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Average Lies 2

When I was a kid there was something I didn’t get. Why did VCRs have a clock? The thing never seemed to work correctly, was slightly different from every other clock in the house, and wasn’t central to the functionality of the VCR unit. I was going to watch True Lies (again) and did not need to know what time it was.

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As an adult I think I get it. The VCR had a clock because clocks were inexpensive to install. A few cents may not make sense from a JTBD approach, it does make sense from a sales approach. When people compare A to B at the same price but A has something B does not (a clock), consumers will choose A even if it’s a feature they don’t really need.

Like a VCR clock.

The same thing happened with pictures. Instagram changed not only how people took photos but how many. Pictures are cheap to take and share. As things become digitized they are cheaper.

Like numbers.

More counts, more code, more algorithms, more nodes. The network grows and the network shows everywhere that Mikey-boy goes. 

We are counting more and computing more which means we will be sharing more numbers. This Average Lies series (part 1) is a reminder to dig deeper into numbers and come up with a framework for when average is, and is not a good measurement.

  • Good: Biological (height). Mediocristan. Large samples. Homogeneous.
  • Bad: Social (media). Extremistan. Small samples. Heterogeneous.

Here are three more examples:

On The Long View, Moshe Milevsky said, “The number of times you’ve circled the sun, your chronological age, doesn’t really reflect the years you have remaining. You can be fifty-five years old chronologically, and I can be fifty-five years old chronologically but that doesn’t really tell us how long we have to spend in the lifecycle.”

Tuscan is cooler but south of Phoenix.

The most successful country in the NBA? Poland of course.

As numbers are cheaper to produce more numbers will be produced. Like VCR clocks and Instagram pictures, some will be good but some will not.

Want more? Check out this pay-what-you-want placebo prescription pdf.

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Calorie Labels, Screen-time Labels

One of the most important findings of behavioral psychology is Daniel Kahneman’s idea of WYSIATS, what you see is all there is. If something is salient, it’s important. If something is hidden, it may as well not exist.

But this tendency comes in contact with any ‘easy’ choice, like what to eat.

Metabolism
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On the one hand salience heightens importance. On the other, we love good food.

In the battle between salient calories on restaurant menus and ‘mmm…barbeque‘ who takes the cake?

Humans will adapt. New Yorkers got used to the calorie displays and slowly ignored them. This is why commutes always suck and houses loses their shine. We get used to things that are presented in the same way (your home) but notice all the novel ways things can be good or in the case of a commute, bad.

Incentives work, to a point. When school children were offered a health snack about 15% chose it. Offer an incentive though, and 75% of kids choose the snack. This effect degrades over time. It works for adults too.

People trade-off. When researchers looked at the buying habits at Starbucks, customers reduced the food they purchased once calorie labels were on the menu but made only the slightest adjustments when it came to their drinks.

People like low numbers. At a cinema, the concessions operators varied the prices of drinks. Sometimes they were the traditional S/M/L pricing. Sometimes they were priced traditionally and per-ounce [i.e. $1.29 (4 cents per ounce)]. People purchased more large sodas when the price-per-ounce was included. This helps explain our family’s Fro-Yo receipt.

Nutritional labels is a logical approach. It’s non-alchemic approach. And it doesn’t work.

I got hungry writing this post. Not from all the talk about the food but to think about all the effort in legislating, designing, crafting, installing, asking, updating, cooking, and serving this idea. It’s a lot, mostly for no effect. Alchemy, on the other hand, is all about creating value from low-cost.

 

Instead we can think of an idea Paul English had during his time at Kayak. English noticed that a lot of people paid a lot of money for a lot of watch without a lot of features. He realized watches mostly do two things: tell time and signal status.

Why not then, make a watch that does both but signals in a unique way? What if Swatch made a purple watch which cost thousands of dollars which were donated to charity?

Two birds, one stone.

A similar idea might to create a water bottle signaler. In the south, Yeti cups act in this way like this. In college Nalgene waters bottles did something to this effect too. We have no idea if this signaling approach will work but for the cost it’s certainly worth testing.

This post started with an idea that that food calorie labels and screen time notifications  have similar effects, minimal. There’s not much research, but that seems to be about right.

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Competing against non-consumption

black and white people bar men
Photo by Gratisography on Pexels.com

On, The Long View podcast, Sallie Krawcheck said, “Our rival is cash and inertia, that’s our biggest competition.”

The crucial idea from Zero to One is to not compete because competition makes a difficult situation more so. Competition aversion is why some buy boring businesses.

Once there’s another entity, the market mechanism incantation summons the invisible hand and cranks into gear competition. Great for consumers, bad for producers.

A business can avoid this by following Bob Moesta’s JTBD framework. Non-consumption, Moesta says, “is buried in everyday life and you have to dig for it.” Because people aren’t using a form of this product, they don’t know what they want, and it’s why Moesta and his crew conduct the scope of interviews they do. It’s hard to find this stuff. It’s why Steve Jobs said he doesn’t ask people want they want.

When Krawcheck started Ellevest in 2015, she would have seen a lot of different investing options. There were many competitors with many features. She could have focused on a metrics like cost per trade, minimum balance and so on. But instead of looking at the easy-to-see things, she focused on the hard to see one: non-consumption.

Business is difficult. One way to make it less so is listen to people who aren’t customers and find which job they need done.

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Average Lies

“Often an average is such an oversimplification that it is worse than useless.” – Darrell Huff, How to Lie with Statistics.

We don’t really think about averages. The average hospital costs for hepatitis A was $16,000 in 2017. The average student loan debt for North Carolina residents is $36,000. The average American says they’ll spend $142 on Valentine’s gifts. Men, on average of course, say they’ll spend more than women.

For some things in life, average is fine. When my daughters were born, the hospital gave us a growth chart for their height and weight. It showed deciles and right in the middle was average. Growth charts are simple. Height. Weight. Plot. On chart meant on track, physically at least.

Now my daughters are twelve and ten and wow how things changed. New parents can track their child’s sleep, diet, movement—bowel or otherwise. And it’s not just parents. Everyone can track their taken steps, hours slept, and Spotify streams.

With technology, counting is easier.

With counts, averaging is easier.

Numbers are tools. Rather than bartering bananas for bread we have dollars and cents. With numbers, stores count their bananas bundles. With numbers, people have balanced budgets.

Numbers are tools. Like other tools, they take practice with feedback to build proficiency. I’m much more careful with the occasional use of power tools than the regular use of a chef’s knife. Numbers are like that. Well practiced and well used, numbers are a unique and powerful tool.

An example of numbers telling another story was the sabermetrics revolution in baseball. Smart teams realized that walks are better than hits, and that walks cost less to buy. Worth more, cost less. It’s like the successful Miller Lite advertising campaign: ‘tastes great, less filling’.

Decades later, sabermetrics happened in basketball with the insight that making one-third of three-point shots was the same as making one-half of two-point shots. Life, like sports, uses numbers more.

Numbers, though hidden in code, will become more prevalent in life and more important. 

Average, as numbers go, is often abused. This is due to many reasons, but just like technology has reduced the cost of tracking a baby’s bowel movements, average is used because the cost is low. It’s sixth-grade math. And it can hide important nuances.

For example, the average student loan borrower owed $28,000 in 2016. If we dig a bit deeper we find:

  • The median debt was $17,000.
  • The median for two-year degrees was $10,000.
  • The median for a four-year degree was $25,000.
  • One-in-four borrowers owed less than $7,000.
  • Only 7% of borrowers owed more than $100,000.

Those details are often omitted from the story. One poll showed that people viewed median debt of $17,000 as the “least bad figure about student loans”. Life is nuanced but numbers are not. Framed influences the way numbers are understood.

Thanks for reading.

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Tools for the internet

One of the challenges of an internet world is reading enough (and the right stuff), missing out, or failing to find that one thing. One solution is to maximize volume. Be online. Enable push notifications. Refresh.

One framing for our internet world is the world of Thoreau. Cal Newport advocates for Deep Work. This approach asks questions like are smartphones necessary anymore and argues for individual focus.

Vekatesh Rao writes against ‘waldenponding’ and explained the idea to Russ Roberts:

“but somewhere on the spectrum of being very online to being completely offline by Waldenpond, any measure of retreat along that axis is what I call Waldenponding. And the pieces I have been sort of developing as sort of a critical pieces advocating against that. There, I argue that Waldenponding is actually a bad thing and it’s sort of a misframing of a problem. It’s the wrong response to the, whatever is going on there; and there’s more effective ways of engaging with digital technology.”

Where you fall between the Newport/Venkat poles depends on your location, situation, disposition, and tool collection.

To combat my FOMO for missing interesting stories and internet advice here some of my favorite tools for balancing Deep Work with Against Waldenponding.

Google scholar, new citations. Books don’t update their results except for mostly small changes in the paperback edition. What works better is to find a bit of research on Google scholar and follow new citations. Read the abstract only.

IFTTT, Reddit. Reddit is the most helpful but least understood part of the internet. Using the IFTTT (free) service, anyone can create recipes to automate content delivery. My favorite is “r/science, flair:social science”. This means that when a piece of social science research is published in the science Reddit, I get an email with a link.

IFTTT, Twitter. Much like above, only for Twitter. Most tweets are sent by a minority of people. Twitter follows the pareto principle. IFTTT can create digests for never missing those rare-but-relevant people.

Twitter, from:@. Founded in 2006, Twitter has a nice history of information—if you can find it. Using this search operator a searcher can use ‘there’s always a tweet’ to their curiosity advantage. While Google offers generous and wide results, Twitter is a thornier haystack to search.

YouTube, -football, -pastor. The video site has a lot of great content with mostly good results. Sometimes however the person you’re looking for shares a name with a church pastor or high school recruit who uploaded all of their game footage. The ‘-‘ operator removes those items. This also works in many other search fields.

Google alerts, -car, -accident. A timely option. For one bit of writing, I wanted information on median and average comparisons. There was a lot of good median data but it was mostly about car accidents. Part of this research led to the note that average temperatures are higher in Phoenix than Tuscan, though the latter is one-hundred miles south of the former.

Thanks for reading. 

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Nothing is Above the Laugh

This is from the POV40IQ magical email series, with the goal of changing perspectives each week day because a change in how you view a problem is better than forty-more-IQ on the problem. 
Here’s an exchange from Marc Maron’s podcast with Jerry Seinfeld which articulates the difference between demand side innovation and supply side innovation.

“I like the laughs but I noticed with you, that there are moments in a bit where they might not be the biggest laugh moments, but they are your favorite moments.” (Maron)

“Yes, that’s fine but I’m very anti-indulgence. My job is to serve the audience. To make them really laugh because that I think is the only relevant currency in the end.” (Seinfeld)

“Just a laugh?”

“Yeah.”

“I always look for meaning in jokes. That’s the reason I got into comedy, because comedians make things understandable and manageable.”

“Yeah, but I never put anything above the laugh. Self-revelation, opinion, insight. I would never weigh those the same as the laugh.”

Comedy is a beautiful art form because it’s fast. Idea, joke, feedback. It’s the mayfly of the art world. Organization innovation cycles take longer, but it’s crucial to think about how they can serve the customers in the way the customer wants. In comedy, “nothing is above the laugh.”

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Linda buys a bat and brand

There’s a quarrel in psychology research over Linda the banker. First some background. Most behavioral psychology is about crafting nearly identical situations with nearly identical composites of people who, despite the near identity, act in different ways.

One example is when employees are prompted with savings cues for their 401k. Imagine that with the annual corporate messaging about insurance, vacation adjustments, and outlook projections was a form that said “Did you know that your 401k contributions from October through December are eligible for a full employer match?” Employees who get the annual message with lines like that, raise their savings rates three percent. Employees who don’t get that message don’t change their rate.

What anyone saves is dependent on their own choices, right? However with the change in one line they aren’t.

Okay, now let’s talk about Linda.

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

Which is more probable?

  • Linda is a bank teller.
  • Linda is a bank teller and is active in the feminist movement.

When this original research was done, most people chose the second option.

And it’s wrong.

This ‘conjunction fallacy’ goes like this: there’s no way that there can be more bank tellers who are active in the feminist movement than there are all bank telllers.

This is mathematical logic. But it’s not how people think. When people hear Linda’s story they take the contextual clues that come along with it. If we could peak inside a participants mind we might see thoughts like this, ‘If you’re telling me all this stuff about Linda then it must be true that she is both a bank teller and active in the feminist movement.’

Any information that people get, people use and numbers are a special kind of information.

Numbers carry an authority.

Home values increased.

Home values increased by 8%.

And numbers lead to fast thinking. 

In his best-selling book, Daniel Kahneman framed this idea in terms of thinking fast or thinking slow. For some things in life, Kahneman wrote, we tend to think fast. Brands are fast thinking.

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There’s no interpretation here.

Numbers are like brands. Though an 8% increase in home values is a complex computation of home sales, realtor surveys, incomes, and so on, we see that and think it’s true without really thinking.

Joining Linda in the pantheon of psychology phrasing is the bat and ball problem. It looks like this:

A bat and a ball together cost $1.10. If the bat costs a dollar more than the ball, how much does the bat cost?

Ok, now try it this way.

Bat + Ball = $1.10, the bat costs a dollar more than the ball.

Or, the same idea in a different way.

A Ferrari and a Ford together cost $190,000. The Ferrari costs $100,000 more than the Ford. How much does the Ford cost?

Each step down slows thinking. People see the bat and ball problem the same way they see brands or 8% increases: fast.

Most of the numbers we encounter in life is like brands, the bat and ball problem or Linda the banker—our default is to move quickly past them. But to get all the details we’ll need to slow down.

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Foraging for BRKB

It was a nice coincidence that on the same day I bought BRKB stock I learned about the optimal foraging equation. What’s great about this is the ability to tweak different variables to affect the value.

From a decision making perspective, investing is super interesting. People like Michael Mauboussin, Shane Parrish, and Patrick O’Shaughnessy explain important ideas simply. However, investing is super difficult. 

The optimal foraging equation is why target date 401k funds work so well. The ‘calories gained’ value may be moderate but the ‘expended’ and ‘time’ values are also quite low. 

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Crossing the know-do chasm

This is from the daily POV40IQ email.

For most situations in life we know what to do. Partner with aligned people, be kind, save more and spend less, and only eat one doughnut in the office conference room.
For some situations in life we don’t do what we know to do. We partner with the wrong people, we snap, we spend more on things we don’t want, and let’s not talk about doughnuts.

Jon Stein, like all of us, is human. Though he majored economics at Harvard and studied behavioral science, he still found himself day-trading and making short-term ill-advised decisions. He knew better but didn’t know how to do better.

Years later Stein founded Betterment and spoke on the Long View podcast about how Betterment helps their clients cross the know-do chasm. In short, it’s about information.

  1. Presentation. What colors do people see when they log in? Studies show that people act differently if the same trend line is in red or green.
  2. Relevance. Clients share what they want to do with their Betterment money, “this means we can tell you if you are on-track or not for that goal.” It’s not about how much money but what to do with that money.
  3. Salience. When clients choose to sell, Betterment displays the tax implications and according to Stein, 75% choose not to exit their position.

This is behavioral science at its best. Through testing ideas with real people, Betterment is able to scale thoughtful decision making—and anyone can.

Consider your personal, professional, and communal decisions. What information should you highlight and what should you fade?

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The Right Proxies

Wharton Moneyball Super Bowl Show.

“I was blessed to know Bill (Belichick) back in college. We worked together for seventeen years. Bill can make complicated game plans but his general principles aren’t very difficult. He had three rules: be on time, pay attention, and work hard. Those seem like simple things but when you’re deaing with players who are entitled, who do things on their own, they have to buy into that system and fall in line. Bill didn’t care how many earings, how many tattoos, how long your hair was. That had nothing to do with discipline.

Scott Pioli

Using proxies can be helpful or not. It all depends how accurately they map to what matters. When Roger Paloff from Fortune Magazine looked into Theranos, he didn’t understand the science and talked to the board members instead. If these smart, accomplished, wealthy people think this makes sense, it must make sense the thinking went.

Other times, proxies are toxic. Often times, it’s for easy-to-measure things. People love the authority of numbers, regardless of how well they map to reality. Another proxy-tally-folly is mistaking action for effectiveness. Regarding productivity, Cal Newport writes, “busyness is not a proxy for productivity.”

It’s impossible to predict the future so we rely on things that, looking back, were present in good outcomes. Sabermetrics using numbers, not if someone looks good in jeans. Belichick avoids appearances too. Those things come to mind easily, but may not be good proxies.