March 12, 2023

Silicon Valley Bank

I don't have any insider information, sorry. Here's an article to help you learn a bit more.

Business Professionals struggle with feedback loops. Feedback loops are cousins of interactions. Here is an example of an interaction. This is a 2x2 factorial test on conversion rates.

Here we see that the interaction of B/C produces the best result. A test of this nature identifies the interaction we should pay attention to.

Now, what would happen "A" was your control and you tested A vs. B? The results would be identical, and you'd conclude to keep doing "A" and you'd never realize that A with B works best.

In our world of A/B testing, we miss interactions all the time. Interactions lead to unique outcomes, and unique outcomes can lead to feedback loops that can either accelerate results or harm our businesses.

I wrote this more than eight years ago for catalog readers (click here). Here we are in 2023 with constant grumbling about how hard it is to find new customers in large enough quantities. With an inability to measure and understand interactions between Amazon and online brands and catalog brands (all of which could have been disclosed by the co-ops but they'd have seen that as bad for their clients), my catalog clients suffered mightily, and continue to suffer.

In the case of Silicon Valley Bank, you saw what the interaction of risk (which likely wasn't as huge as it was on many/most bank failures) did when multiplied by insider Silicon Valley folks pulling money early multiplied by commoners pulling money late leading to the failure of the bank.

Where possible, develop your skills at identifying interactions. It's a critically important business skill to acquire.


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