Framing title insurance

You’d think price matters but when buying a home it doesn’t.

At least the title insurance does not.

On Acquisitions Anonymous, the crew looked at a title insurance company with one million in sales which serves residential real estate clients. One aspect host Bill D’Alessandro wondered about was deal flow. Does the business get clients through advertising or does the owner have specific relationships? If the latter the acquirer must inquire.

But advertising doesn’t really exist for title insurance, “the customer does not shop for these services, you can’t really advertise to the consumer,” Bill observed. And there’s no advertising for two reasons.

First, it’s hard to compete on price because of framing. Framing matters a lot. We see framing in ‘always buy two new cars‘, in making better predictions, and the impact of Covid. Title insurance cost is framed against the price of the house. Saving a few hundred dollars while spending a few hundred thousand isn’t part of our mental accounting.

Second, the fear of being wrong. People switch to avoid loss, the loss of a title snafu is much greater than the loss of the cost of insurance. The JTBD of title insurance is protection. Switching from the default company to another introduces psychological discomfort if something goes wrong. I can only imagine telling my wife, “no, no, I saw an advertisement on Facebook for this cheaper company.”

How much a buyer can unleash a business’s potential is TBD, and dependent on the answer to this deal flow question.

Flat earth beliefs

It is surprising there are not more anti-science beliefs.
1. Science isn’t static, there’s not much canon.
2. Science is mostly not a putting-a-man-on-the-moon problem.
3. Science communication persuasion is difficult, especially relative to cultures, norms, and habits.
4. Science belief doesn’t follow formal logic, it is contextual. There are plenty of people who don’t trust a medical engineering but trust engineered medicine, or vice versa.

One way to think about all the non-science beliefs is as three states of the world: -1, 0, and 1. Put another way: anti-science, ignorant, pro-science.

Sometimes science denial is an information problem. If people only knew…. But that’s not quite it. Yes, sometimes scientific knowledge is zero, ‘they just don’t know the facts’.

“The other thing I think is wrong about how the media portrays it (science denial) is as misinformation. Science denial is about disinformation. Someone has intentionally created the theory that rebreathing into a mask will give you CO2 poisoning. Someone has made that up and filtered it out through the internet where it hits someone’s cognitive bias and they start to believe it.” – Lee McIntyre, Behavioral Grooves, November 2021

Most of life is not a ‘they just know the facts’ situation. C’mon, how many things do you dear reader not hold an opinion on. More often, it’s not non-consumption, but belief in something else. Weight Watchers and financial education are also examples of this state. Plus, our views on science and medicine, finances, and diet-health-lifestyle all have a strong identity component. If someone said, “Look, I hear what you are saying but I don’t trust the experts and this online community are my people,” you would have no idea if they were a Boglehead, a CrossFit participant, or anit-vax father of two.

The case at hand is like an errant Sudoku puzzle, there’s something else in that spot and it’s attached to a person’s identity.

Around here we try to skip the ‘they just don’t know the facts’ stage and go right to designing change. Personal finance is about shifting what we buy, often time rather than stuff. Heath is about shifting what we eat and what we do, replacing one thing with a healthier option. Anti-science persuasion then must replace the anti-science beliefs with something else. The trick here, says McIntyre is to plant a seed. Rather than ‘the facts’, be empathetic and offer suggestions. Reframe your aim from conversion to combustion, be the spark but let them do the work.

It is wild how many things we do become part of our identity.

Update February 15, 2022. Even ‘hard’ sciences are hard. Only forty percent of cancer biology studies replicated and eighty percent of pharmaceutical studies in academic labs cannot be replicated in industrial ones. Also, plastic recycling has (always?) been a sham: NPR Planet Money.

$1 Toronto real estate

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.

“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

Always buy two new cars

I’ve been driving my wife’s car a lot lately. Her car is nice. It’s smooth, it’s got more room, and it has bells and whistles. It’s always had these things but I’d never noticed.

It’s refreshing to notice instances of relative rather than absolute value. Her car is nice relative to mine but not so nice relative to the newest thing for sale. After driving her car I kinda wanted a new car.

Like made up start ups, the advice to ‘always buy two new cars’ is half a joke. Much of the personal finance advice around here is to choose from pretty good options. Emergency funds should be generally right, both 15 and 30 year mortgages are good choices, and personal finance expertise is from experience not eduction.

To buy two new cars then means that the relative value of the next new car will be largely hidden from me. Sure there will be neighbors and Ubers and advertisements but I make – we make – easy decisions. If it’s not easy to compare then it’s a comparison that won’t occur.

Ironically I noticed this idea with iPhones a couple of years ago. It only mattered that the phone was newer, not that it was newest. All value is perceived value.

The ball bet

What are the odds of more than twelve named Atlantic hurricanes in 2021? That Bitcoin will top 75K in 2021? More than 2M travelers through TSA in a single day?

These, and more, were part of the 2021 predictions. That post built on the ideas of Superforecasting, which offers ideas towards better predictions. Julia Galef adds another.

Here’s one of the prompts: Will I lose power at my home in Central Florida for more than three days? I figure these odds were about 10%, and would wager that, no, we will not lose power for more than three days.

Imagine another prompt. In this bag of twenty balls there is one red and nineteen black, pick the red one and win. Okay, simple enough. There’s a five percent chance to win the red. And here’s Galef’s guise, you can only play one game.

Do I feel more confident about the hurricanes making landfall or the finding of the red ball? The hypothetical ball bag bet can slide up or down: 5%, 10%, 30%, etc.

“You just ask yourself, do I feel more optimistic about taking that bet or [the other]…You can play with the ratio of balls to kind of narrow down the number you put on your confidence in the original question.” – Julia Galef, BBC’s More or Less, August 2021

With my kids we use coin flipping. One day I had an appointment and told them there was a 5% chance they would have to go to after care at the school. “That’s like flipping a coin and landing on heads four times in a row” I told them.

Probabilistic thinking is difficult but it can be helping in making good decisions. Poker’s appeal highlights this idea too.

The TSA’s nadir was 87,000 travelers the week of April 13 2020, down 95% from the same week in 2019. In 2021 that number was more than one million. The week of June 11, 2021 there were more than two million travelers. I guessed there was a seventy-five percent chance that would happen.

Just the first day of camp

Stand up comedy is the fruit fly of the comedy world. Comedians can think of an idea in the morning, expand it in the afternoon, and perform it that night. Nothing is above the laugh and the feedback is fast and firm. Jokes work or they don’t.

Covid, no laughing matter, has been similar. Though not as fast or firm, the cycle between idea, test, and results has been pretty good. Though clear-ish now, vaccines, hand washing, masks, social distancing, lockdowns, etc. etc. etc. have been a figure-it-out-as-we-go kind of thing. There’s a lot we didn’t know, and still don’t know.

Another area where we know more is our sense of costs and benefits. For instance:

“Send your kid to camp the first day. When they come home they won’t have Covid, because they didn’t get Covid on the first day of camp and they will be like, ‘Wow, camp was amazing.’ The normalcy makes the other pieces vivid.” – Emily Oster, September 2021

What Oster does nicely here is frame the Covid camp trade off for people who overweight the risk from Covid for kids and underweight the reward from camp. During ’20 & ’21 Covid has been all we think about, and we need a reminder about this other stuff. A small step – the first day – is a good approach for highlighting this balance.

We haven’t always known that kids are mostly okay. We haven’t always known that camp is mostly ok (maybe up to 20,000 people?). We’ve learned that being younger is better. We’ve learned that local conditions matter – a lot! We’ve learned a lot.

Framing information one way rather than another is one of my favorite themes.

It’s all solutions

A Chesterton Fence is the idea that we should understand a thing before we change it. Marc Andreessen tells the Chesterton Fence story of Airbnb. Prior to online marketplace for homes and rooms were hotels and prior to hotels were bed and breakfasts. These bnbs varied and so hotels created brands and brands gave consumers information. It’s this kind of hotel. Brian Chesky et al. figured out that rather than brands, the same information could be in reviews and ratings.

“I want to change the way people see the modern world. I want people to look out at the world around them: at the steel, at the concrete, the glass, the computers, the washing machine, the automobile and jet plane and I want them to see everything made by human beings and understand it as a solution to a problem. There was some problem that we had in the past and we solved it. I think when you start to see the modern world as, ‘I am surrounded by solutions to problems’ you start to appreciate it a lot more.” – Jason Crawford, June 2020

That’s awesome. Everything around me is a solution frames the world as such a cool place.

Everything framed as a solution also nudges people towards a bit more curiosity. If a 401k or a mask policy or an expressway interchange is a solution then why was it that rather than something else? If we use hotels or stores or cars why was that the solution?

Solutions, all the way down.

Crawford’s episode came up on a curated podcast playlist I source from Tyler Cowen’s posts. Cowen is one of the most influential thinkers. Here’s a pay-what-you-want thirty-minute read about a few things I’ve learned from Cowen. Or, if you’re really into the coolness of ‘stuff’, try the book Stuff Matters on Amazon.

Triangle problems

How do you fit the triangle in the circle?
the triangle problem

One way to think about Alchemy, said Rory Sutherland, is to think of a Sudoku puzzle. In Sudoku each column, row, and 3×3 box must have one through nine once and only once.

Sutherland’s suggestion is to shift back and forth between the rows, columns, and boxes. We’ve highlighted donation alchemy, wine alchemy, and magazine alchemy. Alchemy is like moneyball find secondary things that deliver value. An easy addition, from Sutherland, is good wifi and good seating.

Another way to consider Sudoku situations is as a triangle.

“This is why I like being in the field of addiction. It isn’t just about ‘the drug’ and it’s not just about ‘the person’ and it’s not just about ‘the society’. It’s about all three, it’s this triangle between social factors, personal factors, and drug factors. It’s a very complex equation but it’s fun because you can see different parts of the world and different weightings and different outcomes.” – David Nutt, London Real February 2020

Nutt’s podcast covers a lot of ‘the society’ solutions, where certain locales changed consumption patterns. Mostly the outcome change is about ease. When alcohol is less easy to consume – via where and when it can be purchases or how much it costs – then people drink less.

The triangle feels like a better analogy than Sudoku. The triangle can be rotated like a dial. We can move points A, B, or C or A, B, and C. The triangle also fits with a complex adaptive system view: if we move A down three and over two it will be in the circle but then B will be out. And it could affect C too.

Triangle problems joins our toolbox for problem solving along with: black box problems, profession problems, TiVo problems, and cooking problems. Each of these is a framing, if this is the problem here’s how to approach it.

Thanks for reading.

Machiavellian framing

“The thing that makes The Prince such a timeless and scandalous work,” explained Stacy Vanek Smith, “is the same exact thing, Machiavelli removes morality from the situation.”

Smith is out to talk about her book, Machiavelli for Women and the book’s seed came about when Smith was stuck on her salary. Rather, her salary disparity. In her first job out of college, Smith and two classmates both ended up at the same organization in roughly the same jobs. But, not with the same pay. Rather than plead her case, pound the table, and present data, “I was in an emotional spiral of unjustness and upset and I never asked for a raise.” Smith needed some unemotional advice.

“What Machiavelli does is remove all that. He would probably look at (the salary disparity) as great information to use. Now what’s the best way to go about getting a raise? What’s the best way to ask? What do I do now? That’s why it is timeless, because it’s so smart.” – Stacy Vanek Smith, September 2021

Good framing is a design choice that affects behavior. We can frame self talk by having multiple ‘jobs’. We can frame vaccines as better than being bulletproof. We can frame decisions by asking, would I want this even if it were free? Each prompt changes the reference point and possibly the behavior.

As needed then, maybe some people should be Machiavelli Bayesians. Be slightly more princely, if that works do it again until it doesn’t.

Being (even more) Bayesian

Bayesianism has become my favorite math-idea-that-doesn’t-involve-math. It’s three simple steps. Step 1: have an idea about a thing. Step 2: observe the thing. Step 3: have a new idea based on the observation. (repeat)

There are two tricks to make this work for you. The first is how much to update. Being Bayesian means changing your mind in proportion to the change. Try the expression, “I’m slightly more sympathetic to X,” for example. Saying this acknowledges the new information and massages the ego.

The second trick is where to start (Step one), and we have to start somewhere.

“By not taking advantage of the accumulated knowledge that we have as a scientific community, we are artificially leveling the playing field. We are giving theories with no basis in scientific fact too great of a chance to prove themselves through the data.” – Aubry Clayton, The Conversation, August 2021

Clayton’s context is Covid19, but he touches on a larger point too. How much coordination and decentralized command a system allows.

A decentralized command iterates quickly. From the front lines of fast food to fashion to fights. If an organization wants to move fast, the decentralized command structure works better than coordination.

But while individual agents may be fast, the whole may be slow. Why? No coordination. The scientists in a medical research lab will do more experiments with no oversight or collaboration but they may not make more progress.

Coordination and decentralized command apply to both knowledge and people. Having accurate base rates and priors means coordinating our existing knowledge with the accumulated.

Bayesians even frame things beautifully. It’s not “changing your mind” bur rather it is “updating your beliefs”.