Are we baking or cooking?

Though a recipe, this was cooking.

Most of life is a cooking problem. Should you pay off your mortgage or invest? That’s a cooking problem. Cooking problems have leeway because there’s not a lot of interaction. If you get things mostly right you’ll be fine.

For cooking problems the biggest issue is inception. Just start. Cooking problems suffers from paralysis by analysis. Cooking problems should be ‘rough consensus and running code’. Cooking problems are easily fixed and have multiple potential solutions. I made General Tso’s last week. It was a cooking problem. Did I need exactly three scallions? No, as the picky eaters (12, 10) scooped around them anyway.

Baking problems are different. Baking is chemistry and chemistry is balance. Math is precise balance too, so is physics. For baking problems it pays to pay attention. When my daughters make cookies it’s a baking problem; you never want too much baking soda in a batch. Flying planes and medical diagnosis are baking problems too.

Baking problems have tight feedbacks within closed systems and single solution aims. Kill virus, land plane, eat cookie. Baking problems require domain expertise.

Most of life though is cooking.

Baking is recipes. Cooking is mental models: like this pay-what-you-want pdf of ideas from Tyler Cowen. If you like Cowen and podcasts, here is an RSS feed for you.


The pool of tears

A lesson from distance learning.

To keep up with my kids I’ve been taking Khan Academy classes and in one, founder Sal Khan noted that when Abraham Lincoln was in law school he used Euclid’s geometric proofs as a test for understanding. Recounted:

“In the course of my law-reading I constantly came upon the word demonstrate,” Lincoln said. “I thought, at first, that I understood its meaning, but soon became satisfied that I did not.” Resolving to understand it better, he went to his father’s house and “staid there till I could give any propositions in the six books of Euclid at sight.”

That’s ambitious, and demonstrates how much of learning is not linear.

In this way online learning excels. If we need time we take time. If we’re done early we make things. We act like Lincoln. Like Naval.

This is hard to do in school, scheduled to the year, week, day, hour, and even minute. Compounding and confounding is that we are relative creatures. I don’t get it compared to the kids that do. In the same way we are spending by neighbors but not saving, we see those who excel and calculateaccordingtothat.

Online learning isn’t great but it’s not all bad either and we’ve shed a few fewertears.


Gambling with Votes

Thirty days of September and October PredictIt markets.

Like Gambling with Covid19, betting markets can demonstrate probabilistic thinking. In that post we considered an idea from Matt (+EV) about Tom Brady’s potential passing yards.

In April Brady’s over-under yardage was 4,256, nicely inline with previous years of 4057, 4355, 4577, and 3554. However, Matt noted, there’s a lot more room under 4,256 than over it. Brady could get injured, retire mid-year, have a worse system, lose teammates and so on.

On Wharton Moneyball Cade Massey noted that the same idea can apply to modeling voting and prediction markets. In the FiveThirtyEight simulation (40,000 runs), Joe Biden wins eighty-seven times out of one hundred.

What’s the gap between 87 and 66?

  • Potential polling errors. 538 is an aggregation. Put another way, the level of awareness while driving one hour twelve times is not the same as driving twelve hours one time.
  • The Brady effect. There’s just more room for ‘something to happen‘ in one direction instead of another.
  • Matt’s Twitter handle +EV gives an idea too. It could be that Donald Trump’s odds to wins are less than a coin flip just not as bad as a single number on a roll of the dice. That middle area is the market.
  • People like betting favorites, public teams, and for the safety.

A neighbor invited me to a watch party on November third. Another challenges himself to go as long as possible without finding out the news (in 2016 he made it three days). I follow things loosely but thinking about it this way does feel sharp.

As Howard Marks says, it’s not so much what you buy as what you pay. Brady, for those interested, is on pace to go over.


SFTE: College Admissions

This is from our pay-what-you-want collection of ideas from Tyler Cowen.  

Equilibriums and incentives exist everywhere but not always in the same forms because conditions matter. “The key question is no longer: What’s the incentive?” Cowen said, “But to understand the incentive, you have to ask: What do people believe is the case? Subjective perceptions of the objective incentives out there become the new starting point for economics.”

The 2019 college admissions scandal is a situation where incentives and equilibriums existed and produced odd behavior which became criminal. Why would wealthy parents pay tens of thousands of dollars for their children to be admitted to schools, where in some cases, the kids didn’t even want to go?

Let’s pause our pursuit of Cowen’s ideas and introduce a set of cousins: the paradox of skill and the paradox of signalling. 

The paradox of skill is the idea that if skills between people are relatively similar, then luck matters more. If Serena Williams shows up at a local racket club, she’ll win (in straight sets) against the local pro. However, at Wimbledon she needs every bit of skill and a little bit of luck to claim the championship. 

That same idea exists in the world of signalling status. Ask the same question, and we get different results. If the incentive is to stand out from your peers, but your peers are already famous, already rich, and already take vacations to French Polynesia then what do you do? 

You stand out through your kids.

The ring leader was Rick Singer, a once legitimate college counselor who found a side door for clients. Kids were flagged as recruits even though they sometimes never had or wanted to play the sport, but the coach was compensated by the kid’s parents through Singer. It worked because collegiate athletic departments didn’t actually check if the kids were on the team. 

The thinking at the time was that coaches were incentivized to win because that’s how they kept their jobs and paychecks. But the violators followed the JTBD theory to include non-recruits in return for, what they claimed, were non-quid-pro-quo donations.

Ryan Singer solved for the equilibrium. 

Parents wanted kids admitted. Coaches wanted compensated, and recognized. Singer wanted paid. Students wanted help. Like ingredients in a recipe, combining these things and it almost seems inevitable.

To solve-for-the-equilibirum means to also think about incentives, which we look at in the short piece from Cowen. It’s written as an alternative to Netflix or for the dentist who chronically runs late. 


Can you rotate your position?

By rotation, I mean taking all the sides. Whenever there are people of differing positions on an emerging topic — it could be Uber, it could be eSports, it could be 5G, self-driving vehicles, you name it. If I find that I cannot argue from any particular viewpoint, I will book a couple of days to spend time with that community on ethnographic — just hanging out until I rotate my worldview and until I can argue from their viewpoint. That’s called taking all the sides.

Audrey Tang, Conversations with Tyler.

Just one part of of a wide and deep conversation. Tang is one of the few guests who ‘match’ Tyler Cowen on his podcast format.


The college admissions admission

We’re not really sure on the origin of Hanlon’s Razor, but the speculation (via Wikipedia) is Robert Heinlein’s (Heinlein ->Hanlon) story, Logic of Empire, “The character ‘Doc’ in Heinlein’s story described the ‘devil theory’ fallacy, explaining, ‘You have attributed conditions to villainy that simply result from stupidity.'”

I’d remember it more and confuse it less if we stuck with ‘devil theory’ fallacy.

What does stupidity mean though? Most people aren’t dumb, despite our experiences. Most of us error by attribution. And, anyone alive today is the best evolutionary fit! Keep in mind it’s the cream of the crop (for fit) we’re dealing with.

Most of stupidity is wrong-person, wrong-time, wrong-place. In Unnaccaptable, the book about the college admissions scandal, there are a lot of people who broke a lot of laws, most of them stepping from a gray area to a black one.

My daughters (12, 10) aren’t near college applications, but we have been in school for seven years and have helped a lot. We buy supplies, email teachers, advocate to staff, volunteer at the school, attend events, and so on. There’s parental pride, there’s ego, and there’s that unending love parents feel, a willingness to do anything.

Then there’s the chance. Are you willing to do anything?

One minor character from the book is Gordon Caplan, a lawyer who in 2017 did pro bono work to help an Iranian child get admittance to the United States for emergency eye surgery. He told one another interviewer, “I never wanted to do anything that couldn’t be on the front page of the WSJ.”

Yet he crossed from gray to black. From Unacceptable, “I blame no one but myself. I am only angry at myself, I am not even angry at Rick Singer. he was selling something I never should have bought.”

Consider the moment. Consider the step. You’ve helped your kid in the past. You’ve paid for tutors, access, and school. You’ve done the leg work and the research. Then you’re in. You’ve taken the step and everything that got you here gets a further boost. Commitment tendencies kick in. Sunk-costs weight. Status-quo bias lends a hand to head onward and not turn back.

The lesson from Unacceptable is that conditions matter. The heart of Hanlon’s Razor is that conditions matter. This is good.

When Dan Ek spoke with Patrick O’Shaughnessy he clarified the contrast between Spotify and Netflix. ‘No’, Ek explained, Spotify is not just doing what Netflix is doing to avoid wholesale transfer pricing. It’s not that simple. “Unless you understand the system, you can’t just take one of the concepts out of it and expect it to work in your company.”

Conditions matter.

The master of noting how and when things change is Rory Sutherland and his output is Alchemy. Sutherland’s suggestion is that framing something using words is cheap compared to the potential value increase. Consider work from home. When Rory told his team of fifteen they could work from home nobody did. Why? “Instinctively they saw it as a concession. Every time they took advantage of this they were burning reputational air miles.” They viewed it as an exchange. However, when Sutherland mandated a day the exchange went away.

Unacceptable was a great book about an interesting moment filled with characters who made mistakes and should answer for their actions, but the central lesson is the malleability of people.

Another idea present in Unacceptable was covered in the pay-what-you-want notes about Tyler Cowen. One covered Cowenism is to solve for the equilibrium, a prompt to consider how a situation might play out. The college admission scandal provides a nice example to think that through.  


Cowen’s Chow Choices

One local topic during COVID has been motor homes. Some fellow dog walkers want one, some don’t. The obstacle, as often the case, is cost.

A few friends have them and universally they mention the deal they got. It was either a family friend, a distressed seller or a trade-up-buy-out-sale. For us, the math doesn’t work. Thirty-thousand dollars is a lot of nights at a Hampton Inn.

“Buying good things can’t be the secret to success in investing. It has to be the price you pay. It’s not what you buy, it’s what you pay. There’s no asset so good it can’t become overpriced.” – Howard Marks

Great rewards come where value diverges from price. This is the moneyball insight. This is the JTBD insight. This is Tyler Cowen’s Dining Guide insight too.

Where are the wrong metrics being used?

Consider the name of a restaurant suggests Cowen. Would you eat at an Ethiopian restaurant called EYO Sports Bar? Cowen commented: “When I heard that name I thought, this place must be great. When Americans want to eat Ethiopian food what kind of name are they looking for? The Red Sea? Queen of Sheba? Fine. But when it’s EYO Sports bar you know it’s really for Ethiopians.”

In general, better food will be at places with bad names.

Also avoid places on the beaten path, full of beautiful people, and with famous chefs. These are all metrics some people use to choose a restaurant but that don’t necessarily contribute to the quality of the food. It might be good food, but won’t be a good deal.

Instead, use the economic Cowen espouses. Like the name Rus-Uz, a place that serves Russian and Uzbekistan food (and caters!) in Arlington Virginia. Ask, “‘What is the appeal to the masses?’ In relative terms it’s the Russians, so of course that means the Uzbek dishes are better.”

One way to think about metrics is to consider anything that has been quantified, counted, or numbered. It’s easy to count units but hard to count quality.

Part of the reason personal productivity has been an internet subject for so long is that it’s hard to measure. How does someone measure their work? Ask anyone who creates content online and they’ll tell you that it’s the oddest posts that get shared the most. The best productivity advice might just be: don’t give up.

Like this idea? Read more here.


Large N Small p

Is it more likely for an infected football player to transmit a disease to their teammates or their competition? Adi Wyner:

"I would expect intrateam transmission by far. Not only huddle time, but the time on the bench, in the locker room, and while they travel. It’s a small chance of any given pairing but it’s lots of pairs. Anytime you multiply a large number by small odds you get a large number."

That’s via Wharton Moneyball and demonstrates the large N, small p principle. It’s the idea behind TikTok too. Ben Thompson said:

"What’s interesting thinking about Quibi and TikTok is that Quibi was such an arrogant idea, that professionally produced content is always going to be better. Are we sure about that? The vast majority of TikTok is garbage and that’s always the case with user generated content. But as it turns out, .1% of a massive, massive amount of content is super compelling. You find that one-percent not by being a picker, you find it by sourcing it."

Large N, small p is why something is always happening.


What is cheating in chess is winning in life.

Roland Walker (BBC) talking with David Edmonds. The context is how monitors cheating.

“We can’t overstress this enough, humans and computers play utterly differently. Humans play by planning and recognizing patterns. Computers play in unusual ways, it forgets everything that it knew in between every move. A computer doesn’t really have a plan.
“An engine will take back a previous move if it realizes that in the context of the following moves it wasn’t good. A human has a kind of sticky feeling about their plan.”

Chess engines make people better at chess and good players use them to practice, if not to play. It’s the Cowen idea of meta-rationality (more here). The idea of using the right resources.

Computers are good because they compute without bias (kinda) and avoid human mistakes like sunk cost. As Mohnish Pabrai pointed out, “when we spend a lot of time on something, we feel we should get something in return for that time, it’s a danger if you say, I’m going to research a company and decide if I want to invest or not. I think you’re better off researching a company with no such preconceived notion.”

This week my daughters (12, 10) and I watched both Sherlock (also BBC) and Enola Holmes (Netflix, we loved it). In both the episode and the movie, the characters had to be more objective to solve the crime.

However, it’s going full-Sherlock as much as moving in that direction. Like someone training to gain/lose weight, the goal isn’t to become extremely skinny/strong but to be more than the current state.

Meta-rationality then is under indexed, unless of course, it’s outlawed like chess.

h/t Cowen-kinda-queue, a podcast feed of Marginal Revolution mentions.


The Philosophy of Fish

Internet Archive, mentioned here.

"Let us suppose that an ichthyologist is exploring the life of the ocean. He casts a net into the water and brings up a fishy assortment. Surveying his catch, he proceeds in the usual manner of a scientist to systematise what it reveals. He arrives at two generalisations:

(1) No sea-creature is less than two inches long.

(2) All sea-creatures have gills.

These are both true of his catch, and he assumes tentatively that they will remain true however often he repeats it.

In applying this analogy, the catch stands for the body of knowledge which constitutes physical science, and the net for the sensory and intellectual equipment which we use in obtaining it. The casting of the net corresponds to observation; for knowledge which has not been or could not be obtained by observation is not admitted into physical science."

The ichthyologist goes on to explain, "In short, what my net can’t catch isn’t fish."