Quotes – Excelling In Trivialities

Anger, spite, malice, impatience, and a vehement desire of getting the better in a concern wherein it were more excusable to be ambitious of being overcome; for to be eminent, to excel above the common rate in frivolous things, nowise befits a man of honor. What I say in this example may be said in all others. Every particle, every employment of man manifests him equally with any other.

~Michel de Montaigne

How Science Is Science? How Irrational Is Irrational?

Daniel Kahneman helped make chic the idea that mankind is fundamentally irrational, especially when it comes to economics or more crudely as people think of economics, money. At least, that’s what people who read his “Thinking, Fast and Slow” book think he was saying.

I find this “science” to be infuriating and misleading. It gets people to overemphasize the small, selectively irrational parts of the workings of the human mind while ignoring the large, broadly rational parts of the human mind. If what you needed to know about humanity is that we’re really just irrational, you’d be at a loss to explain the wonderfully rational world around us– physics, engineering, social organization and yes… economics.

I have a low estimation of people who find this book and its message appealing. It says a lot more to me about their unresolved childhood traumas and emotional needs than it does about the way the world really works or anyone else’s ability to think critically about various subjects.

And that’s all assuming that what Kahneman wrote a huge book about was actually true! But if it’s not even true, if his science lacks scientificness, well, then we’ve got real problems. On that note, this was fucking embarrassing:

From Daniel Kahneman

I accept the basic conclusions of this blog. To be clear, I do so (1) without expressing an opinion about the statistical techniques it employed and (2) without stating an opinion about the validity and replicability of the individual studies I cited.

What the blog gets absolutely right is that I placed too much faith in underpowered studies. As pointed out in the blog, and earlier by Andrew Gelman, there is a special irony in my mistake because the first paper that Amos Tversky and I published was about the belief in the “law of small numbers,” which allows researchers to trust the results of underpowered studies with unreasonably small samples. We also cited Overall (1969) for showing “that the prevalence of studies deficient in statistical power is not only wasteful but actually pernicious: it results in a large proportion of invalid rejections of the null hypothesis among published results.” Our article was written in 1969 and published in 1971, but I failed to internalize its message.

My position when I wrote “Thinking, Fast and Slow” was that if a large body of evidence published in reputable journals supports an initially implausible conclusion, then scientific norms require us to believe that conclusion. Implausibility is not sufficient to justify disbelief, and belief in well-supported scientific conclusions is not optional. This position still seems reasonable to me – it is why I think people should believe in climate change. But the argument only holds when all relevant results are published.

I knew, of course, that the results of priming studies were based on small samples, that the effect sizes were perhaps implausibly large, and that no single study was conclusive on its own. What impressed me was the unanimity and coherence of the results reported by many laboratories. I concluded that priming effects are easy for skilled experimenters to induce, and that they are robust. However, I now understand that my reasoning was flawed and that I should have known better. Unanimity of underpowered studies provides compelling evidence for the existence of a severe file-drawer problem (and/or p-hacking). The argument is inescapable: Studies that are underpowered for the detection of plausible effects must occasionally return non-significant results even when the research hypothesis is true – the absence of these results is evidence that something is amiss in the published record. Furthermore, the existence of a substantial file-drawer effect undermines the two main tools that psychologists use to accumulate evidence for a broad hypotheses: meta-analysis and conceptual replication. Clearly, the experimental evidence for the ideas I presented in that chapter was significantly weaker than I believed when I wrote it. This was simply an error: I knew all I needed to know to moderate my enthusiasm for the surprising and elegant findings that I cited, but I did not think it through. When questions were later raised about the robustness of priming results I hoped that the authors of this research would rally to bolster their case by stronger evidence, but this did not happen.

I still believe that actions can be primed, sometimes even by stimuli of which the person is unaware. There is adequate evidence for all the building blocks: semantic priming, significant processing of stimuli that are not consciously perceived, and ideo-motor activation. I see no reason to draw a sharp line between the priming of thoughts and the priming of actions. A case can therefore be made for priming on this indirect evidence. But I have changed my views about the size of behavioral priming effects – they cannot be as large and as robust as my chapter suggested.

I am still attached to every study that I cited, and have not unbelieved them, to use Daniel Gilbert’s phrase. I would be happy to see each of them replicated in a large sample. The lesson I have learned, however, is that authors who review a field should be wary of using memorable results of underpowered studies as evidence for their claims.

Some Takeaways From My Time At The D.School

I’m back from Stanford’s d.school and have a few ideas I jotted in my notebook while I was there:

  1. Learn to celebrate failure; watch how you react to it
  2. Let go of your desire to control outcomes; with humans involved, nothing ever goes according to plan
  3. Try things, practice, iterate
  4. Don’t build expense into prototyping; the more it costs, the harder it is to iterate and change and the less you can learn from your failures
  5. Don’t make insight generation complicated
  6. Where is the burning platform? Look for that place and work on the problems involved
  7. Innovation is the outcome of a process, and innovators are the people who do it
  8. The design thinking process: empathize, define, ideate, prototype, test and back again
  9. The answers are not in this building
  10. When empathizing, spend 15% of your time engaging, noticing and following-up and 85% of your time seeking stories
  11. The purpose of your empathy research is to capture emotion; what is it? where does it come from?
  12. Gravitate in your empathizing and your design thinking process between flaring and focusing
  13. When defining, start with an observation, make an inference, then form a hunch that can carry you to insight
  14. Solve one problem at a time
  15. POV essentials: preserve emotion and the individual, use strong language, sensical wording, non-obvious leaps and generate possibilities that lead to problems the team wants to help solve
  16. 5 users are sufficient to capture 85% of usability cases
  17. Tail-end users have explicit needs and better represent the implicit needs of median users
  18. The future is already here, but it’s not evenly distributed
  19. Trusting relationships are the foundation of generative work
  20. Learn how things fail before it matters, not when it does
  21. You can only learn by doing, not by planning
  22. Match prototyping resolution to idea certainty to allow yourself to hear the inevitable critical feedback
  23. Testing = empathy; your prototype is your empathy probe
  24. The value is in the user and their emotions, not in the prototype or experience model itself
  25. The goal is to develop empathy with the user, not the make the prototype perfect; seek understanding
  26. All action aims at advancing the frame and the concept towards convergence
  27. What do your users say about the concept? The users’ reactions and excitement indicate proximity to convergence and likely next steps
  28. 3 elements of storytelling: action, emotion and detail
  29. 100% of people who succeed, start
  30. Struggle and learning are complements; there is no learning without struggle, and the more one struggles, the more one has opportunity to learn; you can not master new knowledge from a place of comfort

Some or even many of these are probably difficult to make sense of or place without further context about the design thinking process.

What Is Austrian Economics?

I was recently invited to give a talk to a group of local investors about Austrian economics. The presentation ran about 2hrs w/ questions. Below is the slide show I shared, which I believe also has slide notes attached that explain the contents of each slide. The material, while lengthy, is not comprehensive. This is supposed to be a holistic flyover. Also, while the intended audience were investors, really only the last few slides pertain to things investors would want to know and the majority of the presentation should make sense to anyone interested in learning more about (Austrian) economics.

What is Austrian economics? Praxeology for practical (value) investors
In preparing this presentation, I found two resources helpful. One is a “top 10” list of what Austrian economics is about according to Eamon Butler from the UK. The second was from an article I searched for which I think I found on Mises.org called “What is Austrian economics?” which I then distilled down to the summary concepts from the larger narrative of the article.

Eamon Butler

  1. Economics is about individuals (micro vs. macro)
  2. Economics is not like natural sciences (no experimental method; in economics cause is known, effect is unknown, in natural sciences effect is known, cause is unknown)
  3. Subjective value vs. objective value
  4. Prices communicate meaningful info about value and cost
  5. Competition is a process of entrepreneurial discovery, not deterministic perfection
  6. Private ownership essential to price formation and exchange (can not get prices without exchange, prices show us what is most valued versus least valued)
  7. Production is an entrepreneurial act that may result in malinvestment
  8. Money is not neutral and inflation distorts the economy
  9. Spontaneous order vs. central planning
  10. Govt intervention involves social guesswork and has real costs

What Is Austrian Economics?

  1. First job of an economist is to tell govt what it can’t do
  2. Methdology of the “thought experiment”
  3. Economics is not about amassing data, but verbalizing universal facts and exploring their logical implications
  4. “Marginalist revolution”
  5. methodological individualism; science of individual choice
  6. uses deductive logic
  7. emphasizes universal fact of time preference
  8. normal rate of profit = interest rate
  9. heterogenous capital w/ time dimension
  10. economic growth = capital intensitivity and longer (roundabout) process
  11. regression theorem; money originates in the market
  12. ABCT (application?)
  13. socialism permits no ownership and exchange of capital goods; creates calculational chaos
  14. deductive method; praxeology, logic of action
  15. monopoly theory; welfare & utility; theory of the state

Review – The Bully Pulpit

The Bully Pulpit: Theodore Roosevelt, William Howard Taft and the Golden Age of Journalism

by Doris Kearns Goodwin, published 2013

I picked up this title for two reasons. The first reason was to try to explore the phenomenon of “fake news” and the mainstream media’s war on Donald Trump’s presidency (and vice versa), to better understand the modern concept of the official press as an important check on government/regime power. The second reason was because at (now) 2,024 reviews on Amazon with an average 4.5-stars, this book seemed to promise it’d be a great, and long at 700+ pages of narrative text, story and I was looking for a great story, something that, whatever I thought of the point being argued, at least proved to be interesting and artfully constructed.

On the second point, I find myself frustrated. The research that went into this book is clearly exhaustive– the author speaks almost as much through verbatim quotes from primary source documents of the period (journal entries, private correspondence, public speeches, newspaper articles and editorials, memoirs, etc.) as she does in her own voice. This lends itself to creepy quirks of the book, such as the preponderance of quotes in which Theodore Roosevelt is found explaining himself in confidence via correspondence with Massachusetts Senator Henry Cabot Lodge, a character who relationship with Roosevelt is never formally introduced or explained! It kind of makes Teddy seem like a tool of some higher, shadowy powers. Why was he constantly justifying himself to another politician when the author never bothered to tell us when and how they met?

But this doesn’t seem to make for a great story. The narrative is rather breathless and sycophantic in tone. Teddy, a progressive openly-hidden amongst Republican ranks, is one of the good guys, he never gives up and, progressivism being the inevitable enlightened state of the universe toward which historical events are constantly moving us all, he of course never meets any real resistance along the way and always wins in the end. And this is a good thing. We never see the author questioning him, catching him in contradictions (though there are many for the alert reader!) or asking how it is that this One, Good Man managed to succeed in a wholly corrupt system and reform it despite the various Interests who had so much at stake in stopping him.

For a critic of progressivism, there is no profundity to consider; for the advocate, no value in confirming what is already known. The story is boring.

As for the topic of “fake news” and watchdog journalism, that must’ve developed at some other time period. We learn again and again of how Roosevelt took various progressive journalists of the era into his confidence and made friends of them, and them of him, with many ebullient feelings being shared all around. We learn of his unique talent for cultivating relationships with these journalists who then heralded him and his policies for public consumption, and we also come to understand the important value this access represented to people who essentially are merchants of information those with access frequently come by. In some scenes, we see them conspiring so closely that it almost seems that the journalists are formulating policy, and the politician is writing the story.

In other words, we see a symbiotic relationship that serves power. Where’s the watchdog here?

One thing I wondered as I read this book was, “Was progressivism truly inevitable?” It’s hard to see how it could’ve been stopped, or what would’ve existed that was much different from it if it had been. Roosevelt’s insidious support for what every critic at the time could quite obviously see was socialism, from within the Republican party, which according to repeated insistence from the text had a stranglehold over the entire government, calls to mind the cliche, “With friends like these, who needs enemies?” It seems that there was a competitive advantage in politics in moving further and further to the left, no matter what party you came from, and the investigative journalists of the era (such as the evil Lincoln Steffens, who spent many years becoming “educated” in Europe about Marxism on his businessman father’s nickel) were only too happy to assist in readying the public for this ideological assault. When you read the accounts of the period of union workers intimidating “scab” worker families (women and kids), beating strike-breaking workers and even dynamiting non-union workers in public places, it kind of sounds like terrorism, something that seems like it would be a hard sell to good-hearted middle class Americans.

Yet, that is the side of history that won, and guys like Roosevelt and the investigative journalists helped make it happen.

It seems like it’s worth not forgetting that when listening to the media today tell us the important role it plays preventing democracy from dying in darkness while it does the bidding of the Deep State.

3/5

Review – The First Tycoon (#review, #books, #capitalism, #history, #entrepreneurship)

The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T.J. Stiles, published 2010

How and why did Cornelius Vanderbilt, steamship and railroad entrepreneur, become America’s “first tycoon” and in the process earn a fortune worth an estimated $100M in the 1870s? The simplest answer provided by this lengthy biography is that Vanderbilt was able to think about abstract entities such as corporations as representing competitive business opportunities in an age when most other people controlling them thought of them as profitable grants of privilege from the State (which they were). The result was that Vanderbilt thought strategically about his acquisitions in the sense of actively seeking to own things with identifiable competitive advantages (the best route, the lowest operating costs, network effects) which he would then exploit while slashing prices, while his competitors were stuck playing defense until they gave up and offered to buy him out in self-defense.

But the book really doesn’t offer enough specific and concrete evidence to validate this thesis, it’s really just a hunch and an attempt to read between the lines of what is offered. Like most biographers and historians, Stiles consistently fluctuates between the two extremes of failing to provide the necessary evidence to actually understand what was happening and why, and forcing a tortured narrative metaphor of “the capitalist as king/general” that ends up just confusing the issues. Vanderbilt is constantly in “rate wars”, is “battling” for control of companies and finds himself with an “empire” after yet another “conquest.” But we never hear this language in Vanderbilt’s own quotations (based upon written correspondence, newspaper interviews and courtroom testimony) which are numerous.

How Vanderbilt saw himself as a businessman and operator, and how Stiles chooses to depict him with his jarring anachronistic fadism are even more incongruous because Stiles himself spends much of the time arguing against his own descriptions! It is a puzzling choice. Perhaps books about old tyme capitalists don’t sell well without a not so subtle nod to the villainous Robber Baron laying in wait inside of all of them, but it’s a shame because the much more interesting story would’ve been the one told through Vanderbilt’s own eyes. Not to mention the fact that the Robber Baron myth is a lie perpetrated against Vanderbilt, not because he was a horrible monopolist but because he was such a pain in the ass to the horrible monopolists!

[The NYT] attacked him for, as he wrote elsewhere, “driving too sharp a competition” [… deriding] “competition for competition’s sake; competition which crowds out legitimate enterprises… or imposes tribute upon them” [… and called on] “our mercantile community to look the curse of competition fully in the face.”

Similarly, there are constant references to “the world Vanderbilt helped make” with reference to markets and businesses, the city of New York and the emergent nation of the United States of America. And while certainly the man’s actions and decisions were influential and impactful, Vanderbilt was not a statesman and never saw himself as anything more than an ambitious private citizen. There is not one example in the book of Vanderbilt plotting to remake the world in his own image. This is just another forced biographical trope that dopey readers, editors and authors seem to think makes a story ten times better to insist upon when the world just doesn’t have that many psychopaths in fact.

Other information missing from the story that seems essential to charting Vanderbilt’s rise: what he paid for various business assets and how he financed them, what he earned from them and what he paid in taxes, when he controlled an asset and when he was a minority partner, etc. Especially, we should like to know his leverage over time and how he was able to benefit from the various money panics that occurred repeatedly throughout his business career. One thing is for certain, he seemed to always be a buyer in such scenarios, never a seller, and he seemed comfortable being in control of his investments and making and enforcing operating policy, rather than being a mere financial speculator such as a partner like Daniel Drew might.

There are many charming bits of early American social and business vernacular we learn sprinkled throughout the book and its strength is in providing so many direct quotations from primary sources, especially the business media of the day, which really help to flavor the narrative and transport the reader to the place and time described. But this can also be a weakness, when the author ends up name-dropping a litany of capitalists involved in some deal or scheme and dribbling their worries and anxieties from private correspondence over several pages as the deal unfolds. I found it difficult to follow and mostly tuned out what I assume are supposed to be the action-packed moments of the story.

I first read this book shortly after it was published in 2010. I since decided to re-read it and while I wish I had had a bit more energy and focus when I did, I am glad of it. I took a new and different appreciation from some of the book’s events than I did on first pass, which suggests I’ve either improved my mental framework or at least changed it in meaningful ways over the last 7 years. Vanderbilt still comes across as a unique and heroic figure, a true titanic will. The narrative is as confused and cluttered as ever, and while I think there were the makings of a better, more concisely argued book here, and the author certainly has done his research, I am not convinced he did the right research or even fully understood what lessons he was taking away from it. The result is I’ve since downgraded the value of this particular work in my mind and think it belongs to a pretty standard class of historical biographies. Vanderbilt the man himself though is easily a five out of five as far as members of humanity are concerned!

I’ve got far more I’d be willing and able to discuss about this work and Vanderbilt as an example in private correspondence than I think I could fit into a short, coherent blog post, so really ruminating on this story will have to wait for another time and a different occasion.

3/5

Review – The Rational Optimist (#books, #optimism, #reason, #evolution, #economics, #development)

The Rational Optimist: How Prosperity Evolves

by Matt Ridley, published 2011

Why, for the last 300 years, has “everything” been getting better and better in terms of just about any human outcome you can come up with? Human beings are getting better at exchanging ideas and thus generating new and better ideas. In addition, the total stock of life improving ideas humanity can build from is compounding at an increasing rate. The benefits of free exchange extend beyond the economic realm and into the philosophic, and then back again.

The author charts a surprising course through humanity’s shared hunter-gatherer history. He argues that it was economic trade which allowed the division of labor to develop, and the division of labor which allowed for the transition from hunter-gatherer subsistence living to agricultural subsistence, and from there to a compounding of capital and an increasing division of labor and economic specialization that allowed for mankind to finally break free of the Malthusian trap in many parts of the globe (and more every year).

In addition, he says we are never going back. The genie is out of the bottle and rather than the division of labor being fragile, it is far more robust than any social structure yet experienced and gets stronger the more specialized it becomes.

Because of this, and because when surveying history up to this point in the broadest terms possible there is evidence of things getting better and better for more and more people, not the opposite, the author concludes that the rational thing is to be an optimist and expect this trend to continue.

There are several convenient leaps of logic built off flimsy premises that would startle and upset an opponent of markets and industrialized societies, but there is such a preponderance of hard logic and even harder evidence that there isn’t enough here to tip over the apple cart. But the value of this book is less in its rhetorical force for free markets and industrial development and more in its sweeping survey of a number of seemingly unrelated historical data and economic phenomena into a coherent picture of hopefulness about humanity’s future. I found myself joyfully surprised by the idea that in the chicken-egg quandry of agriculture and trade, the author contends that trade came first and produced all the surplus we moderns have enjoyed since then.

Going “back to the land” or seeking out de-urbanized, atomized communities seem to be doomed to bring their proponents a lower standard of living overall, idealizing a past reality that never actually existed or rejecting the very thing (the division of labor) which is necessary to enjoying a desirable standard of living with modern securities and comforts.

3/5