Chris Blattman

Supported by Greenhaven Road Capital, finding value off the beaten path.

Chris Blattman joined Russ Roberts on EconTalk to chat chickens, cash, and development economics. The entire interview is good and we’ll highlight four parts.

1/ Decisions must weigh costs and benefits. The podcast begins with Blattman explaining his open letter to Bill Gates about the problems associated with buying chickens for people in poverty. Blattman and Roberts note that Gates is pretty smart and he likely understood the nuances associated with bringing a lot of chickens to one area.

Forget about chickens, but don’t rule them out, says Blattman. Maybe chickens are what people need. But we should experiment first.

2/ Experimentation works.  After hearing Scott Norton talk about ketchup I started to think about experiments as means to the better answers, not the best ones.

Investors do this when they rank choices from best to worst. Go long the choices at one end and short the other and – in the aggregate – you’ll do well.

Charles Koch (and others) have pointed out that experiments should be done with both a central and decentralized team. The people on the ground (those that talk to the customer) should bring ideas but so should the people detached from the immediate issues.

In our example of chickens that might mean talking to the women in a village but an ecologist too. If people won’t eat eggs or if a parasite will infect chickens then this is a terrible choice.

Plan all we want, we still need to experiment to get a better idea. Experiments also help because…

3/ Data is cumulative or not. In some fields data accumulates neatly; medicine, engineering, Newtonian physics. In other fields it’s messier; nutrition, quantum physics, macroeconomics.

Doing experiments gets us to an idea Michael Mauboussin wrote about this in The Success Equation. Mauboussin introduced the two-jar model as a way to think about situations.

In areas where randomness leads the dance, we will see things that fast mean reversion, randomness, and lots of variances. In areas with more guidable, we will see identifiable cause and effect and tight correlations of persistence and prediction.

4/ Change the person or the system? A person’s conditions (poverty, wealth, health, relationship) exist within a system. A finch can be genetically great but if there’s a drought it will die. Similarly, people can be the hardest workers but without the rule of law, they will fail.

Change can come top down with a system-wide change or bottom up at the individual. Top down sounds nice. Sweeping changes! But are difficult to get right. Judd Apatow told Joe Rogan about a peer who was drilling wells. After one installation the neighboring villagers invaded and took control of the well.

Gilbert Gall’s book about systems has many good lines about the top down approach. One of which:

“SYSTEMS RUN BEST WHEN DESIGNED TO RUN DOWNHILL More briefly formulated: AVOID UPHILL CONFIGURATIONS —or, in the vernacular: GO WITH THE FLOW”

The “THINGS YOU DO” (TYD) system runs a certain way for a reason. More sleep, fewer books, sweeter salty softer food all word because there are biologic rewards. To change the TYD system means changing the parts of it.

The other approach is to help the individual. This is what Blattman proposed. Give some people chickens, give others cash, and then see what happens.

Russ Roberts: That’s great. And I think Adam Smith would be happy about it. Maybe I’m wrong. I like to think of Adam Smith–maybe I’m romanticizing, which I am prone to–but I do think of him as open to the richer understanding of human activity than our sort of blackboard theories; and obviously was a student of many aspects of human life, not just the financial and monetary side.

Roberts and Blattman want people to roll around in the world. Maybe we need more chickens, maybe not. What we do need more of is people asking interesting questions – and following through with difficult answers.

 

Thanks for reading, I’m @mikedariano.

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