Mental Models

Five Where Only One is Needed: How Airbus Avoids Single Points of Failure

April 6, 2020 By Nagesh Belludi Leave a Comment

In my case study of the Boeing 737 MAX aircraft’s anti-stall mechanism, I examined how relying on data from only one Angle-of-Attack (AoA) sensor caused two accidents and the aircraft’s consequent grounding.

A single point of failure is a system component, which, upon failure, renders the entire system unavailable, dysfunctional, or unreliable. In other words, if a bunch of things relies on one component within your system, and that component breaks, you are counting the time to a catastrophe.

Case Study: How Airbus Builds Multiple Redundancies to Minimize Single Points of Failure

As the Boeing 737 MAX disaster has emphasized, single points of failure in products, services, and processes may spell disaster for organizations that have not adequately identified and mitigated these critical risks. Reducing single points of failure requires a thorough knowledge of the vital systems and processes that an organization relies on to be successful.

Since the dawn of flying, reliance on one sensor has been anathema.

The Airbus A380 aircraft, for example, features 100,000 different wires—that’s 470 km of cables weighing some 5700 kg. Airbus’s wiring includes double or triple redundancy to mitigate the risk of single points of failure caused by defect wiring (e.g., corrosion, chafing of isolation or loose contact) or cut wires (e.g., through particles intruding aircraft structure as in case of an engine burst.)

The Airbus fly-by-wire flight control system has quadruplex redundancy i.e., it has five flight control computers where only one computer is needed to fly the aircraft. Consequently, an Airbus aircraft can afford to lose four of these computers and still be flyable. Of the five flight control computers, three are primary computers and two are secondary (backup) computers. The primary and the secondary flight control computers use different processors, are designed and supplied by different vendors, feature different chips from different manufacturers, and have different software systems developed by different teams using different programming languages. All this redundancy reduces the probability of common hardware- and software-errors that could lead to system failure.

Redundancy is Expensive but Indispensable

The multiple redundant flight control computers continuously keep track of each other’s output. If one computer produces deviant results for some reason, the flight control system as a whole excludes the results from that aberrant computer in determining the appropriate actions for the flight controls.

By replicating critical sensors, computers, and actuators, Airbus provides for a “graceful degradation” state, where essential facilities remain available, allowing the pilot to fly and land the plane. If an Airbus loses all engine power, a ram air turbine can power the aircraft’s most critical systems, allowing the pilot to glide and land the plane (as happened with Air Transat Flight 236.)

Idea for Impact: Build redundancy to prevent system failure from the breakdown of a single component

When you devise a highly reliable system, identify potential single points of failure, and investigate how these risks and failure modes can be mitigated.

For every component of a product or a service you work on, identify single points of failure by asking, “If this component fails, does the rest of the system still work, and, more importantly, does it still do the function it is supposed to do?”

Add redundancy to the system so that failure of any component does not mean failure of the entire system.

If you can’t build redundancy into a system due to some physical or operational complexity, establish frequent inspections and maintenance to keep the system reliable.

Postscript: In people-management, make sure that no one person has sole custody of some critical institutional knowledge, creativity, reputation, or experience that makes him indispensable to the organization’s business continuity and its future performance. If he/she should leave, the organization suffers the loss of that valued standing and expertise. See my article about this notion of key-person dependency risk, the threat posed by an organization, or a team’s over-reliance on one or a few individuals.

Why People under Pressure Choose Self-Interested Behaviors

January 17, 2020 By Nagesh Belludi

Pressure can put people in a state of threat. As I’ve examined previously here, here, and here, pressure can undermine people’s ability to make sound decisions.

Under pressure, people can abandon their inhibitions, cut corners, and loosen up their moral standards. In other words, they are more likely to engage in self-centered behaviors as opposed to pursuing the common good.

People adopt moral standards that dissuade them from unacceptable behaviors. Under normal circumstances, they think sensibly about the costs and benefits when making decisions. However, under pressure, people can be depleted of the cognitive resources they need to act ethically and resist temptations. See my article on the much-debated “muscle metaphor” of willpower.

When people are in that state of emotional and psychological anxiety, the brain goes into a defensive mode. With that, they are more likely to engage in self-interested behaviors that they would otherwise avoid, especially if the payoff for such behavior is high, and the odds of getting caught and punished are low.

How Stress Impairs Your Problem-Solving Capabilities: Case Study of TransAsia Flight 235

October 1, 2019 By Nagesh Belludi Leave a Comment

As I’ve examined previously, airline disasters are particularly instructive on the subjects of cognitive impairment and decision-making under stress.

Consider the case of TransAsia Airways Flight 235 that crashed in 2015 soon after takeoff from an airport in Taipei, Taiwan. Accident investigations revealed that the pilots of the ATR 72-600 turboprop erroneously switched off the plane’s working engine after the other lost power. Here’s a rundown of what happened:

About one minute after takeoff, at 1,300 feet, engine #2 had an uncommanded autofeather failure. This is a routine engine failure—the aircraft is designed to be able to be flown on one engine.
The Pilot Flying misdiagnosed the problem, and assumed that the still-functional engine #1 had failed. He retarded power on engine #1 and it promptly shut down.
With power lost on both the engines, the pilots did not react to the stall warnings in a timely and effective manner. The Pilot Flying acknowledged his error, “wow, pulled back the wrong side throttle.”
The aircraft continued its descent. The pilots rushed to restart engine #1, but the remaining altitude was not adequate enough to recover the aircraft.
In a state of panic, the Pilot Flying clasped the flight controls and steered (see this video) the aircraft perilously to avoid apartment blocks and commercial buildings before clipping a bridge and crashing into a river.

A High Level of Stress Can Diminish Your Problem-solving Capabilities

Thrown into disarray after a routine engine failure, the pilots of TransAsia flight 235 did not perform their airline’s abnormal and emergency procedures to identify the failure and implement the required corrective actions. Their ineffective coordination, communication, and error management compromised the safety of the flight.

The combination of sudden threat and extreme time pressure to avert a danger fosters a state of panic, in which decision-makers are inclined to commit themselves impulsively to courses of action that they will soon come to regret.

Idea for Impact: To combat cognitive impairment under stress, use checklists and standard operating procedures, as well as increased training on situational awareness, crisis communication, and emergency management.

Small Steps, Big Revolutions: The Kaizen Way // Summary of Robert Maurer’s ‘One Small Step Can Change Your Life’

June 18, 2019 By Nagesh Belludi Leave a Comment

Most intentions for change seek a transformative change—something significant to be achieved once and for all, in a short period. “Big, bold steps” is the mantra of many a self-help book or motivational guru du jour.

Real change, however, takes time and is difficult. You become overwhelmed with the magnitude of the effort and persistence required to lose twenty pounds, save up for retirement, change jobs, or stabilize a sinking relationship.

As with most New Year resolutions, you’ll meet with success temporarily, only to find yourself slipping back into our old ways as soon as the initial burst of enthusiasm fades out.

Gradual Improvement, Not Radical Change

UCLA clinical psychologist Dr. Robert Maurer’s One Small Step Can Change Your Life: The Kaizen Way (2004) conceives transformative change as an endless, continuous process of gradual improvements.

By breaking daunting tasks into absurdly little steps, you feel little resistance to change.

To initiate a worthwhile exercise regimen, for example, Maurer suggests that you start exercising by marching in front of the television for one minute for a day or two. Then, little by little, ask, “How could I incorporate a few more minutes of exercise into my daily routine?” Such modest questions help you seek the next proverbial baby step and “allow the brain to focus on problem-solving and action.”

To tidy up your home, pick an area of your home, set a timer for five minutes, and tidy up. Stop when the timer goes off. [This is similar to my ’10-Minute Dash’ technique to overcome procrastination.]

One small step leads to the next, which leads to one more, and so on—finally leading you to your goal of transformative change.

“Little Steps Add Up to Brilliant Acceleration”

Maurer relates this approach to Kaizen, the famed Japanese system of obsessive tinkering and continuous, incremental improvement. This idea is actually American in origin—it was brought over by American efficiency and quality experts such as W. Edwards Deming who were helping Japan rebuild its industrial strength after World War II.

Kaizen involves making continual, small adjustments to production techniques to not only improve speed and quality, but also save resources. That is to say, it is a relentless pursuit of perfection by breaking it down into incremental improvements.

At companies that have embraced Kaizen and other Total Quality Management (TQM) approaches, employees come to work every day determined to become a little better at whatever it is they are doing than they were the day before. Katsuaki Watanabe of Toyota, the poster-boy of TQM, has acknowledged,

There is no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece. But when 70 years of very small improvements accumulate, they become a revolution.

Small Kaizen questions help you determine the next baby step and allow the brain to focus on problem-solving and action

“Little and often” empowers you to “tiptoe past fear”—your brain stops putting up resistance because it is tricked into thinking that you’re embarking only on something minuscule.

All changes are scary, even positive ones. Attempts to reach goals through radical or revolutionary means often fail because they heighten fear. But the small steps of Kaizen disarm the brain’s fear response, stimulating rational thought and creative play.

You can thus triumph over fear and the subsequent inaction that fear causes.

Small steps rewire your nervous system, create new connections between neurons so that the brain enthusiastically takes over the process of change and you progress rapidly toward your goal.

Minimalist, steady, incremental change helps your brain overcome the fear that impedes success and creativity

To avoid failure at keeping your resolutions despite your best intentions, don’t push yourself to somehow become different rapidly. Instead, pledge to achieve positive, enduring life changes one powerful baby step at a time.

Other prominent insights in Maurer’s One Small Step Can Change Your Life:

“Small actions satisfy your brain’s need to do something and soothe its distress.”
“If you are trying to reach a specific goal, ask yourself every day: What is one small step I could take toward reaching my goal?”
“Small actions are at the heart of Kaizen. By taking steps so tiny that they seem trivial or even laughable, you’ll sail calmly past obstacles that have defeated you before. Slowly—but painlessly!—you’ll cultivate an appetite for continued success and lay down a permanent new route to change.”
If you hit a wall of resistance, “don’t give up! Instead, try scaling back the size of your steps. Remember that your goal is to bypass fear—and to make the steps so small that you can barely notice an effort.”
When we face crises, “the only concrete steps available are small ones. When our lives are in great distress, even while we are feeling out of control or in emotional pain we can try to locate the smaller problems within the larger disaster … to help move us slowly in the direction of a solution. But if we are blind to the small, manageable problems, we are more likely to slip into despair.”

Recommendation: Speed-read One Small Step Can Change Your Life: The Kaizen Way. It will help if you or a loved one is stuck in the rut of goal failure.

Take really small steps towards every significant change you want to make. The cumulative benefits of small improvements do have the power to produce large, transformative change. Let Kaizen be a routine that is never done.

Charlie Munger’s Iron Prescription

May 22, 2019 By Nagesh Belludi Leave a Comment

Intellectual inquiry is effortful, and you need a durable internal push to engage in it.

An inflexible approach impedes critical-thinking. I’ve discussed previously (here, here, here, and here) that a sophisticated critical-thinker considers alternative world-views that may cause him/her to philosophize differently.

For example, if you cling rigidly to a “raise taxes on the wealthiest people” position, you are possibly unwilling to contemplate that, among other problems, higher taxes disincentivize productivity, promote economic behaviors to dodge taxes, and contribute to class warfare. Examining all sensible inferences and considering a variety of possible viewpoints or perspectives may help you to arrive at more moderate, practical positions that are conceivably within acceptable limits.

Charlie Munger’s Iron Prescription: Avoid Intense Ideology

One of the central wisdoms of Charlie Munger, Berkshire Hathaway’s Vice-Chairman and the distinguished beacon of multi-disciplinary thinking, is to keep an eye open for dangers that accompany in submitting to a particular ideology.

At his celebrated commencement address to the graduates of the University of Southern California Law School on May 13, 2007, Munger affirmed,

In my mind, I got a little example I use whenever I think about ideology and it’s these Scandinavian canoeists who succeeded in taming all the rapids of Scandinavia and they thought they would tackle the whirlpools in the Aaron Rapids here in the United States. The death rate was 100 percent. A big whirlpool is not something you want to go into and I think the same is true about a really deep ideology.

I have what I call an “iron prescription” that helps me keep sane when I naturally drift toward preferring one ideology over another. And that is I say, “I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it.” I think only when I reach that stage am I qualified to speak.

…

This business of not drifting into extreme ideology is a very very important thing in life if you want to have more correct knowledge and be wiser than other people. A heavy ideology is very likely to do you in.

In the era of social media and group polarization, it’s easy to slip into confirmation bias by committing yourself to a self-imposed ideology.

As I’ve mentioned previously, studies have shown that associating with likeminded folks can make you even more disdainful of contradictory viewpoints. Nothing will ruin you faster than an ideology burrowing deeper in a closed mind.

Idea for Impact: Nothing deceives you as much as extreme passion

Stay away from intense ideologies until you’ve examined the opposing viewpoint. Don’t ignore the counterevidence. Consider the other side of any thought as carefully as your own.

Postscript: Munger’s other iron prescription concerns avoiding the victim mentality: “Whenever you think that some situation or some person is ruining your life, it is actually you who are ruining your life… Feeling like a victim is perfectly disastrous way to go through life. If you just take the attitude that however bad it is in any way, it’s always your fault and you just fix it as best you can—the so called iron prescription—I think that really works.” See my previous article on Charlie Munger and lessons on adversity.

Four Ideas for Business Improvement Ideas

November 1, 2018 By Nagesh Belludi Leave a Comment

Seek fresh eyes. Ask new employees and interns to make a note of every question they have about how things get done in your organization. If anything—reports, approvals, meetings, reviews—doesn’t seem sensible, let them record those inefficiencies. After a few weeks, when they’ve become familiar with the organization and its workflow, have them reassess and report their observations. The best improvement ideas come from people who aren’t stuck in the established ways.
Notice something? Fix it quickly or delegate. Never walk absentmindedly by something that could be improved. A cluttered instruments cabinet in a warehouse? A loose tile in a walkway? A broken link on your customer service website? Don’t take inconveniences and unpleasant situations for granted.
Explore the outsider’s perspective. Notice how trivial stuff can really frustrate you when you’re standing in line at the Bureau of Motor Vehicles or dealing with a slow bureaucracy? While running errands, do others’ rules, regulations, and procedures annoy you? Bump into something that doesn’t have to be laborious, arduous, expensive, or annoying, but is? Examine if your business imposes any of those inconveniences on your customers.
Make it easy for customers to complain. Seek customer feedback in such a way that it encourages people to share their negative experiences. As I’ve illuminated before, many innovative ideas have their roots in prudent attention to and empathy with customers’ experiences.

Idea for Impact: Problem-finding is one of the most significant—and overlooked—parts of innovation. Learn to pay attention to the subtle clues to opportunities all around.

Creativity by Imitation: How to Steal Others’ Ideas and Innovate

October 22, 2018 By Nagesh Belludi 2 Comments

Emulating others’ ideas is an underappreciated learning tool. Many creative innovators set forth as remarkably astute mimics of others. “Good artists copy, great artists steal,” prods a creator’s maxim often misattributed to Picasso.

Imitation is a leading pathway to business innovation, even if being an imitator is anchored by a sense of derision. Ever more businesses are nicking great ideas wherever they can obtain them—in their own industries or beyond. Hospitals have adapted safety and efficiency procedures from the military and the airline industry. Aircraft manufacturers have adopted the car industry’s lean supply chain management concepts. Ritz-Carlton, the luxury chain of hotels and resorts, runs the Ritz-Carlton Leadership Center that has helped trained its legendary cult of customer service and employee empowerment best practices to managers from companies across industries.

Creativity by Taking Existing Ideas: Applying Them in a New Context

The most prominent example of innovating by imitation is Ford’s development of the automobile assembly line—a system Henry Ford copied (and improved) from the Chicago meat processing business.

Henry Ford’s relentless ambition to build his Model T a high-volume-low-cost automobile, together with his engineering knowledge and manufacturing experience provided the leadership and creative environment that nurtured the development of the moving mechanical assembly line. Today, the moving assembly line is the epitome of manufacturing. Almost everything that is now industrially manufactured—automobiles, aircrafts, toys, furniture, food—passes down assembly lines before landing in our homes and offices.

The genesis of the moving assembly line is in the American agricultural products industry. During the late 18th century, the movement of grains changed from hand labor to belts and later moving hoppers.

Innovation by Imitation: Many Innovations Come from the Outside

By 1873, Chicago’s meat-processing industry adapted belts and hoppers to transform beef and pork production into a standardized, mechanized, and centralized business. After cows and pigs travelled to their fate in train cars from farms throughout the Midwest, they were dropped into hoppers and killed. Conveyor belts then moved carcasses past meat cutters, who progressively removed various sections of the animal, cut them into appropriate sizes, and repackaged and dispatched processed meat across the United States.

The meat processors’ task was disassembly (as opposed to putting together automobile parts in Ford’s plants.) Each worker had a specific, specialized job. Production moved swiftly. The American writer Upton Sinclair famously described this industry’s ghastly working conditions in his acclaimed novel The Jungle and said, “They use everything about the hog except the squeal.”

Chicago Slaughter Houses Were the Pioneers of the Moving Disassembly Line Before Henry Ford Started His Assembly Line

In the early 1900s, when Henry Ford wanted to keep Model T production up with demand and lower the price, Ford’s team explored other industries and found four ideas that could advance their goal: interchangeable parts, continuous flow, division of labor, and cutting wasted effort. Ford’s engineers visited Swift & Company’s Slaughterhouse in Chicago and decided to adopt the “disassembly line” method to build automobiles.

The introduction of the moving assembly line process in 1913 enabled increased production up to 1,000 Model Ts a day and decreased assembly time from 13 hours to 93 minutes. Additional refinement of the process, thanks to reliable precision equipment and standardized shop practices, shortened production time radically: within a few years, a new Model T rolled off the assembly line every 24 seconds. First produced in 1908, the Model T kept the same design until the final one—serial number 15,000,000 rolled off the line in 1927.

Auschwitz-Birkenau and Victims of the Holocaust

Sadly, just as Henry Ford copied the Chicago meat processing and perfected the moving assembly line, the Nazi apparatus copied Ford’s methods of mass production to massacre six million people. While Midwestern butchers processed the livestock carcasses, the Nazis systematically handled corpses of the victims of the Holocaust. Nazi operatives removed victims’ hair, clothing, shoes, gold teeth, hairbrushes, glasses, suitcases, and anything of value to be repurposed for the Reich. The atrocities of this inexpressibly shocking disaster are on display at the train tracks and the museums of Auschwitz-Birkenau, Poland.

Formal Strategic-Benchmarking Programs

Smart businesses have formal strategic-benchmarking programs to achieve significant efficiency improvements: they pinpoint the strategic capabilities that matter most to their businesses, seek out companies or businesses that currently manage those capabilities best, and try to copy and deploy those capabilities as rapidly as possible. But time is of the essence for the success of these undertakings, as the management guru Tom Peters warns,

I hate Benchmarking! Benchmarking is stupid! Why is it stupid? Because we pick the current industry leader and then we launch a five-year program, the goal of which is to be as good as whoever was best five years ago, five years from now. Which to me is not an Olympian aspiration.

Imitation is a Key Characteristic of Highly Creative People: The Case of Steve Jobs Copying from Xerox

One of the key characteristics of highly creative people is their exposure to and experience with working in several related domains. They are very good at crossing domain boundaries, relating their creativeness in new and perhaps unexpected ways, and adapting knowledge into new domains. The following case of one of history’s most famous innovators illustrates this distinguishing characteristic.

Steve Jobs of Apple introduced the revolutionary Lisa computer in 1983. It featured such innovations as the graphical user interface, a mouse, and document-centric computing. Jobs had taken—and refined—all these inventions from Xerox’s PARC research labs and introduced by Xerox on its commercially-unsuccessful Alto and Star computers in 1981. The biographer Walter Isaacson writes in his best-selling Steve Jobs: “The Apple raid on Xerox PARC is sometimes described as one of the biggest heists in the chronicles of industry.” Isaacson cites Jobs: “Picasso had a saying—‘good artists copy, great artists steal’—and we have always been shameless about stealing great ideas… They [Xerox management] were copier-heads who had no clue about what a computer could do… Xerox could have owned the entire computer industry.”

Idea for Impact: Borrow Ideas from Others and Combine Them with Your Own Creativity

Interestingly, many “benchmarking” exercises in the world of business—even academia—do not come “top-down” out of strategy. In other words, innovations by imitation are typically not driven from the top down. Instead, they materialize from everyday operational challenges—those painful experiences that send managers scuttling for solutions in a hurry.

Look outside your industry. To improve your creativity, try spending time researching other smart companies—even those outside of your industry. Learning directly from other companies is a useful, underutilized form of research for finding ways to improve performance.

Attend to developments at your competitors and in other industries. Look for potential opportunities that have been discovered elsewhere. Avoid the “not invented here” syndrome—don’t reject other’s great ideas. Keep an open mind.

Beware of Key-Person Dependency Risk

September 7, 2018 By Nagesh Belludi

Key-Person Dependency Risk is the threat posed by an organization or a team’s over-reliance on one or a few individuals.

The key-person has sole custody of some critical institutional knowledge, creativity, reputation, or experience that makes him indispensable to the organization’s business continuity and its future performance. If he/she should leave, the organization suffers the loss of that valued standing and expertise.

Small businesses and start-ups are especially exposed to key-person dependency risk. Tesla, for example, faces a colossal key-man risk—its fate is linked closely to the actions of founder-CEO Elon Musk, who has come under scrutiny lately.

Much of Berkshire Hathaway’s performance over the decades has been based on CEO Warren Buffett’s reputation and his ability to wring remarkable deals from companies in duress. There’s a great deal of prestige in selling one’s business to Buffett. He is irreplaceable; given his remarkable long-term record of accomplishment, it is important that much of what he has built over the years remains intact once he is gone. Buffett has built a strong culture that is likely to endure.

Key Employees are Not Only Assets, but also Large Contingent Liabilities

The most famous “key man” of all time was Apple’s Steve Jobs. Not only was he closely linked to his company’s identity, but he also played a singular role in building Apple into the global consumer-technology powerhouse that it is. Jobs had steered Apple’s culture in a desired direction and groomed his handpicked management team to sustain Apple’s inventive culture after he was gone. Tim Cook, the operations genius who became Apple’s CEO after Jobs died in 2011, has led the company to new heights.

The basic solution to key-person dependency risk is to identify and document critical knowledge of the organization. (Capturing tacit knowledge is not easy when it resides “in the key-person’s head.”) Organizations must also focus on cross-training and succession planning to identify and enable others to develop and perform the same tasks as the key-person.

Idea for Impact: No employee should be indispensable. A well-managed company is never dependent upon the performance of one or a few individuals. As well, no employee should be allowed to hoard knowledge, relationships, or resources to achieve job security.

The Historian’s Fallacy: People of the Past Had No Knowledge of the Future

June 7, 2018 By Nagesh Belludi Leave a Comment

The practice of picking a thesis and then setting out to establish it is a widespread intellectual pursuit. But biographers and historians sometimes portray their subjects as if the historical participants could recognize what lay ahead of them.

Assuming that people of the past pondered over the events of their day from the same perspective as we do in the present is committing The Historian’s Fallacy.

The notion of the historian’s fallacy was first presented by the British literary critic Matthew Arnold (1822–88) in The Study of Poetry (1880.) In questioning how historical backgrounds were portrayed in the development of literary styles, Arnold called attention to the frequent logical error of using hindsight to assign a sense of causality and foresight of significant historical events to the people who lived through them. In reality, those historical participants may not have had wide-ranging perspective that we assume in interpreting the context, conventions and limitations of their time. Arnold wrote,

The course of development of a nation’s language, thought, and poetry, is profoundly interesting; and by regarding a poet’s work as a stage in this course of development we may easily bring ourselves to make it of more importance as poetry than in itself it really is, we may come to use a language of quite exaggerated praise in criticising it; in short, to overrate it. So arises in our poetic judgments the fallacy caused by the estimate which we may call historic. … Our personal affinities, likings and circumstances, have great power to sway our estimate of this or that poet’s work, and to make us attach more importance to it as poetry than in itself it really possesses, because to us it is, or has been, of high importance.

The American historian David Hackett Fischer, who coined the phrase “historian’s fallacy,” cited the claim that the United States should have anticipated Japan’s surprise attack on Pearl Harbor because of the many warning signs that an attack was in the cards. Fischer argues those signs seem obvious only in hindsight—to the World War II military leaders, many of those signs suggested possible attacks on many positions other than Pearl Harbor.

A good historian strives for objectivity by ignoring his own knowledge of consequent events and employing only what the historic individuals would have known in the context of their own time.

A related fallacy is Presentism—a manner of historical analysis wherein the past is interpreted by means of present-day attitudes. Presentism often fosters moral self-righteousness. Employing present-day moral standards to reflect on the Founding Fathers’ ownership of slaves, David Hume’s racism, or Gandhi’s opposition to modernity and technology should not be tainted by our stance of temporal condescension.

Risk Homeostasis and Peltzman Effect: Why Risk Mitigation and Safety Measures Become Ineffective

May 17, 2018 By Nagesh Belludi Leave a Comment

Risk Homeostasis and Peltzman Effect are two concepts relating to how humans react to risks.

Risk Homeostasis is the notion that our personal psychological frameworks comprise a target level of risk towards which we direct our efforts.

We measure risk on our own “risk thermostat.” Because the risk in our environment changes continuously, we are incessantly forced away from our target risk level, but revert toward it by counteracting those external influences.

If the perceived risk of a situation exceeds our target level, we undertake defensive actions to reduce the risk. And if the perceived risk is lower than our target level, we attempt to increase our risk back to our target level by exposing ourselves to dangerous actions.

Consequently, people take more risks when they’re forced to act more carefully. For instance, requiring motorcycle bikers to wear helmets may make them take more risks—to maintain their level of thrill, not to get into accidents.

Peltzman Effect is the notion that people respond to increased safety by adding new risks. The namesake, economist Sam Peltzman, argued in 1975 that when automobile safety rules were introduced, at least some of the benefits of the new safety rules were counterbalanced by changes in the behavior of drivers. Peltzman posited that making seatbelts mandatory for cars resulted in reducing the number of occupant fatalities, but increased pedestrian casualties and collision-related property damages.

Peltzman made a case that even though seatbelts reduced the risk of being severely injured in an accident, drivers compensated by driving aggressively and carelessly—driving closer to the car ahead of them, for instance—so as to save time or maintain their level of thrill, even at the risk of causing damage beyond themselves and their cars.

Risk Homeostasis and Peltzman Effect remain controversial theories. Despite their apparent relevance, the prevailing evidence remains inadequate and inconclusive about how people behave less cautiously when they feel more protected and vice versa.

Further, Risk Homeostasis and Peltzman Effect challenge the foundations of safety and injury-prevention policies. They assert that the only effective safety measures are those that alter individuals’ desired risk level. Anything that barely modifies the environment or regulates individuals’ behavior without affecting their target risk levels is useless.

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Mental Models

Case Study: How Airbus Builds Multiple Redundancies to Minimize Single Points of Failure

Redundancy is Expensive but Indispensable

Idea for Impact: Build redundancy to prevent system failure from the breakdown of a single component

Wondering what to read next?

Wondering what to read next?

A High Level of Stress Can Diminish Your Problem-solving Capabilities

Wondering what to read next?

Gradual Improvement, Not Radical Change

“Little Steps Add Up to Brilliant Acceleration”

Small Kaizen questions help you determine the next baby step and allow the brain to focus on problem-solving and action

Minimalist, steady, incremental change helps your brain overcome the fear that impedes success and creativity

Wondering what to read next?

Intellectual inquiry is effortful, and you need a durable internal push to engage in it.

Charlie Munger’s Iron Prescription: Avoid Intense Ideology

Idea for Impact: Nothing deceives you as much as extreme passion

Wondering what to read next?

Wondering what to read next?

Creativity by Taking Existing Ideas: Applying Them in a New Context

Innovation by Imitation: Many Innovations Come from the Outside

Chicago Slaughter Houses Were the Pioneers of the Moving Disassembly Line Before Henry Ford Started His Assembly Line

Formal Strategic-Benchmarking Programs

Imitation is a Key Characteristic of Highly Creative People: The Case of Steve Jobs Copying from Xerox

Idea for Impact: Borrow Ideas from Others and Combine Them with Your Own Creativity

Wondering what to read next?

Key Employees are Not Only Assets, but also Large Contingent Liabilities

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?