Interview with Me

I did an hour-long interview with Nick Lamparelli for his Profiles in Risk podcast. Nick and I met when he commented on this very blog a few years ago, an experience that he says inspired him to engage with social media, blogging and podcasting himself. Needless to say, Nick’s rocketed past me in accomplishment there.

In the interview we cover:

    • That time I cried and other exam experiences
    • How my two main jobs now, sales and analytics, are both things I hated/feared before starting work
    • Honesty and being real
    • Reinsurance and the recent hurricane events

Link to the full interview here. I did enjoy it. Maybe there’s something to this podcasting thing. Stay tuned!

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A couple of years ago I (once again) swore off exams and this past January I (once again) broke that promise. I started studying for CAS Exam 7.

There wasn’t a lot of room for this. I had a pretty demanding job and three kids at home under 5. I bathe them every night, read them books and tell a story before bed. Now I was to detonate this nice little balance with a first attempt at an upper level actuarial exam? No way.

But a colleague started studying for 7 and I felt a pang of.. jealousy? Brutal though the exam process is, that feeling of pushing yourself to your limit is addictive. Real life problems are hard, too, of course, but real life payoffs tend to take a long time. That buzz of a duel on exam day and the rush of the result with genuinely high stakes is hard to get anywhere else.

So this was an experiment. Can I start four solid months out and study only on my commute and in little chunks here and there and pass an exam? Well, the self-talk went, if I can cover the whole material twice by the signup deadline, I’ll go for it. But that was in March! To get there I needed to commit hard in January. If this was nuts at least I’d only lose two months of my life.

Turns out it wasn’t nuts! Or at least it was achievable. It was definitely nuts. I had my 500 cue cards done by mid Feb. I scheduled daily close reading sessions with my co-studying colleague (we actually got to about 2 a week). Every minute I was focused.

In the back of my mind I knew that the chances of my delicate little balance blowing up in my face was pretty high. That means I was scared. Constantly. For months.

It works, you know, fear. Learning is so painful your mind desperately looks for every little way to procrastinate or avoid the work. You convince yourself to focus on the things you’re good at. You self-deceive about the stuff you’re not good at, like, “oh, I get that” after one problem (Liar!).

The way to suppress the fear is to feel mastery over the material. But since exam outcomes are always a bit random true mastery is almost impossible. That’s why the fear comes back fast and drives you on.

I tasted the lash of fear for four months. I had good weeks and bad weeks but contained studying to my commute and the cue cards I literally carried everywhere. Still reading to my kids at night, I started cautiously feeling good.

Then the wheels came off. We had the floor replaced in our house and it went wrong. I had to take the week off work (no commute!) and we moved into a hotel for 5 days. With the kids of course. Two weeks before the exam. The very day we move back in I fly to Europe for a week-long business trip. And on the first night in Europe, I get the flu. Influenza B, from a Chuck E Cheese we visited trying to kill an afternoon while they demolished our living room. All three kids and my wife got it, too. And they were home sick while I was away. I had it bad. They had it worse.

I wasn’t able to crack a book until Saturday night having not studied for 13 days. The exam was the following Thursday morning. My family was exhausted. I was exhausted. But fear had been there all along, growing stronger. It was terror now. Did I have enough time?

I sat for the exam. Felt good about it. But I was burnt out. Normally after sitting I sheepishly look up the next exam’s syllabus: what’s next? Not this time. I couldn’t bear to look at it. Others download the exam when it’s released and replicate their answers to guess their grade. That thought made me nauseous. My colleague was all ready to dig into Exam 8. No way. I don’t want to do that again. I’m burnt out.

Where I come from a burnout is a kid that smoked too much weed and has that heavy lidded, slow talking disposition welded to their personality. This feeling is similar. It’s not laziness, really. Lazy people are lying to themselves about the consequences of them parking their ass for another week. Burnouts know what we’re missing. We’re making an informed decision to sit stuff out. It ain’t worth it!

So my result notice went to my junk mail and I got it late. I was in no rush. This exam didn’t mean much on its own if I was truly done. A pass, though! It still feels good, I have to say, but…

No more exams.

(again! I know..).


Hey, thanks for reading this. If you enjoyed it and think you’d want to get a short weekly email from me with some article and podcast links, consider signing up here!

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Disruption In Insurance

My latest on Here is the intro:

For any company, it’s good to be relentlessly focused on the customer: success means knowing what they want and delivering that with discipline and low prices.

Or maybe not! The amazing thing about disruption theory, as defined by Clay Christensen, who coined the term in his 1996 HBR article and subsequent book, is that it reveals this strength to also be a deadly weakness.

Do click through and read!

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Me on Pod-listening

At insnerds:

So back to Tyler’s question: listening fast does increase my talking speed because I’m just used to it. But this is a bad, bad habit. Why do we converse at 1x anyway? I say that thisis the speed limit of talking, and faster talking degrades the quality of thought: faster talkers make less sense!

More at the link!

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Study Tips – How To Be Awesome in 10 Steps

My latest for insnerds. Here’s the intro:

I have a longstanding love/hate relationship with professional exams since starting my career. I’ve done CFA exams and actuarial exams (CFA are easier.. just). I’ve passed exams; I’ve failed exams. I’ve panicked in an exam and failed. I’ve cried after passing an exam. I was once so ashamed of myself after failing (fourth fail in 7 months) I couldn’t bear to talk to anyone and hid in a coffee shop for hours. And when I emerged I lied about the result!


And I persevered. Here’s what I’ve learned.

Please do click through and read!

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I Blogged Elsewhere

I was asked by a reader to post for a neat insurance media startup, Somehow an organization with nerds in the name didn’t have any actuaries involved. Well, I’m happy to put an end to that! Here is my contribution. One excerpt:

In any negotiation, you are introducing a seriously high risk of human fallibility, and the shareholders of these organizations have very strong preferences for the kinds of errors they want their organizations to make. Risk taking organizations want fewer false positives (doing fewer bad deals), and sales organizations want fewer false negatives (ditching fewer good deals). They fight it out to correct for cognitive bias.

Please do read the whole thing.

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Big Company, Small Company

Some time ago I was toying with the idea of opening a retail franchise. Now, I didn’t know a thing about retail, but I remembered one of my marketing professors was a retail specialist, so I emailed him. He suggested a textbook and I ordered it (older version because, come on, $120!?). Then, for the first time in my life, I read a textbook trying to learn rather than just get through a course.

Complete waste of time. No real advice on how to actually run a business. Instead, lots of features for memorizing a load of minimally useful jargon: summary bullets in the (large) margins, more bullet summaries at the end, narrative summaries, Q&A and very little actual advice.

I eventually passed on the franchise but was left with the impression that the academy has very little to offer business owners. So with that in mind, this article from the OECD has got me thinking of the big picture of my own business.

The core idea boils down to this graph, which charts the increasing gap between labor productivity of the top firms and the rest (note how much stronger this is in service firms):


They also note that the churn in firm rankings is dropping, too, so firms at the ‘global frontier’ are getting older and that

“..evidence from eight European economies suggests that MFP growth over the 2000s was weaker in sectors that recorded larger declines in the share of young firms (under 6 years), and in particular start-ups (under 3 years)”.

The authors like this explanation:

More importantly, the rising gap in productivity growth between firms at the GF and other firms since the beginning of the century suggests that the capacity of other firms in the economy to learn from frontier may have diminished [emphasis DW].

They go on quite a lot about how firms should learn from each other and that promoting this should be the key policy goal.

I don’t buy it.

Firms do learn (steal) from each other but I think the biggest difference in success is management’s desire and ability to take raw (stupid) ideas and turn them into great businesses. That is about high quality people, effective management, perseverance, passion. Those things aren’t any more scarce than they were 50 years ago.

Interestingly, there’s a hint of an explanation I much prefer in the paragraph following the quote above:

Firms at the global productivity frontier are typically larger, more profitable, and more likely to patent, than other firms. Moreover, they are on average younger, consistent with the idea that young firms possess a comparative advantage in commercialising radical innovations (Henderson, 1993; Baumol, 2002) and firms that drive one technological wave often tend to concentrate on incremental improvements in the subsequent one (Benner and Tushman, 2002). However, the average age of firms in the global frontier has been increasing since 2001 (Figure 12). To the extent that this reflects a slowdown in the entry of new firms at the global frontier, it could also foreshadow a slowdown in the arrival of radical innovations and productivity growth [emphasis DW].

The big point the authors miss here is that the large firms, which are themselves young, were once small firms that beat the frontier firms du jour. They did figure something out. Then they sat on that idea and mined it.

Here’s Peter Thiel:

Thiel flagged top entrepreneurs such as Bill Gates, Larry Page, and Mark Zuckerberg as people who had built their businesses on unique ideas, and advised future innovators that, “if you’re copying these people, you’re not learning from them“.

Now I summon Horace Dediu:

What really causes a company to fail is disruption. The business model around which all products, customers and priorities are built; the culture, the skills and “DNA” of the company; is vulnerable. This vulnerability is why companies have considerably shorter lifespans than the people who work there. They are one of the most fragile of organisms: high infant mortality, with short, unpredictable lives.

Microsoft ascended because it disrupted an incumbent (or two) and is descending because it’s being disrupted by an entrant (or two). The Innovator’s Dilemma is very clear on the causes of failure: To succeed with a new business model, Microsoft would have had to destroy (by competition) its core business. Doing that would, of course, have gotten Ballmer fired even faster.

The key thing that Disruption Theory taught me is that profitable firms can’t make big changes. Management snuffs out the raw (stupid) ideas instead of building businesses with them. Their first priority is to protect the existing business which real disruption necessarily destroys. Any other innovation is called sustaining innovation, in that it can be adopted by incumbents, making them stronger, not weaker. So if I observe older firms and stagnant rankings my question is: why aren’t the younger firms innovating? Peter Thiel again (video):

It’s not a fact of nature that the slowdown has happened. We’ve become risk averse, we’re regulated to death, we’ve become incrementalist and we’re not really willing to take bold steps. We’ve talked ourselves into thinking that throwing angry birds at pigs is the best we can do.

“We” don’t want innovation? I think that’s right, actually.

There happens to be an enormous amount of confusion over disruption in insurance circles because people think you’re talking about the periodic purge of the market cycle. The laggard firms do tend to take a lot more damage during cycle turns and cyclical startups do tend to use the newest tech so cyclicality acts as an accelerant for innovation. The fact remains, though, that the cycle of the insurance business is much more powerful in the short term (ie for your career) than innovation. The vast majority of startup firms in insurance businesses owe their scale to good cycle timing.

The average culture is thus highly aware of cyclical change but under-appreciates structural change. I work at a small company, dwarfed by our competitors by 10x, 100x, 500x and I see every day how the large organizations are slower to react to new ideas than we are. They can’t jeopardize that existing business! So though it makes me feel good to say that we are leaders in much of what we do, quicker to invent, quicker to adopt, we feel our lack of resources all the time and resources have been enough to keep the incumbents entrenched. They do a good enough job! No innovation we’ve led has been so novel that our competitors can’t either steal it or ignore it and cede to us the moderate growth that rewards moderate innovation.

But moderate innovation is still something and we’ve capitalized on maturing technologies in data capture, storage and analytics. These are sustaining innovations so everyone benefits but they’ve still been transformational on a longer time scale.

Back in the dark ages, decisions were made at the hyper-local level and only consolidated for financial reporting purposes. Large organizations could not be centrally controlled because it was too expensive to answer any question other than: are we making an accounting profit?

So they had a culture of delegated decision making: independent, proud, cunning and highly social. Deals were done on the proverbial napkin because a low oversight, high trust relationship meant mistakes could be corrected or swept under the rug with ‘special deals’ later on.

Then technology facilitated oversight and accountability from a distance. People who could manage systems and build models to oversee operations were suddenly empowered at the expense of grass roots freedom. This concentration of information (power) enabled a wave of consolidation, snuffing out the need for individuals to manage external relationships. Less freedom, more oversight, less (individual) trust, more transparency. We all became a bit more corporate and the culture changed.

My story is that this drove the consolidation of reinsruance brokers, too. Back in the old days, an individual broker would spend half his career working for someone else, building up a book and then selling that book to a bidding firm or starting his/her own shop. The individual relationship was what mattered. Today the value of those relationships is significantly eroded. Business is ‘corporatized’, more services are required and a whole hierarchy of relationships are needed to manage the hierarchy at client and counterparty organizations. The actual change has been long and painful, yet the firms that remain are mostly the same ones that we started with, excepting for a whole lot of M&A.

Now we can test the OECD observations and analysis against my experience.

  • Are the small firms lagging behind the large ones? Check.
  • Is the gap widening. Yep, probably.
  • Is it because they can’t learn from the large firms? No, I don’t think so.

I think small firms are disappearing because the industry wants scale to supply capital-intensive and relationship-intensive services. Small firms generally have the same ideas as the big firms but they just lack the resources to implement them. To win (survive), small firms need to have better ideas.

My company has been different from other small firms in that we’ve been able to implement new ideas that large firms haven’t. We have a superior process. But our ideas haven’t been powerful enough to unseat the megas in a meaningful way.
Scale rewards itself and it’s hard to break into that virtuous cycle. M&A works, but it is difficult not to revert to the cultural mean doing that.  And scale the ‘easy’ way yields the most stagnant of entities: constantly fighting over itself. Maybe most importantly of all, there are very few small firms still in existence in my business, so nobody to buy.

And that’s the key feature that the OECD report misses. Something is different out there that is killing startups before birth. I say increasing rewards to scale have kept smaller firms from getting a seat at the table.

The market prefers scale to the innovations it’s been presented.

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