Risk Aversion and Sunk Cost Fallacy

In his book Misbehaving, Richard H. Thaler tells an interesting story. In a class on decision-making to a group of executives from a company in the print media industry, Thaler puts the executives to a scenario: Suppose you were offered an investment opportunity for your division that will yield one of two payoffs. After the investment is made, there is a 50% chance it will make a profit of $2 million, and a 50% chance it will lose $1 million. When Thaler asked who would take on this project, only three of twenty-three executives would do it. Then he asked the CEO how many of the projects would he want to undertake (suppose all projects were independent, that is the success of one was unrelated to others), the answer is all of them!

Agile Software Development: China Navy

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Agile Methodology, Lean Startup

The best demonstration of agile software development is probably the modernization of China Navy. Following a “Run Swiftly in Small Steps” strategy, China Navy has undergone a stunning modernization push that puts it near parity with the US. Look below how China Navy has steadily improved each class of their destroyers in gradually shorter and shorter time. They are the grand master of agile development.

Payroll: An Overlooked Area in FinTech

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Banking, Payroll

A lot of brain power and money have been poured into FinTech, especially lending and payment areas. These are indeed exciting areas with new business models and technologies. On the other hand, people rarely associate the sexy FinTech with payroll services. Although it may sound boring, payroll is actually an overlooked gold mine for innovators. Traditionally, payroll service companies make money by service fees. New HCM service companies such as Zenefits work as insurance brokers while providing free payroll and HR services. But if we lean under the hood and look at the process, there is an interesting opportunity.