Bottom up links

In this Freakonomics podcast, Steven Levitt discusses his work with companies whose managers resist experimentation to test their beliefs.

In one example, he couldn’t convince a company to stop running newspaper ads in any market to see if that would have an effect on sales. But, they discovered that an intern neglected to buy ads in Pittsburgh one summer. It had no effect on sales. But, the company still buys ads.

In this EconTalk podcast, Yuval Levin made what I expected to be a dull conversation about Edmund Burke and Thomas Paine, very interesting. On this, especially, I agree:

I think that there’s a way in which the Left takes for granted a thriving economy that just comes in the background and the question is how to distribute the goods. We have to make the argument that that thriving economy–which makes possible the thriving life of this society–has to be sustained. And it’s a function of certain attitudes toward law and order, of certain kinds of rules, certain kinds of liberties that have to be defended, both because they are right and because they are good. Conservatives are nowhere near good enough at making that kind of case.

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‘…losses encourage prudence.’

As I mentioned at the end of this post, last week’s EconTalk with Nassim Taleb, Skin in the Game, is worth listening to. He describes some history of how having skin in the game is a simple and effective risk management rule and how removing it causes problems.

In ancient Babylonia, architects who built houses that fell down and killed people could themselves be killed. As Taleb explained, ‘that simple rule outperformed any inspector.” And, yet, there were still architects there. Apparently good and/or confident ones.

Here is more of what Taleb had to say about the Golden Rule:

And of course we have the Golden Rule that we see in the Old Testament, which is a positive–up till then it was a negative rule: ‘Don’t do unto others what you don’t want them to do to you.’ And then the Golden Rule: ‘Do to others what you want them to do to you’ and so on. Up to then we had a civil rule. What you see behind this is the foundation of moral philosophy, as a foundation of ethics and a foundation of civil society. But in it we saw something much more potent–we saw the foundation of risk management.

I thought this was interesting, too, regarding parenting and letting kids grow up:

The expression in Lebanon, that the first 7 years you play with them (and protect them), the second 7 years you let them get in trouble and the third 7 years you advise them on how they got in trouble.

Why didn’t I think of that?

Immerse yourself in a game as you run with the Zombies, Run! app. On your run, you’ll get to pick up munitions for your base and outrun heavy breathing zombie herds.

What a fantastically creative way to shake up those boring trods and add some sprints and interval workouts.

Sometimes innovations seem so obvious. I’m amazed it took so long for something like this to emerge. Can’t wait to see what follows.

 

 

Teachers matter

Here’s an interesting write-up of a high school turnaround.

Decades ago, the school was slivered off from a suburban school district by the neighboring urban school district so it could meet its racial diversity targets. That district, along with this school, when down hill and only a third of students were graduating.

Fast forward to 2007 and the residents of this area voted to move back to the suburban school district.

Now, just five years later, 90 percent graduate from that high school.

The surprising bit for me: The new school district only hired 12 people from the previous district to fill the 400 positions to staff the schools that transitioned.

That surprised me because my mental model had been that the teachers are less important in the school failure equation than student and parent expectations. Perhaps I need to rethink that.

 

Innovation is a discovery process

I also enjoyed this Wall Street Journal article about innovation and Thinking Inside the Box.

Yep:

How could business leaders rate innovation as so important yet feel so dissatisfied with their own organizations’ performance? Because what they really want to know is how: How do you actually generate novel ideas and do so consistently, on demand?

The article goes on to provide five suggestions for taking a different approach to innovation by taking an existing idea and doing things like removing essential elements, combining unrelated tasks, and so on. Less ‘pie-in-the-sky’ thinking.

They provide good real world examples of each. One such, under the combining unrelated tasks, was the online security measure where you have to type in the letters of a fuzzy image to prove you’re not a computer.

The unrelated task is that those images are old texts that haven’t been converted to digital format yet. So, as we all verify that we’re not computers trying to buy tickets to our favorite sporting events, we’re also helping someone digitize an old book.

Even though I found their examples interesting, I’m still skeptical that their recommendations would improve effectiveness in producing innovation on-demand.

I think there’s 20/20 hindsight bias in their observations. They key in on the innovations that work, but don’ts consider the innovations that used the same approaches and didn’t work.

What “works” isn’t obvious. Even the people who eventually get the most out of an innovation would never had guessed that they would find that value prop useful prior to its existence. The Sony Walkman is a good example:

Even Akio Morita, Sony’s chairman and the inventor of the Walkman, was surprised by the market’s enthusiastic response.

Here are the suggestions for innovation that I’d add to the authors’:

Try stuff in the real market, even on a small-scale. It doesn’t have to be perfect or refined to the level of your other products to find out if you have something. The things that I’ve worked on that have worked were not pretty in their initial stages, but they still ‘moved some numbers’ and refining them didn’t seem to improve the effectiveness.

Don’t let your biases get in the way of trying something. Let the market test it.

I’ve seen too many things that are actually working get canned because someone with political clout didn’t like it. They didn’t like it because it wasn’t their idea. Or, they didn’t feel it ‘fit with the brand’, though customers did. Or, they simply relied on poor business analysis that focused on a negative trade-off and ignored the positives.

When people have ideas, encourage them to put their money where there mouths are to try to prove it out. Reward them handsomely if it works. Encourage them to try again if it doesn’t. Understand, failure is likely and not a sign of incompetence. Good baseball players strike out much more often than they hit home runs.

Alos, read Nassim Taleb’s trilogy: Fooled by Randomness, The Black Swan and Antifragility.  Then read F.A. Hayek’s The Fatal Conceit. And, finally, read Russ Roberts’, The Price of Everything.

After reading these, you may see the world differently. Innovation is not a planning process, it’s a discovery process.

Higher Education Bubble Watch

I read about the Enstitute: Learning By Doing in Forbes. This may not replace MIT, just yet, but I love seeing these upstart experiments to offer something different from the traditional seminar model of education.

I think this kind of stuff should start around 5th or 6th grade, maybe sooner.

“…generally pathetic”

In The Chronicle of Higher Education,Tom Bartlett writes about his meeting with Nassim Taleb, the author of The Black Swan, Fooled by Randomness and his latest book, Antifragile: Things That Gain From Disorder.

Taleb is known for his gruffness. That turns off a lot of folks. Not me. I’ve always had a penchant for substance over style and I think Taleb offers substantive observations on how the world works.

I believe a key observation from his latest book is to avoid having a single point of failure. Why? Because things fail and they fail more often than not. What thing have you seen that never fails? A single point of failure is dumb.

Engineers design their electrical and mechanical systems with redundancies to try to avoid single points of failure. Electric utility companies, for example, usually have more than one way to get power to your service drop. If one path fails, they can switch to the backup path while they’re fixing the main path. That’s one reason most folks usually don’t experience more than a few hours of electrical outages in a given year.

However, for your home, your service drop is a single point of failure. If it fails, you will be out of service until you get an electrician to fix it. Unless, of course, you’ve invested in a backup generator.

But, we rarely consider single points of failure in our social systems. Central planning is a single point of failure, yet many folks tend to support moving things in that direction whether the topic is health care, education or charity.

For example, I often hear folks advocate a single, national K-12 education standard. What if that standard fails? The answer they give is easier said than done, fix it. How do we fix something that has no competing models to learn from?

Below are a couple of my favorite passages from Bartlett’s piece on Taleb.

It would be for the greater good if more of us shared Taleb’s view on economists. Bartlett describes it as such:

He saves his iciest hate for economists. Taleb has no use for the “charlatanic” field, comparing economic research to medieval medicine. Economists are, in his estimation, weak, ignorant, fearful, and generally pathetic.

This is a good observation. Entrepreneurs and innovators have generated the wealth that’s made our standard of living so much better than our ancestors, not economists.

Here’s another interesting passage:

Taleb is a professor of risk engineering at the Polytechnic Institute of New York University. Despite his wall of degrees (he has an M.B.A. from the University of Pennsylvania’s Wharton School and a doctorate from the University of Paris), he believes that universities propagate “touristification,” another term he coined, a phenomenon that occurs when what should be an exciting exploration turns into a programmatic exercise. It’s better to be an adventurer than a tourist. Education isn’t the only result of this modern sin; gym machines and “the electronic calendar” fall short as well.