Saturday, September 14, 2013

Weekend blogging -- "Zatoichi and the Chess Expert"

Not chess as we think of it (though it does qualify as a first cousin).






Still how can I not post a link to a film where a blind master swordsman meets up with a mysterious chess-playing samurai (and one of the best of the series to boot).




Tuesday, September 10, 2013

Dilbert

This Dilbert comic strip shows that Scott Adams still has it.

But how often is the cost-benefit equation for work and reward really put this cleanly?

Still more Motley Foolishness

In the pursuit of a couple of threads about the business of media, I find myself frequently clicking on links to Motley Fool posts and almost always regretting it. Here's how I summed up my reaction earlier:
MF specializes in overexcited, often under-informed posts usually focusing on hot topics that have strong emotional associations of success or (more rarely) failure. All of which is designed to get readers anxious and eager enough to shell out $199 a piece for various newsletters.
One part of that formula is the BIG HEADLINE!/small story. The pattern here is to start with a wildly overstated headline then scale back to a much more modest actual claim in the article. On top of that, even the modest claim is weakly supported only by very optimistic arguments.

Recent examples:

This Marvel Movie Has "Winner" Written All Over It
(about the upcoming Guardians of the Galaxy)

and

Why Disney's "Agents of S.H.I.E.L.D." Could Be Bigger Than "The Avengers"

If you read the first, you go from Guardians having winner written all over it to it being "an interesting mix of characters that under the guidance of director James Gunn could result in a potent Marvel movie." In this context, I'd read "winner" to be above average for a film in the larger Avengers franchise or at least a 300 million dollar box office. From there we go the the more modest and far more vague 'potent.'

Left out is the fact that the director, while promising, has only directed two features, Slither and Super, neither of which appear to have broken even. Add to that the fact that introducing large numbers of unfamiliar characters is problematic, and that one of these characters is named Rocket Raccoon (a joke that wasn't good even when the reference was fresh).

Likewise, after claiming that the new Shield television show could be bigger than the Avengers, the article never actually argues for anything more than it possibly being a successful show that's good for the network. Once again, even that fairly limited claim is not well supported. No reason is given why the show should be more successful than something like Young Indiana Jones (another TV spin-off of a hit franchise) or that, if it is successful, that success will be somehow more important to ABC than the success of a Castle or a Dancing with the Stars. It should also be noted that while Joss Whedon has been the creative force behind many critically acclaimed TV show, he has never, to my knowledge, been involved with an actual hit. (And no, having a long run on the CW does not count).

Just to be clear, I have every reason to believe that these shows will be entertaining and have a reasonable shot at success. The people at Marvel have a good track record and have shown themselves to be smart about playing a long game.

What I am saying is that Motley Fool has not presented any arguments to show one way or another that these projects will be successful enough to move the stock. What MF is doing is trying to create a emotional state such that you will be eager to start playing the market and you will subscribe to one or more of their newsletters. As far as I've been able to tell, that's pretty much all they try to do.

I have two problems with that approach. First, they appear to be selling a product of little value. Second, and this is the kicker, they are encouraging people to engage in what is for most of us a highly risky behavior.

I have no way of knowing whether or not Guardians of the Galaxy will break box office records or if Agents of S.H.I.E.L.D will be the top rated show next year. If they are hits, I couldn't tell you whether or not that success has already been anticipated by the market and priced in to the stock. These analysts might be right about Disney stock or they might be wrong. Given the arguments we've seen so far I have no reason to guess one way or the other. However, given the cost and risk involved, I would be reluctant to make an investment based on one of these guys' monthly newsletters.

Monday, September 9, 2013

Charter Schools and Hedge Funds

A Wall Street trader draws an interesting analogy:
Survivorship bias
In statistics, this is a textbook case of what is known technically as “survivorship bias”—otherwise known as “ignoring data that makes you look bad.” This statistical fallacy opens up enormous opportunities for people with flexible ethics and an entrepreneurial bent. It is a mainstay of the hedge fund industry, for instance.  Hedge fund indices routinely appear to outperform simple, non-fee generating investment strategies like index funds by neglecting to include funds that closed down, and take funds out of the index whenever they stop reporting performance (hint: no fund fails to report good performance!).

R u hot or not?
Some funds, which shall remain nameless on the advice of counsel, improve quite a bit on these crude methods. They recruit new traders continuously, and give them a bit of capital. After a few months, the ones that make money are trumpeted to investors as the next hot thing, while the ones that don’t are quietly fired and never mentioned again. In this business model, what the traders actually do is irrelevant, as long as they are cheap and willing to sign leonine contracts. In fact, buying monkeys and letting them flip coins to predict market direction would work even better, though this might make the game a bit too obvious.

Repeat as necessary
The parallels to the emerging charter school paradigm are obvious. You start a lot of charters. Some do better than public schools, some do worse, but overall they underperform. You shut down the bad ones. Now repeat the analysis with the non-terrible ones. Improvement!  Except that the students unfortunate enough to attend these terrible school don’t just disappear (we hope – let’s not give charter schools any ideas!). However, they do disappear from the CREDO study, and that seems to be good enough for the charter sector and its advocates to proclaim this a success story.
I haven't seriously dug into the CREDO data so I can't vouch for the rest of the trader's analysis but it looks reasonable and it reinforces a point I've been making for a while: there are a lot systemic factors which favor charter schools and which furthermore tend to bias the data in these schools' favor. In other words, given the conditions charters operate under, we would expect them to outperform public schools even if they were pedagogically identical due to factors like selection, volunteer and placebo effects and even if the schools were performing identically, we would expect the charters to look better due to factors like attrition and survivorship. Add to this some non-trivial cases of data cooking and you can see where this leads.

Even with these factors, charter school performance has been tepid, at best. I don't see that as an argument for abandoning the experiment, but it does mean that the standard the-more-charters-the-better narrative is no longer viable and movement reformers like Arne Duncan have got to mark to market if they expect to be taken seriously.

Saturday, September 7, 2013

Weekend blogging -- sometimes the least conventional covers turn out to be the most faithful

The standard approach to "You Rascal You" would be a band dressed Thirties-style in white tuxedos against an Art Deco background fronted by a vocalist with a mock-menacing bass voice but a cheerful demeanor, figuratively (and perhaps literally) winking at the audience to let them know it's all in good fun.

Played straight, without the winking, the effect is very different.









Friday, September 6, 2013

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

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.

Thursday, September 5, 2013

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? 



Wednesday, September 4, 2013

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.”

Tuesday, September 3, 2013

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. 

Monday, September 2, 2013

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. 

Saturday, August 31, 2013

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.

Friday, August 30, 2013

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).

Thursday, August 29, 2013

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.


Wednesday, August 28, 2013

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.