The UK’s exam-focused educational system is similar to the one in China

Friday, December 29th, 2017

Puzhong Yao graduated with first class honors from Trinity College, University of Cambridge, and received an MBA from the Stanford Graduate School of Business. He looks at the Western elite from a Chinese perspective — with particular attention to idea’s from Robert Rubin’s autobiography In an Uncertain World:

It was the summer of 2000. I was 15, and I had just finished my high school entrance exam in China. I had made considerable improvements from where I started in first grade, when I had the second- worst grades in the class and had to sit at a desk perpendicular to the blackboard so that the teacher could keep a close eye on me. I had managed to become an average student in an average school. My parents by then had reached the conclusion that I was not going anywhere promising in China and were ready to send me abroad for high school. Contrary to all expectations, however, I got the best mark in my class and my school. The exam scores were so good that I ranked within the top ten among more than 100,000 students in the whole city. My teacher and I both assumed the score was wrong when we first heard it.

As a consequence, I got into the best class in the best school in my city, and thus began the most painful year of my life. My newfound confidence was quickly crushed when I saw how talented my new classmates were. In the first class, our math teacher announced that she would start from chapter four of the textbook, as she assumed, correctly, that most of us were familiar with the first three chapters and would find it boring to go through them again. Most of the class had been participating in various competitions in middle school and had become familiar with a large part of the high school syllabus already. Furthermore, they had also grown to know each other from those years of competitions together. And here I was, someone who didn’t know anything or anyone, surrounded by people who knew more to begin with, who were much smarter, and who worked just as hard as I did. What chance did I have?

During that year, I tried very hard to catch up: I gave up everything else and even moved somewhere close to the school to save time on the commute, but to no avail. Over time, going to school and competing while knowing I was sure to lose became torture. Yet I had to do it every day. At the end-of-year exam, I scored second from the bottom of the class—the same place where I began in first grade. But this time it was much harder to accept, after the glory I had enjoyed just one year earlier and the huge amount of effort I had put into studying this year. Finally, I threw in the towel, and asked my parents to send me abroad. Anywhere else on this earth would surely be better.

So I came to the UK in 2001, when I was 16 years old. Much to my surprise, I found the UK’s exam-focused educational system very similar to the one in China. What is more, in both countries, going to the “right schools” and getting the “right job” are seen as very important by a large group of eager parents. As a result, scoring well on exams and doing well in school interviews—or even the play session for the nursery or pre-prep school—become the most important things in the world. Even at the university level, the undergraduate degree from the University of Cambridge depends on nothing else but an exam at the end of the last year.

On the other hand, although the UK’s university system is considered superior to China’s, with a population that is only one-twentieth the size of my native country, competition, while tough, is less intimidating. For example, about one in ten applicants gets into Oxbridge in the UK, and Stanford and Harvard accept about one in twenty-five applicants. But in Hebei province in China, where I am from, only one in fifteen hundred applicants gets into Peking or Qinghua University.

Still, I found it hard to believe how much easier everything became. I scored first nationwide in the GCSE (high school) math exam, and my photo was printed in a national newspaper. I was admitted into Trinity College, University of Cambridge, once the home of Sir Isaac Newton, Francis Bacon, and Prince Charles.

I studied economics at Cambridge, a field which has become more and more mathematical since the 1970s. The goal is always to use a mathematical model to find a closed-form solution to a real-world problem. Looking back, I’m not sure why my professors were so focused on these models. I have since found that the mistake of blindly relying on models is quite widespread in both trading and investing—often with disastrous results, such as the infamous collapse of the hedge fund Long-Term Capital Management. Years later, I discovered the teaching of Warren Buffett: it is better to be approximately right than precisely wrong. But our professors taught us to think of the real world as a math problem.

The culture of Cambridge followed the dogmas of the classroom: a fervent adherence to rules and models established by tradition. For example, at Cambridge, students are forbidden to walk on grass. This right is reserved for professors only. The only exception is for those who achieve first class honors in exams; they are allowed to walk on one area of grass on one day of the year.

The behavior of my British classmates demonstrated an even greater herd mentality than what is often mocked in American MBAs. For example, out of the thirteen economists in my year at Trinity, twelve would go on to join investment banks, and five of us went to work for Goldman Sachs.

He goes on to describe his “success” at Goldman, what he really learned at business school, etc.

Non-consensus and right

Thursday, December 28th, 2017

If you aspire to do something legendary, Mike Maples argues, the biggest breakthroughs come from pursuing insights that defy conventional wisdom:

In the startup world, this translates to having what PayPal founder and Facebook investor Peter Thiel calls a “secret” or what Benchmark co-founder Andy Rachleff would describe as an idea that is “non-consensus and right.” Before diving into why this is true, let’s summarize these two views.

From his days as a Stanford student, Peter Thiel was influenced by the French philosopher René Girard. I learned of his work a little over a decade ago and loved it. One of Girard’s fundamental ideas is that human desire is mimetic, which means that most of our desires come from our observations of the desires of other people, rather than the desires we generate internally for ourselves. There are lots of implications to this for society, and Peter describes them in his book Zero to One as they relate to startups. The first is that the vast majority of us act out of mimetic desire as if by reflex, starting early in life. We compete for trophies. We get rewarded in school for giving the exact answers the teacher is looking for, but we are often discouraged from providing answers that are too different. “Successful” people often double down on this by seeking education at prestigious Universities, by earning high-paying jobs, and by using the money to live a lifestyle that is broadly desired and admired. It becomes so ingrained in most people’s thinking that it no longer seems to be a conscious choice.

The problem with mimetic desire is that it’s the wrong “personal operating system” for coming up with a breakthrough idea — it is by definition an incrementalist view of the world that emphasizes following the rules and outcompeting others, rather than re-inventing the rules and transcending competition. His second point is that most of us, having been programmed by mimetic desires our entire lives, find it hard not to be reactive to what others are doing. As an investor, I can relate to the many pitches with multiple competitors in a matrix, and their product has more checks than all the others. A typical “mimetic” person will think this way. But a non-conventional founder will notice that chart and immediately two words will come to mind — mindless competition.

[...]

Andy Rachleff views unconventional success through a slightly different lens but with the same broad takeaway. Andy’s argument, influenced by Howard Marks of Oak Tree Capital, goes as follows: Startup ideas have two dimensions. On one dimension, you can be right or wrong. On the other, you can be consensus or non-consensus.

Wrong is always bad. Obviously, if you are wrong, you are wrong. That’s bad. You fail. But being right is not enough.

Most people don’t realize that if you are right and consensus, you are usually not successful enough to make a significant impact. Your startup might be onto a good idea that has customers eager to adopt the product. But as your company races toward product/market fit, it encounters severe obstacles. Because the opportunity is widely believed to have promise, multiple me-too competitors are funded by me-too VCs. As competition floods the market, prices erode, sales cycles lengthen, and more money gets poured into the sector. These markets often turn into a VC funding arms race, and each round of financing comes with massive dilution for the founders and employees. In the meantime, potential acquirers gain increasing power to choose among many worthy and well-financed competitors when they consider M&A opportunities, further capping the upside for founders and employees.

Carlos Slim slashes New York Times holdings

Friday, December 22nd, 2017

Mexican billionaire Carlos Slim has long held an enormous stake in the New York Times, but now he plans to slash his holdings:

Billionaire Carlos Slim is planning to sell more than half of his 17 percent stake in the New York Times Co. to U.S. hedge fund investors, reducing his sway over one of the world’s most influential publishers.

Slim’s businesses earlier this month sold $250 million of mandatory exchangeable trust securities in a private offering that gives the buyers a claim on a 9 percent stake in the New York Times, according to a person with knowledge of the matter. The newspaper’s shares have surged more than 50 percent since Slim boosted his stake in 2015 and became the biggest shareholder.

The deal, which was referenced in a Dec. 6 statement but has gone largely unnoticed, means that when the securities mature three years from now and they automatically convert into Class A shares of New York Times, Slim and his companies will be left with about 8 percent of the publisher’s shares, said the person, who asked not to be identified because the information is private. In essence, the billionaire created a trust, pledged New York Times shares to it, locked the shares up for three years, then sold rights to that stock to investors.

Slim built his stake in the New York Times after lending the company $250 million in 2009 to help it get through the financial crisis. In 2015, he exercised stock options to become the Times’s biggest single investor in a display of confidence in the company even as readers and marketers flocked to the Internet where content is often free and ad rates are cheaper.

With the smaller stake, he’ll lose some of the power he had to vote for Class A directors, a group that can include no more than a third of board members. The Ochs-Sulzberger family — the paper’s controlling owners — hold Class B shares that give them a firm grip on the company. Publisher Arthur O. Sulzberger Jr. will retire at the end of this year after a quarter-century of overseeing the newspaper. His 37-year-old son, A.G., will take over.

Transferring the shares through the hybrid instruments allows Slim to take advantage of deferred tax payments until the transaction is completed, the person said.

My passive investments seem even more passive now.

Handle predicts a shakedown

Sunday, November 26th, 2017

Handle predicts a shakedown, and Arnold Kling sees it as a very plausible scenario:

That is, the capitalists will try to purchase respectability and pay off potential critics that could create real trouble for their businesses by buying ‘indulgences’ in the form of funding donations for certain prominent anti-capitalists, conspicuously and prominently towing the party line in public on the most important ideological commitments, and hiring the right number of the right people for cushy sinecures. If they show they are reliable allies instead of potential threats or rivals, and put enough money where their mouths are, and use their platforms, technological savvy, and expertise to help progressives win elections (e.g. Eric Schmidt wearing his “Staff” badge at Clinton campaign HQ), then in exchange, they will be left alone, and maybe even get some special treatment, favorable coverage, and promotion instead of demonization.

The thing about this shakedown tactic, Kling adds, is that it is like paying ransom in a kidnapping:

It relieves your problem, but it increases the chances that there will be other victims. In the case of a shakedown by activists, giving them hush money relieves our problem but it hands the group more resources to go and shake down the next corporate victim.

Handle has much more to add:

One additional thing to keep in mind is that the overall sector is not merely rich and prestigious and full of big juicy targets, but that many of the most important companies are fundamentally media outlets that have the potential to play gatekeeper roles regarding information and to use that power to influence public opinions and perceptions, or, in the alternative, to bypass the common gatekeeping that is characteristic of the legacy media institutions, or even to become rivals using a different set of standards for information filtering.

So ACORN can shake Freddie down for some hush money, and the progressive elites will support that effort as benefiting one of their coalition’s clients, maybe holding their noses a little, but otherwise whether or not it happens is not a very important issue for them. See also the “predatory loans” settlements.

But Twitter, Google, and Facebook and now the way social informational social points are broadcast, spread, and establishes, and have all kinds of way to subtle or overtly promote or suppress and generally have “jurisdiciton” over who can say what over their platforms. And, currently, none of that power is constrained by statute or the First Amendment or threat of civil liability, which means that power over information can currently be used in ways that circumvent any of the restrictions on direct state action. Amazon and Netflix and the rest are also media institutions to the extent they produce their own content and decide which content to host or not, or in the case of Amazon which services or pages to host. And of course many of these companies recycle and repackage and deliver the content of legacy media institutions, and so can have an enormous effect not just on that industry but to shape the ideological window of accessed messages. Also, Bezos bought the Washington Post for good reason.

If everybody is having their worldview and daily passions mediated by a few private internet companies which are also fundamentally media institutions that “curate” access to all the other media instutions, then it is absolutely clear to progressive elites that these companies pose both the greatest potential threat and greatest potential opportunity in a generation to propagate their views, agenda, and aims. That makes it absolutely essential they be strongly encouraged to get fully on board with the program as soon as possible, and be made to stay on board.

Occasionally, one is going to have to hang (or threaten to hang) an admiral or two pour encourages les autres and to let everybody know who’s boss and who can bring down whom if one strays too far from the path. The obvious thing that makes every technological company liable for demonization and even legal destruction is discriminatory employment practices. Those companies really can’t do anything about that sword of Damocles hanging over their head, and so they will be playing ball to whatever extent necessary to keep it in the air, hoping they will earn the grace of some prosecutorial discretion by so doing.

Now, this permanent prosecutorial threat is a terrific way to launder state action and have ideological regulation enforcement outsourced to private entities that aren’t constrained by the First Amendment or other rules. If non-progressives don’t grasp the overall situation soon and do something about it, then their futures will not be very bright.

Elon Musk is not a robot sent from the future to save humanity

Wednesday, November 15th, 2017

Over the course of nine months of reporting, Neil Strauss determined that Elon Musk is not a robot sent from the future to save humanity, but he may be the most successful and important entrepreneur in the world:

It’s an easy case to make: He’s probably the only person who has started four billion-dollar companies — PayPal, Tesla, SpaceX and Solar City. But at his core, Musk is not a businessman or entrepreneur. He’s an engineer, inventor and, as he puts it, “technologist.”

Most of Strauss’s piece is about Musk’s broken relationships — with ex-wives, with his recent ex-girlfriend, and with his “ruthless” estranged father.

Musk tries to do useful things:

Think of the other names that one associates with innovation this century: They’re people who built operating systems, devices, websites or social-media platforms. Even when it didn’t start out that way, the ideology in most cases soon became: How can I make my company the center of my users’ world? Consequently, social-media sites like Facebook and Twitter use a number of tricks to activate the addictive reward centers of a user’s brain.

If Musk’s employees suggested doing something like this, he’d probably look at them like they were crazy. This type of thinking doesn’t compute. “It’s really inconsistent to not be the way you want the world to be,” he says flatly, “and then through some means of trickery, operate according to one moral code while the rest of the world operates according to a different one. This is obviously not something that works. If everyone’s trying to trick everyone all the time, it’s a lot of noise and confusion. It’s better just to be straightforward and try to do useful things.”

He discusses building a permanent moon base, and further funding SpaceX by creating passenger rockets capable of traveling to any city in the world in less than an hour, a form of transport he calls “Earth-to-Earth.” I ask if there’s anything that he believes works that surprises people.

“I think being precise about the truth works. Truthful and precise. I try to tell people, ‘You don’t have to read between the lines with me. I’m saying the lines!’”

He enjoys the usual pop-culture geek favorites: The Onion, Rick and Morty, South Park, The Simpsons, and The Hitchhiker’s Guide to the Galaxy.

You probably can’t force the public to love you

Saturday, November 4th, 2017

Perhaps the best kind of advertising is the kind that doesn’t look like advertising, Steve Sailer suggests:

I’m biased, but I can’t help pointing out that lots of smart rich guys are investing more in opinion journalism than you might expect. For example, Amazon’s founder Jeff Bezos, who overtook Bill Gates as the world’s richest man last Friday, spent a quarter of a billion of his own money to buy The Washington Post in 2013.

Bezos claims it’s profitable, but profit and loss is hardly the point. His goal is to shape the climate of opinion in ways favorable to his interests, much as Mexican monopolist Carlos Slim bailed out The New York Times in 2009 with a $200 million infusion.

A bigger purpose is less to change minds than to rule out inconvenient ideas. For instance, Harvey Weinstein got away with decades of bad behavior by controlling the means of production of public sentiment.

You probably can’t force the public to love you, but you can spend money on journalists to make their readers sense that it’s just not done to hate you.

You might notice that you haven’t read a lot in the American press about how Slim made a bundle off charging impoverished illegal aliens exorbitant fees to speak with their loved ones back home in Mexico. Nor have you heard much about how Slim married himself into a genuine Fascist dynasty, the Gemayel clan, founders of the Lebanese Phalange party.

That’s not considered news. The American news media traditionally gets its guidance on what is fit to print from The New York Times, and the Times hasn’t been in a hurry to cause embarrassment to its largest individual shareholder.

Similarly, the U.S. media has in recent years been more interested in topics such as transgender rights than in former staples of debate, such as the need for anti-monopoly enforcement.

In Mexico, Slim was more or less synonymous with the Mexican state since the 1990s, when he offered a $25 million campaign contribution/kickback to the ruling party at the notorious “Billionaires Banquet.” But recently Slim had the misfortune to fall out with the latest presidente, who opened up the Mexican market to an American competitor, knocking tens of billions off Slim’s net worth.

Things could be worse for Slim. He is still the sixth-richest man in the world, in part because he hasn’t had these problems in the United States since investing in the Times eight years ago. Donald Trump always calls it “the failing New York Times,” but from the perspective of Slim, the newspaper is working quite well.

[...]

In summary, while Americans tend to believe they are natural-born advertising geniuses who could create commercials that would outcompete their opponents, the richest, smartest businessmen don’t believe in a fair fight. Instead, own a monopoly and then own a major chunk of the media to protect it.

It may (or may not) pay to advertise, but it pays to look like the news.

The greatest trick the advertisers ever pulled

Friday, November 3rd, 2017

We were just discussing whether advertising works, and now Steve Sailer wonders aloud, could advertising in general be over-advertised?

To paraphrase a Kevin Spacey movie:

The greatest trick the advertising platforms ever pulled was convincing the world that advertising works.

One unsettling possibility is that most everybody wants to be tricked into believing in the power of advertising. After all, we get shown all sorts of interesting things for free or low cost that we’d have to pay for if it weren’t a truism among hardheaded businesspeople that Advertising Pays.

I worked in marketing research for eighteen years in the late 20th century and helped write a couple of white papers on whether our internal data showed that paying for more television commercials would sell more supermarket products.

The firm I worked at had constructed the finest test-marketing laboratory in history.

(Even after a third of a century, I want to maintain a certain level of obscurity, so I’ll call the service BehaviorCheck.)

In the first half of the 1980s, BehaviorCheck was wildly successful at being hired by blue-chip makers of consumer packaged goods, such as, I’ll call it, G&Z.

When launched in 1980, BehaviorCheck was a science-fiction wish-fulfillment fantasy for marketers.

Brand managers had always dreamed of proving to their CEOs that if only they’d be given a bigger budget, their brilliant ads would move more product. And now BehaviorCheck was here to provide scientific proof about just how persuasive their ads were if only they were given a larger budget.

A BehaviorCheck test market was run in one or more of the eight small cities where our firm had bought newfangled laser checkout scanners for all eight to twelve supermarkets in town. In return, the grocers had their checkers scan the barcode ID cards of a couple thousand families we had recruited to share with us scanner records of all items they purchased. We then manipulated which commercials they saw on cable television.

In a typical test, G&Z would hire us for a year to show double the normal national level of ads for, say, Crust toothpaste to a test group of 2,500 households, and the regular level of ads to a control group matched for exactly equal toothpaste buying over the previous year.

But in the second half of the 1980s, clients started to complain that very few of our tests showed that increasing TV advertising by 50 or 100 percent would move the needle on sales at all.

In response, we did a couple of meta-studies summarizing hundreds of test markets we’d run.

Occasionally, we found, higher advertising did pay off, especially if you had news to share, such as that your chemists had actually invented a better ingredient. Dave Barry joked in 1988 about one new version of a product that really did benefit from higher ad spending:

The Toothpaste Manufacturers Association, which each year holds a contest to come up with a new repulsive dental substance for Americans to worry about (previous winners: “tartar” and “plaque”) announce that this year’s winner is: “scuzz.”

If you really had invented a scuzz-fighting toothpaste, it could definitely be worth your while to invest in alerting consumers about the menace of scuzz.

On the other hand, if you didn’t have any news to tell consumers, we didn’t find much evidence that you could cajole them into buying more just through the awesomeness of your advertising.

This is not to say that good advertising couldn’t help a new brand, but there tended to be diminishing returns once an identity was established.

For example, we did a long-running test for one famous product that had used the same slogan for so many years that the character who said the catchphrase was as identifiable to the public as Jimmy Carter.

While the control cell saw the standard level of advertising, one cell saw more and another cell saw less. There were no differences in sales among the three cells.

As the evidence piled up, I recommended to G&Z that they pay us to test cutting their advertising budgets. They could start perpetual tests with us to see if reducing ad spending hurt their products’ sales. If it hadn’t after two years, they could cut their commercials nationally. If in later years our forerunner tests picked up a long-term downturn, they could boost advertising nationally back to the original levels before any harm was done.

For $5 million in testing, they might be able to save $50 million (or even $500 million) in advertising. (G&Z currently spends about $7 billion per year on advertising in total.)

This logic seemed unassailable to me. But my contacts at G&Z explained that no brand manager had ever gotten promoted by cutting his ad budget. G&Z believed in advertising. To consider reducing commercials was heresy.

In short, Americans like to advertise.

Our assumption that somebody must have proved that advertising works is reassuring even if nobody can remember the exact details.

We’ll all end up with extended warranties and after-market undercoating

Thursday, October 26th, 2017

We are witnessing the collision of two megatrends that have permeated our daily lives — the widespread use of video, and persuasion:

The appeal of Khan Academy is immediately obvious to anyone who has encountered barriers in learning, like taking a college class taught by a graduate teaching assistant for whom English was a second language. The website has helped my children for years.

But there are other messages that people want to put in front of us, many aimed at separating us from our cash.

I recently bought my younger daughter a used car. Her current ride, a Ford F150 4×4, had developed rust, which never ends well. So we quickly found a replacement. (Yes, it’s another F150 4×4, but it’s what she likes.)

I wrote a check for the difference between vehicles, but still had to sit down with the dealer’s finance manager.

At one point my daughter asked about the thick, black device that he seemed to be using as a desktop. He told us it was a computer monitor and cost $18,000, and that a third-party sold it to the dealership, not the parent company automaker.

When operational, it will display the different things consumers can add to their car purchases, like warranties and dealer add-ons.

I thought about this, and asked if the display simply showed documents, or video? He answered the latter, and that all buyers will be required to watch it.

Bingo.

Now I knew several things.

The dealership had contracted with a third-party to provide a presentation for each after-market possibility, like warranties, that had the highest probability of success. There’s no doubt that such video presentations, like candidate Trump’s election musings and the videos on Khan Academy, are full of the persuasive language described by Scott Adams.

I’m also certain that this language has been tested in focus groups and used in beta-test situations nationwide to prove its effectiveness. Why else would a dealership shell out almost $20,000 for a display system that will do the same thing the finance manager is supposed to do?

I explained to my daughter that the point of the system was to guarantee that the selling process had the highest chance of success, and to ensure that it wasn’t left to the skill level and whims of each finance officer.

I also told her the eventual goal was to cut headcount, which reduced payroll. I said all of this as we sat with the finance manager filling out forms.

He assured me there was no way to get rid of finance people. The dealership was much too busy.

Those were famous last words from a guy who never presented me the option of an extended warranty on a used vehicle.

That screen, and those videos, are intended to replace him and persuade me.

Technology is bringing the best sales techniques to every situation.

As consumers, if we don’t continually educate ourselves on what we need and what we can decline, we don’t stand a chance.

Meaning we’ll all end up with extended warranties and after-market undercoating.

Give support and encouragement to competent people who have ideas they want to try out

Wednesday, October 18th, 2017

Techniques of Systems Analysis reminds the Systems Analyst to take technical estimates for complicated systems with some skepticism if not cynicism:

The best that can be done is to push the state of the art in a whole series of component fields, give support and encouragement to competent people who have ideas they want to try out, be on the alert to extract by-product and bonus values and, most important of all, examine the programs as a whole to see if they are complete. The Systems Analyst should especially concentrate on the last two things. After all, almost everyone else is tied up with either specific projects, administration, budget crises, or congressional investigations. In some cases, he is just about the only Indian who can spend full time looking at the broader aspects of a program. What is also important, he often has a full-time and technically competent group of associates to help him look.

Nobody should object to buying insurance even if he doesn’t have a fire

Monday, October 16th, 2017

Development projects provide options, Techniques of Systems Analysis emphasizes:

We often hear statements that the major reason for doing a Systems Analysis is that development programs are so expensive and it is crucial that none of them be wasted; therefore, all development programs should be tied into a system, designed as a whole. Nothing could be more wrong. Development people have a saying, “It may or may not be a mistake to develop something which is not procured, but it is always a mistake to procure something which is not developed.”

The most important thing the Department of Defense can do is see to it that we maintain a great deal of flexibility in our capability and have available a great variety of on-the-shelf items to meet a variety of contingencies. This ordinarily means that many of our development projects will never reach the stage of large-scale procurement. This may create very difficult relations with both Congress and the public. The problem has to be faced directly and preferably adroitly, but it is a mistake to cut back on potentially valuable development programs just to prevent possible criticism in the event they do nut turn out to be needed. Nobody should object to buying insurance even if he doesn’t have a fire.

What would this look like if it were easy?

Thursday, October 12th, 2017

What would this look like if it were easy?, Tim Ferriss likes to ask:

It’s easy to convince yourself that things need to be hard, that if you’re not redlining, you’re not trying hard enough. This leads us to look for paths of most resistance, creating unnecessary hardship in the process.

But what happens if we frame things in terms of elegance instead of strain? In doing so, we sometimes find incredible results with ease instead of stress. Sometimes, we “solve” the problem by simply rewording it.

So, Tim “easily” wrote his next book, Tribe of Mentors, by sending his usual questions (and a few new ones) to a list of dream interviewees:

After hitting “send” dozens of times, I clasped my hands to my chest with excitement and bated breath, to which the universe replied with… silence. Crickets.

For 12 to 24 hours, nothing. Not a creature was stirring, not even a mouse. And then, there was a faint trickle through the ether. A whisper of curiosity and a handful of clarifying questions. Some polite declines followed, and then came the torrent.

Nearly all of the people I reached out to are busy beyond belief, and I expected short, rushed responses from a few of them, if I got any at all. Instead, what I got back were some of the most thoughtful answers I’d ever received, whether on paper, in person, or otherwise. In the end, there were more than 100 respondents.

Granted, the “easy” path took thousands of back-and-forth emails and Twitter direct messages, hundreds of phone calls, many marathons at a treadmill desk, and more than a few late-night bottles of wine, but . . . it worked. Did it always work? No. I didn’t get the Dalai Lama (this time), and at least half of the people on my list didn’t respond or declined the invitation. But it worked enough to matter, and that’s what matters.

In cases where the outreach worked, the questions did the heavy lifting.

[...]

The older I get, the more time I spend — as a percentage of each day — on crafting better questions. In my experience, going from 1x to 10x, from 10x to 100x, and from 100x to (when Lady Luck really smiles) 1000x returns in various areas has been a product of better questions. John Dewey’s dictum that “a problem well put is half-solved” applies.

Life punishes the vague wish and rewards the specific ask. Conscious thinking is largely asking and answering questions in your own head, after all. If you want confusion and heartache, ask vague questions. If you want uncommon clarity and results, ask uncommonly clear questions.

Fortunately, this is a skill you can develop. No book can give you all of the answers, but this book can train you to ask better questions. Milan Kundera, author of The Unbearable Lightness of Being, has said that “The stupidity of people comes from having an answer for everything. The wisdom of the novel comes from having a question for everything.” Substitute “master learner” for “novel,” and you have my philosophy of life. Often, all that stands between you and what you want is a better set of questions.

A close examination makes the precise imprecise

Tuesday, October 10th, 2017

Techniques of Systems Analysis notes that there are almost always large uncertainties when it comes to costs:

At first sight, costs look like a pretty concrete thing. You just grab an accountant and put him to work. However, as always, a close examination makes the precise imprecise. As we will explain later, when we talk about time-phasing, there is a real ambiguity in deciding the dollar cost of a system. Roughly speaking, this occurs because a military system is not bought at one instant of time by going into a department store and ordering it. It has to be built up over the past years and it is expect to have a continuous existence in the future. Under such circumstances one must always ask himself what it costs to use facilities which are already owned, and what will be the salvage value of any expenditures made this year in future years. Also, if one is procuring or developing a new system, he may have had no experience on which to base cost estimate.s It is surprising, in practice, how inaccurate even careful estimates of the costs of new systems have proved to be. Careless estimates tend to be out of this world.

There is another ambiguity in costs which the Analyst generally ignores but with which the policy make is sometimes concerned. Some dollars are harder to come by than others. Research and Development funds, for example, are ordinarily tighter than procurement funds. In the U.S., expensive gadgets are often easier to buy than high grade, but relatively low cost, people. Public works funds, for obvious reasons, are often easy to get and, of course, traditional expenditures are almost always easier to justify than new ones.

Finally, there are many costs which are not usually measured in dollars, such as crew lives, dislocations, political effects, etc.

Psychology beats business training

Thursday, September 28th, 2017

Francisco Campos and his fellow researchers chose to monitor 1,500 people running small businesses in Togo in West Africa and gave them two different sorts of training:

The typical firm had three employees and profits of 94,512 CFA francs ($173) a month. Only about a third kept books, and less than one in 20 had a written budget.

[...]

As they report in Science, the researchers split the businesses into three groups of 500. One group served as the control. Another received a conventional business training in subjects such as accounting and financial management, marketing and human resources. They were also given tips on how to formalise a business. The syllabus came from a course called Business Edge, developed by the International Finance Corporation.

The final group was given a course inspired by psychological research, designed to teach personal initiative — things like setting goals, dealing with feedback and persistence in the face of setbacks, all of which are thought to be useful traits in a business owner. The researchers then followed their subjects’ fortunes for the next two-and-a-half years (the experiment began in 2014).

An earlier, smaller trial in Uganda had suggested that the psychological training was likely to work well. It did: monthly sales rose by 17% compared with the control group, while profits were up by 30%. It also boosted innovation: recipients came up with more new products than the control group. That suggests that entrepreneurship, or at least some mental habits useful for it, can indeed be taught. More surprising was how poorly the conventional training performed: as far as the researchers could tell, it had no effect at all.

Surveillance capitalism fuels the Internet

Sunday, September 17th, 2017

In case you didn’t notice, Bruce Schneier reminds us, you’re not Equifax’s customer:

You’re its product.

This happened because your personal information is valuable, and Equifax is in the business of selling it. The company is much more than a credit reporting agency. It’s a data broker. It collects information about all of us, analyzes it all, and then sells those insights.

Its customers are people and organizations who want to buy information: banks looking to lend you money, landlords deciding whether to rent you an apartment, employers deciding whether to hire you, companies trying to figure out whether you’d be a profitable customer — everyone who wants to sell you something, even governments.

It’s not just Equifax. It might be one of the biggest, but there are 2,500 to 4,000 other data brokers that are collecting, storing, and selling information about you — almost all of them companies you’ve never heard of and have no business relationship with.

Surveillance capitalism fuels the Internet, and sometimes it seems that everyone is spying on you. You’re secretly tracked on pretty much every commercial website you visit. Facebook is the largest surveillance organization mankind has created; collecting data on you is its business model. I don’t have a Facebook account, but Facebook still keeps a surprisingly complete dossier on me and my associations — just in case I ever decide to join.

I also don’t have a Gmail account, because I don’t want Google storing my e-mail. But my guess is that it has about half of my e-mail anyway, because so many people I correspond with have accounts. I can’t even avoid it by choosing not to write to gmail.com addresses, because I have no way of knowing if newperson@company.com is hosted at Gmail.

And again, many companies that track us do so in secret, without our knowledge and consent. And most of the time we can’t opt out. Sometimes it’s a company like Equifax that doesn’t answer to us in any way. Sometimes it’s a company like Facebook, which is effectively a monopoly because of its sheer size. And sometimes it’s our cell phone provider. All of them have decided to track us and not compete by offering consumers privacy. Sure, you can tell people not to have an e-mail account or cell phone, but that’s not a realistic option for most people living in 21st-century America.

The companies that collect and sell our data don’t need to keep it secure in order to maintain their market share. They don’t have to answer to us, their products. They know it’s more profitable to save money on security and weather the occasional bout of bad press after a data loss. Yes, we are the ones who suffer when criminals get our data, or when our private information is exposed to the public, but ultimately why should Equifax care?

Yes, it’s a huge black eye for the company — this week. Soon, another company will have suffered a massive data breach and few will remember Equifax’s problem. Does anyone remember last year when Yahoo admitted that it exposed personal information of a billion users in 2013 and another half billion in 2014?

The Occupy Wall Street protesters and the bankers share a common delusion

Friday, August 18th, 2017

Eric Weinstein explains the crisis of late capitalism:

I believe that market capitalism, as we’ve come to understand it, was actually tied to a particular period of time where certain coincidences were present. There’s a coincidence between the marginal product of one’s labor and one’s marginal needs to consume at a socially appropriate level. There’s also the match between an economy mostly consisting of private goods and services that can be taxed to pay for the minority of public goods and services, where the market price of those public goods would be far below the collective value of those goods.

Beyond that, there’s also a coincidence between the ability to train briefly in one’s youth so as to acquire a reliable skill that can be repeated consistently with small variance throughout a lifetime, leading to what we’ve typically called a career or profession, and I believe that many of those coincidences are now breaking, because they were actually never tied together by any fundamental law.

Weinstein shares this anecdote about class warfare:

I reached a bizarre stage of my life in which I am equally likely to fly either economy or private. As such, I have a unique lens on this question. A friend of mine said to me, “The modern airport is the perfect metaphor for the class warfare to come.” And I asked, “How do you see it that way?” He said, “The rich in first and business class are seated first so that the poor may be paraded past them into economy to note their privilege.” I said, “I think the metaphor is better than you give it credit for, because those people in first and business are actually the fake rich. The real rich are in another terminal or in another airport altogether.”

The Occupy Wall Street protesters and the bankers share a common delusion, he says:

Both of them believe the bankers are more powerful in the story than they actually are. The real problem, which our society has yet to face up to, is that sometime around 1970, we ended several periods of legitimate exponential growth in science, technology, and economics. Since that time, we have struggled with the fact that almost all of our institutions that thrived during the post-World War II period of growth have embedded growth hypotheses into their very foundation.

That means that all of those institutions, whether they’re law firms or universities or the military, have to reckon with steady state [meaning an economy with mild fluctuations in growth and productivity] by admitting that growth cannot be sustained, by running a Ponzi scheme, or by attempting to cannibalize others to achieve a kind of fake growth to keep those particular institutions running. This is the big story that nobody reports. We have a system-wide problem with embedded growth hypotheses that is turning us all into scoundrels and liars.

Let’s say, for example, that I have a growing law firm in which there are five associates at any given time supporting every partner, and those associates hope to become partners so that they can hire five associates in turn. That formula of hierarchical labor works well while the law firm is growing, but as soon as the law firm hits steady state, each partner can really only have one associate, who must wait many years before becoming partner for that partner to retire. That economic model doesn’t work, because the long hours and decreased pay that one is willing to accept at an entry-level position is predicated on taking over a higher-lever position in short order. That’s repeated with professors and their graduate students. It’s often repeated in military hierarchies.

It takes place just about everywhere, and when exponential growth ran out, each of these institutions had to find some way of either owning up to a new business model or continuing the old one with smoke mirrors and the cannibalization of someone else’s source of income.

Then there’s the Wile E. Coyote effect — as long as Wile E. Coyote doesn’t look down, he’s suspended in air, even if he has just run off a cliff:

But the great danger is understanding that everything is flipped. During the 2008 crisis, many commentators said the markets have suddenly gone crazy, and it was exactly the reverse. The so-called great moderation that was pushed by Alan Greenspan, Timothy Geithner, and others was in fact a kind of madness, and the 2008 crisis represented a rare break in the insanity, where the market suddenly woke up to see what was actually going on. So the acute danger is not madness but sanity.

The problem is that prolonged madness simply compounds the disaster to come when sanity finally sets in.