New at You Do the Math -- The Eugen Weber Paradox

This is not Harvey Korman...

...which is at least tangentially related to this post about Udacity, educational media, ddulites and my skepticism about the coming revolution.

"Rove's Dilemma" Graph Game

I suspect that Karl Rove's strategy in 2000 was to use the support of evangelicals and nativists to entrench Republican power then abandon them and transition to other groups, particularly Hispanics. Rove, an agnostic who was close to his gay adoptive father, appears to have had no personal investment in the social conservative wing of the party and though overrated as a strategist, he was certainly capable of following demographic trends.

Twelve years later, that strategy is looking less than doable. The nativists and social conservatives appear to be a shrinking demographic and the idea of winning over Hispanic voters seems increasingly unlikely. Some have made the case that the GOP's best strategy at this point is abandon its shrinking base and make a big play for the next demographic wave. The trouble with that strategy (from a strictly strategic viewpoint) is that a party has to maintain a certain critical mass to remain viable.

All this got me thinking about the best way to describe this. Here's what I've come up with. It's not there yet but I think it's on the right track.

1. We have a graph where each node is associated with a shifting size metric.

2. These nodes represent populations. You win support from these populations with messages.

3. If you target two nodes with the same message those nodes are associated

4. If the message targeted to one nodes raises support in that node and lowers it in another, those two nodes are disassociated

5. You can not target disassociated nodes.

6. Messages have a half life. If you wish to drop a node so you can start targeting one disassociated with it, you will have to wait a few cycles.

7. The objective is to get the most support possible support over the run of the game while never letting that support fall below a critical level.

Other than a little with Bayesian networks (which doesn't quite seem to cover this) I've never done a graph-based simulation so the odds are good that I'm stating or missing the obvious here. Still, the idea of graph as shifting fitness landscape might be interesting and it does explain how GOP strategists could have seen the coming demographic tides and could still have found themselves trapped by the rising water.

...worth a thousand words

A graph that really makes its point.


From James Lawrence Powell via Tim Haab by way of Thoma

This is simply remarkable

Aaron Carroll:

Lots of those 65 and 66-year-olds will need Medicaid. That will cost the federal government about $8.9 billion. Lots of those seniors will go to the exchanges for insurance. That will cost the federal government about $9.4 billion in subsidies. Oh, that Medicaid will cost states too, about $700 million. The 65 and 66 year olds getting  insurance from their employers will cost them about $4.5 billion (they’re expensive). As I’ve reported before, Medicare premiums will go up ($1.8 billion), and exchange premiums will go up ($700 million). And, there will be increased out-of-pocket spending by the 65 and 66-year-olds themselves for premiums, deductibles, co-pays, etc. Add it all up. To save the federal government $24.1 billion, we need to spend $29.8 billion.
 

 Even if some of these assumptions are naive, it doesn't look like this change is about saving money at all.  Instead, I am beginning to accept Peter Sunderman's claim that it is all about the long game of decreasing the consituency for the program.  But as a practical matter, it seems like this is a fairly stiff price to pay for a symbolic gesture that will make things more dificult for people to get medical care.  I am not even convinced that it does much to increase the work incentive -- moving social security to age 67 likely did most of the heavy lifting on this front already. 

Peter Principle or Dilbert Principle*

In case you haven't heard, Jeff Zucker has just been named president of CNN. Since we've been discussing incompetent executives lately, this seems like a good time to ask how, despite huge stakes, fierce competition and multiple layers of screening, incompetents still sometimes manage to make it to the top of large corporations.

At first glance, Zucker would appear ot be a perfect example of the Peter Principle, an effective producer promoted past his talents, but when you look closer at Zucker's one big accomplishment, the resurgence of the Today Show, you see less proof of competence and and more evidence that corporate reputations are often built on unrepresentative baselines, delayed effects, external factors and the tendency to embrace appealing and established narratives.

First some background via Wikipedia (as are all block quotes unless otherwise noted).

In 1989, [Zucker] was a field producer for Today, and at 26 he became its executive producer in 1992. He introduced the program's trademark outdoor rock concert series and was in charge as Today moved to the "window on the world" Studio 1A in Rockefeller Plaza in 1994. Under his leadership, Today was the nation’s most-watched morning news program, with viewership during the 2000-01 season reaching the highest point in the show’s history. ... In 2000, he was named NBC Entertainment's president.

Sounds pretty good, but remember two things that happened at the Today Show in 1990 an 1991. The first was a disastrous transition from Jane Pauley to Deborah Norville. You could make the case that Norville was actually better qualified for the job, but that did nothing to soften the viewer reaction. The younger Norville was seen as taking advantage of looks and youth to steal Pauley's position. Saturday Night Live even did a sketch entitled "All About Deborah Norville."

The ratings took a hit from the debacle, but Norville was soon gone, setting the stage for an upturn. That recovery was all but guaranteed by the hiring in 1991 of Katie Couric, a journalist who could have been genetically engineered to host a morning show.

Whoever got the producer's gig in 1992 was almost certain to oversee a substantial rise om ratings as the memory of the debacle faded and Couric started bringing in viewers. Now add in what was going on at Today's significant competitor.

Good Morning America entered the 1990s with its overwhelming ratings success. Gibson and Lunden were a hard team to beat. But Good Morning America stumbled from its top spot in late 1995. Lunden began to discuss working less, and mentioned to network executives that the morning schedule is the hardest in the business. ABC executives promised Lunden a prime time program; Behind Closed Doors would be on the network schedule. On September 5, 1997, Lunden decided to step down after seventeen years on Good Morning America and was replaced by Lisa McRee. Gibson and McRee did well in the ratings. However, ratings sharply declined when Gibson also left the show to make way for Kevin Newman in 1998. With McRee and Newman as anchors of Good Morning America, long-time viewers switched to Today, whose ratings skyrocketed and have remained at the top spot since the week of December 11, 1995.

In other words, Zucker started with an artificially low baseline, was handed a major TV personality on the verge, and saw his competition fall apart at exactly the right time. All of the important drivers of the show's success were things he had nothing to do with.

Just to be clear, many, probably most CEOs get their jobs because they are smart and capable and add value to the company, but there are other ways to  succeed in business. You can:


Fit in with the culture;

Make the right friends;

Couple your career with rising leaders and initiatives;

Fashion a persona that complements the favored narratives;

As for that last one, the legend of the studio boy wonder runs deep in the entertainment industry, from Thalberg to Silverman. When Zucker was put in charge of Today in his twenties and NBC in his thirties, he tapped into something both familiar and resonant.

But Thalberg and Silverman really were boy wonders who had laid down impressive resumes before they were put in charge. Zucker only had the perception of success. Sometimes, though, that's enough.



* Technically not the Dilbert Principle, but close.

Right to work is anything but!

This is right on:

Now naturally an employer's not going to want to agree to that. But he's not going to want to agree to higher pay or more vacation days either. That's why it's a negotiation. A right-to-work law is a law banning employers from making that concession.

The impact, obviously, is to make it hard to form strong unions in a given jurisdiction and thus make it a more business-friendly jurisdiction. But note that this same trick works across the board. You could just ban pay raises in general. Any one firm, after all, faces a dilemma. On the one hand it would be more profitable to pay people less. On the other hand, it's also unprofitable to have everyone quit to go work for some other higher-paying company. So a law against pay raises would make everyone more profitable, spurring crazy business investment and job creation. Except nobody does that because it would be (a) insane and (b) obviously unfair. And yet the proponents of right-to-work laws are generally exactly the people most inclined to stand up for freedom of contract under other circumstances.
 

 It is very odd that right to work has become a libertarian position.  Employment contracts require both sides to be able to bargain freely.  In an "Adam Smith" nation of shopkeepers, where an employee is bargaining with a single business owner there is some sort of sense to this arrangement.  But business has a lot of money and power relative to workers.  Why would it be illegal to try and pool resources on the worker side when it is fine for a pool of owners to pool resources by forming a corporation?  Do we honestly think that corporations don't also try and influence the political process via lobbying and donations just as unions do? 

Wage controls are also not without precedent but at least the contradiction is more immediate and obvious.  Now, I am not a libertarian but I would really like to know how this sort of ban on organizing groups is a loss of freedom.  Sure, you could end up belonging to a group you did not intend to join.  But we don't ban corporate takeovers because the workers never consented to being a part of the acquiring company, do we? 

I'm a Mac... and I'm about to be eaten by feral dingoes

Yet another reason to stick with the Android.

Hostess Pensions

Some choice quotes from a Yahoo! News article on the Hostess pension plan hijinks (called by one person in the article a "Betrayal without remedy):

Mr. Rayburn became chief executive in March and learned about the issue shortly before the company shut down, he said. "Whatever the circumstances were, whatever those decisions were, I wasn't there," he said.

and

It might have been "impossible" to undo the agreements that called for Hostess to make pension contributions using employee money, Mr. Rayburn added. One reason: Hostess could have been too short of cash to make up the difference, though he said he isn't sure.
 

Now it is true Mr. Rayburn was a last minute CEO and may well have ended up leading a company that was in worse shape than expected.  But how he could not know basic details like whether the company had enough cash to meet obligations or not suggests a lot of disarray.  I understand that precise numbers in a large business are illusory, but he should have a decent idea given that it was a major sticking point of union negotiations.

Similarly, claiming that he can't take responsibility for previous bad decisions makes sense at some level.  But at another level it makes me wonder how anybody can negotiate with an entity that can change management and request a clean slate on past misdeeds since the current teram was not there.

Krugman versus Yglesias

Paul Krugman has two explanations for why profits are rising at the expense of workers:

As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.
 

Matt Yglesias advances what I think is a better explanation:

 To put it nonpolemically, you can see in the chart that not only is there a structural trend in the labor share of output, there's also a strong cyclical trend. The labor share declines during recessions and rises during booms. And the problem of the Federal Reserve is that over the past 30 years, it has a perfect track record of never allowing inflation (which is to say a sustained period in which wages rise faster than productivity), but it doesn't have a perfect track record of never allowing recessions. The inevitable consequence of this asymmetrical success is for the labor share to steadily decline.
 

I like this argument for the simplicity: it is based on a clear policy choice that was made and which continues to this day.  There is no need for an appeal to "the world has changed" over and above the decision to be willing to hold price stability in place at the cost of employment.  This is directly relevant to today as the Federal Reserve has a dual mandate.  On one side of the mandate, they have the requirement to ensure price stability.  On the other side of the mandate they need to encourage full employment.  It's pretty clear that they are doing much better with one piece of this mandate than the other. 

To spell out or not to spell out

I just posted some thoughts on the pros and cons of teaching algorithms for solving math problems. It's  fairly long but here's a quick look:

It takes a great deal of thought to come up with an algorithm and to understand why it works, but actually performing one should be an almost entirely mechanical process. The whole point is to get the answer reliably and quickly with an absolute minimum of thinking. 

This isn't a bug; it's a feature. There are situations where you want people operating on autopilot. Thought is slow, unpredictable and distracting. You probably don't want your tax preparer stopping to reflect on the subtleties of economic distortions while filling out your 1040 and if you're an administrator, you certainly don't want students thinking about the nature of numbers while doing long division on a standardized test that determines your next bonus. You could even argue that most of the progress of mathematics over the past three centuries is due to notation that makes much of the work thought-free thus allowing mathematicians and scientists to focus on more important matters.

If you're a teacher or just someone with an interest in math education, check it out and let me know what you think.

First they come for the pigeons...

Well this is ominous:

The study, conducted largely by scientists from the University of Toulouse, is titled "Freshwater Killer Whales" and describes the beaching behavior of European catfish on the River Tarn in France. The study's abstract section states: "Among a total of 45 beaching behaviors observed and filmed, 28 percent were successful in bird capture."

Dogwalking

I was struck by this comment in Dean Dad's column:

The Times article quotes someone saying he knows people with six figure incomes from dog-walking businesses.  I don’t.  And I bet you don’t, either.
 

What is interesting about this quote is that I see a six figure income as a dog walker as plausible if you are talking revenues.  Dog walker is actually a tough gig if you are going to make it a profession and give high end experience.  You need a vehicle to transport the animals to a dog park.  You need insurance (liability and personal health).  You need to be bonded as you likely have access to people's houses when they are at work.  You are dealing with beloved animals who may well decide not to listen at a key time. 

So it takes trust and there is a lot of effort involved in building that reputation.  The effect of reputation (do you trust the professional or the new person) is an effective barrier to entry to new dog-walkers who simply can't just compete on price.  So this creates a space for some dog-walkers to end up able to generate a lot of revenue. 

But this sort of heavily networked profession is more than just picking up dog poop.  It's also about controlling lots of animals, knowing how to run a high liability business and developing an impeccable reputation -- being able to sell yourself as trustworthy.  Ending up in that sort of profession where you are the real product being sold (musicians, car salesman, model) has always been a alternate path to a decent income.  But there is a huge element of risk in all of these approaches and not everyone can end up with a highly successful network. 

Value Investing

I often cringe at Megan McArdle's social commentary, but she seems to be pretty sharp at the level of the small, individual investor.  I especially liked her comments on value investing:

Graham's big investment coups came in the early 1930s, when the market was so depressed it was literally possible to buy some stocks for less than you'd get if you just shut the place down and sold off the assets.  Buffett similarly made a lot of money in the prolonged bear market if the 1970s.  And except for a brief period in late 2008 and early 2009, the market has simply never dipped low enough for investors to make those kinds of profits.  To be sure, 2009 was a great year for value investors, but you cannot build an entire financial career off of a single nine-month period.
 

I think that this is precisely correct.  To gain huge returns (on the order of Buffet) one really needs a stock market so depressed that extraordinary value is just sitting there.  I remain skeptical that such opportunities exist (in general) where everyone is looking.  In modern, carefully analyzed and highly liquid stocks this seems to be a hard thing to pull off. 

It's also the case that it can't be done consistently.  A single mis-priced stock could end up never appreciating in value or, even worse, could suffer an adverse change (say of CEO and thus strategy).  You need to be able to play the numbers (trying for many opportunities and relying on the law of large numbers) and that probably requires systematic under-pricing. 

Incentives

There has been a recent discussion of Ross Douthat's column on women in the West not having enough children and how this is a sign of decadence.  I want to outsource one major objection to this column to James Joyner, who is far from a liberal.  Consider:

Or, as some of our fellow conservatives call it, “taking responsibility for their lives and not having more children than they can afford.” Indeed, Douthat seems to acknowledge that on the part of the individual while lamenting the collective outcome.

and

But this is an argument that we conservatives apply nowhere else that I can think of. Indeed, most American conservatives, myself included, rail against collectivism in much less significant arenas. Let government try to force us to change to a more energy efficient lightbulb or regulate the water capacity of our toilets and the calls for revolution ring out across the land. Encourage us to buy more energy efficient automobiles through tax incentives and corporate subsidies and you’re a tyrant. Suggest that we turn off electronic devices that aren’t in use and you’re at very least a dirty hippy and probably an out-and-out commie. But suggest that women give up the advances they’ve made over the last half century because somebody has to have more kids, why, what could be more reasonable?

I think that this point is completely correct.  Even worse, there are a lot of policy choices that we could implement if we decided (as a society) that we wanted more children.  Just consider programs like "Aid to Families with Dependent Children" that could be reinvented.  Or we could subsidize childcare.  Or add in mandatory long maternity leaves.  Why not use incentives to try and improve collective outcomes?

Golden Sponge Cake with Creamy Filling and Moral Hazard

One argument for high executive compensation is that there is a high degree of risk that comes with the job. In theory, great success is met with great reward, mediocre results produce much lower compensation and anything short of that will cost you your job. This is supposed to align the interests of executives with those of shareholders -- my portfolio loses value and you lose your job -- but where we have risk, it probably makes sense to talk about moral hazard.

Think about the familiar argument against a one-time government program to bail out underwater homeowners. Even if we included a provision saying that the homeowners sign away the right to take advantage of similar programs in the future, you could still argue that the program presented a moral hazard because it set a precedent. To put it in plainer terms, it's a bad example. Other prospective homeowners will look at this and be more likely to buy more house than they can afford or, worse yet, pick up a copy of Rich Dad and start flipping houses.

We can argue about the validity of the argument in this particular case (I have problems with it myself), but we should all be able to agree on at least two points:

1. there are potential problems to shielding people from negative consequences;

2. these problems extend, not just to those shielded but to those who think they may be shielded in the future.

All of this suggests that the numerous and highly publicized examples we've seen of executives getting better compensation than their performance merits might be doing damage even in companies that really are aligning   pay and performance.

And it makes stories like this truly scary:

The latest news from the bankruptcy front at iconic Twinkies maker Hostess Brands: AP is reporting that the Irving, Texas company is planning to ask a bankruptcy judge to grant approval of bonuses totaling up to $1.8 million for its executives. Hostess says the incentive pay is necessary to assure that the 19 managers in charge of the liquidation process remain on board until the wind-down is complete. Hostess wants to make two of those executives eligible for additional financial rewards, depending on how efficiently they carry out the liquidation.

What's so disturbing here is the fact that the horrible condition of Hostess is actually an argument for increasing the potential compensation of the executives who drove it into the ground. They managed the company so badly it supposedly can't survive a change in management.

That's what I call a bad example.