The Week End Economists ponder a "System of Profound Knowledge". Mar 25-26, 2016.

[Hugin]

This weekend we're going to have a look at Quality and more specifically at it's biggest proponent: W. Edwards Deming.

Why?

This quote for starters:

"In God we trust; all others must bring data."

Anyone who knows me personally, knows how much it galls me to roll out praise for a Statistician. But, before all of that, Deming was an Engineer. Most importantly he was at once an anathema to Wall Street and to many a money making scheme built on nothing, but, con-artistry due to his systemic demand for empirical evidence.

Let's look at the basics

William Edwards Deming (October 14, 1900 – December 20, 1993) was an American engineer, statistician, professor, author, lecturer, and management consultant. Educated initially as an electrical engineer and later specializing in mathematical physics, he helped develop the sampling techniques still used by the U.S. Department of the Census and the Bureau of Labor Statistics. In his book The New Economics for Industry, Government, and Education, Deming championed the work of Walter Shewhart, including Statistical Process Control, Operational Definitions, and what Deming called The Shewhart Cycle which had evolved into PDSA (Plan-Do-Study-Act). This was in response to the growing popularity of PDSA, which Deming viewed as tampering with the meaning of Shewhart's original work. Deming is best known for his work in Japan after WWII, particularly his work with the leaders of Japanese industry. That work began in August 1950 at the Hakone Convention Center in Tokyo when Deming delivered a seminal speech on what he called Statistical Product Quality Administration. Many in Japan credit Deming as the inspiration for what has become known as the Japanese post-war economic miracle of 1950 to 1960, when Japan rose from the ashes of war to start Japan on the road to becoming the second largest economy in the world through processes founded on the ideas Deming taught:

Better design of products to improve service
Higher level of uniform product quality
Improvement of product testing in the workplace and in research centers
Greater sales through side [global] markets

Deming is best known in the United States for his 14 Points (Out of the Crisis, by W. Edwards Deming, Preface) and his system of thought he called the System of Profound Knowledge. The system comprises four components or "lenses" through which to view the world simultaneously:

Appreciating a system
Understanding variation
Psychology
Epistemology, the theory of knowledge

Deming made a significant contribution to Japan's reputation for innovative, high-quality products, and for its economic power. He is regarded as having had more impact on Japanese manufacturing and business than any other individual not of Japanese heritage. Despite being honored in Japan in 1951 with the establishment of the Deming Prize, he was only just beginning to win widespread recognition in the U.S. at the time of his death in 1993.

The philosophy of W. Edwards Deming has been summarized as follows:

Dr. W. Edwards Deming taught that by adopting appropriate principles of management, organizations can increase quality and simultaneously reduce costs (by reducing waste, rework, staff attrition and litigation while increasing customer loyalty). The key is to practice continual improvement and think of manufacturing as a system, not as bits and pieces."

In the 1970s, Deming's philosophy was summarized by some of his Japanese proponents with the following 'a'-versus-'b' comparison:

(a) When people and organizations focus primarily on quality, defined by the following ratio,
Quality = Results of work efforts / Total costs
quality tends to increase and costs fall over time.

(b) However, when people and organizations focus primarily on costs, costs tend to rise and quality declines over time.

According to Deming, here are the seven biggest problems facing organizations. Any organization. I submit, even Governments and Countries. I see it all around us.

Seven Deadly Diseases

The "Seven Deadly Diseases" include:

Lack of constancy of purpose
Emphasis on short-term profits
Evaluation by performance, merit rating, or annual review of performance
Mobility of management
Running a company on visible figures alone
Excessive medical costs
Excessive costs of warranty, fueled by lawyers who work for contingency fees

"A Lesser Category of Obstacles" includes:

Neglecting long-range planning
Relying on technology to solve problems
Seeking examples to follow rather than developing solutions
Excuses, such as "our problems are different"
Obsolescence in school that management skill can be taught in classes
Reliance on quality control departments rather than management, supervisors, managers of purchasing, and production workers
Placing blame on workforces who are only responsible for 15% of mistakes where the system designed by management is responsible for 85%
of the unintended consequences
Relying on quality inspection rather than improving product quality

And there you have it.

This week's WEE.

More about W. Edwards Deming: https://en.wikipedia.org/wiki/W._Edwards_Deming and his Foundation's web-site: https://deming.org

[Gungnir]

1. Radical improvement in working conditions was a side effect of Demning and ISO improvement...

I was working in manufacturing in late 80s early 90s and when management was forced to go to ISO certification by the vendors it radically improved quality and working conditions. The most basic processes had to be written down, kept on the line, taught to NEW employees as well as old, and followed. Preventative maintenance had to be done and documented. Dangerous chemicals had to be documented and use explained to workers. All without the Union having to fight constantly for these most basic concepts. (OSHA? fucking joke, inspected once every 2-3yrs, and totally toothless. Kill a worker? $10K fine, and thats assuming it wasn't reduced or dropped on appeal)

I could go on and on.

Gungnir

[Gungnir]

2. Deming’s 14 Points and Their Influence on ISO/FDIS 9001, Part 1

Too bad Deming didn't have the information on Authoritarians.
It really is amazing how much Deming and ISO are a damning condemnation of capitalism. It's hilarious that " ISO/FDIS 9001 has adopted the Annex SL summary for understanding and defining the context of an organization. This has become the cornerstone of the 2015 version of the standard, requiring organizations to understand the business environment in which they operate,". So, 34 years after Deming published Out of the Crisis, capitalism is still such a wild west shit-show that its players need to be forced to understand the most basic and fundamental questions that affect its profits.

http://www.qualitydigest.com/inside/quality-insider-column/deming-s-14-points-and-their-influence-isofdis-9001-part-1.html

Out of the crisis and into the standard

In 1982 the late, great W. Edwards Deming condensed more than 50 years of innovation and experience into a book designed to be a wake-up call for U.S. industry. That book was called Out of the Crisis (MIT reprint, 2000). At that point in his career Deming’s legacy as a mathematical physicist, statistician, management consultant, and visionary was already ensured. But his ongoing frustration with the outdated management philosophy he continually encountered when working in America was plainly evident.


Analyzing Deming’s 14 points

1. Create constancy of purpose toward improvement of product and service with the aim to become competitive, stay in business, and provide jobs.

This is a great point to start with because ISO/FDIS 9001 has adopted the Annex SL summary for understanding and defining the context of an organization. This has become the cornerstone of the 2015 version of the standard, requiring organizations to understand the business environment in which they operate, the issues related to that environment, and drivers originating from stakeholders. This understanding of a business environment and how it interacts and drives the management system is an important evolutionary step for the ISO 9001 standard. It’s also a critical consideration when ensuring that an organization achieves a constancy of purpose.

Much more at link

[Gungnir]

3. Deming’s 14 Points and Their Influence on ISO/FDIS 9001, Part 2

Maybe Deming and ISO should be brought to the financial sector (documentation...)

http://www.qualitydigest.com/inside/quality-insider-article/deming-s-14-points-and-their-influence-isofdis-9001-part-2.html#

A successful QMS is built on principles and culture

In part one of this two-part article, I began an evaluation of Deming’s 14 points, and how they influenced the final draft international standard (FDIS) version of ISO 9001:2015. Part one provided an overview of Deming’s first seven points; in this continuation we explore points eight through 14.

[Gungnir]

4. For Hugin: Data Skeptic podcast

Thought you might find this podcast of interest. Mini episodes 10-15min and long 40min-1hr episodes.

http://dataskeptic.com/

#90: Detecting Pseudo-profound BS
Posted: 2016-01-15
Duration: 37:37
Direct Download: pseudo-profound-episode.mp3
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A recent paper in the journal of Judgment and Decision Making titled On the reception and detection of pseudo-profound bullshit explores empirical questions around a reader's ability to detect statements which may sound profound but are actually a collection of buzzwords that fail to contain adequate meaning or truth. These statements are definitively different from lies and nonesense, as we discuss in the episode.


#80: Big Data Doesn't Exist
Posted: 2015-11-06
Duration: 32:28
Direct Download: big-data-doesnt-exist.mp3
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The recent opinion piece Big Data Doesn't Exist on Tech Crunch by Slater Victoroff is an interesting discussion about the usefulness of data both big and small. Slater joins me this episode to discuss and expand on this discussion.


#53: Using Data to Help Those in Crisis
Posted: 2015-05-08
Duration: 34:47
Direct Download: Crisis_Text_Line.mp3
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This week Noelle Sio Saldana discusses her volunteer work at Crisis Text Line - a 24/7 service that connects anyone with crisis counselors. In the episode we discuss Noelle's career and how, as a participant in the Pivotal for Good program (a partnership with DataKind), she spent three months helping find insights in the messaging data collected by Crisis Text Line. These insights helped give visibility into a number of different aspects of Crisis Text Line's services. Listen to this episode to find out how!

[Hugin]

5. Great!

Thanx.