Unemployment ending?

Well, not quite. According to the news, 1.3 million will be losing unemployment checks as the extended unemployment benefits come to an end.

Note the extension was from 26 weeks (~6 months) to 99 weeks (~2 years) at one point and, if I’m reading the article correctly, 73 weeks (~1 year and 3 months). All of those periods seem long for something that is meant to be a temporary stop-gap.

One lady who will stop getting unemployment checks interviewed on one TV news spot that I watched said she was going to have to start spending more time looking for a job and less time on school. Isn’t looking for a job a condition of receiving unemployment? Don’t be to harsh, but unemployment isn’t meant to be a ‘take time off from work so you can go to school’ program.

Another news spot said that unemployment benefits help the economy because recipients spend the money. It didn’t say where that money came from. (Answer: A taxpayer, either now or in the future, who could have also used that money to ‘help the economy’).

Another lady who will stop receiving unemployment checks was asked what she thought about Congress going on break without extending ‘her’ benefits. She said something like (paraphrased from memory), My benefits shouldn’t be dependent on the whim of other people like that. Apparently, not realizing that her receiving the benefit was dependent on exactly that whim.

Of course, none of the folks who will not be receiving unemployment checks any longer took the time to thank their fellow taxpayers for helping them out. How rude.

Personal Preference Bias

Taylor Swift sells a lot of song downloads.  Yet, I couldn’t name one of her songs without Google’s help.  I don’t dislike her, but I just don’t prefer her music.  Lots of people do like her and her music and she does very well.

I have a personal preference bias against Taylor Swift.

In almost every aspect of life, I see the personal preference bias at work.  It works fine when we’re dealing with products in a free market.  Nobody tries to impose their preference for Taylor Swift on me.  I can change the channel when her song comes on the radio, choose not to attend her concerts and choose not buy her songs.

It works fine with our friends.  We tend to hang out with the people who we prefer.

Here William Gadea ponders the motivations behind why a bread company would make 40 varieties of bread (thanks to Russ Roberts at Cafe Hayek for the link).  Gadea can’t imagine that folks actually like 40 varieties of bread, because he doesn’t like 40 varieties of bread. He thinks it’s more likely that the bread company produces so many varieties to control shelf space.

I wrote about personal preference bias in my Moneyball post, though I didn’t call it that then.  The baseball talent scouts and coaches in the movie exhibit personal preference biases that caused them to overlook valuable baseball talent.

I see this in the business world.  Folks, who don’t necessarily produce the best results, are often promoted because they are simply preferred by the folks who are doing the promoting.

Politics is steeped with personal preference bias. We often vote for candidates because we can imagine ourselves “having a beer” with him, rather than basing our decision on his qualifications, policy positions and view of the government and the Constitution.

Policy is also influenced by personal preference bias. Because some people preferred owning homes, they thought it would be good for everyone. Renting was seen as bad, even though folks have rented for thousands of years.

That personal preference bias led to policy to get more people to own their homes and ended in the financial crisis. In fact, for many of the very people it was designed to help, it turned the ‘dream’ of home ownership into a nightmare. Canada did not fall for this particular personal preference bias.

Payday lending opponents exhibit personal preference bias. Because they don’t see value in getting a payday loan, they don’t think others should, either, even though many do.

Supporters of minimum wage exhibit personal preference bias. They don’t think anyone should earn less than minimum wage, unless, of course, those willing parties work for them.

We all have personal preference biases. I certainly do. The trick is recognizing your biases and restraining yourself from forcing them on others.

The right performance output measure at Alaska Airlines

In the previous post, I wrote about using meaningful performance output measures to trump biases.  In the Weekend Interview in the Wall Street Journal, Alaska Airlines CEO, Bill Ayer provides some good examples of this from the business world.

The Journal frames the discussion with Alaska Airline’s success:

Alaska shares rose 30% last year, making it the only major airline to show a full-year gain. The industry was down 25% on average.

Here Ayer mentions the common status quo bias:

It’s easy to justify the status quo. We fell into that trap. We always had a quick answer. Just that sometimes it was wrong.

It’s like an overweight person who has done the same exercise and diet routine for years. It obviously isn’t working.  Why aren’t they willing to try something new?  Because that’s the way they’ve always done it.  And, they rationalize things could be worse.

Here, Ayer talks about the right performance output metric for a business:

“[At] airlines that are profitable,” he says, “the business model is there to grow. If you’re not profitable you shouldn’t be growing. You don’t want to grow for growth’s sake. You don’t want to just grab market share from other people.” Note the implied dig at competitors like Delta and JetBlue that borrowed to expand. Mr. Ayer suggests that airline executives need to change their mindset. “If lack of profitability is the core problem, then the central metric ought to be about profitability.”

That’s a common mistake I see in business.  Managers desire to change some metric without bothering to understand if that will drive meaningful results.  They want to grow market share or client counts or they want to improve client retention or sales through ratio and they either assume profitability will take of itself or don’t consider profitability at all.

Often they succeed at improving whatever metric they’re measuring, but lose their job because it turns out that metric had an opportunity cost to profitability that they had not considered.  For example, they may improve client retention by 1% using the old business myth “it’s cheaper to keep a client than get a new one“, but hurt new client acquisition by 3% in the process and come out behind on profits.

This is another quote from Ayer that I enjoyed:

“Hope is not a strategy. We don’t spend a lot of time counting on things we can’t control.”

Surprisingly, all to often hope is the strategy and all too often we do try to control things that can’t be controlled.

Descriptions

I remember frequently hearing the media descriptions of tea party rallies include a statement about racial composition.

I have yet to hear similar statements included in descriptions of Occupy rallies.

I wonder why?

Being wrong isn’t bad

I listened to two podcasts in row that happened to touch on the subject that inspired me to start this blog — changing one’s mind.

I’ve always been fascinated by events, arguments, rhetoric, conversations and observations that get people to reconsider their previous ideas on how things work and possibly change their minds.

The first podcast was a Dennis Miller Show podcast of his interview with David Horowitz from September 28.  Miller and Horowitz were discussing the liberal mindset and Miller makes what I think is an apt description of folks who have difficulty changing their mind (and not just liberals).

Miller says (emphasis added):

I don’t view it as a craziness. People are too easy on them when they say they’re crazy. I view it as an obstinacy, a non-curious obstinacy that infects their lives.

I can’t tell you how many people have said to me, ‘how could you work with O’Reilly?’  I go, ‘You ever watch the show?’  They go, ‘No! I wouldn’t watch that show!’

Non-curious obstinacy.   I like that description and I like Miller’s example.

When you encounter folks with a non-curious obstinacy, it’s not worth discussing whatever it is they are going on about beyond asking if they’ve ever given it a try or if they can describe specific examples on which they’ve based their conclusions.

More often than not, the answer is ‘no.’   If so, you can respond, ‘let me know when you can provide specific examples and I will be happy to discuss it then.  Now, let’s talk about something else.’

The second, a Freakonomics podcast, The Folly of Prediction.  The show host, Stephen Dubner was speaking with guest, Phil Tetlock, psychologist at Penn.  Tetlock has extensively studied folks, especially ‘experts’, who make predictions about things ranging from the economy, the stock market, politics and sports outcomes.  Dubner asks:

  …we’re getting into the nitty gritty of what makes people predict well or predict poorly.  What are the characteristics of a poor predictor?

Tetlock answers (after a brief pause):

Dogmatism.

I think an unwillingness to change one’s mind in a reasonably timely way in response to new evidence.  A tendency when asked to explain one’s predictions, to generate only reasons that favor your preferred prediction and not to generate reasons opposed to it.

Dogmatism (def. The tendency to lay down principles as incontrovertibly true, without consideration of evidence or the opinions of others).  That’s another word for non-curious obstinacy.

Folks don’t like to be wrong.  I didn’t like to be wrong, though I have gotten better in this respect.  I still don’t like it sometimes, but I get over it.  We’re trained from a very young age that being wrong is not a good thing.

But, I’m not sure why.  Being wrong shouldn’t be a bad thing.  Just about all learning in life is done based on trial and error.  That is, we try something based on how we think it should work, and then we find out that we were wrong.  We then try it differently, until we find something that does work.

We tend to learn these lessons best where we pay the costs or consequences for being wrong.  I’ve only turned the wrong way down a one way street once or twice in my life.  Now I’m pretty good at checking the signs and flow of traffic before I turn.

We tend not to learn the lessons as well when we don’t pay the direct costs or consequences for being wrong.  Politics is a good example.  I can vote for someone because I like the way they dress or speak, or because he’s ‘better than the last guy’, or because he’s cool, or I better identify with the others who are voting for him.  And, if I’m wrong, I don’t really care.  We were all wrong.  But, we don’t really even have to admit that.  There are plenty of ways for us to explain it away…”things were worse than we thought,” or “at least we had good intentions, we were trying to help, unlike the other side who is only for the fat cats.”