Obama and Eisenhower

Some subversive decision making influences, like a cross breeze in golf, are the unnoticed dynamics. Social pressures, human tendencies (status quo bias for example), status, ego, and so on. But like with a vegetarian diet, it is possible to design around them.

One design choice is incentives. Incentives work as designed sometimes, but other times create yes men and women. YM&W are a completely predictable case of certain incentives within an organization.

To get around this, certain leaders argue well and vigorously debate an issue. The aim is a debate rather than a resolution.

Another path is to not state a perspective and enroll a (similar status) opponent, but to be more of a blank page. It may not be coincidence that at least two presidents followed this direction.

Speaking about his new book, Noise, Cass Sunstein said:

“President Obama was a master of not giving a clear signal of what he wanted to do because he wanted to get as much information as he could and that reduced the noise.” – Cass Sunstein

The book Ike’s Bluff, covered how Dwight Eisenhower used this tool too:

“Despite his open demeanor, at press conferences Eisenhower would from time to time pretend to know less than he did, leaving the illusion that he was distracted and ill informed about matters that deeply engaged him. Indeed, Eisenhower was willing to appear less than sharp, even a little slow-witted, if it served some larger purpose. Unlike most politicians, he was not driven by an insecure need to be loved and recognized. He possessed an inner confidence born of experience.”

There’s as many paths to success as there are organizations trying to succeed. To ‘argue well’ or ‘listen like Ike’ is one of many ways.

Predicting an AA A+

There’s this idea in sports that certain people are “ruining the game”. It’s those baseball people who favor home runs and defensive shifts. It’s the golfers who drive for show and dough.

And we can blame computers.

And us. We’re to blame too.

Computers compress time. I could have mailed this to you as a letter but that would take me buying paper (after a trip to the store of course) writing it…yada yada yada…and you walking to the mailbox. Computers compress all that.

Analytics is a type of compression. Rather than a lot of people and a lot of time to learn about the advantages of home runs or infield shifts in baseball or long drives in golf, a few people with computers thought it might work and ran the data.

This is an issue we will see more of: novel data making interesting predictions.

“We looked on Twitter for anyone who announced they were going to their first AA meeting and we followed what they tweeted after that. Did they stay sober for ninety days or did they go back to drinking? Did they complain about being hungover at work? Did they celebrate their sobriety? Then we took all the data we could model from their Twitter feeds to try to predict if they would be sober. Things like: who do you follow, do they talk about booze, are you over 21, how do you cope with stress? We can predict with 80% accuracy if someone will stay sober or not on the day they decide to go into treatment.” – Jen Golbeck, November 2020

This algorithm, Golbeck notes, is also pessimistic, it tends to say you won’t recover when you will. And it’s confounded by the sample: only certain people announce things on Twitter.

These algorithm approaches will grow in the decision making blend. Part-of-that means understanding the tools. We are time traveling, leaping to the future rather than walking there.

Envy, the least fun mistake

Maxim 17 from Richard Zeckhauser is “Strive hard not to be envious – see your friend’s success as your gain”. Envy is an obstacle to be recognized early in the decision making process warned Charlie Munger in his Psychology of Human Misjudgment speech.

A 2021 Sports Illustrated profile of Pete Sampras addressed his envy, or lack of. When Roger Federer broke his record of fourteen major wins. A friend recalled this conversation:

‘“I said, ‘It’s getting close. What do you think?’ ” recalls (Paul)Annacone.
“It’s pretty amazing!” Sampras replied.
“What do you mean?” pressed Annacone who, ironically, would go on to coach Federer.
“Well,” said Sampras, “I just know how hard it was for me. If anyone else can do it, that’s just too good. That’s amazing!”

Zeckhauser, Munger, and Sampras all express an idea seen every weekend at the local 5k race. There’s little envy because every runner is running their own race. The couch to 5k crowd is happy to finish and the elite runners are happy to see them finish too. Toward the front of the pack the attitude is that each person competes against the clock.

If envy is uninvited should it, like spam emails, be blocked and never surface in the mental inbox? Maybe not. Denise Shull advises her clients to accept and understand their emotions because emotions are information. But what kind of information? Shull said:

“Put your feelings into buckets. Which feelings are childhood repetition? Which ones are because the other guy is doing better? Which one is your market recognition? Which one is your intuition? People can learn this, but most men have been told to put all that stuff aside.”

When Hank Aaron was asked if he was going to give Barry Bonds the home run record, Aaron replied that he wasn’t giving anything, that records were made to be broken.

There’s this snarky idea that if you’re one in a million there’s still 8,000 people like you in the world. That’s true. But it only takes thirty-three binary variables to get to 8 billion unique answers. Do you like licorice? Y/N. Have you seen Star Wars? Y/N. And so on.

In that sense everyone is running their own race and envy is irrelevant. I think Shull is right about envy as information, the winning move is to play it like Munger, Aaron, and Sampras.

Unlocking the restricted actions section

There are (at least) four ways actions are restricted: macro-culture like society, micro-culture like an office, job mandates, and personal psychology. For Andrew Sullivan, the obstacle was the last one, the self.

“What I find that marijuana does, and to some extent — mushrooms definitely do, meditation does as well — is that they suppress the ego. They weaken the ego.” – Andrew Sullivan to Tyler Cowen, August 2021

Psychedelics, for Sullivan, offer a change in perspective., “You’re less attached to your own pride. Your mind is taken out of its normal rut,” he explained.

How much THC is TBD, but Sullivan’s point is healthy. Ego, for instance, is part of the reason Jason Blum is successful making horror movies. Ego, is part of the reason, Bank of America succeeded. The proletariat, it turns out, is profitable. “I don’t care where an idea comes from,” said Gregg Popovich, “You have to be comfortable enough in your own skin to realize that an idea can come from anywhere.”

A healthy amount of ego helped make Friends. An unhealthy ego meanwhile leads to dentists opening restaurants or financiers on movie sets.

This is one of those that-kinda-makes-sense ideas but a regular dose certainly helps.

Thorpe’s Two Questions

Ed Thorpe is in graduate school and has a professor who is ‘mailing it in’. In class Thorpe stands up to the instructor, demeans him, and is threatened with expulsion. Needing to stay in school, if only to avoid the Vietnam War draft, Thorpe crafts a careful apology:

“I explained that I’d come to realize his teaching methods were unique and that students, though they may not always appreciate it rarely encounter a professor of his caliber. What I said was true, but allowed more than one interpretation.”

It was an early lesson that was almost quite costly. In the future, Thorpe started to ask two questions: “None of this would have happened if I’d have asked myself beforehand, if you do this, what do you want to happen? And, if you do this, what do you think will happen?

Book: A Man for All Markets

Cruising mood

One of Tyler Cowen’s suggestions for thinking better is to avoid mood affiliation. From 2011:

“It seems to me that people are first choosing a mood or attitude, and then finding the disparate views which match to that mood and, to themselves, justifying those views by the mood.”

This is clear in politics when people judge ideas on whichever party is blaming/praising on whichever media. Rather than the easy pickins of politics though, let’s journey a sunnier path: cruising.

Cruise ships are awesome. Many miss this thanks to mood affiliation. It’s not their people. It’s not their food (buffets!). I don’t want someone to dictate where to be and when is the comment I hear the most. Some non-zero number of people look at a cruise vacation and decide they don’t like it and then come up with reasons for why.

But cruises balance flexibility with stability. The only rules are the times the ship arrives and leaves. That’s it. In that window people can do nearly whatever they want. Cruises are like Crocs, they can be as laid back or “attack mode” as the vacationer likes.

Food on cruise ships is good. The buffet is good, especially the vegetarian curry options because that is home-cooking for the international staff. Ships also offer a number of (revenue growth) fine dining options. The best of these are magnificent. It won’t be extraordinarily but how many people prioritize this on vacation?

On board are a variety of options like rock walls, FlowRiders, theaters, slides, escape rooms, and kids clubs. Off the ship are many interesting tours, excursions, and experiences. Private drivers are especially adaptable, this is another Tyler Cowen suggestion.

Look at that form!
Flowing

Cruising is not for everyone, but maybe not for the stated reasons. And Cowen, probably couldn’t stand cruising.

Konnikova’s Data

Park of poker’s appeal  is that people balance consequences and rewards. Thoughtfully in the best cases. But the lessons aren’t always obvious.

Nate Silver notes that live poker can be boring because participants don’t play that many hands. Yes, Maria Konnikova replied, that’s one way to look at it.

“There’s a perception that live poker can be boring because if you’re playing well you shouldn’t be playing that many hands. There is a lot of time you are just sitting there. But something I learned from Eric Seidel is that the times you are not in a hand are some of your most valuable opportunities to gather data.”

Konnikova recounts to Silver a time she was disposed as chip leader by an opponent who, after a day of play complimented her on her previous tournament. Why? It was televised. He picked up on her over aggressive style (something Konnikova notes in her book, I highly recommend The Biggest Bluff) in that tournament, and he used that against her in this one.

So rather than play as the thing-to-do, observe and learn are the things to do. Konnikova (and Seidel) reframed poker folds from something passive to something active. This is the same trick Annie Duke used for her poker clients. Duke reframed the action from playing hands to making good decisions.

Barry Ritholtz calls this the don’t just do something, sit there challenge. It’s hard to break the action-progress association. Yet there are situations, beyond poker, where not doing is more important that doing.

The basic level of learning a new thing is the advice to “just do it”. Just exercise/save/invest/read more. That’s difficult, especially without an anchor. A better way might be to substitute something of the same class. In the case of poker, Duke and Konnikova substituted one verb with another, and gave a reason for doing so.

I’m on a big pickleball kick right now and this advice, along with Winning Ugly from Brad Gilbert points in a clear direction: my game isn’t so much about hitting winners first but hitting winners second. A lot of my level is about setting up n+1 shots. Rather than beat an opponent down the line, with varying success, my aim should be to hit feet high down the line, move them, wait for a ‘green light ball’ and then hit winners. 

onward and upward

The Restricted Actions Section

Shane Parrish on Capital Allocators:

“Even during the pandemic, there are tons of public health guidelines out there where people are telling you what to think, how to think. You need to filter that and digest it. You can’t just rely on it. They came out and said that masks don’t matter and then said masks do matter—well there was no downside to wearing a mask. You might look like an idiot in the short-term but there’s no downside to it.”

Shane Parrish

One theme in Shane’s great conversation with Ted Seides was how much the cost of looking dumb restricts possible actions. About his podcast Shane said he’s just an idiot with a microphone.

But restricted compared to what? An idiot how?

Restrictions differ by scale and is much like the old political joke: I’m a libertarian at the national level but to my dog I’m a Marxist.

This idea surfaced in Bill Brewster’s podcast with Dan McMurtrie.

“I was somewhat bold enough to call out a transaction that some people have been burned on. But when I started to get inbounds from real mutual funds and managers and as I listened to why people weren’t buying I was like ‘Oh, I’m gonna fucking win on this because I don’t have the constraints.”

Dan is super good in the interview and together they address the four levels of constraints.

  • Macro culture (society). For instance, it’s taboo to talk about sex, or at least the dating market.
  • Micro culture (office). In another Seides podcast, he spoke with Ben Reiter about culture.
  • Position (job). Certain institutions have mandates about size, moral, or industry situations. ESG is a literal example.
  • Psychology (self). In the podcast Dan and Bill joke about investors who say “See’s Candy is my fav WEB investment”. That’s a psychology restriction.

So what? Why do constraints matter? Because they limit what a person can do. Dan again:

“I never want to compete against Stan Druckenmiller in timing the market. I never want to compete against David Einhorn in valuing a company. I never want to compete against Dan Loeb in writing an aggressive letter to a board. Where I might compete is where the environmental factors means that fighter is not able to perform at their best.”

It’s not more options that are better, but different options. Having good ideas (‘Go’) that also look good (‘Show’) is twice as difficult as just having a good idea. Or, can you look a bit like an idiot?

Correlated Decisions

“We use quantitative methods to put together diversified portfolios that don’t blow up over time. We have technical guys who are very sophisticated, one guy was the MIT chess champion. We need these guys to balance our portfolios, but they’re not picking stocks. I pick those guys because they have no idea how to pick stocks and I don’t want to know what they think about picking stocks, that’s for our researchers.”

– Joel Greenblatt, Capital Allocators.

The JTBD of diversity within an organization is uncorrelated decisions. If we’re all thinking the same way, the expression goes, nobody is thinking.

Early in the episode with Ted Seides, Greenblatt cautioned that there’s always more correlation in a portfolio than someone expects. This is consistent with the idea that most financial issues are liquidity issues.

If there are 3 ways to spend your day then we should be wary about the feed, the search, and the trends. For instance, the September 1 – December 1 BTC search trends. When Coinbase emailed me “Why Bitcoin is in the News.” I thought, this might be a good time to sell.

Google Trends for “bitcoin”.

Trends, searches, and feeds aren’t bad, but they are correlated.

The best solution to uncorrelated decision making is to use a bit of decision making advice from Rory Sutherland. When we select one at a time, we choose the average item. When we choose multiple things at a time, we choose a variety.

Rather than consider a best option then, we can consider a basket of options. With finite resources it’s hard (impossible?) not to prioritize but it does lead to new ideas.

It’s neat to hear that Greenblatt’s operation is like a newsroom: editorial and news, research and technical. Division is balance. The worst outcomes aren’t when something goes against us but when everything does.

How we decide

Our first boil, 2019

Moving to Florida in 2018 has been mostly positive. Y’all and ma’am are great and I use them each day. The weather is wonderful. We also make a boil.

A low-country boil (minus the pesky crawfish) is a holiday and weekend staple. Boil water with seasoning; add potatoes, corn, onions, sausage, shrimp, enjoy. The ratio of work to taste is very low. It’s a good deal.

But making it the first time was hard. We had friends over and I didn’t want to be the person who gave everyone food poisoning or served potatoes that tasted like dirt. The whole meal went great, if not a touch spicy, and each subsequent preparation has been slightly easier even for serving a crowd.

There’s a lot of other options we could do as well. We made a lot of chili when we lived in Ohio. We could order out, make sausage stuffed potatoes, or any number of things. But we don’t. We make a boil.

A boil is familiar. It’s easy. The opportunity cost is opaque. Will <other meal> be better? We don’t know. Let’s make a boil.

A lot of decisions are like this. Opportunity costs are hard to quantify.

During the late teens one bit of regular startup advice was that a product had to be 10x better than the existing option. While JTBD offers a slightly different approach, the idea is a good one. People do switch from one thing to another all the time but it’s often because the decision to do so is easy.

Making a boil in Ohio: hard.

Making a boil in Florida: easy.

Organizations then can consider how to dial the friction up or down. To keep serving people, make it easy for them to stay. To serve new people, make it easy for them to switch.