The Black Swan


For Christmas I received a copy of Nassim Nicholas Taleb’s “Skin in the Game”. Before I start it, though, I am reading through his previous works, collectively known as the “Incerto”. I had read “Anti-fragile” and “Fooled by Randomness” in the past and have just completed “The Black Swan”. In another upcoming post I will provide my reviews on them.

Today is a meditation on Black Swans and my life in telecom. People beleived that all swans were white; until they saw a rare black one. For Taleb, the Black Swans are the events that happen in areas where our thinking and mental models fail to realize that they follow fractal probability distributions and not those bell curves that they taught us in high school. His favourite example is the turkey, who is fed for 1000 days straight, and so continues to forecast that this pattern will continue…up until the day before Thanksgiving. His lesson ? Don’t be the turkey !

Fractal distributions are also known as power-law distributions and a popular version is the 80-20 rule. Eighty percent of your revenue will come from twenty percent of your customers and similar effects. We can see such models at work in lots of places; the distribution of incomes (no matter how much the left rails against “inequality”) the box office of movies, best seller books, the rise of the giants of Silicon Valley (Google, Amazon, Facebook, Netflix etc) where network effects and first mover advantage have the giants dominating their respective markets.

So how does one thrive in areas where the “winner take all” phenomena means that the lion’s share goes to a small number of players ? That is what got me thinking about my experience in telecom.

The first lesson, in working in such environments, is that first and foremost you must survive. As we saw in the financial crisis of 2008, companies like Long Term Capital Management thought they were risk averse by using sophisticated algorithms and models designed by academics. In reality they were very exposed to Black Swans that ended up taking them down and almost the entire financial system. Never risk everything, as survival is paramount.

I am proud that AurorA has been in operation for over 24 years. There have been four or five major pivots along the way, but the company has survived and thrived. This is also Nature’s model. Mother Nature has many strategies that have evolved to ensure survival, such as redundancy among our body parts which is not “optimal”. It is why we value the experience and wisdom of our elders; they have seen previous Black Swans and survived and can pass on that knowledge (if we are willing to listen).

The second lesson I took from this is that even though fractal distributions predominately reward a few, they also leave a long fat tail. In a multi-billion dollar industry like telecom, that means that there are plenty of niche opportunities in that fat tail that can be mined. That is precisely how I have operated AurorA , whether entirely consciously or not. AurorA specializes in international applications and specifically in the wholesale market; niches where I can exploit my competitive differentiators like quality and fraud mitigation to swim in a “blue ocean”. Those niches may be small, compared to the overall market, but they are plenty for AurorA to serve.

I am looking forward to reading “Skin in the Game” next and will report back to you with more detailed reviews of it and Taleb’s other books. Until then, keep reading !

The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility”

Mother’s Day

There is a great anecdote in the book “Eccentric Orbits – The Iridium Story” that I reviewed in a previous post.

It was May 9, 2004. The technicians at the Network Operating Centres for the Iridium satellite system in Hawaii and Arizona noticed a high level of dropped calls (more precisely failure to connect) and a very high level of traffic in general. They were confused because everything seemed to be working normal, and the system could hand almost 100,000 calls at a time and there were barely 140,000 handsets in service at the time.

Then they noticed that all the calls were coming from one particular place, massive numbers of people were all trying to call over the same satellite. That is what was taxing the system, a specific geographic overload. You see, there were 146,000 American troops stationed in Iraq at the time. And that year, May 9 was Mother’s Day.

The only situation that could max out the Iridium system was Mother’s Day in a war zone.

Anyone who has spent time in network or traffic engineering for a telco knows that the busiest day on the network is Mother’s Day. Even more than Christmas, or any other holiday. That is why I laughed when I read that story as it immediately resonated with me. All these soldiers and Marines HAD to call home on Mother’s Day.

So make sure that your network is ready for this Sunday, because the traffic is going to ramp up bigly.

And don’t forget to call your Mother !

Iridium Extreme 9575 Satellite Phone

Tales from the Telecom Trenchs

I am a long time voracious reader. It is a habit developed as a kid and I’ve kept it up throughout my life. Usually, in the hour before going to bed I try to turn off all electronics and spend some time reading. Often, I will also cart my latest book(s) with me to lunches, meetings and appointments so that I can dip into it if I have some time available.

My interests are wide, and includes non-fiction as well as fiction. Philosophy, histories, biographies, business books and self-help tomes are all of interest to me. Over the last year, there have been a few outstanding books on telecom that I wanted to share here with you.

Eccentric Orbits: The Iridium Story by John Bloom

I read this book over the Christmas holidays as mentioned in my Jan 7, 2018 blog post on quality six-sigma. I learned from it that the Six Sigma management philosophy on eliminating defects was pioneered by Motorola (and then exported to General Electric and to Japan). This book covers the history and the fascinating story of the Iridium LEO satellite system built by Motorola and the huge commercial and political battle to save it from being destroyed due to bankruptcy.

The story itself is fascinating, both from a revolutionary technology perspective and from a business, military and government perspective. It gives some great insight into the thinking that goes on behind the scenes and behind the headlines and how one determined man can make a difference.

It is also very relevant to our current times as there are now multiple groups trying to launch new LEO satellite constellations to provide broadband Internet anywhere on Earth; Elon Musk’s Space-X (Starlink), Richard Branson’s (and Qualcomm and Softbank) OneWeb (to be launched using Jeff Bezos’s Blue Origin), and Mark Zuckerburg’s PointView Tech (Athena). The race to provide space-based connectivity has drawn interest from all of the Silicon Valley heavyweights.

I highly recommend reading this book as it will provide some useful context to the upcoming space-based battles as well as being a great tale on its own.
Eccentric Orbits: The Iridium Story

Iridium Extreme 9575 Satellite Phone

Losing the Signal: The Untold Story Behind the Extraordinary Rise and Spectacular Fall of Blackberry
by Sean Silcoff, Jacquie McNish

This is the story of the Blackberry, from the company formerly known as Research in Motion. Told by two veteran Globe and Mail, Report on Business journalists it brings to life one the premier Canadian technology success stories.

This was very fascinating to me as I lived through this time and this story. Blackberry is headquartered here in Waterloo; this is a very local and vary familiar story. I recognized many of the people and events in the book and found it incredible to read it all again.

It highlights the founders Mike Lazaridis and Jim Balsillie and how they revolutionized telecommunications by inventing a whole device, the smartphone. There was a time where the “Crackberry” ( a very addictive device) was THE phone to have; whether you were in business, finance or even the President of the USA.

Yet, from the heights of owning the market, Blackberry fell due to a combination of factors, all outlined in this riveting tale.

Again, highly recommended both as a celebration of a Canadian success story, but also as a cautionary tale.
Losing the Signal: The Untold Story Behind the Extraordinary Rise and Spectacular Fall of Blackberry

Broadbandits: Inside the $750 Billion Telecom Heist by Om Malik

This book is now almost fifteen years old. Om Malik is someone I have immense respect for. He was an investigative reporter when he wrote this before he launched GigaOm, one of the top technology and business blogs in the world and turned it into a media company and research firm. He is now a respected venture partner at True Ventures.I follow Om on social media and always look forward to his curated reading list each week.

Broadbandits is another story that I personally lived through, and it also brought back many memories and many emotions, including a lot of swearing. It describes a lot of the financial fraud behind the telecom bubble of the late 1990’s and early 2000’s. Telecom giants such as WorldCom, Global Crossing, and the financiers and stock pundits who ended up causing huge financial losses.That telecom bubble affected me directly, as we were just in the process of trying to sell AMI when the market collapsed. Many friends lost a lot of money in the stock market collapse of these frauds.

Reading this book brought it all back to me. If you have been in telecom for a few years you will recognize some of these stories and may have the same reactions I did. If you have been in telecom for less than a decade, read this book to find out the real history and some of the deceit and lies and fraud that preceded you. Either way, it is important to remember the Wild West days of a stodgy industry like telecom here in North America (and Canada was NOT exempt).

Again, highly recommended.
Broadbandits: Inside the $750 Billion Telecom Heist by Om Malik (25-Oct-2004) Paperback