Day: January 2, 2009


With New Year’s now in the rear view mirror, I’ve been speculating on what kind of resolutions the folks on Wall Street made this week.  This year’s dismal performances in the markets leave a lot of room for good intentions, and I suspect one common theme of these resolutions was “better tools.”   Last quarter, in the laying of blame for the credit failures that caused the financial system to buckle, there were many aspersions cast about the models used by credit rating agencies for risk assessment and decision evaluation in investing, and there were even some fingers pointing directly at Monte Carlo software and the other computational tools for risk analysis.  

Sharper tools may help protect future investors making decisions under the usual levels of uncertainty, but the fact is that shiny new tools are easier to develop than flawless judgment.   And the judgment of the model creator is a huge factor in the reliability of the model: “garbage in, garbage out,” as is famously said about any kind of computer output.  

The judgment of the modeler is particularly crucial when it comes to the handling of probabilities. Therefore, RESOLVED: my first entries in 2009 will be devoted to the role and specification of probability.

High Gas Prices . . . Unforgettable?

Just a couple of months ago when gas cost over $4/gallon, Americans were scrambling maximize their fuel economy and buying hybrid electric vehicles to save money, cut our dependency on foreign oil, and to save the earth. At that time, a very wise friend said, “Wait and see, gas prices will come back down and we (Americans) will forget all about it.” What happened over the next few months is exactly as he predicted. If it were not for the domestic automakers being on the brink of economic collapse, there would not have been any recent talk of innovation, reform, or the need for more efficient automobiles.

As we all know and feel, the gas crunch as been replaced by a much larger and serious worldwide economic down turn that threatens all. There are many speculations to how we got here and even more on how we get out. Lean Six Sigma is a proven methodology to remove waste and variation from our business processes and is receiving a lot of attention to do just that. Many companies are – but many more should – be scrambling to implement a Lean Six Sigma program to save what is left of their businesses. I hope that they will be successful.

Now let’s look ahead 2, 3 maybe 5 years . . . once our economy has stabilized and “returned to normal.” Have the experiences of the past changed us for the better? We will continue to apply sound Lean Six Sigma principles and risk analysis to our business, making them stronger and more efficient. Or will this too fade as a distant memory until the next time?

I do not feel there is not a business or process that would not be benefited by applying the tools  and principles of  Lean Six Sigma in many  aspects of their businesses. Let us use this opportunity as a catalyst for business and government reform and increased efficiencies in order to provide the best products and services for our customers, and to avoid a repeat of the current state of affairs.