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Disagreeing in a Crisis

Recently on Twitter there’s been a trend of “it’s not that bad” tweets gong around. One said that half of Italy’s CoVid19 fatalities were people with three or more existing illness while people with no other illnesses existed in less than one-percent of deaths. Among the ‘maybe it’s not that bad’ list are Elon Musk, Phil Hellmuth, and Bill Gurley.

No one is saying doing nothing, but many are saying to look at the costs. Many are saying to think like economists. 

With hindsight we’ll see that someone had the right model from day one. It likely won’t be you or me. However we get to sharpen our thinking (skill) rather than be right (luck).

So, what might account for these experts in one domain to be right in this one too? 

  • Data. It could be that there’s so little good data that we face an elephant problem. The Italy statistics look like this. The China statistics look like this. One country sees a pandemic, one an outbreak. 
  • Uncertainty. Maybe I’m too confident in my projections of outcome distributions. It could be way better or way worse than I expect right now. 
  • Salience. It could be we’re all caught up against a ‘common enemy’ with nonstop news fanning the flames. 
  • Opportunity costs neglect. People tend to overemphasize the importance of what comes to mind and dismiss what else they could spend money or time on.
  • Stock data. The stock market thinks that immediate future earnings will be significantly less. Could this be a bad proxy? 
  • Outcome severity. Maybe there will be many more with ‘zero effects’ than ‘death/ruin’. If that’s the case then CoVid19 edges more towards “driving across the country” and away from “contracting Ebola.”
  • Existing immunity. The virus has already spread through many people and those that have survived are resistant to antibodies. The influence like illness data that’s coming out might suggest this. 

It could be that Musk, Gurley, and Hellmuth were wrong in their consideration of all the details. However the process of considering why is right. Our Phantom Tyler Cowen suggests we write out why the opposing side is correct. 

There’s a lot here about arguing well and the critics of that idea say that doing is so much more difficult than discussing it. In this crisis is an opportunity.

(I use luck in the Mauboussin sense of anything out of one’s control. For example, if this were a physics problem like ‘where will planet X by at time t we would have the answer for the CoVid19 pandemic). 

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Tim Harford’s Arguing Advice

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.

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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.

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Argue Zell

One trait of great business leaders (seems to be) a willingness to hear dissenting opinions. It takes a seed of humility that will sprout a culture where ‘arguing well’ can survive.

Michigan Dean, Scott DeRue told Sam Zell: “I’ve met a number of your employees and one of the things that’s universal when they talk about what it’s like to work with, and for, Sam is that it’s not always easy. You will challenge them but they know that you believe in them.” To which Zell replied:

“You don’t kill the messenger. As I say to my people all the time, take me on. I’m not afraid to defend my position and neither should you.”

Sam Zell

This has been important, Zell explained, because he’s been “business agnostic.” Investments in twenty different industries (“it could have been forty”) means that Zell has to think on the fly. As such, “No one is quicker to admit they’re wrong than I am.”

Yet, as people this is hard. It’s difficult to separate I was dumb from That was dumb. In th wrong culture it’s impossible

As Zell put it, “I’m not afraid to defend my position and neither should you.” I think it was Kara Swisher who said that when she hears someone say, ‘I like to be challenged’ they really don’t. To her it’s a red flag. Partly because, good arguments are difficult to do well. Yet in the right place, it’s possible and as Zell proves, profitable, to argue well.

Other quotes from Zell:

  • On Risk, “If my watch has one moving part then it has a very small probability of not working. If my watch has fifty moving parts then there would be another forty-nine potential reasons it didn’t work.
  • Risk, again. “I only want to be right seventy percent of the time. The real key is how wrong are you on the thirty percent.”
  • Leaving money on the table, “I think that a great deal of my financial success is directly related to the fact that we’ve been long-term players.”
  • Being different, “Look at everyone the Forbes 400 who didn’t inheret money. Everybody went left when conventional wisdom said to go right.” & “There are very few examples of high margin businesses that are done by everybody.”
  • Skill and luck, “I think ninety percent of success is accidental. Accidental in terms of the opportunity arising, not accidental in terms of people’s understanding and willingness to take it up.”
  • Action, “My advice to everyone is to become a profesional opportunist.”

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