If you have to ask, you should use the door marked "Morlock"

From Business Insider:

An NYC High Rise Is Putting In Separate Entrances For Rich And Poor Renters

A luxury high-rise apartment in Manhattan’s Upper West Side is set to have a so-called “poor door” — a separate entrance for low-income residents receiving subsidized housing.

The 33-story building — 40 Riverside Boulevard – being developed by Extell Development Company will have 219 condominiums selling for more than $1 million each.

But by including 55 affordable housing units on the first few floors renting at a starting price of $845 a month, the developer could get a tax break, according to the West Side Rag.

With this disparity between the million-dollar condos for purchase versus the units for rent at a phenomenally low price for Manhattan, the developer decided to design the building with separate entrances for those who own condos and those who rent at a price below market value. As one might expect, this “rich door,” “poor door” situation doesn’t sit well with some.

Excellent Point Alert

Via Thoreau, we have a comment on Dean Dad's latest post:

I graduated three decades ago with an engineering degree, and in spite of all the talk about the shortage of technical skills, less than 20% of my graduating class got jobs in their field.

I thought then, and I still think now, that "skill shortage" is management-speak for "shortage of skilled people willing to work for what we want to pay them". I also note that the rhetoric about needing to pay enough to attract good people stops as soon as you get below upper management level…

 Thoreau goes further:

Hiring cheap workers on the lower rungs is always, always justified as necessary for the business to survive, as it paying exorbitant salaries to failed managers.

There really is a disconnect here.  It is not necessarily that senior management salaries are wrong.  it is more that it is odd that senior salaries are going up at the same time as other salaries plummet.  Given the cost of managers, they would seem to be the best candidates to outsource -- all things being equal. 

But we have a mystical faith that strong leaders are necessary for a business to prosper but that we can get cheap on the lower levels.  However, there are some organizations (say militaries) with very objective success metrics where the officers are often seen as less important than the non-commissioned officers (Britain would be an example of this).  The NCOs provide the low level guidance required to ensure excellence. 

Are we sure corporations are different? 

This is a really big deal

From Yglesias

Most low-income Americans aren’t poor at all by global standards, so evidence from successful anti-poverty programs in the developing world are difficult to apply to domestic poverty. That’s why it’s so telling and fascinating that a study on the cognitive downsides of poverty would find identical results in New Jersey and Tamil Nadu. Much work on domestic poverty rightly emphasizes the idea of skills and “human capital” needed to navigate a complicated modern economy. This naturally leads to a focus on education, whether in the guise of various school-reform crusades or the push to bring high-quality, affordable preschool to more households. But adults need help, too, and the perception that poor adults—as opposed to presumably innocent children—are irresponsible often leads to reluctance to treat adults as adults who are capable of deciding for themselves how best to use financial resources.

This paternalistic notion that we should be relatively stingy with help, and make sure to attach it to complicated eligibility requirements and tests, may itself be contributing to the problem of poverty. At home or abroad, the strain of constantly worrying about money is a substantial barrier to the smart decision-making that people in tough circumstances need to succeed. One of the best ways to help the poor help themselves, in other words, is to simply make them less poor.

The causal ordering here is really important.  We see this dilemma with other variables that are difficult to randomize.  So, for example, it isn't 100% clear if lack of exercise contributes to obesity or if being heavy makes one less likely to exercise.  It can make a big difference in public policy if the causal arrow reverses direction (or if there is a positive feedback loop that goes between the two variables).

In this case, there seems to be evidence that making a stingier and more complex welfare state increases the long run poverty via decreased decision making due to financial stress.  If this is borne out in other context then it totally changes the optimal policy responses to poverty. 

I didn't realize that it was OK to overstate numbers by an order of magnitude if it made for an interesting conversation

I'm going to try to get back to this and connect it with some other threads. For now though, consider it one more data point in the ongoing story of the challenges faced by people who try to correct falsehoods once they've made their way into the mainstream.

From Marketplace:

Could it possibly be true that watching videos on my smartphone uses as much electricity as two refrigerators?

“This is an example of a claim that sounds interesting, but really has no basis in fact,” says Jonathan Koomey, a research fellow at the Steyer-Taylor Center for Energy Policy and Finance at Stanford University.

Koomey has devoted years of his professional career to fighting this refrigerator analogy. It first came up more than a decade ago, by the same author, then making the claim that a Palm Pilot used the same electricity as a fridge.

Koomey says fighting it again now is pretty frustrating, “I’d rather not have to spend time rehashing this stuff.” But, the claim is back. So Koomey is back; figuring out just how much electricity goes into making and using my smartphone.

By his calculation, it’s about 60 kilowatt-hours.

Mark Mills, a senior fellow at the Manhattan Institute, and the author of the phone-equals-refrigerator claim, estimates it’s closer to 700 kilowatt-hours.

Mills is author of a report called The Cloud Begins with Coal, sponsored by the mining and coal industries. He says he wants to get people thinking about how much electricity these devices use. And he doesn’t think the controversy around the refrigerator analogy distracts people from his bigger point.

“The debate makes it an interesting conversation, like we’re having,” says Mills.

He stands by his calculations and his main assertion: “It is accurate: it uses a lot of electricity. Now if someone were to say, it’s not equal to a refrigerator or equals half a refrigerator or a tenth of a refrigerator, that’s still a big number.”

Epidemiology example in tech

This post is a great example of epidemiological reasoning:

When people compare the stability of Linux and Windows, they may be biased a couple ways. First, Linux is more often deployed on servers and Windows more often on desktops. So they may unintentionally be comparing Linux servers to Windows desktops. Second, they may be thinking that Linux users’ computers are more stable than Windows users’ computers, which is probably true. Linux users typically know more about computers than Windows users. They are more able to avoid problems and more able to fix them when they occur.

You see central issues in epidemiology of trying to form comparable comparison groups and trying to disentangle environmental factors.  The higher knowledge base for the Linux users is directly comparable to the healthy user effect (more informed individuals are more likely to use preventative therapies).  The differences between server versus desktop is a great example of differences in the population.  If drinkers are also more likely to smoke, sleep less, and so forth then you may well see more problems unrelated to the exposure itself. 

Epidemiology is everywhere. 

Movies! -- some thoughts on television's second best classic movie channel

One of the things I've noticed following this antenna TV over the past few years is that the quality of reporting on television tends to be very strong in Chicago, strong in LA, pretty good in Atlanta and terrible in New York, a ranking that tracks fairly well with the importance of the industry in each town. I don't have much first hand knowledge of Milwaukee but I'd imagine that, given the proximity there's a fairly strong shared culture with Chicago. 

That would explain why Duane Dudek of the Milwaukee Journal Sentinel not only covered a terrestrial superstation but actually took the time to get quotes from Neal Sabin, the Ted Turner of over-the-air television.

The channel called MOVIES! is a partnership between the Chicago-based Weigel chain and Fox Television Stations. The channel will reach over 40% of US TV homes when launched, said Neal Sabin, president of content and networks for Weigel.

He said the films will be presented in a "movie lovers' kind of manner," with 12 minutes of commercials per hour and with no editing for length.

Which means a movie will end "when it's over," he said. The service is "a little Turner Classic movies, it's a little AMC and it's a little ME-TV in the way we present the films," Sabin said.

Films will often be presented in showcases, he said, such as female-oriented films on Saturday night and Westerns every morning "because that's a genre that isn't in most places."

"And every night in prime time, there will be an iconic movie or iconic movie star in the movie."

Films are from the Fox studios library, plus two other yet to be named studios.

The first prime-time movies Monday will be "Silent Movie" (1976) and "High Anxiety" (1977), starring and directed by Mel Brooks. 

It's obvious both from reading press materials and from watch the station that despite the fact that it runs on Fox stations, shows Fox movies and is probably financed by Fox money, Movies! is very much a Weigel operation and it shares the underlying philosophy that have made ThisTV and METV so much fun:

Try to find something good. Failing that, find something interesting. Failing that, find something different.

The big difference between Movies! (yeah, I'm getting tired of the exclamation mark too) and the earlier Weigel efforts, particularly the otherwise similar ThsTV is budget. Though ThisTV found a number of creative ways of working around a lack of resources, sometimes even making a virtue out of their limitations (such as their Tarantinoesque art-house/grind-house vibe), but there are obviously some programming choices that the channel wouldn't make if they had the option of showing something better. Movies! is Weigel operating largely without financial constraints. 

Turner Classic Movies was the reason I went over to rabbit ears in the first place, or, more precisely, it was the last straw. I'd been growing increasingly pissed off with cable for years, the inconvenience of installation (I moved frequently), the poor customer service, the opaque pricing and bait-and-switch offers, the failure to improve value even though viewing alternatives (online and DVD) were constantly getting better. I kept telling myself, next time I move I'm going to get my TV online and over the air but what finally tipped the scale was when my provider bumped TCM to a more expensive tier. After that, I looked at my cable listings and asked myself "what am I getting here that I can't get online or via DVD? The answer was "not much."

TCM remains the gold standard for movie people, but Movies! pulls off a surprisingly respectable second. It can't match Turner's commercial-free format (though twelve minutes an hour is quite reasonable) or catalog, but they do have a good catalog and they do dig deep enough to present an interesting cross-section. This week, which is fairly representative, features films ranging from Lawrence of Arabia to Mothra, recognized classics like John Ford's Rio Grande, interesting oddities like Elvis Presley's two best reviewed dramatic films (one directed by Don Siegel, the other written by Clifford Odets), notable work by stars like Clark Gable, Dick Van Dyke, Janet Leigh, Burt Lancaster, Peter Lorre, Gary Cooper, Rita Hayworth, William Holden, Richard Widmark, Richard Boone, Sean Connery, Richard Harris, James Coburn, James Caan, Charles Bronson and others, loads of effective little genre pictures and guilty pleasures like the Zatoichi remake Blind Fury, Ray Harryhausen's creatures in Mysterious Island and the Grand Guignol of Hush, Hush, Sweet Charlotte.

Movies! and the other terrestrial superstations raise some interesting business and media questions but those can wait till later. For now I just want to say that, speaking as someone who has wasted a big chunk of his life watching TV, even if you gave me unlimited cable, I'd still keep a set of rabbit ears around for the Weigel channels. Like TCM and Cartoon Network, they show what happens when you hand television over to smart people who love the medium. 

Weekend blogging -- sometimes combination is creation

I was putting together a weekend blogging post of catchy songs and I started to throw in my favorite mash-up...




but then I realized this video was better suited to another, earlier thread about being derivative in an original way:

You could argue that there are two distinctly British traditions of coming-of-age novels: the Arthurian (think the Sword in the Stone) and the school story. The best known example of the latter is Tom Brown's School Days; the best is Mike. Both genres are uniquely tied to British character and culture but, as far as I know, no one saw how fundamentally similar they were until Rowling came along.

You can see that underlying similarity of the two genres (and Rowling's skill at combining them) by imagining the Harry Potter and the Philosopher's Stone first with the fantasy elements removed, then with the public school elements removed. The results would be, respectively, a conventional school novel and a conventional juvenile fantasy novel, but they would both be basically the same story. Most of the characters and the majority of the plot work equally well in both genres.

To see connections between seemingly disparate elements and to find a way to bring them together in a coherent whole is pretty much the soul of originality, even those elements are old and familiar and worn smooth with use.

Joseph was overly and insufficiently harsh with Nicholas Carlson's Mayer profile

First off, when my co-blogger Joseph called this piece "a clever hatchet job," he was wrong. Having read the whole damned thing, I feel fairly confident saying that Carlson was not setting out to be unfairly or excessively critical of Marissa Mayer, though it's clear that some of his sources were. Instead he gave us something that is, to me at least, quite a bit worse.

For starters, the traditional hatchet job is not the worst of all genres, particularly if you can identify the author's position and, if needed, correct for it. Mark Twain's treatment of James Fenimore Cooper was unquestionably a hatchet job and it remains both a sharp piece of criticism and a damned funny piece of prose.

Carlson's profile falls into another genre, a type of novelistic business journalism heavily influenced by Michael Lewis, long (and I do mean long) form reporting built around a central narrative with lots of time spent on character sketches and atmosphere. When done well (and Lewis generally does it very well indeed), it can be both highly informative and wonderfully entertaining. Done badly (and badly seems to be the norm), it can be simplistic and misleading and as annoying as all hell.

Lewis has exceptional literary gifts, a sharp understanding of business and, perhaps most importantly, a satirist's eye. Carlson has, if anything, the opposite. Behaviors that would have Lewis looking for his best scalpel actually seem to inspire uncritical sympathy from Carlson. Consider the following:

One by one, they walked in and sat down at a table across from Mayer. Then, she launched into questions. She asked: “Where did you get your education?” “Where are you from?” “What do you do here?” And so on.

As Yahoo executives answered, Mayer took notes on their answers with pen on paper, hardly looking up.

“It kind of felt like you were summoned to the principal’s office,” says one executive who went through one of these introductory meetings with Mayer.

“You would have thought a fair portion of [that meeting] would have been about ‘so what are you going through? How are you feeling? Sorry about Ross. We love him. We’d like to keep him. Realistically, he won’t stay but that doesn’t have any impact on you.’

“There wasn’t any kind of commiseration or any kind of bear hug. There wasn’t even a question of ‘Are you in or are you out?’ It was: ‘I assume you’re in. Let me know otherwise.’

“There was no time for short conversation or human emotions. It was very boom, boom, boom.

“Most people walked away from that meeting saying, ‘Holy shit.’”

Keep in mind the situation here, this was a complete management shake up at company that was generally seen as headed for the rocks and we have a group of well-compensated executives (over compensated by many metrics) whining about the lack of bear hugs. Like so many places in Carlson's piece, his sources here seem to be asking for mockery but they are allowed to slide, partly because Carlson seems to lack all sense of the absurd and partly because he displays a troubling lack of detachment when it comes to his sources (particularly worrisome since many of them appear to have strong personal agendas).

The tendency to let sources frame reality for him, especially when that reality matches his narrative,  causes Carlson to miss the real significance of much of what he reports. Again and again he describes incidents, both at Google and Yahoo, that indicate dysfunctional cultures where effective decision-making and time management give way to wounded egos. Carlson is so caught up in the mindset of his sources that the message he takes away from these confrontations is that Mayer is too robotic (or as most of us would call it, professional) rather than asking what kind of organization puts hurt feelings and petty grudges ahead of sound decision making.

As for the non-people-person narrative. Trying to find some simple personality trait that explains a subject's behavior is usually a bad idea, but seldom as bad as it is here. Carlson's attempt to build a fairly normal level of shyness for a teenaged girl -- enough for her to describe herself as painfully shy, not enough to keep her from going to prom or becoming head cheerleader -- into the secret key that explains all of her career is unbelievably hokey. I'm amazed people still write this sort of thing.

I know most of you regular readers are probably sick of hearing this but having non-critical journalists shoehorning complex stories into overly simplistic narratives is a bad thing. Among other problems, it makes those journalists gullible as long as what they're being fed matches the narrative. To see just how gullible Carlson was, read David Auerbach's masterful take down  (which arguably is a hatchet job, though I don't mean that in a bad way).

On the downside, when I make powerpoints they hardly ever have all that cute animation

Frances Woolley has a good post up on piracy in the textbook market but she lost me on this paragraph:

If students cannot be relied upon to cough up the cash, textbook publishers will start looking to raise more money from instructors and universities. Right now textbooks are paid for by students, but marketed to instructors, who choose the required text for their courses. Companies compete by providing instructors with complementary copies of textbooks, powerpoint slides, test banks, study guides, solution manuals, and so on. If the student market collapses, companies may decide to start charging for all of those beautifully prepared powerpoints.

It's been a while since my college teaching days but back in the day, I got a chance to view this issue both from textbook committees and as a producer of some of the supplements Woolley discusses.

I've always held the minority opinion that students can and should actually read math textbooks and that one of the impediments to getting them to read the books is the fact that most of them are virtually unreadable. I lobbied hard for better written texts but I don't believe I ever convinced any other committee members of my point. As far as I can remember, the rest only looked for two things, the homework problems in each section and what order the topics were presented in.  Obviously the committee had to make a decision and when most committees don't consider factors like clarity of explanation and price, that leaves lots of ties.

In this situation, assuming you do not allow kickbacks, very small factors often in up decisive. Case in point, video series as course supplements. Back when I was in the field, most books came with a video supplement, usually consisting of one of the authors working through a few examples for each section.

Back in the late 90s, I produced one of these for a college algebra textbook. I am not going to give you the name because it was one of the most God awful videos you'll ever seen, however since it did look more or less professionally produced and since it was long enough to cover most of the chapters and mainly since I got it in on time, everybody involved was reasonably happy and I got to pay off my car loan.

The sad truth was that most of these videos were pretty much useless. Most of the time they were put in tutoring centers where occasionally a student would try one or two and find they were not at all helpful. The problem was a combination of poor quality and the failure to think through exactly how video instruction should work ( insert MOOC comment here).

The reason these videos kept getting made was that they served as a check mark, a tie breaker. Committee members when faced with 10 or 15 books all of which seems more or less the same would look for some small but clear advantage that they could use to put some books at the top of the pile. These included videos that few students would watch, computer software that few would use and on the other side things like power points and lesson plans and test banks which the committee members probably wouldn't use but which they thought someone else might.

The thing about these tiebreakers is that they only have value when bundled with the product being sold and when the difference between the product and its competitors is very small. They serve much the same function as a $.10 toy in a three dollar box of cereal.

Historically the pay off for having a general ed textbook accepted by a major university has been huge. That was in large part because there was no practical option (legal or otherwise) for students who wanted to get a degree. If they couldn't find a used book, they simply had to pay what the publishers told them to.

There is no such monopoly on supplemental material, at least no effective monopoly. More importantly these supplementals are by nature non-essential. In fact many teachers, myself included, chose not to take advantage of them even when they were given to us for free. I preferred to make my own tests and presentations, and I know many teachers who feel the same way. That combination of monopoly, compelled-purchase, and principal agent problem which made the situation so dangerous with textbooks simply does not apply here.

We don't need to worry about text book publishers gouging instructors for free power points and test banks because these things are easy to do without.

Unfortunately, we still do need to worry about the rest of Wooley's concerns.

More on rank (noun, verb and adjective)

Following up on Joseph's recent posts on corporate incentive plans that use rank to assign nice carrots and spiked sticks, here are a few disorganized thoughts.

1. The law of large numbers tells us that the distributions of random sample will converge on the distribution of the population as the size grows large. If you're assuming small, nonrandom samples will have nice distributions, this theorem is not applicable;

2. Most of these incentive schemes assume a linearity that neither experience or first principles support (I blame Heinlein). These relationships are not monotonic. A sufficiently strong penalty can, by prompting anger or panic or paralysis, produce the very behavior being penalized. A sufficiently large reward can and often does encourage people to game the system;

3. Complex systems can pretty much always be gamed. This is particularly true for systems where all parties are acting solely out of self interest with no emotional investment in the larger goals of the institution;

4. As incentives (positive and negative) increase, people will be more likely to come up with new behaviors that satisfy the letter of the conditions.

5. Even if we put aside the concerns in item 2, the potential for misalignment of incentives in peer interaction here is huge. When you interview potential co-workers, is it in your best interest to see the strongest candidate get the job? What about when a co-worker asks your advice on a modeling problem?;

6. From the management side this might even be worse. There are certain people managers are inclined to protect, either for personal reasons or because they full an immediate need in team. Sometimes a manager would rather hold onto an adequate SAS programmer even at the cost of losing a gifted financial analyst;

7. "Because that's how Jack Welch did it" has gotten to be a less and less convincing reason over the years.

Marissa Mayer: a continuing saga

The recent unauthorized biography of Marissa ayer was a very clever hatchet job thorough piece that quoted many critics of Ms. Mayer.  David Auerbach has done the hard work of asking tough questions: like why do the traits that people attribute as criticism to Ms. Mayer bear a remarkable resemblance to the strong points of CEO's like Steve Jobs?

The most devastating points of attack:

Mayer is an executive outsider not only as a woman but also as a techie. Her background is not in business or marketing, but in the actual guts of product development and management. This makes her far more of an outsider to business culture than women like Carly Fiorina and Meg Whitman. Creative, technically oriented outsiders are founders, not corporate ladder-climbers: David Packard, Walt Disney, Ted Turner, Jeff Bezos, Steve Jobs, and even Bill Gates. 

and, after discussing the brutal level of corporate politics the piece continues:

These aren’t incidental details. They speak exactly to the sort of people whom Mayer is deposing, and to why they certainly could never have saved Yahoo, just bled it dry while it withered. I suspect one of the final quotes in Carlson’s piece is dead-on: “If [Mayer] hadn’t come in, all the smart people would have left.” 

I don't want to say that Ms. Mayer will succeed in her venture or that she is without flaws (she has a few that would drive me nuts in a manager).  But this sort of radical approach at least holds the possibility of a successful turn around.  If she does this as a techie and not as an MBA then I cannot say that I would see this as a tragedy. 

EDIT: Nicholas Carlson has a different perspective on the Marissa Mayer piece than the one voiced in the first paragraph:

This is Nicholas Carlson.

I reject the idea that my story was a "hatchet job" of any sort.

Here is how it ends:

“If she hadn’t come in, all the smart people would have left.

“And that would have been the end of Yahoo.”

I am not sure that I completely agree, but on sober reflection a better description could likely have been chosen than "hatchet job". 

Stack Ranking Continued

More on the Microsoft ranking system:

This was my problem. I had three reports, A, B, and C, and they neatly fit into three categories: C was good, B was great, and A was fantastic. They were all nice and retiring sorts—they weren’t self-promoters, which put them at a disadvantage at Microsoft—and I did want to do well by them. Based on their position in the stack rank, I thought that this would have been a fair assessment of them relative to the company in general:

My Ideal Distribution

A: Above Average
B: Above Average
C: Average

Above Average would get A and B nice bonuses and raises, while C might get a small raise and a decent bonus with an Average. That didn’t happen. My manager told me baldly that this was how it would go:

The Actual Distribution

A: Above average
B: Average
C: Below average

My desired rankings were out of the question, since my manager would then have had to steal that extra Above Average from some other manager. I thought that B could live with Average (we were all well-compensated, after all), but rating C as Below Average hurt.

So I argued for C, and my manager said there was exactly one alternative:

The Alternative Distribution

A: Average
B: Average
C: Average

But A had been at the very top of the stack! How could A do worse than people we’d all agreed were weaker programmers? I gave up and let C take the Below Average. This is the zero-sum game at work.

I still feel bad about this.

This very much shows how the ranking ended up being all about politics and balance between different managers.  You can immediately see how taking a weak person could be a great idea to protect the rankings of the people actually doing the work.  And how good teams would be the absolute worst place to possibly join. 

I was mistaken about Mark P being a proponent of the system in a previous work situation (it is the only way to make IT workers productive was the gist but I don't recall the details and the other obvious person from that era has drifted out of touch).  But it keeps getting clearer and clearer that this kind of ranking system can lead to perverse incentives.  The actual example however shows something else -- the managers are imposing the distribution of ability on a three person team.  That the whole organization should have a wide distribution of talent is likely (the law of large numbers and all) but that any three person team will happen to follow an ordered distribution balanced around the grand mean of the company is a rather heroic statistical assumption

Now consider education reform and imagine what would happen if you tried the same thing with teachers.  All of a sudden there are new and interesting incentives to keep "poor teachers" because the distribution is fixed by design. 

Paul Krugman is not a marketer

A marketer would spend more time discussing the tremendous role that brand has played in Apple's success. Other than that Krugman's analysis is spot on.

From On The Symmetry Between Microsoft And Apple

The Microsoft story is familiar. Back in the 80s, Microsoft and Apple both had operating systems to sell; Apple’s was clearly better. But Apple misunderstood the nature of the market: it said, “We have a better system, so we’re going to make it available only on our own beautiful machines, and charge premium prices.” Meanwhile Microsoft licensed its system to lots of people making cheap machines — and established a commanding position through network externalities. People used Windows because other people used Windows — there was more software available, corporate tech departments were prepared to provide support, etc..
...
But Microsoft missed the boat on mobile devices, while Apple got temporarily ahead of the curve. I say “temporarily”, because as far as I can tell Apple products no longer have a dramatic quality edge. I’ve had an iPhone — which, sad to say, did not survive dunking in water — and now have a Samsung, and the differences don’t seem huge. I have an iPad 2, which I bought for the picture quality; but when I decided I also wanted a small tablet that I could carry around in my jacket pocket, it turned out that the iPad Mini wasn’t significantly better than several Android competitors, and in fact for my purposes worse in some ways.

Now, unlike Microsoft, Apple isn’t selling an inferior product. But it’s selling products that are little if any better than competitors, at premium prices. How can it do that? Again, network externalities: mainly a much deeper bench of apps, or so I’m told (I actually don’t use many).

[App selection is certainly a selling point for Apple, but I'd say that brand and marketing are currently much bigger factors.]

So how do the prospects for Apple’s reign look compared with those of Microsoft? Let’s not forget that Microsoft is actually an incredible success story — it maintained its PC lock for decades, and in fact still retains that lock today; it’s just that the market is changing. My casual impression is that Apple’s lock isn’t nearly as secure, in part because it’s relying on the loyalty of individual customers — in contrast to Microsoft, which was largely relying on the loyalty of corporate IT managers, who are inherently more conservative.
...

So, my problem with Apple. In general, the thing about Apple is that it reflects the spirit of Steve Jobs, who knew what was good for you — and left you no way to do things differently. And if you are an atypical user, you end up putting a lot of effort into fighting iOS in order to do simple things.

Case in point: as regular readers know, I really like watching live performances on YouTube; and I want the best of them available even when I don’t have access to broadband. So I download them onto my PC as MP4s — there are many add-ons that will do this.

But I actually want them on a tablet. To do this in iOS, you first have to import them into iTunes, then synch; not too big a pain, but still a couple of annoying extra steps. The big problem, however, comes when you want to organize your videos: how do I tell iTunes that, say, my 10 favorite Arcade Fire performances are a related set?

Well, the only way I’ve found is to convince iTunes that they are episodes of a nonexistent TV show. It’s doable, but stupid. Whereas on my Nexus 7 I just copy them into a folder named “Arcade Fire”, and there they are.

For more on the appeal of Apple's brand, check out this reflection by Rob Long on the company's near complete dominance of the entertainment industry.

Health Care and Complexity

Aaron Carroll:

That said, if you want to have a discussion on the merits of making the American Health Care system look like Singapore’s, I’m on board. Let’s do it. But what I’ll fight against – and call out – are the people who do that with lots of “buts”. You want Singapore, but you don’t want the mandated savings accounts. You want Singapore, but you don’t like government involved in purchasing decisions. You want Singapore, but you oppose centralized budgets. You want Singapore, but you oppose government subsidies.

This was partially in response to Tyler Cowen:

Now enter Aaron Carroll, who tries to argue Singapore is moving in an ACA-like direction.  His post has been cited numerous times, but it is not insightful nor does it show much curiosity about the new changes in Singapore.  It is mostly a polemic against Republicans.  In any case the new Singaporean emphasis on taking care of the elderly isn’t well understood by a comparison with ACA.

 In some ways I think they are both making very good points, albeit very different ones.  In Cowen's defense, health care has become so tightly bound to partisan politics in the United States that a strong pro-ACA line is going to look like an attack on Republicans, even if it is modeled on a Republican plan.  That's rather unfortunate but true. 

On the other hand, one of the ways to argue for a system is to find historical (or, even better, contemporary) examples of a particular approach working.  Innovation is likely to be tried by smaller groups first.  So Democracy works out so-so in Athens and people begin to tweak it.  Eventually you get the UK model and the US model of democracy, neither of which look like the original.

The problem with this approach is that it requires one to be extremely clear about what the effects of these tweaks will be.  The United States appears to be in an equilibrium where, at a population level, it costs a lot and delivers middle of the road outcomes.  Moving further into that space (and away from programs that are cheaper and deliver better results) requires a very clear argument for why we think there is a local (or perhaps even the global) maxima out there. 

So the problem with Singapore is that there seems to be real disagreement over whether specific pieces are essential or not.  You also have a very different economy -- only 5 million people with an unemployment rate running in the 2-3% range.  While they have no minimum wage, the government tends to be the largest shareholder in Singapore companies and thus excessive wage inequality can be handled at the ballot box.  These design features can make a mandated savings program work really well.  But we also have what looks a lot like a command economy (just one that is small enough and distributes decision-making enough that they are not overwhelmed by complexity).  In any case, much of the US problems would be well handled by a 2% unemployment rate where people would be able to reliably save against disaster and have a decent chance to get a new job (and notice that Singapore is a single city, so there are no relocation frictions if you lose your job in a part of it with few opportunities -- you just commute longer as a result). 

So the problem is trying to reduce the number of moving parts.  I suspect that, despite its huge flaws, this is why the Canadian system keeps coming up.  It is based in a nearby country with a similar type of economy, lots of immigrants, lots of regionalism, and delivers equivalent outcomes (overall) for less overall cost.  It also encourages economic risk taking by making the risk of being uninsured negligible which can also be a benefit. 

But trying to import external health care systems is tough -- they are complex and have lots of points where it is unclear if the piece is essential or merely nice to have. 

Revisiting the growth fetish (kind of a relief to be agreeing with Felix Salmon again)

Salmon has an excellent post, based in part on an equally good John Kay post, about the trouble people have with the idea of healthy contraction in business.

Here's Salmon:

I can understand where Mims is coming from. HP is a technology company, and under the unspoken rules of the US stock market, all public companies, and especially all technology companies, should constantly be growing as fast as possible. It’s the inexorable mathematics of discounting: if a company can deliver consistent growth which is faster than the prevailing discount rate used to calculate net present value, then its stock price should, by rights, be infinite. Consequently, given that infinite upside, it’s worth risking quite a lot to achieve growth.

But the facts are pretty plain: (a) HP is very good at producing excellent products in the shrinking markets which make up most of its business right now; (b) HP has in recent years shown no particular ability to produce excellent products in other markets; (c) Meg Whitman is not by nature a visionary innovator. Given those facts, it makes perfect sense for HP to run its existing businesses as efficiently and as profitably as it can, and to extract as much value out of them as possible, in the knowledge that all companies are mortal. In fact, it makes more sense to do that than it does to follow the Tim Armstrong playbook, where AOL’s CEO decided to take his enviable dial-up revenue stream and invest it in doomed content plays like Patch.

Here's Kay providing some historical context:

The marketing guru Theodore Levitt elaborated this theme in an article half a century ago. Levitt denounced marketing myopia. There was always, he suggested, a future for a company; the key was to look for a creative answer to the question: “What business are we in?” Manufacturers of buggy whips might still be around as carmakers if they had only understood that they were not simply encouraging faster horses; they were transport companies.

Much of Levitt’s analysis was devoted to urging oil companies to recognise that they were really in the energy business. Some of these companies found his arguments persuasive.

Yet 50 years later, few of their diversifications into other forms of power have worked out – their flirtation with coal in the 1970s and 1980s was particularly unsuccessful – and the traditional oil majors still make most of their money out of oil.

Levitt did not recognise that competitive advantage, rather than a fertile imagination, is the key to success. The whip manufacturers had neither production capabilities nor marketing channels relevant to the automobile industry. The skillset needed to manage coal mines is very different from that required to run an integrated oil company.

Recent history has provided a textbook illustration of the limitations of the Levitt hypothesis – the disastrous remodelling of JC Penney’s dowdy stores by Ron Johnson, brilliant designer of Apple’s retail chain. The outlets of both JC Penney and Apple are shops but the age group and disposable incomes of their customers – and their reasons for visiting the stores – were entirely different: JC Penney and Apple were not really in the same business.

Along with ddulites, the growth fetish has been a hobbyhorse here at West Coast Stat Views since before we were West Coast Stat Views.

Think of it this way, if we ignore all those questions about stakeholders and the larger impact of a company, you can boil the value of a business down to a single scalar: just take the profits over the lifetime of a company and apply an appropriate discount function (not trivial but certainly doable). The goal of a company's management is to maximize this number and the goal of the market is to assign a price to the company that accurately reflects that number.

The first part of the hypothesis is that there are different possible growth curves associated with a business and, ignoring the unlikely possibility of a tie, there is a particular curve that optimizes profits for a particular business. In other words, some companies are better off growing rapidly; some are better off with slow or deferred growth; some are better off simply staying at the same level; and some are better off being allowed to slowly contract.

We also managed to tie a similar take on JCP to another favorite hobbyhorse, fitness landscapes.