Archive for July, 2011

Debt, Revenue, and Changing the Way Washington Works: The Greatest Entrepreneurial Opportunity of Our Time

July 30, 2011

“Holding the line” on spending and taxes does not make for a fundamental transformation of the way Washington works. Simply doing less of one thing is just a small quantitative change that does nothing to build positive results or set a new direction. What we need is a qualitative metamorphosis akin to a caterpillar becoming a butterfly. In contrast with this beautiful image of natural processes, the arguments and so-called principles being invoked in the sham debate that’s going on are nothing more than fights over where to put deck chairs on the Titanic.

What sort of transformation is possible? What kind of a metamorphosis will start from who and where we are, but redefine us sustainably and responsibly? As I have repeatedly explained in this blog, my conference presentations, and my publications, with numerous citations of authoritative references, we already possess all of the elements of the transformation. We have only to organize and deploy them. Of course, discerning what the resources are and how to put them together is not obvious. And though I believe we will do what needs to be done when we are ready, it never hurts to prepare for that moment. So here’s another take on the situation.

Infrastructure that supports lean thinking is the name of the game. Lean thinking focuses on identifying and removing waste. Anything that consumes resources but does not contribute to the quality of the end product is waste. We have enormous amounts of wasteful inefficiency in many areas of our economy. These inefficiencies are concentrated in areas in which management is hobbled by low quality information, where we lack the infrastructure we need.

Providing and capitalizing on this infrastructure is The Greatest Entrepreneurial Opportunity of Our Time. Changing the way Washington (ha! I just typed “Wastington”!) works is the same thing as mitigating the sources of risk that caused the current economic situation. Making government behave more like a business requires making the human, social, and natural capital markets more efficient. Making those markets more efficient requires reducing the costs of transactions. Those costs are determined in large part by information quality, which is a function of measurement.

It is often said that the best way to reduce the size of government is to move the functions of government into the marketplace. But this proposal has never been associated with any sense of the infrastructural components needed to really make the idea work. Simply reducing government without an alternative way of performing its functions is irresponsible and destructive. And many of those who rail on and on about how bad or inefficient government is fail to recognize that the government is us. We get the government we deserve. The government we get follows directly from the kind of people we are. Government embodies our image of ourselves as a people. In the US, this is what having a representative form of government means. “We the people” participate in our society’s self-governance not just by voting, writing letters to congress, or demonstrating, but in the way we spend our money, where we choose to live, work, and go to school, and in every decision we make. No one can take a breath of air, a drink of water, or a bite of food without trusting everyone else to not carelessly or maliciously poison them. No one can buy anything or drive down the street without expecting others to behave in predictable ways that ensure order and safety.

But we don’t just trust blindly. We have systems in place to guard against those who would ruthlessly seek to gain at everyone else’s expense. And systems are the point. No individual person or firm, no matter how rich, could afford to set up and maintain the systems needed for checking and enforcing air, water, food, and workplace safety measures. Society as a whole invests in the infrastructure of measures created, maintained, and regulated by the government’s Department of Commerce and the National Institute for Standards and Technology (NIST). The moral importance and the economic value of measurement standards has been stressed historically over many millennia, from the Bible and the Quran to the Magna Carta and the French Revolution to the US Constitution. Uniform weights and measures are universally recognized and accepted as essential to fair trade.

So how is it that we nonetheless apparently expect individuals and local organizations like schools, businesses, and hospitals to measure and monitor students’ abilities; employees’ skills and engagement; patients’ health status, functioning, and quality of care; etc.? Why do we not demand common currencies for the exchange of value in human, social, and natural capital markets? Why don’t we as a society compel our representatives in government to institute the will of the people and create new standards for fair trade in education, health care, social services, and environmental management?

Measuring better is not just a local issue! It is a systemic issue! When measurement is objective and when we all think together in the common language of a shared metric (like hours, volts, inches or centimeters, ounces or grams, degrees Fahrenheit or Celsius, etc.), then and only then do we have the means we need to implement lean strategies and create new efficiencies systematically. We need an Intangible Assets Metric System.

The current recession in large part was caused by failures in measuring and managing trust, responsibility, loyalty, and commitment. Similar problems in measuring and managing human, social, and natural capital have led to endlessly spiraling costs in education, health care, social services, and environmental management. The problems we’re experiencing in these areas are intimately tied up with the way we formulate and implement group level decision making processes and policies based in statistics when what we need is to empower individuals with the tools and information they need to make their own decisions and policies. We will not and cannot metamorphose from caterpillar to butterfly until we create the infrastructure through which we each can take full ownership and control of our individual shares of the human, social, and natural capital stock that is rightfully ours.

We well know that we manage what we measure. What counts gets counted. Attention tends to be focused on what we’re accountable for. But–and this is vitally important–many of the numbers called measures do not provide the information we need for management. And not only are lots of numbers giving us low quality information, there are far too many of them! We could have better and more information from far fewer numbers.

Previous postings in this blog document the fact that we have the intellectual, political, scientific, and economic resources we need to measure and manage human, social, and natural capital for authentic wealth. And the issue is not a matter of marshaling the will. It is hard to imagine how there could be more demand for better management of intangible assets than there is right now. The problem in meeting that demand is a matter of imagining how to start the ball rolling. What configuration of investments and resources will start the process of bursting open the chrysalis? How will the demand for meaningful mediating instruments be met in a way that leads to the spreading of the butterfly’s wings? It is an exciting time to be alive.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Number lines, counting, and measuring in arithmetic education

July 29, 2011

Over the course of two days spent at a meeting on mathematics education, a question started to form in my mind, one I don’t know how to answer, and to which there may be no answer. I’d like to try to formulate what’s on my mind in writing, and see if it’s just nonsense, a curiosity, some old debate that’s been long since resolved, issues too complex to try to use in elementary education, or something we might actually want to try to do something about.

The question stems from my long experience in measurement. It is one of the basic principles of the field that counting and measuring are different things (see the list of publications on this, below). Counts don’t behave like measures unless the things being counted are units of measurement established as equal ratios or intervals that remain invariant independent of the local particulars of the sample and instrument.

Plainly, if you count two groups of small and large rocks or oranges, the two groups can have the same number of things and the group with the larger things will have more rock or orange than the group with the smaller things. But the association of counting numbers and arithmetic operations with number lines insinuates and reinforces to the point of automatic intuition the false idea that numbers always represent quantity. I know that number lines are supposed to represent an abstract continuum but I think it must be nearly impossible for children to not assume that the number line is basically a kind of ruler, a real physical thing that behaves much like a row of same size wooden blocks laid end to end.

This could be completely irrelevant if the distinction between “How many?” and “How much?” is intensively taught and drilled into kids. Somehow I think it isn’t, though. And here’s where I get to the first part of my real question. Might not the universal, early, and continuous reinforcement of this simplistic equating of number and quantity have a lot to do with the equally simplistic assumption that all numeric data and statistical analysis is somehow quantitative? We count rocks or fish or sticks and call the resulting numbers quantities, and so we do the same thing when we count correct answers or ratings of “Strongly Agree.”

Though that counting is a natural and obvious point from which to begin studying whether something is quantitatively measurable, there are no defined units of measurement in the ordinal data gathered up from tests and surveys. The difference between any two adjacent scores varies depending on which two adjacent scores are compared. This has profound implications for the inferences we make and for our ability to think together as a field about our objects of investigation.

Over the last 30 years and more, we have become increasingly sensitized to the way our words prefigure our expectations and color our perceptions. This struggle to say what we mean and to not prejudicially exclude others from recognition as full human beings is admirable and good. But if that is so, why is it then that we nonetheless go on unjustifiably reducing the real characteristics of people’s abilities, health, performances, etc. to numbers that do not and cannot stand for quantitative amounts? Why do we keep on referring to counts as quantities? Why do we insist on referring to inconstant and locally dependent scores as measures? And why do we refuse to use the readily available methods we have at our disposal to create universally uniform measures that consistently represent the same unit amount always and everywhere?

It seems to me that the image of the number line as a kind of ruler is so indelibly impressed on us as a habit of thought that it is very difficult to relinquish it in favor of a more abstract model of number. Might it be important for us to begin to plant the seeds for more sophisticated understandings of number early in mathematics education? I’m going to wonder out loud about this to some of my math education colleagues…

Cooper, G., & Humphry, S. M. (2010). The ontological distinction between units and entities. Synthese, pp. DOI 10.1007/s11229-010-9832-1.

Wright, B. D. (1989). Rasch model from counting right answers: Raw scores as sufficient statistics. Rasch Measurement Transactions, 3(2), 62 [http://www.rasch.org/rmt/rmt32e.htm].

Wright, B. D. (1993). Thinking with raw scores. Rasch Measurement Transactions, 7(2), 299-300 [http://www.rasch.org/rmt/rmt72r.htm].

Wright, B. D. (1994, Autumn). Measuring and counting. Rasch Measurement Transactions, 8(3), 371 [http://www.rasch.org/rmt/rmt83c.htm].

Wright, B. D., & Linacre, J. M. (1989). Observations are always ordinal; measurements, however, must be interval. Archives of Physical Medicine and Rehabilitation, 70(12), 857-867 [http://www.rasch.org/memo44.htm].

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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A Framework for Competitive Advantage in Managing Intangible Assets

July 26, 2011

It has long been recognized that externalities like social costs could be brought into the market should ways of measuring them objectively be devised. Markets, however, do not emerge spontaneously from the mere desire to be able to buy and sell; they are, rather, the products of actors and agencies that define the rules, roles, and relationships within which transaction costs are reduced and from which value, profits, and authentic wealth may be extracted. Objective measurement is necessary to reduced transaction costs but is by itself insufficient to the making of markets. Thus, markets for intangible assets, such as human, social, and natural capital, remain inefficient and undeveloped even though scientific theories, models, methods, and results demonstrating their objective measurability have been available for over 80 years.

Why has the science of objectively measured intangible assets not yet led to efficient markets for those assets? The crux of the problem, the pivot point at which an economic Archimedes could move the world of business, has to do with verifiable trust. It may seem like stating the obvious, but there is much to be learned from recognizing that shared narratives of past performance and a shared vision of the future are essential to the atmosphere of trust and verifiability needed for the making of markets. The key factor is the level of detail reliably tapped by such narratives.

For instance, some markets seem to have the weight of an immovable mass when the dominant narrative describes a static past and future with no clearly defined trajectory of leverageable development. But when a path of increasing technical capacity or precision over time can be articulated, entrepreneurs have the time frames they need to be able to coordinate, align, and manage budgeting decisions vis a vis investments, suppliers, manufacturers, marketing, sales, and customers. For example, the building out of the infrastructure of highways, electrical power, and water and sewer services assured manufacturers of automobiles, appliances, and homes that they could develop products for which there would be ready customers. Similarly, the mapping out of a path of steady increases in technical precision at no additional cost in Moore’s Law has been a key factor enabling the microprocessor industry’s ongoing history of success.

Of course, as has been the theme of this blog since day one, similar paths for the development of new infrastructural capacities could be vital factors for making new markets for human, social, and natural capital. I’ll be speaking on this topic at the forthcoming IMEKO meeting in Jena, Germany, August 31 to September 2. Watch this spot for more on this theme in the near future.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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