Thursday, July 19, 2007

Risk Management

This is a summary of the feedback I received on my previous blog entry.

I always had two feedback channels for this blog: the open comments and the personal email. After the system problems in the first half of June, which prevented you from posting comments and me from blogging, the comment channel has closed up. However, the personal email still keeps coming.

Posting comments works again and I much prefer comments to personal email, because this is supposed to be a conversation — with personal email it just looks like I am pontificating. In this post I summarize the feedback I received on the last blog entry, hoping further feedback uses the comment channel, which is up and running.

The emailers agreed among them that I had it all wrong. They observed that Christoph Hauert et al. had the typical European view of a social state, which is proven to be inefficient. Readers pointed out at how efficient the American businesses have become and therefore that one has to study them to learn how to build a successful society.

Using the terminology in Hauert's paper, cooperators tend to become inefficient over time. Defectors are the good guys who identify these inefficiencies and by exploiting them become the punishers of the lazy cooperators and build a better society. Examples given included hedge funds and takeover partnerships like Steel Partners in the Bull-Dog Sauce case.

The question then is about the morality of defectors punishing cooperators to create a better society. The answer to that was that every cooperator has to have a risk management strategy in place to be useful to society. Hence, the risk manager should replace the abstainer proposed by Hauert et al. An example of risk management in business is the poison pill, but the emails I received mentioned this as a bad example, without giving me good examples.

Anyway, what does risk management mean for us in color science? We do research, which is about taking risk. None of the emails I received touched this topic.

Some classical strategies to manage risk include transferring the risk to an outside party (i.e., out-source research to a university), and reducing the negative effect of the risk. The risk is that the invention cannot be transferred into a product, hence researchers should only take on projects proposed by marketing as a result of a customer study. In our jargon we call this going only for the low-hanging fruit, and the associated tactic is to stick to incremental product improvements.

Practically this means we should stop research in solid state light sources and focus instead on improving the color rendering index of fluorescent and halogen discharge lamps. Similarly, instead of spectral imaging, color Fourier imaging, or high-dymanic-range imaging we should keep improving look-up table methods, add parameters to ICC profiles, and measure more color patches.

Do you have a better understanding you can share?