Tuesday, February 24, 2009

Categories of Risk

According to the February trends update from the Lawlor Group, FAFSA applications are up 10% for the year. That jibes with the number of American google searches for "Financial Aid," shown below.

Interestingly, the actual searches for "FAFSA" have declined (I checked FASFA too, a common misspelling). It's amazing how regular the pattern is over time.

Overall trends point down: financials on the decline, and effectiveness of traditional marketing going down with it. These are the times when good leadership is called for. In reflecting on this over the last few days, I recalled another time of uncertainty--during the Iraq invasion, and our erstwhile Secretary of Defense's comment. Quoting from Slate:

The Unknown
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.

—Donald Rumsfeld, Feb. 12, 2002, Department of Defense news briefing

Some people thought this was nonsense, but it seems like a perfectly good way of categorizing risk to me; there are variances we can bound, and those we can't. For example, based on historical yield rates, we could say that our 'normal' yield rate is R plus or minus 3%. The actual rate is a known unknown, but we can deal with the variability with a reasonably accurate contingency. The current trends create plenty of uncharted territory, however. We have no basis from which to judge variability: an unknown unknown. That's where leadership and vision come in. Of course, those who lead in the wrong direction will possibly be weeded out of the gene pool, but it's still better than doing nothing.

There is missing term in Rumsfeld's algebra of risk. Ironically, it turned out to be the Achilles heel of the Bush administration. I refer to "unknown knowns." These would be things like CIA reports of increased terrorist activity before 911, the fact that the yellowcake pretext for invasion wasn't true, and so forth--knowledge that was there for the finding within the organization itself. This isn't intended to be political--they are just apposite examples in the context of Rumsfeld's remarks.

In the higher education realm, within any institution there are bound to be plenty of "unknown knowns." This is because the structure is very hierarchical and organized into silos of responsibility and knowledge. Economics or finance professors generally have little to do with planning the endowment investments, for example. Statisticians aren't usually invited to predict enrollment. I speak of this solely from my own experience. Maybe yours is different.

We should pay attention to the parents of the incoming class of 2009 and look to broad pools of information, even if these are not organized into our normal bureaucratic categories. Going further, we should create these institutionally with wikis and blogs, with message boards and other forms of sharing opinions that can be done freely in a kind of marketplace for ideas. I figure if you don't have a pile of good ideas left over after you've expended your resources on current projects, then you're not really looking. Even working at full steam, there should always be a wish list of to-dos, so you can apply an evolutionary process of weeding out the low priority ones and focusing on the best ideas.

I've been reviewing an open source project called Cyn.in that proports to be a portal for such things. I have it running on a virtual machine, but haven't really warmed up to it yet. You can see some screenshots on the official website. Some of the integrated elements include blogs, wikis, galleries, calendars, mindmaps, workflow, and indexes to these. It's pretty, but seems a bit slow on my system. A mindmap is shown below.

This is one way to start sharing institutional knowledge. There are plenty of others. The larger point is that it's important to be constantly churning ideas and even-handedly ranking them. We tend to focus on external threats and opportunities, but the revelation to me in my survival research was that internal threats and opportunities are just as important for any organization that wants to survive the long haul. There is, in fact, some chance that any organization will self-destruct due to the unpredictability of its internal processes. Worse, this probability is a true unknown unknown--it logically can't be known. But that doesn't mean we can't look for ways to increase the probability of survival--and looking internally is a good place to find out things you didn't know you knew.

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