Weekly Thoughts

Here are three things that caught our eye this week:
 

Countdown Clocks

This week we read a fascinating article about the New York City subway system and the ongoing attempts to bring arrival countdown clocks to the lettered routes (as opposed to the numbered routes for which this service is already available). Countdown clocks on subways fall into a category of technology in which initial exposure creates the immediate perception of ongoing need. While one may begin life perfectly content to wait for the N train and its uncertain arrival, doing so is far more difficult after a visit to London which boasts a comprehensive train arrival timetable at each tube station. Particularly in the current environment where we can determine the location of each nearby Uber driver from our phone, it is hard to imagine how train tracking technology isn’t fully rolled out to the NYC metro system. From James Somers, the author of an Atlantic article on this topic:

“…we live in a world with cars that can drive themselves. Trains are huge objects that move in one dimension. How could it cost hundreds of millions of dollars and take nearly a decade just to figure out where they are and report that information to the public? Really: How?”

The complexity of the answer to this question is a window into the different challenges that corporations face when managing technological change. On the surface, the easiest explanation for the lack of countdown clocks is that the MTA simply doesn’t have the data. As shocking as it may seem, the guts of the NYC subway system are currently run on highly compartmentalized, track-focused infrastructure. The trains run independently of one another and are monitored via sensors on individual sections of track. The control room then is only able to determine when a train is on a particular section of track, not which particular train it happens to be. This creates ignorance and a hefty maintenance bill as all those sensors need to be in working order at all times.

The solution is to switch to an open architecture, train-focused model in which software can monitor all the trains simultaneously and optimize the functioning of the entire network. Unfortunately, attempts to implement such a system are plagued by operational and cost related problems that can provide lessons for any business. The first issue is rooted in the well-intentioned, but ultimately counterproductive, impulse to avoid down-time at any cost. Essentially, MTA officials want the trains to keep running, and as a result, they are less willing to completely embrace new solutions and the implementation time they require. Again from the Atlantic:

“…New York decided to run CBTC [the new system] on top of a reduced form of the old fixed-block signaling system, requiring that both be expensively maintained, despite evidence from other cities that no backup was necessary…

Barone says New York just wasn’t willing to rip the band-aid off. Cities like London deal with major transit upgrades by packing maintenance and line closures into as short a window as possible, however painful that might seem at the time. New York, by contrast, draws out its track maintenance. When I spoke to the president of Thales Transport & Security, one of two major CBTC suppliers to New York, he said that ‘getting time on the track is by far the biggest schedule driver.’ Crucial test-runs get queued behind miscellaneous track maintenance, so that it takes months to validate even small changes. ‘In the New York mindset,’ he said, ‘there just isn’t the concept of the trains ever stopping.'”

The second issue relates to project design. One reason for the hesitancy to bring countdown clocks to the lettered trains in NYC was that the program to bring the technology to the more prominent numbered trains took 50% longer than anticipated and came in well over budget. The cause was a communication failure between the key players involved. On one hand, MTA officials, seeing little utility in capital expenditures that did not involve a new station or train, spent little time participating in planning sessions with the software contractor tasked with building the new system. On the other hand, the software engineers failed to appreciate the complexity of the individual pieces of the system and were overly reliant on off-the-shelf solutions. Again from the article:

“You get the impression that the two groups simply didn’t respect each other. Instead of collaborating, they lobbed work over a wall. The hope on each side, one gathers, was that the other side would figure it out.”

We empathize with this situation because we anticipate similar challenges, albeit at a much smaller scale, will present themselves in our own business. Each day we dispatch people and equipment to various job sites with limited ability to track our crews once they leave our yard. While we strongly suspect that a software based solution may dramatically improve our efficiency and analytical capabilities, we struggle with questions about reliability, cost over runs, and adoption. The reality is that the crews currently get where they need to go, and they provide high quality service to our customers. To fully embrace a different system would risk disappointing those same customers, and if done inefficiently, could materially hurt the bottom line. Going forward, we’ll continue to follow the development of systems like the countdown clocks in NYC to see if we can apply those lessons to our own projects.

The Atlantic
 

City Score

Earlier this week the Red Sox made headlines by signing David Price to a gaudy seven year, $217 million contract. The ace pitcher commanded such a price due in large part to his impressive statistics: last season he posted an AL-leading 2.45 ERA and a second place pitching WAR (wins above replacement) of 6.0. It is no secret that “moneyball” is firmly entrenched in the baseball world and million dollar decisions are being made based on ever more complex statistical models that distill performance down to a single number. What is less well known is that Fenway Park is not the only place in Boston where executives are relying on metrics to guide their actions. In fact, we were interested to learn in a recent podcast and TED talk that Daniel Koh, chief of staff to Boston’s mayor, has been leading a major push to established a wide variety of metrics that quantify the city’s civic performance. Moreover, he is working with a team of data analysts to combine these metrics into a single number, called City Score, which he hopes will eventually serve as a universal measure of city operational quality. From a recent New York times article chronicling the effort:

“City Hall is humming with data. Traffic engineers can draw on troves of it from a mapping app, Waze, as they seek to relieve rush-hour congestion here. The commissioner of public works has up-to-date statistics on potholes and burned-out streetlights. The city’s chief diversity officer can instantly look at the gender and racial breakdown of city employees on a digital dashboard. Now city officials are hoping to corral their data on issues like crime, housing for veterans and Wi-Fi availability and turn them into a single numerical score intended to reflect the city’s overall performance.”

Crucially, Koh emphasizes that the practice of metric tracking isn’t meant to replace the Mayor’s more qualitative political agenda, nor is it meant to diminish the importance of mayoral visits to various Boston neighborhoods and in-person discussions with residents. Instead, the data analysts are actually developing the metrics based on priorities identified by the mayor’s platform, and rather than limiting in-person visits, the data are actually making such activities more effective since his office can now track where the mayor goes and make sure he distributes his time equitably.

Perhaps the most intriguing element of City Score is its simplicity. Rather than a complicated dashboard of numbers and graphs, Koh and his team are working hard to weight their metrics appropriately in order to combine them into a single numerical index. While the detail is there to allow for a closer analysis, the hope is that a single number can be created to represent city performance in the same way ERA or, more recently, WAR has come to represent pitcher performance. Graphically the approach looks like this:

We find this entire exercise fascinating since we are in the early stages of developing our own data-driven dashboards to monitor company performance and have found it to be a three part challenge. The first step is the analytical process of defining what we want to measure. The second is more logistical in nature as we try to figure out how to collect the data that will allow us to calculate the metrics we want. Finally, we need to think creatively about how to visualize the data once we have it collected. Getting the entire process running smoothly will take some time, but we aspire to follow Boston’s lead and hope that in time we might be able to evaluate our own businesses by tracking a single, elegantly complex variable.

Open Source, Ted Talk, New York Times, ESPN
 

Patience

This week we spent some time thinking about patience. Over the last few months, we have actively sought out advice from many people in our network as we tackle the challenges and formulate the strategies associated with helping to operate a company. Universally, they all encouraged us to resist the urge to do too much, a perspective we certainly understand. We deliberately seek out investments that are already performing very well by most objective measures, and with that backdrop, success for us probably could mean simply making sure nothing goes horribly wrong. If we understand where we want to get to, we need to be patient to make sure the long term vision plays out. In his excellent blog, Fred Wilson references this concept when he talks about long roadmaps:

“A big vision is critical for a big success. You have to know where you want to be in a decade or more. That’s where the long roadmap comes in.”

That said, the focus on long term patience directly conflicts with our natural tendencies. We are somewhat paranoid about the risk of becoming complacent, that somehow simply “not messing up” will overtime become “good enough.” We also realize that any large vision will be comprised of smaller, more mundane component parts, and each of these requires focus and attention as they tend to be cumulative in nature. Again from Fred Wilson:

“A long roadmap is comprised of many short and focused roadmaps, each leading to the next one. It’s like you want to drive from NYC to LA. You start by driving to Philly. Then you drive to Pittsburgh. Then Cincinnati, then St Louis, then Kansas City, then Denver, then Salt Lake City, then Las Vegas, and finally you drive to LA. Each trip is its own thing and you plan it out carefully and then execute it with focus and energy, not thinking about where you want to end up beyond the next city.”

When dealing with those shorter term issues, the problem we have been grappling with recently is the trade-off between analysis and execution. Our investment related backgrounds mean that we are very comfortable tossing around ideas on a theoretical basis, but turning those ideas into tangible action comes less naturally. To borrow a carpentry analogy, while we believe it is important to measure twice and cut once, we want to make sure we aren’t performing an in-depth strategic review of the measurement plan, and then forgetting to cut altogether.

To us, the solution to this problem is to exercise a degree of controlled impatience with the smaller tasks that comprise the larger vision. Once we settle on an idea or a course of action, we try to establish a plan for implementation and/or execution so we can then move on to the next issue. Of course the competing impulses for patience on the one hand and impatience on the other are difficult to balance. Once again, we thought Fred Wilson did a nice job of highlighting this juxtaposition by noting that “building a great company is a combination of patience and impatience in equal doses applied unevenly. Impatient short term, patient long term.” We think this is great advice and will be sure to keep it in mind as we move forward.

AVC
 
Have a great week,

Your Chenmark Capital Team