What Must Be True: Strategic Thinking for Managing Risk

Roger Martin, former Dean of the Rotman School, has written a fascinating and insightful article about risk management, emphasizing that a robust strategic process is the only effective way to approach it. Martin argues that, in most cases, risk management conducted by corporate boards often amounts to little more than box-ticking to comply with the Sarbanes-Oxley Act (S-OX) Section 404. This requirement, enacted after scandals like Enron and WorldCom, has become a lucrative exercise for consulting firms but provides little real value to management or investors. Instead of addressing critical risks, these efforts often generate exhaustive lists of potential risks (as seen in typical 10-K filings), which serve as "safe harbor" statements for management rather than actionable insights. A more effective way to approach risk management is by applying the Rumsfeld Risk Matrix (as illustrated in the accompanying graphic). This matrix divides risks into four quadrants: 1.Known Knowns – Risks we are aware of and understand well enough to measure and manage. 2.Known Unknowns – Risks we recognize but do not fully understand. 3.Unknown Knowns – Risks we are unconsciously aware of but fail to identify as risks. 4.Unknown Unknowns – Risks we are entirely unaware of. The ultimate goal of risk management is to increase awareness, turning unknowns into knowns, and improving precision by addressing uncertainties. This involves identifying key risks that are not fully understood, assessing their material impact and likelihood, and investing in understanding them better. It also requires implementing systems to monitor risks that might not be obvious and to uncover entirely new risks. So how is this achieved? The answer lies in a strong strategic process. A well-designed strategy explicitly considers what must be true (WWHTBT) for success and potential derailment, addressing factors such as industry dynamics, customer behavior, organizational capabilities, competitor actions, vendor dependencies, and technological advancements. By conducting thorough internal (IFE) and external (EFE) factor evaluations, along with a comprehensive SWOT analysis, organizations can identify key risk factors, enhance awareness, and improve their ability to detect unknown risks early. This article offers valuable insights and is highly recommended for anyone interested in strategic risk management. (text revised by a LLM) https://rogermartin.medium.com/risk-management-strategy-59869afd3558

- Pedro

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Hermanos Gutiérrez - Musica

Mi ultimo descubrimiento musical! Son buenísimos! https://open.spotify.com/artist/73mSg0dykFyhvU96tb5xQV?si=T9FfR1yVTu27j2VWVOipcw

- Pedro

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Books read throughout 2024! not a bad year

Throughout 2021 I’ve read 21 books, 5.745 pages and my average rating was 3.5 on Goodreads. The full list was the following: 1.Disciplina sin lágrimas 2.Até ao fim 3.The BlackSwan 4.A brief history of time 5.Raving Fans 6.Price and peace 7.Obvious Adams 8.Fascim 9.Os Ratoneiros 10.The secret language of competitive intelligence 11.Do dice play God 12.Strategy beyond the hockey stick 13.How to take smart notes 14.How to decide 15.The pyramid principle 16.12 rules for life 17.Deus na escuridao 18.The tipping point 19.Value-Based pricing 20.Win, keep, grow 21.Sobre la brevedad de la vida Hope 2025 i will make it to 25, but the most important is that i pick good ones, learn and enjoy myself in the journey. https://www.goodreads.com/user/year_in_books/2024/71159677

- Pedro

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How Math Connects Fireflies, Clocks, and Computing

A fascinating video featuring Steve Strogatz explores the power of mathematics and how it reveals hidden patterns in the world that would otherwise remain undiscovered. In one example, Strogatz discusses a study where he and his colleagues explained why fireflies begin flashing in unison. This phenomenon, initially thought to be purely biological, was redefined as a mathematical problem. Building on these findings, engineers developed a method to synchronize small electronic clocks, demonstrating how the mathematical principles from the study extend to fields like distributed computing and sensor networks. Mathematical abstraction—a cornerstone of mathematical reasoning—strips away irrelevant details, allowing us to focus on the fundamental elements of a problem. This approach uncovers connections and commonalities across diverse phenomena and scientific disciplines. I hope you enjoy the video as much as I did! (text revised by a LLM) https://youtu.be/kV-pnbtfraE

- Pedro

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El Gran Otro: Cómo el Capitalismo de Vigilancia Moldea Nuestros Comportamientos

He terminado La era del capitalismo de la vigilancia: La lucha por un futuro humano frente a las nuevas fronteras del poder por by Shoshana Zuboff, Albino Santos (Translator) Mi valoracion - 3/5 (Qualitativa - “Me ha gustado”) Un extenso libro sobre lo que la autora define como el capitalismo de vigilancia, que representa un nuevo paradigma para la sociedad, en el cual nosotros (los humanos) y nuestros comportamientos somos la fuente principal de materia prima para este proceso. Shoshana nos guía de manera exhaustiva a través de sus orígenes, cómo funciona y la importancia del behavioral surplus (excedente conductual) como base de todo. También aborda quiénes son los ganadores de esta nueva forma de organización social y económica (las "Magnificent 7") y quiénes son los grandes perdedores (nosotros). Se nos presenta todo lo que estamos perdiendo, en la mayoría de los casos sin ser conscientes de ello. Asimismo, se explican los riesgos a los que nos enfrentamos como sociedad: el fin de la privacidad, el libre albedrío individual y la creación de un "Gran Otro" que intenta influir en todos nuestros comportamientos. Es un libro cuya lectura recomiendo encarecidamente. Sin embargo, no es para todos, ya que resulta demasiado extenso. Estoy convencido de que podría reducirse fácilmente en un tercio de sus 861 páginas actuales sin perder su valor. De hecho, creo que esa reducción aportaría mayor claridad y eficacia al mensaje. Como diría Saint-Exupéry: "La perfección no se alcanza cuando no hay nada más que añadir, sino cuando no hay nada más que quitar". (texto revisado por LLM)

- Pedro

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How Games Shaped Probability, Strategy, and Economics

An excellent Economist’s Podcast that features Kelly Clancy—a neuroscientist, physicist, and author of Playing With Reality—discussing the profound impact of games on our lives and societal dynamics. Clancy emphasizes that games are a powerful form of learning, shaping how we think and interact with the world. Games like Chess, Go, Dice, and Cards introduced humanity to the concept of uncertainty, paving the way for probability theory (via Pascal and Fermat’s correspondence) and, subsequently, modern statistics. The episode also highlights the critical role of war games, such as Chess and Go, which evolved into more complex systems like Kriegsspiel. The latter was instrumental in training military officers and predicting battlefield outcomes, particularly during World War II. Clancy then connects this history to Game Theory, one of the most significant developments in economics, pioneered by John von Neumann. Game Theory has informed concepts like nuclear deterrence and continues to influence modern strategic thinking. However, it’s essential to complement it with insights from behavioral economics to understand human decision-making fully. The takeaway? Games are not just entertainment; they’re essential tools for education and skill-building. They can influence our behavior, shape our knowledge, and enhance problem-solving abilities. For instance, Miegakure (https://miegakure.com/) challenges players to solve problems in four dimensions—a fascinating way to expand your cognitive boundaries. All of this in just 38 minutes (at normal speed)—a fantastic return on your time! (revised by a LLM) The surprising ways in which games have changed the world—an interview with Kelly Clancy https://www.economist.com/podcasts/2024/11/27/the-surprising-ways-in-which-games-have-changed-the-world-an-interview-with-kelly-clancy

- Pedro

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How Machine Learning Is Revolutionizing Economic Thinking

A Sendhil Mullainathan delivered a fantastic keynote on Economics in the Age of Algorithms, a talk lasting approximately one hour (at normal speed). In it, he compellingly argues that algorithms (machine learning, AI, etc.) are, at their core, economics. Among the many fascinating topics he covered, I particularly enjoyed how he framed the difference between Estimation and Prediction. Estimation represents the traditional approach to tackling problems, while Prediction is the newer approach enabled by supervised learning (ML). In essence, estimation focuses on optimizing the estimated Beta, while prediction aims to optimize the estimated Y. Sophisticated algorithms that optimize Y (the prediction) are remarkably valuable for uncovering new and strikingly original hypotheses. However, economists (humans) play a crucial role in designing recommendations for payoffs and loss functions, ensuring that ML outputs are meaningful and actionable. Did this triggered your interest? Sit back, relax, and enjoy an hour of insights from one of the great economic minds! (text revised by a LLM) https://videosolutions.mediasite.com/Mediasite/Play/cb9d64c0274d4aae98b61dd6779791b31d?playfrom=970000

- Pedro

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An Hour with Mozart: Pure Musical Bliss

I highly recommend this masterful podcast about Mozart. The hour flies by in what feels like seconds, immersing you in a "flow" state that makes time vanish. When it ends, you’re left wishing it lasted three times longer. A significant part of the magic comes from the live performances by the Academy of St Martin in the Fields Orchestra, which elevate the experience to another level. I hope you enjoy it as much as I did! (text revised by a LLM) In 1756 a musical prodigy was born in Salzburg, Austria: Wolfgang Amadeus Mozart. Thanks to the efforts of his exacting father, Mozart's genius was exhibited and celebrated in some of the greatest courts of Europe from a young age. At four years old he wrote his first keyboard concerto, at six he was performing for the empress Maria Theresa. Soon he and his father were touring Europe, and the young Mozart's exploits proved increasingly lucrative for his overbearing parent. But, like all young men, Mozart was growing up and becoming increasingly uncontrollable. Feeling stifled and professionally frustrated, he began to disobey his wealthy patrons and went freelance, risking financial security and the favour of his family. Yet, it would also see him falling in love, and writing some of his most glorious works. Nevertheless, time and life was running out for the young composer, as he began to write the powerful Requiem, which may prove to be for his own death... Join Tom and Dominic at the Royal Albert Hall, featuring the Academy of St Martin in the Fields and the Philharmonia Chorus, conducted by Oliver Zeffman, they explore one of the most famous musical figures of all time: Mozart. What was the origin of his genius? What are the stories behind some of his most famous works, such as The Magic Flute and Don Giovanni? And, what is the truth behind his tragic and much mythologised death, young and penniless? https://podcasts.apple.com/es/podcast/the-rest-is-history/id1537788786?i=1000682044598

- Pedro

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10 Trends to Watch in 2025: Insights from Tom Standage

10 Trends to Watch in 2025, Inspired by Tom Standage’s Insights 1-America First Redux Geopolitical shifts will unfold as the U.S. doubles down on its "America First" policy. 2-A Call for Change Macro-political transformations are imminent, driven by demands for reform in nearly every major election of 2024. 3-Heightened Instability in Europe and the Middle East A transactional approach from the new U.S. administration could exacerbate tensions in these regions. 4-The Tariff Tsunami Expect more tariffs, with ripple effects on global trade and economic growth. 5-The Clean-Tech Boom China's advancements in clean technology could revolutionize the energy sector worldwide. 6-Inflation and Fiscal Tightening Most economies are gearing up for stricter fiscal policies, raising questions about growth and voter approval. 7-The Politics of Aging Could age limits for political leaders become a global trend? 8-AI Revolution Agentic AI systems are poised to become the most transformative innovation since the internet. 9-Tourism Backlash The pushback against overtourism will reshape the travel industry. 10-Expect the Unexpected From global pandemics to solar storms, the world must brace for unpredictable disruptions. Stay tuned for a deeper dive into each of these trends in the near future. (text revised by a LLM) Tom Standage’s ten trends to watch in 2025 https://www.economist.com/the-world-ahead/2024/11/18/tom-standages-ten-trends-to-watch-in-2025 From The Economist

- Pedro

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