Keeping calm and carrying on, Cringely style

From Bob Cringely:

This is probably the last picture ever taken of our house in Santa Rosa, California. The time was 11:30PM Sunday and a neighbor had just pounded on our door. Fifty mph winds had been blowing all day but nobody expected fire. Yet the glow you see is from burning houses behind and beside ours. They, too, are gone.

We left with what clothes we could grab. I forgot my computer. I’m still blind and awaiting surgery so Mary Alyce drove one car and we left the other to burn.

By 8AM we were on the Mendocino coast with crappy Internet service and this iPhone. But we were all safe.

Certainly I’d been stupidly feeling a bit sorry for myself, but that ends now.

The schools are closed so with Fallon at my side we’ll buy a notebook and resume writing. Look for my next column as early as tomorrow.

The heading on this blog post is what caught my attention. “I Have No Boils” it read. Bob explains:

Finally, about the headline, my old neighbor Ella Wolfe complained to her doctor once that she was suffering all the trials of Job from the Bible (Ella was approaching 100). “You have no boils,” said her doctor.

Neither do I.

Heartwarming stuff. The good news is that he and his family are safe.

Richard Thaler’s Nobel Prize

It all came from a list he maintained on the blackboard in his office under the heading: “Dumb Stuff People Do”. Eshe Nelson has a nice piece in Quartz which summarises some of them. They include:

The endowment effect — the theory that people value things more highly when they own them. In other words, you’d ask for more money for selling something that you own than what you would be willing to pay to buy the same thing

Loss aversion. “People experience the negative feeling of loss more strongly than they feel the positive sense of a gain of the same size.“

Anchoring. “If you are selling an item, your reference point is most likely to be the price you paid for something. Even if the value of that item is now demonstrably worth less, you are anchored to the purchase price, in part because you want to avoid that sense of loss. This can lead to pain in financial markets, in particular.”

Planning vs doing. The internal struggle between your planning self and doing self. One way to avoid this conflict is to remove short-term courses of actions. Goes against the traditional economic notion that more choices are always better.

Nudges. “Thaler and Sunstein pioneered the idea of using nudges to create alternative courses of actions that promote good long-term decision making but maintain freedom of choice. One method of doing this they found is simply changing the default option—switching users from opt-in to opt-out, for example. “ (Piece includes interesting map of the world showing countries where nudging has become government policy.). The overall philosophy is: if you want people to do something, make it easy to do. Internet companies have become very rich by understanding this.

The availability heuristic. “People are inclined to make decisions based on how readily available information is to them. If you can easily recall something, you are likely to rely more on this information than other facts or observations. This means judgements tend to be heavily weighted on the most recent piece of information received or the simplest thing to recall.” So if you’ve been to a store that had a few spectacularly low-priced items you’re inclined to think that it is, in general, a low-priced store.

Status-quo bias. “Most people are likely to stick with the status quo even if there are big gains to be made from a change that involves just a small cost. In particular, this is one of the implications of loss aversion. That’s why a nudge, such as changing the default option on a contract, can be so effective. Thaler’s research on pension programs shows that while employees can choose to opt-out of a plan, the status quo bias means once they are in it, they are actually more likely to stay put.”

In a way — as the FT points out — Thaler’s biggest contribution was in persuading the economics profession that behavioural traits ought to be included in economic theory and practice. “If economics does develop along these lines”, he wrote, “the term ‘behavioral economics’ will eventually disappear from our lexicon. All economics will be as behavioral as the topic requires.”

Asked how he proposed to spend the money, he replied “as irrationally as possible”.

The MBA: a Grand Tour in the age of Airbnb

Lovely column in today’s FT (behind a paywall, alas) about the MBA degree, a qualification that I’ve long regarded as pernicious. The peg for the piece is the fact that King’s College London is launching a new business school which is very pointedly not offering an MBA. At one point, Broughton retells a story about the “marshmallow challenge” invented by Peter Skillman (a former smartphone company executive):

A team of four or five people is asked to build the tallest possible structure using 20 strands of dry spaghetti, a roll of tape, a ball of string and a marshmallow, in 18 minutes. Mr Skillman found that the most successful were children just out of kindergarten. They immediately began building, and if their tower collapsed they would build again. The worst were recent MBA graduates. They would start by arguing about who had the most expertise, then sketch blueprints and make calculations before constructing a tower. If it collapsed, they had no time to start over.

That sounds too good to be true. Still, as the Italians say, if it’s not true it ought to be.

Bureaucracy and accountability

A discussion about the REF and expenses today has reminded me (as such discussions often do) of this famous dispatch from the Duke of Wellington to his political masters in London.

Portugal, 1812

Gentlemen,

Whilst marching from Portugal to a position which commands the approach to Madrid and the French forces, my officers have been diligently complying with your requests which have been sent by H.M. ship from London to Lisbon and thence by dispatch to our headquarters.

We have enumerated our saddles, bridles, tents and tent poles, and all manner of sundry items for which His Majesty’s Government holds me accountable. I have dispatched reports on the character, wit, and spleen of every officer. Each item and every farthing has been accounted for, with two regrettable exceptions for which I beg your indulgence.

Unfortunately the sum of one shilling and ninepence remains unaccounted for in one infantry battalion’s petty cash and there has been a hideous confusion as to the number of jars of raspberry jam issued to one cavalry regiment during a sandstorm in western Spain. This reprehensible carelessness may be related to the pressure of circumstance, since we are war with France, a fact which may come as a surprise to you gentlemen in Whitehall.

This brings me to my present purpose, which is to request elucidation of my instructions from His Majesty’s Government so that I may better understand why I am dragging an army over these barren plains. I construe that perforce it must be one of two alternative duties, as given below. I shall pursue either one with the best of my ability, but I cannot do both:

1 To train an army of uniformed British clerks in Spain for the benefit of the accountants and copy-boys in London

or, perchance,

2 To see to it that the forces of Napoleon are driven out of Spain.

Your most obedient servant,

Wellington

What poetry is for

One of my rules is that whenever Louis Menand writes anything in the New Yorker, I drop tools and read it. IMHO, he’s the best literary critic living today. In July he wrote a marvellous review piece on a whole raft of books about the role and importance (or lack thereof) of poetry. I was struck by this para:

One of [Ben] Lerner’s chief examples of misplaced expectations for poetry is what he calls “nostalgia for a poetry that could supposedly reconcile the individual and the social, and so transform millions of individuals into an authentic People.” He says that this kind of poetry never existed. To which there is a one-word response: Dante. The Divine Comedy is a first-person poem about a man who suffers a crisis (“I found myself in a dark wood, for the straight way was lost”), which he resolves by undertaking an imaginary journey that he pretends has been made possible by the soul of a dead woman he loved. That poem, written in the vernacular in the fourteenth century, is still at the heart of national identity in Italy. As the Iliad and the Odyssey were for ancient Greece, and as the Aeneid was for Rome.

Towards the end of the piece Menand quotes from a poem by Frederick Seidel in a post-election collection of 50 poems edited by Amit Majmudar. This is how it goes:

And you could say we’ve been living in clover
From Walt Whitman to Barack Obama
Now a dictatorship of vicious spineless slimes
We the people voted in has taken over.
Once we’d abolished slavery, we lived in clover,
From sea to shining sea, even in terrible times.
It’s over.

Telling it like it was

Lovely story in today’s Times Diary:

Today marks the 35th anniversary of the death of Sir Douglas Bader and I couldn't let it pass without this story about the RAF hero. He was giving a talk at an upmarket girl's school about his time as a pilot in the Second World War. "So there were two of the f***ers to my right, three f***ers to my right, another f***er on the left", he told the audience. The headmistress went pale and interjected: "Ladies, the Fokker was a German aircraft." Sir Douglas replied: "That may be, madam, but these f***ers were in Messerschmitts".

Terrific story. Wonder if it’s true.

Richard Posner retiring? Not exactly.

On Saturday, Richard Posner retired from his position as the lead judge on the Seventh Circuit Appeals court. For some of his legal peers this may come as a relief, because it means that they won’t have to continue their unequal struggle to keep up with the rulings of the most influential jurist in recent American history. Cass Sunstein, a legal scholar and colleague of Posner’s at Chicago has a nice appreciation of his mentor in which he enumerates the 3,300 judgments that Posner handed down during his time as a judge and explains his significance as a legal thinker. “In the modern era”, he writes, “no one comes close to Posner in terms of the sheer width and depth of his influence on contemporary law”.

Posner’s approach has a deceptively simple starting point: We should focus insistently on the real-world consequences of legal rules.

Suppose that a company has emitted pollution, causing injuries to its neighbors, and the neighbors want to shut the company down; that poor people have purchased refrigerators on credit for what seems to be a very high price, and they want to get out of the deal; that a company has gotten really big, and regulators want to break it up.

In his academic work in the 1970s, Posner asked what different legal rules would actually do, and he used the tools of economics, with its focus on incentive effects and unintended consequences, to answer that question. If the victims of pollution have a legal right to shut companies down, the injuries will stop, but the companies’ workers and consumers will be hurt, which means that courts have to make some tough trade-offs. If poor people can get out of the refrigerator deal, they won’t have to pay that high price, but companies might not want to give credit to poor people in the future.

In countless areas of the law, Posner showed that economic analysis casts a new and often surprising light on questions that people might otherwise try to answer with unhelpful intuitions.

What has always fascinated me about Posner is his role as the most formidable public intellectual in the US since the death of Daniel Patrick Moynihan. For anyone interested in ideas he’s both inspiring and infuriating: inspiring because of the range of his interests and the power of his intellect; infuriating because of his astonishing productivity and his ability to write pellucid prose.

On his intellectual range, Sunstein writes:

It is astounding but true that many of Posner’s contributions have come wholly or mostly from outside of the area of economic analysis of law, with valuable work on (for example) law and literature; on how to deal with catastrophe; on economic crises; on national security threats; and on the federal judiciary itself, and whether it is political, and what it does well and poorly.

On his literary style, the two books of his that I know are Public Intellectuals: a study in decline and his 2011 book on the 2008 banking crisis, A Failure of Capitalism: The Crisis of ’08 and the Descent Into Depression.

Reviewing the latter in the New York Times, Jonathan Rauch observed:

You know that story, and Posner tells it well, with a particular flair for showing how dozens of moving parts interacted. Being Richard Posner, however, he is not content to be an amiable guide through the thicket. His real interest is in finding and detonating grenades in the underbrush.

One is right there on the title page, which flaunts the D-word. The current crisis, Posner maintains, is a depression…

The thing that’s really interesting abut the book is that Posner — in characteristic contrarian style — doesn’t buy the conventional wisdom that the banking catastrophe was (in President Obama’s words) “a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.” In other words, capitalism is a perfectly good system ruined by crazy, greedy and irresponsible people. Posner disagrees — which, for a guy who has spent most of his career using ideas from economic theory to illuminate legal questions, is remarkable. Instead he argues that what the crisis showed is that markets are not intrinsically the self-correcting mechanisms of economic theory. “The mistakes were systemic”, he wrote, “the product of the nature of the banking business in an environment shaped by low interest rates and deregulation rather than the antics of crooks and fools.” Markets, of their own accord, will sometimes collapse and be unable to right themselves completely for years at a stretch.

That remind you of anyone? For me, it’s back to Keynes, for two reasons. The first is that Keynes had the same insight into the capacity of a market system to reach an equilibrium at a very low level from which it cannot recover. And secondly because Posner, in his ability to change his opinion on something he has believed for years, brings to mind Keynes’s alleged retort to a journalist who accused him of inconsistency: “When the facts change, I change my mind. What do you do, sir?”

(Sadly, this attribution may be apocryphal. Sigh. Some things are too good to check.)

Anyway, the good news that although Posner will not be judging any more, he will still be writing. And still exploding grenades in the undergrowth. More power to his elbow, as we say in Ireland.