Normalcy Bias and You

Normalcy BiasIf you aren’t familiar with the term “normalcy bias”, here’s a quick definition:

Normalcy bias is…the phenomenon of disbelieving one’s situation when faced with grave and imminent danger and/or catastrophe. As in overfocusing on the actual phenomenon instead of taking evasive action, a state of paralysis.

Another way to think about normalcy bias is the often used term in project management circles of ‘analysis paralysis.’ A much simpler way to think about normalcy bias is that it is an assumption that nothing bad will happen in the future because nothing bad has happened in the past.

I hope everyone reading this can see how dangerous normalcy bias can be, especially for people or organizations going through difficult times.  People are smart and can generally see that things aren’t working out for them or their company…but very few people take action to make a change.

I can provide a real-world example from my past to illustrate this point.

An Example

While in grad school for my MSEE, I worked in the telecom industry and did some contracting work at a major telecom player in the mid to late 1990’s. This company was a leader in the telecom space and was growing by leaps and bounds but just about everyone I spoke with at the company was worried about the future of the business.  They didn’t know how the business could continue to grow at the pace they had been growing at and were always amazed that growth continued at a record pace.   I was a dumb kid with little life experience and couldn’t quite understand how the business was growing so rapidly but I just figured there were people way smarter than me making decisions and leading this company so I just shrugged my shoulders and went about my work.

Things were apparently great for this particular company throughout the 1990’s. They were setting records for revenue and growing rapidly. Everyone I spoke with at the company was concerned that the company was going to implode ‘soon’ because they just didn’t understand how the growth could continue.  There was a real fear of a major catastrophe ‘soon’ but nobody seemed to be doing anything about it.  Everyone was focused on an implosion because they didn’t feel like things were going that great but nobody seemed to be taking any steps to ‘fix’ the problems.  I remember speaking with some folks back then about the issues and can clearly remember someone saying “well…nothing bad has happened yet so I doubt it will.”

Everyone that I spoke with was guilty of falling into the normalcy bias trap. I fell into that trap as well.  The normalcy bias trap is an easy one to fall into…its ‘easier’ to expect nothing bad to happen even while being presented with bad news.  People (and entire companies) can (and do) tend to ignore the bad news and expect things to ‘work out.’

By the way…that company I used in the above example WorldCom. They filed the largest bankruptcy ever filed (at the time) in 2002.  There was plenty of reasons for people to be worried about their operations and business model but instead of trying to do something about it, people ignored it.  That said, there are many times that things can’t be done because people at the top don’t want things to change…but that’s a different issue.

Normalcy Bias and You

The above example isn’t an ideal one because there are plenty of extenuating circumstances that could have kept people from doing anything about the impending ‘disaster’.  As it turns out, there were plenty of things wrong at WorldCom but there were people at the top of the company that were actively working to hide any wrongdoing and any issues. That said, there were plenty of people suffering from normalcy bias because they assumed things would be fine in the future because they had always been fine even with all of the issues that existed.

Normalcy bias is a very dangerous thing.  By assuming things will always be fine because they have always been fine, you are putting blinders on to issues and not preparing yourself or your organization for change that is most likely coming.

Normalcy bias can be your downfall and the downfall of your business.  Don’t let yourself fall into the trap of focusing on the outcome to the extent that you paralyze yourself from doing anything. Also, don’t make the assumption that nothing is going to happen because it hasn’t happened yet…there are too many examples of failure of families, companies and societies to allow yourself to assume nothing bad will ever happen to you or your business.

To overcome normalcy bias, identify the issues that might happen and be prepared if they do. Don’t go overboard of course but have a plan of action to address the issues you see, minimize the risk that those issues might cause and then have a plan to deal with the fallout from if the issue(s) are ever realized.

Don’t let normalcy bias destroy your life, career or company.  Identify the risks in your life/business, mimimize or remove those risks and then create a plan for how you will deal with those risks if they become reality.

Optimizing your Data Center with the Cloud

Tcloud-computinghis post is brought to you by the Enterprise CIO Forum and HP’s Make It Matter.

Most organizations today have some type of cloud implementation and/or service.  Every organization views the cloud a little differently than any other organization. Some view the cloud as a place to store data while others view the cloud as a replacement for their data center.   Some companies are using the cloud to handle low priority workloads for non-critical systems while others are using the cloud for mission critical work that requires extremely high availability.

Integration with the cloud is a no-brainer for most organizations today since just about any size company can find value in the cloud.  Regardless of how an organization views or uses the cloud, there is no question that every organization can find a way to make the cloud a part of daily data center operations.

Whether your organization views the cloud as a ‘backup’ system or a ‘primary’ system, there’s value to be found in the cloud as a platform to assist with optimizing the data center.   There are many demands being placed on the data center today.  There’s an enormous amount of data coming into the data center along with demands to store and process that data. In addition to the amount of data hitting the data center today, there are many forecasts for exponential growth in data with the Internet of Things (IoT) initiatives underway in many organizations.

The data center today is different than the data center of ten years ago. The requirements of the data center today are similar than in previous years but the pace of change is dramatically faster. Running a data center the same way as it was run ten years ago will not and cannot work today. The data center must be able to be just as agile (if not more agile) than the business itself it it hopes to keep up with the speed of business in the future.

This is where the cloud comes into play. Rather than continually try to upgrade and update systems and platforms within the data center, organizations can look to the cloud as a means to maintain an efficient and cost-effective data center capability that is also agile and flexible.

The great thing about the cloud is that it can be different things to different companies. Your organization could move your mission critical applications to the cloud to ensure high availability and agility while keeping your legacy systems chugging along within your data center.  Conversely, you could move your non-critical systems to the cloud to open up the data center to handle your more important and more mission critical systems.

The way your company uses the cloud is up to you.You could build your own private cloud, use a public cloud or use a combination of the two with a hybrid cloud solution. The cloud brings a lot of flexibility to your organization and allows you to optimize your data center to ensure it (and the cloud) can deliver what your organization needs today and tomorrow.

This post is brought to you by the Enterprise CIO Forum and HP’s Make It Matter.

Links for March 30 2014

Google Flu Trends’ Failure Shows Good Data > Big Data – Kaiser Fung – Harvard Business Review
Quote: The amount of data still tends to dominate discussion of big data’s value. But more data in itself does not lead to better analysis, as amply demonstrated with Flu Trends. Large datasets don’t guarantee valid datasets. That’s a bad assumption, but one that’s used all the time to justify the use of and results from big data projects.

HP Blogs – The Role of the CIO, evolution or revolution? – The HP Blog Hub
Quote: Is the transformation to the digital world an evolution or a revolution for the CIO? I would say it depends. Some CIOs. Primarily those already linked to the business will see it as an evolution, the continuation of the efforts they have already taken to work hand in hand with the business. Other CIOs, focused mainly on technology will definitely see it as a revolution. Where are you in that spectrum and how do you take on the digital transformation?

Enterprise Agile: One Size Does Not Fit All — CIO Dashboard
Quote: Whatever approach you choose, scaling agile requires complex navigation during each phase. It’s an evolutionary process, requiring balance across many different aspects of the organization. With a strategic and tailored approach, organizations can successfully scale agile and realize all that a greater agile reach has to offer. If you steer clear of the hurdles, it’s a worthwhile journey.

Whither the CIO? The role of IT — and the IT leader — will evolve along two different paths | TechViews
Quote: Technology is turning whole businesses on their heads, and CEOs everywhere are struggling to find the best way to manage and leverage it. It makes sense that as technology increases its impact on businesses, the role of the technology leader will evolve. The notion of CIOs—and their organizations—as being all about operations and all about innovation—at the same time—cannot hold. The key for every CIO working today is this: Know which path plays to your strengths, and get moving

Four steps to help CIOs drive innovation and strategy – The CIO Leader
Quote: The type of radical change required to reposition the CIO role and the IT function is a significant undertaking. It will require the dismantling of much of the IT function’s existing structures, processes and teams, and the development of new competencies, skills and knowledge. Such a transformation takes time and requires the understanding and support of the rest of the C-suite.

“Everyone Has A Plan Until They Get Punched In The Face” | Partners in EXCELLENCE Blog — Making A Difference
Quote: If we’ve developed a good plan, if we must stay focused on executing it. This doesn’t mean we don’t adjust it based on new information, but we can’t abandon it. We know we will face changes and challenges to our plan. Hopefully, we’ve thought of those in our planning process and developed strategies to deal with these, when we are hit with them, we can deal with it.

The role of IT and the CIO in Marketing

Isaac Sacolick recently wrote a post titled Dear CIO, Here’s How To Help the CMO with Marketing Automation where he talked about the need for CIO’s and CMO’s to work closely together for marketing automation projects.

In that post, he wrote:

…fully achieving “marketing automation” is no where as easy as SalesForce, Microsoft, or Oracle will sell your CMO. There is certainly a lot less coding involved to develop workflows, produce dashboards, or integrate data but some of the same problems exist such as cleaning duplicate/dirty data, developing audit-able workflows, improving the usability of dashboards, crunching large data sets, securing private/financial data, or maintaining master data.

mauMarketing Automation isn’t just about implementing technology to ‘do’ marketing…there are plenty of aspects associated with marketing technology that many people overlook.  You don’t normally just turn on automation tech and ‘set it and forget it’ like many vendors and consultants will try to advise you to do.

Marketing automation, just like every other technology, can bring quite a bit of complexity to an organization.  Many people who haven’t lived in IT and technology don’t / can’t really understand how complex technology can be. After implementation, there is  still a great deal of work to do on the operational side of things, even if you use ‘the cloud’ for your solution(s).

That’s where the CIO and the IT team come into play.  We should be involved as early as possible in any project involving technology to help other teams understand the long-term issues around technology and should be playing more of a consultative role within the organization than we have in the past. The key now is for the CIO to build relationships with other C-level executives and ensure the IT group is involved in any/all technology projects at the outset.

The roles of the CIO and IT group are becoming more consultative rather than purely operational. That’s a good thing.  The CIO and technology professionals can play a much larger role within the marketing team that many currently are. Isaac’s suggestions were spot on…the key now is to make sure the CIO and CMO (and other CxO’s) are having conversations early enough to ensure that the IT group is involved in technology selection projects.


Links for June 9 2013

  • Freeing your IT department from Stackholm Syndrome — Tech News and Analysis

    Quote: Many IT departments are enslaved by the very systems they have constructed. The solution doesn’t require starting over, only giving business the freedom to operate outside the stack.

  • Reclaiming the role of the CIO

    Quote: So, rather than being distracted by constant haranguing in relation to the role of the CIO, it is right and fitting that CIOs proactively embrace the challenges they are invited to address by virtue of their office and related functions.

  • The Inexorable Rise Of Nginx And Why CIOs Should Care: It’s About Mobile Engagement | Forrester Blogs

    Quote: Nginx is a symbol of a massive pivot in your techology platform from three-tier Web to four-tier engagement. Growth in nginx adoption should signal a radical overhaul of the architecture you will need to thrive in the mobile era. It’s time for us all to get smart about that.

  • Will the latest NSA surveillance scandal be a wake-up call about the power of data? — Tech News and Analysis

    Quote: We talk a lot about the business benefits of big data and only a bit about the privacy implications. A report alleging that Verizon is sharing phone data at the request of the NSA may make privacy a higher priority.

  • What cities, data and Yahoo have in common: Interaction matters — Tech News and Analysis

    Quote: A recent study from MIT suggests the likelihood of face-to-face interactions within a city means more productivity. It seems to apply equally to companies and even data, which suggests engineers and architects of all types should take notice.

  • Jim’s Notebook: Critical Thinking and Creativity

    Quote: It’s particularly problematic in user experience, where the suggestion of presenting the customer with a straightforward and logical process is overwhelmed by knee-jerk reaction, the whim of a silverback, or the sense that reason is inapplicable because "people don’t think," only to be replaced by a sloppy and obviously flawed alternative that is in the long-term best interest of neither the customer nor the firm.

  • Don’t Chase Happiness. Recognize It. | Becoming Minimalist

    Quote: There is a beautiful life of simplicity calling out to those who will listen. It invites us to live the life we were born to live, not the life our neighbor is seeking to achieve. Simplicity invites us to pursue the things we value most, not the values of billboards and magazines. It invites us to remove the distractions that keep us from living and enjoying life to the fullest.

  • Some will always say you’re wrong | Derek Sivers

    Quote: But if you expect this criticism in advance, and take pride in your stance, you can bash on with a smile, being who you want to be. Then every time they say you’re wrong, that’s a sign you’re doing it right.

  • Unsupervised Machine Learning, Most Promising Ingredient Of Big Data : CloudAve

    Quote: Traditionally, BI has been built on pillars of highly structured data that has well-understood semantics. This legacy has made most enterprise people operate on a narrow mindset, which is: I know the exact problem that I want to solve and I know the exact question that I want to ask, and, Big Data is going to make all this possible and even faster. This is the biggest challenge that I see in embracing and realizing the full potential of Big Data. With Big Data there’s an opportunity to ask a question that you never thought or imagined you could ask. Unsupervised machine learning is the most promising ingredient of Big Data.

Comparing Twitter Sentiment vs Random Numbers for Entry Signals

This is a cross-post from Trade The Sentiment

One of the concerns that I have of my research into using Twitter Sentiment for entry signals in the market has been that the market has, in general, been in an up-trend over the last year.   With that up-trend, there’s a good change that any entry, made enough times over the course of the year, would have resulted in a profitable trading year.

So…I developed a basic random number generation script in Python that generates a random signal between 0 and 2 to try to mimic the ranges found in the overall market bear/bull sentiment.

With this random signal, I then used the same strategy for an entry signal used in my Twitter Sentiment entries.   The comparisons are below

Trading Rules

  • Enter when Bearish Extreme found in Raw Bear/Bull when Sentiment (or Random Signal) > 1.1
  • Buy 500 Shares of the SPY ETF. This strategy is Long Only.
  • Hold for 6 trading Days.
  • Timeframe: Nov 1 2011 to Nov 30 2012
  • Commission = $10
  • Slippage = $0.05 per share

Using Tradestation, I ran my strategy with both the Twitter Sentiment Signal and the Random Signal without optimizing any of the strategy inputs.  Both systems closed out their last trade before Friday so no trades are held.

The outcome of both systems are provided below.  Below the table, I’ve provided the

Note: The Buy and Hold Rate of Returns are different due to the date of the first trade made by each system. Trade #1 for Random Signals was taken on Nov 9 2011 while Trade #1 for the Twitter Sentiment was taken on Nov 14 2011.

Based on this particular test, I’d say the twitter sentiment entry signals are much more robust and accurate. This signal delivers more profit, more return and much less drawdown than the random signals entries.

Each strategy’s entry / exits are shown in the graphs below.

Twitter Sentiment Signals

Random Signals Entries

This is a cross-post from Trade The Sentiment

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