Sunday, August 5, 2018

One Cheer for Buy Local?

I’ll start by saying the “buy local” movement is deeply misguided in many ways. The belief that locally grown food is more environmentally friendly is just plain wrong for fairly obvious reasons.

I don’t want to be confused with these people who fail to do basic cost-accounting. The “buy local” crowd simply does not understand basic concepts of comparative advantage and the gains from trade. Thus only one cheer.

Where to start? When I was in high school my friends and I played some role playing games from the White Wolf universe. (Full of vampires, werewolves, and other creatures, mostly in the modern world.) White Wolf had a “support your local comic store” philosophy. As in, if you see this role-playing guidebook at a big book store in an out-of-town trip, go back home and buy it or order it from your local comic store. (Presumably this idea also applied to internet sales.)  I think this is actually a good idea.

Why? Can’t a big book store or an internet vendor carry a bigger selection and more efficiently supply us with role-playing books? Yes. Maybe. But the local comic book store is supplying something else. Maybe the store owner has deep knowledge of the products he sells. Maybe he can answer questions, even hard-to-google questions, about Dungeons and Dragons or comic books. You get access to this knowledge “for free”. Meanwhile the comic store has fixed costs: inventory, keeping the lights on, paying staff, etc. It would be a little bit rude to pump the store owner for his specialized knowledge, which he dispenses for free, then turn around and price-shop from someone who will undercut him. (The internet vendor has lower inventory costs, because they can make-to-order or keep a few copies on hand for a much larger population than what the local store serves. At some point, the local comic store can't compete with these economies of scale.)

In this sense, maybe there is a case to be made for supporting local boutique-style shops over internet vendors or big stores in the nearest big city. The higher price you pay is like paying “club dues”, and you get access to specialized knowledge for paying these dues. You might also get a sense of community. I would often run into people I knew and have nerdy conversations at my local comic shop. If you value this kind of interaction, it’s probably worth supporting your local shop.

Maybe there’s an even better model, where nerds and artisans get paid directly for their expertise, so we do away with this “marked-up retail” model of reimbursing them. Pay directly for the expertise, then shop for the best price anywhere we can find it. Or maybe there are enough online forums and discussion groups that this information is freely available or easily search-able. (Careful with this. Ever run into a question that’s hard to Google? I sure have. I alluded to this problem above.) But it’s worth thinking about whether there’s some wisdom to this “buy local” stuff.

Some Thoughts on Teaching At Work vs. College

Cross-posting from my Facebook page.

I’ve been trying to learn some data science concepts and teach them to my team at work. A few thoughts and observations.
  1.  It’s different from teaching physics to engineering students (my previous experience with teaching). My team at work needs to actually learn this stuff because it affects their ability to do their jobs. The engineering students were eager to get their A (or B or perhaps C) and then forget everything. Best case scenario, they might use 10% of what they learned in their physics class. The class was mostly useless and they knew it. Motivation is important.
  2.  There is a powerful and tempting illusion that your listeners understand you as well as you understand yourself. Resist this illusion. Do you remember how long it took for these concepts to sink in when *you* learned them? Nobody soaks it up in a single lecture. Be realistic about your expectations. (I was ecstatic when someone told me he understood ~30% of my discussion.) It usually takes time and repeated exposures and some effort studying the material outside of class.
  3.  I have a pretty good memory (sometimes), and I have to remind myself that not everyone has this gift. (I remember explaining a chemistry lab to the valedictorian of my class in high school. Something about how the experiment we were doing was a straightforward application of a previous unit, and he’d said something like “Nobody remembers all that crap.”) When I have baffling conversations with colleagues, I remember them. I sometimes understand them *years* later, when it finally clicks, when I finally acquire the necessary context to understand. “Oh, *that’s* what that guy was talking about!” I think most people just forget about stuff they don’t understand and it’s gone for good? Maybe other people have this experience? (If this is a more common experience, that would make me more hopeful.)
  4.   If you’re going to teach something, know your shit. Practice. Review the material multiple times. Know it inside and out. Rehearse explaining it to a skeptical or confused audience. In the reading group I’m leading at work, we’re reading a chapter out of a data science textbook. I’ve read it through three times now, and read some passages 10 or 20 times to get the point. The same principle applied when teaching physics. I knew some grad students who didn’t prepare adequately or at all, and their students probably resented them for it.
  5.  Related to 2) and 4), there is something called the “illusion of explanatory depth”. You feel like you understand things more deeply than you do. You might read something and be nodding your head, but it might not be sinking in as well as you think. Stop yourself, summarize what you just read in plain English, pretend you are explaining it to an audience, etc. Better learn you’re confused now than while standing in front of an audience, whose respect you’re trying to hold.
  6.  Watch your audience. Look at their faces and scan for signs of confusion. You may just need to slow down and reiterate a point. Or maybe you need to ask if anyone has questions. This is a difficult skill, and I’m not really sure I have it. It’s much easier to accommodate a group of five or ten motivated listeners than a room full of 30 students, though.
  7.   Not everyone will “get it.” That’s okay. Be willing to write off some percent of your audience. If a few of them absorb a substantial fraction of the material, that’s a win!
  8.  There is some combination of “here are practical things you need to know to use these methods” and “here are the academic/theoretical underpinnings of what we’re doing.” You can still do quite a lot if you only have the former but lack the latter. But ultimately you should be able to describe what you’re doing and answer tough questions from people who are skeptical of your analysis. You need the theoretical underpinnings to do this. Imagine someone designing a building entirely by using engineering software vs. someone who understands the physics of force diagrams and could validate some of what the software is doing by hand or from first principles. My guess is that the one with a better understanding of the physics is less likely to make a huge conceptual mistake. Just so with modern statistics.
  9. I recently read Bryan Caplan’s The Case Against Education. There are long and depressing sections about how little people actually retain from their educations (high school *and* college). Also, “transfer of learning”, the application of concepts from one field to a related problem in a different field, is virtually impossible to find in the real world. (As in, studies of this topic fail to find it, despite heroic efforts to search for it.) Not to be too cynical here, but try to temper your enthusiasm with a little skepticism.
  10.  Teaching a physical skill is somewhat easier in the following sense. You can witness someone trying and failing, critique their form, and have them try again. It’s harder to observe understanding, because that takes place inside someone’s head. (Getting people to speak up when they’re confused is difficult, as any teacher will tell you.) Also, people doing physical activities are usually more motivated and are explicitly “opting in.” I’m thinking mostly of the various martial arts I’ve done. Particularly jiujitsu, where you often have to use a technique against an unwilling opponent who is trying to stop you.

Wednesday, July 25, 2018

Economists Have Done a Great Job Making the Case Against Tariffs

Famously, economists have very different opinions from the lay public about economic policy. They are largely pro-free trade. Until fairly recently there was broad agreement among economists that the minimum wage causes unemployment. (Which probably means it’s a bad idea, but not necessarily.) They are broadly pro-free-market.

So what’s going on with the public? We have this whole tribe, this entire profession, who spends their time thinking deeply about these topics, collecting data, building formal models, and doing other kinds of research. And they come to agreement on at least a few topics. So why is this consensus so widely at variance with what the general public believes?

I sometimes hear professional economists comment on this belief gap. They say things like, “Economists have done a terrible job of making the case for free trade.” (Or whatever the topic.) I’ll insist otherwise. Economists have done a fantastic job of making the case for free trade. A single microeconomics course cured me of a lot of sloppy thinking on economic topics. It’s not like they just jot down a bunch of equations and throw in some stodgy commentary for text-filler, just to fill up a 400+ page textbook. The formulas are just there to keep your thinking disciplined. The text is there to explain the logic of free trade in plain English. I’ve seen many very elegant examples of this argument (this one about a car-crop in Iowa is probably my favorite). Some of the econ textbooks I've read are downright quotable, converting a logical, mathematical argument into beautiful prose. If someone writes a short, beautiful, easily digestible proof, it’s not their fault that the lesson fails to register on the narrow bandwidth of the public’s short attention span.

Russ Roberts has done some important work trying to communicate economics to the public. His podcast Econtalk is excellent. It covers a wide range of topics in a conversational style, but (almost) always manages to give the economist’s perspective. He’s written some books that try to viscerally communicate the lessons of economics, using fiction (The Invisible Heart, The Choice, The Price of Everything). It’s important work, and this is probably an effective way to reach people. But I want to push back against the notion that formal logic is too stodgy, or that we need to be “touchy-feely” to reach everyone.

Dry, textbook economics cured me of my leftism. I’ve seen the critiques of basic economics (mostly I’m speaking of micro/price theory), by left-wing economists and by non-economists. I think these critiques are mostly lame and totally unconvincing. Even when they land a solid critique (“Humans aren’t always and everywhere rational actors…”) these critiques fail to revive the interventionists policies supported by those critics (“…therefore, what, the government should be able to intervene in all our life decisions?”). What I’m trying to say is: textbook economics is very convincing. I’ve been there. I’ve had this play out inside my own brain. I know what it feels like to be convinced by pure logic, to discard a political orientation that was once a part of my identity because it’s not tenable. When I hear a different kind of argument, the kind that goes “Let’s discard our sense of reason because of this touchy-feely consideration over here…” I always think it’s a little bit creepy. Like someone is trying to override my sense of proportion or scale by fixating me on something emotionally compelling. Emotionally compelling examples might be necessary to "bring the lesson home" so to speak, but the underlying logic has to be there, too. Otherwise the next guy who comes along with a different compelling example will sway me back, and so on in a pointless random walk.

There's something to be said for convincing people with bad-but-convincing arguments, but it feels totally sleazy. It always leaves me with the dueling reactions: "I didn't want it this way" and "Meh, I'll take it." Also, it tends to back-fire. The person who is convinced by a bad argument might not stay convinced for long. Also, people observing the discussion will come away with the impression that your side is disingenuous, and as Exhibit A they can point to this shining example you've just given them. 

Sunday, July 22, 2018

Does Scott Alexander Read My Blog?

I had written these two posts a few weeks ago. Then Scott Alexander wrote a post last week with a nearly identical theme. Scott's post is longer than mine and covers a lot more ground, but is built on the same theme. It's kind of eerie. It's not like this was something from the news cycle that we both decided to comment on.

I'm sure it's a coincidence, actually, because I have this feeling all the time. I get it with other bloggers I follow (Bryan Caplan, Scott Sumner, David Henderson). Maybe it's an over-active pattern-matching routine in my head. Or maybe I'm actually taking a cue from them. I'm sure Scott Alexander hears from the same kinds of people I do on the "personal responsibility/laziness" question. So actually, maybe it's no coincidence he has something to say in response to these people.

Tuesday, July 17, 2018

Drug Poisonings and Chronic Health Conditions

In an earlier post, I wrote that about 20-25% of drug poisoning deaths involved some kind of chronic health condition. See what I wrote. I think this calls into question whether these were truly drug overdoses. If a death certificate for a supposed opioid poisoning has “sleep apnea” and “obesity” listed on it, that calls into question whether, in a “but for” sense, the death was caused by the drugs. It's more accurate to say that the death was a combination of a drug overdose (drug interaction, in most cases) and a pre-existing health condition.

I’ve done some more thorough analysis, and it looks like I was on the right track with the 20-25% figure. I can’t give any details just now, but I’m glad I stumbled on this path. Will share details and acknowledgements when I can.

I also know quite a lot more about how the death certificate is filled out, how the causes of death get coded in the ICD-10 codes, how an “underlying cause” is selected from the various causes listed on the certificate, how the different parts of the certificate work, etc. When I wrote that post (linked above) a couple of years ago, I had no idea about any of this. I guess I just assumed it was a bunch of contributing causes listed in no particular order. The story is a little more complicated than that. I may have to do a “death certificate explainer” post when the paper I’m working on comes out. I don’t think the stuff I know now invalidates anything I wrote before, but the details are interesting.

Shoulder Flexibility

I’ve been taking private gymnastics lessons, one or two a months since last November. I’d always wanted to do those cool gymnastics tricks (front handsprings, back handsprings, back flips, aerial cartwheels, etc.) After eight lessons, I have a solid front handspring, and I’m close to a back flip and an aerial. My back handspring is not at all ready for prime time, but I can do them on a trampoline. I’m fairly pleased with my progress. In my most recent lesson (last week), we figured out I could do a roundoff after about five minutes of instruction. That was satisfying.

I said this before in a previous post : It’s really important to get a coach with stuff like this. You can sometimes make impressive gains on your own, but there’s no substitute for having an expert telling you what you’re doing wrong. Try this for anything you want to get better at. Are you struggling with a computer language or some other skill at work? Find someone who knows better than you and ask them. Even offer to pay a tutor. Come up with a set of questions or skills you want to learn, then set up a meeting with a co-worker or paid tutor who is willing to teach you. You might find you’re not even asking the right questions.

One thing I never would have thought about is my shoulder flexibility. I had very stiff shoulders, which my gymnastics coach spotted right away. I’ve been stretching them daily since November, and they’re a lot more flexible now. I have very good leg flexibility (almost down to the splits), but never stretched my shoulders. This deficiency was masked from my view, because in my mind “I’m pretty flexible.” I never would have thought to work on this. My front handspring (which I could already do to a reasonable standard before I started stretching) has gotten much better. The push off the ground isn’t at the proper angle unless you can reach your arms far enough above/behind your head.

The moral of the story: get a coach.

Monday, July 16, 2018

Personal Debt of CEOs as Pre-commitment

I’m interested in the topic of very high executive pay, which I’ve written about several times on this blog. The short version of my take: the expected payoff for getting the very best person, as compared to the second or third-best person, can be worth millions or even billions of dollars. So it’s worth shelling out for top talent. Also, once you snag this person, it’s worth coming up with some kind of incentive scheme to actually motivate them. A relatively low base-salary with generous bonuses for performance is probably better than a flat multi-million dollar base salary.

Another problem might be the following: Once you snag the best person, how do you ensure they stay snagged? If someone paid me a $5 million salary, I’d be very tempted to work for one year and then retire. A tiny fraction of the pay that a high-powered corporate executive makes over the course of their career would make a substantial nest egg for any mere mortal. Warren Buffet’s austerity aside, many CEOs have reputations for lavish spending and luxurious homes.

I’m curious if lavish spending can be a sort of commitment strategy for highly-paid executives. In The Smartest Guys in the Room, a book about the Enron crisis, there is a brief discussion of Ken Lay’s personal finances at the end of his tenure. Enron was basically trying to oust him, but he wouldn’t go quietly. It seems he’d racked up $20 million or so in personal debt, some no doubt from his own consumption, some from supporting various benefits and charities. He made sure to negotiate a nice severance for himself, because he had backed himself into a tough spot. (This is from memory, from a book I read in 2011. If any of the details don’t match the actual story, I’m sorry. In that case, please take this example as a hypothetical.)

In that particular case, the pre-commitment strategy backfired. Lay’s debt made it harder for Enron to get rid of him when they wanted to. But in normal times and for normal companies, it’s probably a good thing for a firm if their CEO is sweating a little about their personal finances. It means they’ll stick around. It solves the “What’s keeping this guy from working for a single year then leaving?” problem.

There are other solutions to this problem. “Debt as a pre-commitment” is surely a small piece of the answer. There’s always the good old contract. Just have a clause saying the new CEO will stay on for at least 5 years or something. This isn’t perfect. You might get two great years and then three lack-luster years as the CEO loses interest in the company and starts salivating over his early retirement. Contract or no contract, it’s impossible to make someone show up to work and perform to the peak of their ability if they just don’t wanna. Reputation has to be part of the answer, too. People have personal reputations for things like ambition, honesty, and so on. The board will consider these traits when they appoint their next CEO, looking for some assurance that the person will stick around. Maybe for the kind of person who is likely to climb to the top of a corporation, the “work one year, then retire early” option isn’t even appealing. Maybe the vetting/promotion process selects for people with a lot of raw ambition.

There is a broad literature on this topic of incentivizing executive performance. In the actuarial exam syllabus, there is a discussion of whether or not investors should let companies hedge their risks, and why or why not. The investors can hedge their own risks by investing broadly, so they don’t want the individual companies to blow a lot of money on expensive insurance policies or hedging strategies. But one reason to allow hedging has to do with incentivizing the executives. You want the executive to make a substantial investment in the company, the thinking goes, so they have skin in the game. But it hurts to lose skin, so CEOs will hesitate to invest more than they absolutely have to. Allow the CEO to hedge and protect their investment, and they’ll be prone to invest more of their own private wealth in the company. With more skin in the game, they’re on the hook for bad decisions, they’re more likely to take a long term view, and so on. This is another way to solve the problem described above. It will be hard for a CEO to leave and sell off their investment in their employer without losing a substantial chunk of their investment. A CEO’s surprise retirement is likely to make a company’s stock take a dive. Similar with a major shareholder selling off large quantities of stock. This is a good way for a CEO to tie himself to the mast.

Interestingly, Jeff Skilling, who succeeded Lay at Enron, seems to have tried some version of “work a single year then leave” strategy. Except he didn't quite make it a full year: 

On February 12, 2001, Skilling was named CEO of Enron, receiving $132 million during a single year….Skilling unexpectedly resigned on August 14 of that year, citing personal reasons, and he soon sold large amounts of his shares in the corporation.

Oops! Apparently it’s important to worry about this problem. The Smartest Guys In the Room fills in the details of his short tenure and unexpected resignation.