Fire causes

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There’s a few ways to be paid for work. One is monetary. Another is pleasure. A third is knowledge through experience. Framing work this way means someone always ‘gets paid’.

A friend posted on the neighborhood Facebook group that he cleaned his dryer vent and it was full of stuff *after only three years*. ‘Oof, I thought, and ordered a cleaning kit on Amazon. But do I need it?

About one in twenty-five homes has a fire each year. Half of all fires are cooking related and another sixth are from heating equipment. About one in ten are electrical related and 3% of those are due to dryer related fires. So all told, about 0.012 percent of homes in the United States have a dryer related fire each year. That’s an already low base rate, mix in a newer home and the satisfaction I get from cleaning the lint trap and our odds are pretty dang low.

Though unlikely, this was still a good exercise. For one, cooking fires are more common than I thought. One in fifty homes? Each year? The damage may be small, these are fires reported and responded to, but it’s high enough to be a bit more careful in the kitchen. Second, I’ll be paid in experience, one of the best teachers a guy can ask for.

“I’m your financial advisor”

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In the early 2010s I listened to Dave Ramsey nearly every day. The Nashville based personal finance (personal accountability) radio host is still on the air, holding court. There’s a few things that make Ramsey popular.

First, he’s great on the radio. The content fits the medium, and Ramsey’s basic explanations, stories, and approaches combined with the delivery works.

Second, he gives good advice rather than perfect advice. There’s a difference between precision and accuracy, usually between the world of a model and the real world. It’s why Ramsey suggests beginning with the debt snowball:

“Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. Pay minimum payments on everything but the little one. Attack that one with a vengeance. Once it’s gone, take that payment and put it toward the second-smallest debt, making minimum payments on the rest.” – Dave Ramsey (link)

A great behavioral angle. We like feelings of progress and by focusing on the smallest balance we get that, especially given the financial conditions we may be in.

A third thing Ramsey does well is filling an answer gap. One time a woman called into his show and asked a question. He answered. She protested that her friends and family wouldn’t understand. He suggested telling them her financial advisor advised it. I don’t have a financial advisor she said. “I’m your financial advisor!!”, Ramsey retorted.

In another instance he told someone it didn’t matter how much their income was, the purchase wasn’t “in the budget”. Could they afford it? Yep. But framing it against the contrived ‘budget’ change the conversation. (I’ve used this one, it works.)

Both “I’m your financial advisor” and “it’s not in the budget” fill in an answer gap. Having ready answers can change our fast thinking. It works for drinking too much, a diet, or any kind of behavior we’re trying to stick with.

The ready answers can be pretty arbitrary too. If you offered “meatless Monday” would anyone actually comment? I’d wager not. So it’s not the validity of an explanation but merely the existence of one.

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Some people don’t like Ramsey’s advice but I’m reminded of the Tyler Cowen expression: opposed to what? If not this then what?

Underdog or tie game?

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It’s important to highlight base rates in the wild as a way to keep them top-of-mind. What’s available is what we think about. Nowhere is this better than sports. We tend to overreact rather than “short the narrative” and base rates are a useful thinking tool to practice.

Talking about the last week of the NFL season and potential playoff situations, otherwise sane Shane Jensen offers up, “I think it’s less likely the Colts lose to the Jaguars than that other game ends in a tie.” Okay, what’s the base rate? Since 2017 there have been 5 games that ended in a tie, and 7 games where a big underdog won.

What’s probably happening is recency bias. The Jaguars lost by forty points to the Patriots, fired their coach mid-season, and maybe aren’t the best run organization. All of those things can be true as well as still being more likely to win than a tie game.

Part of the Wharton Moneyball podcast is to be entertaining. That’s fine. But part of it is to be analytical, and for that this was a miss.

By what conventions?

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This episode dropped among a list of NFT episodes, but first the quote.

“In education there is a lot of incentive to fail with the pack rather than to take a risk away from the pack. For example, folks would teach the Prussian Lecture method. We all knew it was bad, we all did it together, and education failed but no one stood out. There were brave people who built flipped classrooms, but a lot of students didn’t like it and they would get bad teaching evaluations and sometimes lose tenure. If in football you play by the book, which isn’t really the book, it’s what everybody has historically done, and you fail then you are failing the same game the way everybody else fails. In a way you are failing in a more honorable space than somebody who does something differently and takes that chance.” – Eric Eager, The Science of Change, November 2021

Failing conventionally is an idea we’ve looked at before. But there are two additional points.
1. Conventions (‘the book’) change.
2. It’s the relative difference to these moving conventions that matter.

In football, for instance, going for it on fourth down is being normalized. If in next year’s season the convention is go for it on fourth and one in the opponent’s territory then the conventions have changed and coaches who go for in in their own territory will have less relative difference from the conventions.

What does any of this have to do with NFTs? NFTs are weird. They’re basically agreements. We all live under a collection of agreements: constitutions, laws, proposals, deals, partnerships, user agreements, contracts and so on. Some of these agreements are more explicit than others. The laws of physics notes Neil Degrasse Tyson are true whether you believe them or not. Contracts more solid agreements depending on the enforcement system. Relationships are toward the softer end of agreements and NFTs are digital agreements.

Like Eager’s flipped classroom and fourth down comments NFTs are novel conventions. And we should expect more weirdness.

Conventions used to be dictated by the physical space. We acted mostly like the people around us acted. Now, we hang out on the internet. The conventions are still dictated by the people around us but now it’s in the digital space. And as we are in the digital space more we will come up with new agreements there.

![Generative art](https://upload.wikimedia.org/wikipedia/commons/b/be/VeKings.png =200×200)

Digital art is an early development for these digital agreements because it’s easy. An NFT is basically a link to a file with an agreement attached. The file is stored in this server which is how website work, AND it is owned by so-and-so.

Our lives are full of agreements and conventions. If the things we do are online more the agreements and conventions in our lives will change. NFTs may be one such example.

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Art NFT are a bit overhyped because the price is wrong. The floor on one ape was $200,000 but really the price was 50ETH. But there’s no way whoever buys this ape will pay for it when 200K=50ETH. Rather, part of the NFT craze is that a bunch of people have ETH at prices well below the fall 2021 levels.

Customer Acquisition Cost Communication (CACC)

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One way to change the CAC is to change the communication. When an organization communicates well it clearly frames the exchange which helps people ‘get it’.

It happens in politics. It happens in emergencies. It happens in sports and in investing too. When asked why he didn’t bring part of his business to a new venture, Bill Miller replied, “We are only interested in having clients that understand you’re going to get volatility. We try to monetize the volatility.“

The simplest form of this is the dating advice: be yourself.

Who is the message for and how would they like to hear it? At Duolingo the how is short.

“Any page on Duolingo has the minimum amount of text, the minimum amount of instructions and an intuitive simple interface. That’s in contrast to how language is traditionally learned, which is in a textbook, which usually begins with a conjugation table. What works better is to let the user jump into the exercise, get some hints, answer questions, and then we unlock new concepts.” – Cem Kansu, The Science of Change, October 2021

In sports the idea was unlocked with images (like heat maps). In investing the idea was unlocked with shareholder letters. It’s the same thing over and over – it’s just finding a fit. Kansu said they’ve run hundreds of experiments, on probably every part of their service. Part of those are how to find a good way to communicate well.

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My own version of this is the sixty-two ideas drip. Like this post, it’s a short daily email about an idea. Communicating well is one. It’s five bucks.

Parenting advice about lacrosse

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The best parenting advice for me has been small bits that, like train switches, change the outcome direction. This too shall pass as well as a few deep breaths does wonders. Resetting expecations closer to reality helps too. We’ll add another today.

Todd Simkin wanted to quit lacrosse. He wasn’t quite as good as the other kids, or as fast. It was hard. He was in high school. There were other things to do, not that Simkin knew what they were when asked. So, he told his dad over dinner we was quitting lacrosse. Then, Simkin went to bed. This is what his dad said the next morning.

“Come into the living room, I want to talk to you. I’ve been thinking about it all night and it’s really bothering me. I haven’t heard why you wanted to quit other than you’ve been frustrated with your coach. There’s not enough here. It doesn’t make sense. You have to explain it in a way that makes sense for me to be supportive of this.”

Another bit of parenting advice is to avoid unnecessary ultimatums. Pick that up or else you’re going to bed right now!! Though it’s the mad emoji feeling in the moment it’s the zen emoji we should strive for. That’s kinda what Todd’s father did.

“This was such great parenting. It wasn’t saying: this is what you have to do or, here’s what you can’t do. Instead it was: if this is a reasonable or consistent or rationale choice I’ll back you up on this. If it’s rash and has long-term consequences then there are implications here that require appropriate weight and thought.” – Todd Simkin, The Knowledge Project, September 2021

Todd didn’t have a great answer so he didn’t quit the team, but he also didn’t play the next year.

There’s a lot of empathy in this podcast episode. It’s about understanding where people are physically, mentally, emotionally and meeting them there and it’s fully of helpful advice for our personal and professional relationships.

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Give someone a hug today. Digital or physical, doesn’t matter. 🤗

Words from Wharton

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Sometimes we just need the right word to explain an idea which leads to action. Having a name for a thing changes the way we think about it. These are some of my favorites from the Wharton Moneyball podcast.

Let’s be precise. For instance, what does herd immunity mean? Often we are not precise.

What’s the effect size? There are a lot of things we could do, but which matter most?

Short the narrative. In sports there’s a narrative that drives the stories. Often the narrative is overpriced.

The most parsimonious explanation. I can never remember if it’s Hanlon’s or Occam’s razor. This and ‘short the narrative’ pair well together, like the blades of a scissors.

Mean reversion. Outcomes are combinations of skill and luck. Skill mostly persists, luck mostly does not, hence the Madden Curse. But(!!) skill isn’t static. If one player has a great year, the next year they might have a better year because while their luck component contracts, their skill share expands.

Coin flip. Statisticians (and artists) fall in love with their models. The coin flip is a Zeckhauser-esque simplification. How often will a team win three-straight games? One-eighth of the time.

Favorites or the field. We’ve covered this one. (Twice)

Tennis variance. Fewer events means more variance. Tennis events, like the Olympics, may have more upsets. This could also be part-of-the-reason there are more dominant men than women.

Update my priors. To change ones view with information. It’s being Bayesian.

Never-buyers (August 2022 addition). People unreachable through advertising. Example: Thomas Tull. 

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It was fiction that focused the idea of names.

Where are the notifications?

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One difference between the human brain and the laptop computer is that location matters. A human thinks differently, a computer compiles the same. This makes alchemy possible.

This also makes academia tough.

In behavioral science information presentation is everything. Order your tickets in the next 14:59. Put another way, what we see is all there is. Researchers will find that calorie labels work (!!), conditionally.

To humans, conditions matter. This, is a creativity canvas.

For instance, payment medium matters. People tend to spend differently because the feedback, the salience of paying with a twenty dollar bill is much higher than with a credit card.

“Certain payment systems leave a weaker trace in your memory. When I’m facing a purchase I ask, ‘How much have I spent in the recent past on things like this?’ If the answer is a lot then I’m less likely to make a new purchase, and if I’m paying by credit card I don’t remember those past purchases.” – Dilip Soman, The Decision Corner, October 2021

So, Soman created an app where people could spend and see feedback on their recent purchases. They spent less! Success!! But in 2010 South Korea created a text-message-for-purchases-alert-system and they found the opposite. “On an average,” Soman said, “people who opted in to receive the notifications spent more instead of less.”

The mechanism seems to be that text message information registers in a different way. “When we interviewed people they would say things like, ‘Oh if I ever needed a record I know my phone has it.’ Instead of being more vigilant they outsources that to the phone.”

The replication crisis in behavioral sciences makes me more hopeful about the tool’s potential. Human beings are goofy. Being one place and not another doesn’t matter how hungry I am, but you wouldn’t know by our actions.

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Bottom line: the easiest behavioral tool is dialing friction up or down. Thanks for reading and supporting.

$1 Toronto real estate

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Average is like my reciprocating saw: never as useful as I expect. Part of the reason average sticks around is economics, It’s cheap to produce.. Average is a crude tool, like with student loan debt, and often hides the heterogeneity of a situation.

We’re entering an era of precision. One covid lesson has been the effect size of heterogeneity. At the macro level, the impact of covid depends on time and place. At the micro level, the impact depends on age, immunity, and social network. Covid was (is?) difficult to judge because there are a lot of factors that need fitted together.

If we need precision we should probably think about distributions at least as often as we think about averages. An example is the periodic one dollar real estate listing. Yes, this generates attention, spins up the market mechanism, and might be the marketing magic an owner needs. But it also changes the distribution of offers without changing the average offer.

“When you give people a listing price they ask if it’s worth more or less and by how much, so they anchor at the listing. If you don’t have an anchor people build a valuation from first principles. The average (offer) doesn’t change but the distribution does. For a one dollar listing you get some really high rates and some really low ones. In the listing price you get distributions around what the asking price was. This is a world where the seller doesn’t care about the average, they only care about the top end of the distribution.” – Dilip Soman, The Decision Corner, October 2021

Maybe this is being too hard. Average, like the saw, has its uses. The aim here is to combine numeracy with psychology to get by in the world. That means presenting the ‘best’ wait times or predicting rain more often. Being numerate is understanding that the average age is 78, but if you make it to 65 you’ll probably live well past eighty.

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“The average looks like 10-12 years lost due to Covid – but that’s an average of a distribution with a very odd shape, a highly skewed distribution, some people have lost forty years of life. The peak of the distribution is people who lost less than a year of life.” – David Spiegelhalter, Risky Talk October 2021

Interval training

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One of the perks of this blog is repetition. There are areas afield of the core focus (which itself moves) but there’s a lot of repetition. This is good. Jason Zweig once said that his Wall Street Journal articles were just the same principles in different forms.

There are other intervals. Sleep and exercise seem to be daily intervals. Eating might be longer or shorter. A business’s innovation interval depends on the industry. What’s the interval might be an interesting question.

There are vaccine intervals. Pfizer and Moderna tested three and four weeks and were (largely) administered in that time space too. But not always.

“In Quebec, in early 2021, the world was short on vaccines. To spread the doses in Quebec they decided to spread the interval to sixteen weeks. The researchers looked at the immune responses after the second doses and found a lot of similarities to people with hybrid immunity: high levels of antibodies, and neutralizing diverse coronavirus variants.” – Ewen Callaway, Nature podcast, October 2021

In Quebec at least the longer interval worked better.

Part of what makes cac such an interesting business angle is that there are a lot of ways to reduce the number and a low cac changes a lot of the economics. Intervals are like that too. The cost to experiment in intervals is low but the effect might be large.

DuoLingo experimented a lot with their reminders and what ultimately worked was one of their early interval tests, remind people about a day later. That will happen with experiments, but knowing about intervals as an option expands our field of experiments.

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