a client, there is invariably a form of negotiation going on. By being better able to understand the client’s interests, you are better able to provide value for them. The book has made me think quite a bit about listening to others’ perspectives before offering my own, and I find that the lessons are pretty universally applicable as well as understandable.

As usual, Wikipedia has an excellent outline of the main points, although you will get much more by reading the book as well.

Original article: Review: Getting to YES