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Design a minibar with Tim Harford

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Like engineers, we sit around and think about ways to make the good easier and the bad harder. In December of last year this happened when I swapped a tray of cookies into the pantry and replaced it with dried fruit, fresh fruit, and nuts. Though the cookies were still an arm’s reach away, they were out-of-sight behind a door the cookie consumption crumbled.

As a fan of design, it was a treat to see Tim Harford’s approach in his FT article about adjusting his mobile phone usage:

Trying to get some work done with an internet-enabled device is like trying to diet when there’s a mini-fridge full of beer and ice cream sitting on your desk, always within arm’s reach

Tim Harford

Harford removed apps from his phone and installed software on his computer. Both actions increased the friction. It was a good nudge (Harford appreciates Thaler’s work), Harford had access, but had to work for it.

Design is not divine. Design is a messy process of interviews, prototypes, iterations, and all kinds of other stuff. Designing is like any other verb. It’s a skill people learn and like learning the guitar, it’s ineffecient at first.

Designs encourage the easy. There are no pull-up bars in hotel rooms. If there were, we’d do more pull-ups.

Designs encourage the easy. There are mini-fridges in hotels rooms. There are internet enabled devices in our pockets. To change an action, try to change the design.

Word-of-mouth, for-the-win.

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“This kind of thing is manna from heaven, but nobody knows how to do it on purpose. At least, I don’t.”

David Ogilvy

As Ogilvy noted, word-of-mouth is divine. It’s a moment when culture quiets, someone speaks, and ideas spread. At it’s best, word-of-mouth follows the rules of a dream. At it’s worst, word-of-mouth runs afoul.

Part-of-the-reason WOM wows is that it’s targeted. We think of Facebook as refined, but WOM is even better. Jonah Berger said in his Talk At Google: “If you don’t have a baby, no one is going to tell you about baby products. Word of mouth is like a searchlight that lurks through your social network to find the person that might be most interested in a particular product or idea.”

In his research for Contagious, Berger talks about the STEPPS to raise your batting average. There’s no guaranteed way to create a sensational idea, but there are things that make it a bit easier. 

For example, though Disney is a great brand, they could do better in the WOM game. They could follow the STEPPS for better WOM: social currency, triggered moments, emotion, public, practical value, and stories.

Berger’s book, in a sentence, might be, remind people to tell stories of helpful and meaningful things. 

This means Disney’s problem is this: “The problem with Walt Disney World is that we don’t go very often and there’s nothing in the environment to remind us that the product exists. When people come back they talk about it a lot but they don’t keep talking about it because there’s no trigger to remind them of the product.”

A great WOM product was the Zestimate. This Zillow feature arrived after Bill Gurley challenged the team: market without a budget. That challenge, co-founder Rich Barton said, “lit the creative juices of the team.”

When Zillow.com launched, the site crashed. People had to know. People told their friends. Barton hoped for this, “We figured it was so practical, and also voyeuristic, that word of mouth would carry it for a while.”

According to Berger’s STEPPS program, the Zestimate was great. It provided social currency in an era when new websites were cool. It was attached to an emotion, the largest asset for many people. It was public data and it offered a practical value. 

According to Zillow Talk, the Zestimate’s accuracy was 14% at launch. In 2019 it was within 1%. Barton would go on to use the same contagious ideas when he founded Glassdoor. 

When Walt Disney started to build his theme parks, he told the Imagineers that they had to include a Weenie. These were landmarks people could use to orient themselves. Move forward fifty years and that Weenie-spot is now a selfie-spot. Create someone where people can take a picture. That’s something worth talking about. 

The incentives of salted roads

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On NPR’s, The Indicator, listener Tara Harvey asks host Cardiff Garcia why we salt the roads so much. “Research shows oversalting increases the possibility of slipping, costs more for materials and labor, and causes property damage.”

The Indicator is an economics podcast and Garcia offers economic reasons. Salt is cheap and effective. Salted roads reduce accidents by 87%. Salted roads allow people to get to work, “and that is an economic activity that needs to be counted against the cost.”

Everything Harvey asks and everything Garcia says are logical statements. But while numbers convey authority, they aren’t always right.

An alternative theory focuses on incentives. Consumption and payment aren’t connected. 

Salt is purchased by governments and governments take heat for not being prepared. Their incentive is to salt more, not less. The consumer’s immediate incentive is excess too. Better safe than sorry.

Until however it comes time to pay. Garcia knows this, “It all costs money. Not just the direct use of the salt itself, which has to be found and paid for, but also the environmental and ecological damage that it leaves behind.”

However, consumers never connect consumption with cost. Sure taxes are too high, but does anyone know how much of their taxes go to salting the roads? Ditto for the environmental effects that follow overselling. Consumers pay, but later and indirectly.

This salty situation is similar to the psychology behind too much debt. Act now, pay later. If later is long enough away and opaque (how much does salt cost a taxpayer?) then the cost seems especially low.

Photo by Simon Matzinger from Pexels. 

Are you tired? Is that really the question?

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“When faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.”

Daniel Kahneman

We probably do this a lot more than we think. Consider how many decisions we face in a day, how many are automatic, and how many switches go unnoticed.

It happens to everyone. In a recent post, Scott Alexander writes about an individual randomized control trial for a sleep supplement. Alexander wanted to know if the supplement helped him sleep better, or if it was a placebo effect.

Placebos are powerful and cheap. If they get the job done, all the better it seems. But Alexander is serious, smart, and curious—so he tested this idea.

A friend disguised the supplements and sugar pills in oversized capsules, flipped a coin to determine the order, and placed the camouflaged pills in a monthly pill planner. To test the effectiveness, Alexander recorded hours of sleep and subjective ratings on how he felt. The results shocked him.

But not for the reason he expected.

I think the active ingredient here was not letting myself look at the clock. Without external cues to tell me how tired I should feel, I was forced to rely on how tired I actually felt, which in many cases was “not tired at all”. 

Scott Alexander

In removing the alarm clock, Alexander removed the easier question. If it was before nine, it was too early. Obviously. Or not.

These kinds of tendencies work great for a lot of things, but occasionally work too much and we get interesting results like this.

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Photo by Aphiwat chuangchoem from Pexels

The Psychology of Rotten Tomatoes

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In an article for Wired, @SVZWood writes about Rotten Tomatoes, the website one in five Americans use to inform their movie choices. Wood’s article showcases three helpful ideas:

Simple algorithms. Rotten Tomatoes has become a successful business and top website based on a simple algorithm—counting. Two movie curators read reviews each day, judge them as positive or not, and then count the totals. If a movie has more than sixty percent positive, it’s marked as fresh.

Numerical authority. There’s something about people, numbers, authority, and precision we just can’t get over. Wood captures this, writing, “There is an authoritative allure in the site’s numerical scores….(people) reflexively—and nonsensically—trust a fresh sixty percent Tomatometer over a Rotten 59%.”

In an age of big data and algorithms and random forests, it’s helpful to keep in mind that simple systems work. One example, football.

Numbers feel secure. They’re a rationalization blanket in a world of unknown things under the bed.

Jobs-to-be-done. Reviewers don’t like the binary nature of fresh or not. Wood notes that, “there is no Underripe or Overripe tomato.” In the terms of Bob Moesta, this is the difference between a supply-side orientation and demand-side orientation.

In JBTD theory, the goal is to find what customers want to do that rather than what a supplier wants or thinks the customer wants. Reviewers (supply) want to share their nuanced take rather than a 👍 or 👎 via their Twitter account. The customers (demand) just want to know if a movie is bad, potentially good, or very good. This plays out in some interesting ways that Rotten Tomatoes has plucked.

For example, a review which is glowingly positive and a review which is slightly positive are both coded as positive. This leads to extreme scores. This is a feature, not a bug. It’s the information people want to know.

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Morey thinking like Marks

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It looks like Daryl Morey is thinking like Howard Marks. But, he probably always has.

On the Wharton Moneyball podcast, Eric Bradlow talked through why the Houston Rockets might think playing “five guys a large number of minutes that are all six-seven to six-four” to end the season and into the playoffs was a good idea.

At first this seems like a mistake.

Basketball has defined positions. Point guard, shooting guard, small forward, power forward, center. We’ve always done it this way.

Oops.

That expression is a red flag. Instead we should think from first principles, which is what Bradlow and co-hosts Adi Wyner and Shane Jensen do. If the Rockets play shorter players that don’t fit the traditional mold, what will happen. Bradlow summarized:

“Given they’re shooting threes and the higher variance of the rebounds, a lot more balls hit the floor because it’s not just dropping straight down so you might want faster players who can get to the ball quickly.” (though maybe not)

“And now you’re getting the other team to possible take less threes. That’s a good thing about the Rockets.” (by exploiting size mismatches down low)

“The other thing you might argue is that the other team is going to crash the boards and that might create more fast break opportunities.”

Wharton Moneyball podcast 2/12/2020

Small ball strategy might be something smart coaches pursue. Zach Lowe wrote that Toronto’s Nick Nurse will play weird defense, and will sometimes tempt the other team “into inefficient one-on-one battles.”

Two principles Marks hammers again and again is the importance of being right and different and the importance of second level thinking. Though it’s really no surprise that Morey and Marks take different paths to make similar results in unique domains.

Danger Word Search

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My kids love Ellen’s Game of Games.

My kids love the mini-game Danger Word. The premise is for one player to get their teammate to guess a word. The wrinkle is that the winning word (sofa, ocean, etc.) is similar to the danger word (couch, sea, so-on). If a guesser says the danger word, they get smothered and covered. If a guessers says the winning word, the other team gets hit with it.

It’s an interesting game because the best clues have multiple levels. They give information about both the danger word and the desired word. One winning moment was when a woman gave the clue ‘otter’ and her partner guessed ‘sea’. It was a winning clue that also avoided the danger word of ocean.

Knowing something is this, and not that, will become more important as things move from single-issue-tangible to many-copies-digital.

  • YouTube is an amazing resource but the search options are mostly by name. The most challenging queries are for people who share names with pastors. One side effect from weekly sermons is regular content and what better way to reach the flock than via YouTube.
  • Websites used to have a .gov, .org, .com structure that hinted something was this and not that. In some recent research I found a dot-org domain that looked pretty legitimate. However, going to the About page showed that it wasn’t what it appeared to be.
  • Visual evidence used to be clear. Screens though are shaded windows. Rather than asking is something manipulated, the default is now to ask how something is manipulated.

In Ellen’s game, the goal is to give a precise clue.
In YouTube searches, the goal is to search a precise query.
In website scours, the goal is to find truthful facts.

As more information goes online there will be more, not less, statements about being at war with EastAsia. The skill we’ll all need, my daughters included, is separating one category from another. Danger words from winning words, helpful queries from unhelpful ones, real from fantasy.

Made Up Start Up: Upcoming Streaming

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Movies are awesome. The next time you hear someone regret remakes, remixes, and redundancy please remind them to respect your review. No one complains about meatloaf, sequels are comfort food.

However, I don’t always remember who is who, who is alive, or who is in love. Here’s the pitch: a streaming service that offers a limited run of a limited number of movies based on the time of year.

Wharton professor Jonah Berger researched how ideas spread and part-of-the-reason ideas spread is timing. People are contextual operators. We need cues for action. How many times have you seen a trailer, heard about a restaurant, or found out about some music only to never followup. You need a nudge.

The Upcoming Streaming businesses would be just that. The week before Harry Potter X comes out, the last two movies from that universe are available to stream. The Rock has another Jumanji-like movie coming out, and so another Rock movie is available to stream. Actually, the Rock always has movies coming out. He’s a mainstay.

For movie studios this is a no-brainer. Some studios spend more marketing a movie than making one. This streaming service would be inverted marketing. People pay to get excited for the next movie. Free money.

There’s hope for this idea as smart contracts become more popular. Tyler Cowen notes that Hollywood and whaling were the VC OG. If Silcon Valley is into crypto and blockchains then maybe the theater business isn’t far behind.

Another advantage is that this business doesn’t interfere with the competitive advantage of existing streaming services. If a movie is offered in more than one location, few customers would cancel Netflix just because a movie or two each year were available somewhere else.

But wait, there’s more! This business has scarcity. If movies are only available for the week before a release people will feel the need to act now. It can’t hurt having psychological influences pushing this idea along.

Upcoming releases wouldn’t be the only available source of inspiration. How many studios would love to pump their old rom-com libraries for one more run as they return to our lives as a special Valentines week lineup? How great would it be to stream only the Thanksgiving episodes of Friends over the Thanksgiving holiday?

If someone knows Michael Ovitz, have him get in touch.

Tim Harford’s Arguing Advice

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Tim Harford joined Tyler Cowen to speak about his career, production function, and why dice are something he couldn’t live without. Harford said this about debates:

“I still think debating is underrated. People think that it’s a very elite thing, practiced by elite people from very posh schools and very privileged backgrounds and favors a certain kind of education. Those things are all true. At the same time, in a debate you are protected by certain rules, given space and time, and people are not allowed to interupt you except in certain formalized ways.

“Once I became an adult, and entered certain corporate spaces and corporate meetings, I became aware that all the old men were talking all over the young women. They’d interupt and wouldn’t let these younger people get a word in edgewise. I realized that debating protects anyone.”

Tim Harford

A contest has explicit rules. A culture has implicit rules.

For organizations to ‘argue Zell‘, they must have leaders willing to be challenged and leaders who communicate that. Career risk depends on the culture.

Like strategy, marketing, or ethics, culture is something organziations do. “Unless you set it, it’ll just be what it is.” The easiest way to create a specific culture is to hire well. After that, incentives matter.

Solve for the Equilibrium: Marathon Lottery

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When supply equals demand—in economic models, not Alchemy—the price is calculated, equilibrium is achieved, and angels sing. What economists do we aren’t sure. Rarely does this work because value is subjective. Our relativistic nature is seen when it’s less grating for a CEO to make 100 times their employees than for a peer to make double.

However solving for the equilibrium is a helpful. This Phantom Cowen would lead us to ask about how we might design a system people can’t buy, favor, or cheat their way into? How do we fix the game and avoid equilibirum? It’s been done with Jeopardy and horse racing.

Enter the NYC marathon.

The NYC marathon is super popular. The race welcomes 53,000 people, the most in the world, but demand is triple the supply. If this were a business, the organizers could raise prices. Pricing power! But profits aren’t the goal.

“At New York Road Runners, it is our goal to give everyone on the planet both a reason to run and the means and opportunity to keep running and never stop.”

NYRR Mission

Rather than raise prices, the NYRR had to solve for the equilibrium another way. In Planet Money episode #962, host Kenny Malone explains how the running club allocates their scarce resources. How they solved for the equilibrium.

What’s great about this example—beyond the process—is the creative ways NYRR solved their problem. They’ve added value without addressing the race.