Wednesday, June 30, 2010

The problem with innovation is that it sometimes solves problems

I'm in my mid-Forties so, other than some brief experiments with facial hair, I've been shaving more or less daily for around thirty years. I started with my dad's old twist-to-open razor that took a two sided blade. They were known as safety razors which always seemed an ironic name for a product that routinely caused bleeding with regular use.

Twin blades had been around for years but they were still gaining acceptance. There was a wide-spread sense that they were nothing more than gimmicks. Saturday Night Live even had a parody commercial touting a three-bladed razor that looked remarkably like what would be the Mach Three.

But as silly as they sounded, the twin blades greatly reduced the blood loss. It was one of those innovations where the results actually matched the hype.

A few years later the triple blade razor was introduced (prompting another, almost identical SNL parody). The new technology produced a closer, more comfortable shave and, best of all, virtually eliminated the bleeding.

Of course, there are confounding factors (I'm older and I've had a lot of practice shaving) but there are still occasions when I'm on the road and have to go back to an older style razor and the result is always bloodshed.

The triple-bladed razors are a great product. As a long-time, steady customer I can give them an unqualified endorsement.

That's a terrible problem for the people who make razors. They have a new generation which, they claim, will give a closer shave with less tugging and irritation. I believe them. These are smart people with a history of successful technological innovation and as far as I can tell, all of their products have lived up to the claims made about them.

Unfortunately for them I am not a motivated customer. If there was, at this very moment, blood dripping from my face, I would certainly be an easy sale. If the last time I had used rubbing alcohol as an aftershave I had grasped my face and moaned "Oh God, make it stop!", you certainly would have found me receptive to an upgrade.

But Gillette and Schick have solved those problems for me, and when you truly solve a problem for a customer, you create one for the marketing department.

How to REALLY lie with statistics

Darrell Huff had a witty explanation of how you can change the impression a graph gives by playing around with the scale and range of the y-axis, but even in a book called How to Lie with Statistics he never even considered changing just part of the scale of an axis. Of course, Huff was limited by the fact that his book was based on real statistical lies and screw-ups that he had found in the popular press as of the early Fifties. He also tried to limit himself to lies that were at least true in some technical sense. There was no way he could have anticipated Fox News.

The catch comes from Media Matters via Mark Thoma.

Here is the same graph with vertical lines for full comic effect.

Go ahead, measure them for yourself. It's fun.

In all fairness to Fox, the period from September '08 to March '09 did feel like a long time.

Bob Dylan, the Monkees and the flooded landscape analogy

Seth Godin's comments on Bob Dylan and the Monkees (which comes to us via Gelman via DeWitt via Tinkers via Evers via Chance) got me thinking about fitness landscapes. Here's the quote:
Let me first describe a distinction between the Monkees and Bob Dylan. Bob Dylan gets laughed or booed off the stage every ten years, whether he wants to or not. He got booed off the stage when he went electric and again when he went gospel, and most recently with his horrendous Christmas album. The Monkees never get booed off stage, because the Monkees play "Last Train to Clarksville" exactly the same way they did it 30 or 40 years ago. Here's the thing: Bob Dylan keeps selling out stadiums and no one goes to see the Monkees, because the Monkees aren't doing anything worth noticing. There are people who have succeeded who just keep playing the same song over and over again, whatever that is that they do.
Think of a musician's career as a landscape where creative decisions like repertory, genre, style, arrangements give the location and concert sales are the fitness function. (see here and here for previous posts on landscapes)

In Godin's example, the Monkees have stuck very close to a local maxima that has sank over the years (the sticking close part doesn't actually match reality all that well -- Mike Nesmith had a run of innovative and interesting projects in the early days of music video -- but for the sake of the post let's overlook that part). Any small to moderate change in repertory or arrangement or style would move them to a lower point on the landscape.

I think I may be stealing this from Stuart Kuafmann, but let's flesh out the metaphor a bit and add water. Our landscape dwellers can travel freely on dry land but they can only swim very short distances. Exactly how does this relate to our real life example? Remember that altitude in our landscape corresponds to ticket sales. In order to stay viable, ticket sales for a touring act have to stay above a certain level. If the sales fall below that level, the act loses bookings and can no longer cover its expenses. Of course, like any other business, the act can run at a loss for a while (swim) but that's obviously not a long term solution.

Godin suggest that a willingness to, in our analogy, move to another optima is the key to success. Dylan made the move and thrived. The Monkees stayed put and whithered. But how comparable were the two situations?

Dylan had a steady source of income from other artists covering his songs. In landscape terms, he was a good swimmer (of course, so was Nesmith who got a tiny check every time you used that little Liquid Paper brush). More importantly, Dylan didn't have that far to swim. He might not even have needed to get wet. At least a portion of Dylan's fan base were going to stay with him no matter where he went on the musical landscape and given his reputation (and phenomenal talent, though I'm trying to leave that out of the discussion), there was a maxima waiting for him at pretty much every genre and subgenre of popular music. Those moves might not have been as artistically or commercially successful as the ones he made but Dylan was going to remain viable no matter where he went.

What about about the Monkees? Musically they weren't a bad line-up. Dolenz was a veteran child actor, Jones was a Tony nominee for Oliver! and Tork and Nesmith were both accomplished musicians. Highly successful careers have certainly been built on less, but what did their career landscape look like? Compared to Dylan's collection of tightly-packed peaks, the Monkees had a lonely island surrounded by what looked like a large and empty ocean. The vast majority of their fan base was location specific. When they moved away from that location they hit deep water very quickly.

It is, of course, possible that the group could have focused on coming up with new songs and a new sound with the hope of finding a new audience. This is a dynamic landscape, and where the artist chooses to go is one of the factors that affects it. There might not be a concert market for the Monkees playing new grass or thrash metal now but that doesn't mean there won't be one in the future. Sometimes, by playing music no one wants to hear, you can create a demand for that music. To return to the landscape analogy, treading water in one spot can cause an island to rise up beneath you. It has been known to happen but it's probably not something you want to count on.

In the case of the Monkees, the water-treading strategy would be particularly risky since their reputation is likely to work against them if they try something radically new. This is probably why Nesmith chose to use his own much less well known name for the Grammy-winning Elephant Parts rather than trying to sell it as a Monkees project.

Which brings us back to Mr. Godin and the advice books he and other business gurus dump on the market every year. These books gush out at such a rate that there are actually companies that put out fifteen page versions so that executives can at least give the impression that they have read the latest releases. The Dylan/Monkees example is sadly representative. It takes one of business gurus' favorite truisms (take risks, i.e. move out of your comfort zone, i.e. they laughed at Henry Ford), bills it as a fundamental key to fabulous success (fabulous as in fabled as in obviously untrue) then backs it up with an irrelevant but impressive sounding example.

Godin is telling businesses to be like Bob Dylan and to make radical moves that may piss off your customers and invite scorn and mockery. The trouble is very few businesses are Dylan-at-Newport. The majority are the Monkees-at-the-state-fair. They have something they do reasonably well. If they stick close to their local maxima they can turn a decent profit and have a pretty good run. If they follow Mr. Godin's advice they will sink like a cinder block and never be heard from again.

Monday, June 28, 2010


Professor in Training has a nice post on grant writing and the frustrations encountered in the process. I have to admit that the first point is the one that I find the hardest: with papers I can be relentless in getting them into journals. With grants, the limited number of submission options is very discouraging -- especially given my lack of success so far.

I know that I need to keep at it but it is one of the hardest things for me in my current role!

It is possible to have a simple question in a complex field

Kartik Athreya packs a lot of stupid into one PDF and though Mark Thoma does a good job of unpacking most of it, there are, inevitably, statements that could use additional rebuttal. Here's an example:
It is precisely from this low-level vantage point that I am totally puzzled by the willingness of many who fearlessly and breathlessly opine about economics, especially macro- economic policy. Deficits, short-term interest rate targets, sovereign debt are all chewed over with a level of self-assuredness that only someone who doesn’t know more could. The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the “Macroeconomic Policy is Easy: Only Idiots Don’t Think So” movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it’s all really very simple (and may even be found in Keynes’ writings).
There's an obvious but important point that Dr. Athreya either manages to miss or avoid, namely the distinction between a simple field and a simple question. In almost all fields, even the most complex and challenging, there are simple, easily-answered questions.

Krugman and Delong frequently argue that some colleagues, policy-makers, journalists or politicians have reached the wrong conclusion about a simple point in macroeconomics. They sometimes also contend that some of these errors are partially the result of idealogical thinking or outside influence (both of which have occasionally been observed in economics).

Dr. Athreya is free to dispute Krugman and Delong's arguments either by showing that the question is not simple or that it is simple but they still got it wrong. If he could actually prove either he could really advance the debate. Instead he seems to argue that the existence of simple questions implies a simple discipline.

And for someone of Dr. Athreya's qualifications and accomplishments, that's kind of simple-minded.

Sunday, June 27, 2010

A pre-post post on Bob Dylan, the Monkees and the perils of reading business books

Andrew Gelman has a post that refers to this passage from business guru Seth Godin:
Let me first describe a distinction between the Monkees and Bob Dylan. Bob Dylan gets laughed or booed off the stage every ten years, whether he wants to or not. He got booed off the stage when he went electric and again when he went gospel, and most recently with his horrendous Christmas album. The Monkees never get booed off stage, because the Monkees play "Last Train to Clarksville" exactly the same way they did it 30 or 40 years ago. Here's the thing: Bob Dylan keeps selling out stadiums and no one goes to see the Monkees, because the Monkees aren't doing anything worth noticing. There are people who have succeeded who just keep playing the same song over and over again, whatever that is that they do.
This got me thinking about adaptation and fitness landscapes and all sorts of other interesting topics but before I get into that I really should take a moment to point out that, like so many examples from business gurus, this is complete bullshit.

Big stadium shows are dominated by heritage acts singing decades-old songs. Almost none of these acts have done significant work recently; many of the biggest (the Stones, the Police) haven't even released a full studio album in the past decade. Dylan is an tremendous anomaly here. He's not quite unique (Neil Diamond also recorded some of his most critically and commercially successful material in the past decade), but he is spectacularly unrepresentative.

Just to sum it up:

1. Loads of acts from the Sixties,Seventies and Eighties are selling out concerts;

2. Two or three of them are trying something new;

3. All the rest are coasting by on greatest hits.

From this Godin implies that the key to success is not repeating yourself.

Some mathematical humor from Jeff Mallett's charming strip Frazz.

Thursday, June 24, 2010

Social Norms

Justin Alexander has an interesting post on the case of Twixt; a media professor named David Myers decided to play in an online game. He decided to deliberately ignore the social conventions of the game (it being an online role-playing game) and focus entirely on what the rules would allow (even if doing so irritated, annoyed and frustrated his fellow players).

For me the key quote was:

Given the adaptive value of individual play in exploring and revealing system characteristics, the social pressures against this sort of play in CoH/V seem drastically and overly harsh, even unnatural.

This approach ignores that, in most societies there are two layers to behavioral constraint. One is the use of actual laws while the other is social norms of behavior that apply to interactions. These social norms act as an important break on places where the rules do not apply. Would we not have concerns with an person who used an innovative approach to the law in order to committ pre-meditated murder? Would we decide that this was an important legal innovation and encourage more such innovation? Or would we be seriously concerned about the actions of the person involved.

I think that this issue is central to understanding how to make innovation work well; ideally innovation needs to be both an improvement and be accepted by the potential users. While the Twixt case was rather extreme, it does have some important issues for Epidemiology. When we diagnose risk factors for disease, we also have to decide what the current social context accepts as a reasonable implementation of these findings. Some ideas, like standing desks, might take a while to gain social acceptance. Others, like smoking, may require decades long public health campaigns to finally reduce the levels of exposure, despite the potential health risks involved.

Innovation is a complicated business . . .

Wednesday, June 23, 2010

Advice on meeting people

Prof-like substance has a great post on how to break the ice in unfriendly departments. I rather suspect it would work just as well in speeding up the process of getting to know people in friendly departments as well. However, I am not a bench scientist and there is a sharp limit to the number of statistics books I can borrow.

Any ideas how how to generalize this advice to the epidemiology world?

Monday, June 21, 2010

Effect and cause: Hollywood edition

From New York Magazine:
How Toy Story 3 Scored: Even though the kiddies all clap their palms raw whenever that silly cyclops of a desk lamp hops out to squash the "I" in "Pixar," Disney still faced a conundrum: Those tykes who were in first grade when Toy Story first hit theaters in 1995 are now seniors in college.

However, instead of writing off the twentysomethings as too jaded to come, the studio targeted them, knowing that the Woody/Buzz bond was ageless. "Pixar went out of their way to ground the movie in the idea that the character [Andy who] you knew as a kid was now off to college," explained David Sameth, Disney's senior VP of marketing, "It’s only natural to pick up the same idea in marketing, and translate it into our terms." That meant courting the keg-stand-performing college kids directly: In the run-up to TS3's release, Disney sponsored a special "college cliff-hanger campaign," screening two-thirds of the finished film for undergrads at some 80 colleges nationwide, which kicked off the positive buzz from the Twitter set. The studio also crafted a viral YouTube campaign — fake period ads for one of the movie's new additions, Lots-o-Huggin' Bear — that is still being discovered.

Helped by a 100% favorable rating on, not only did those former grade schoolers come running back to make this Pixar's top-grossing opener ever (helped by 3D pricing), but so did everyone else: Its audience was 46% over the age of 25, and roughly equally distributed between males and females. Who went? With 4,000 plus theaters showing it, "Everybody," said Chuck Viane, Disney's distribution chief. But what about "franchise fatigue" and all that? Says Disney's Sameth, "People don't go to see franchises; they go to see movies. This is a great one."

I'll buy that last part. I haven't seen the film yet but based on the reviews, the talent and most importantly, the standard of work from Pixar, I will be surprised to see anything less than excellence.

I would also have been surprised to see the picture fail to bring in dump trucks of money. This kind of long-awaited sequel tends to do well (think of how many people went to see Harrison Ford hobble around in Crystal Skull or George Lucas burn off what remained of his legacy in Phantom Menace). Pixar films also tend to bring in big money (Up grossed nearly three quarters of a billion worldwide). Add to that the fact that after three films built around gifted but non-bankable character actors (Oswald, Asner, Plummer) and uncomfortable themes (rats preparing food; the destruction of the environment; old age, loneliness, and even miscarriage), Pixar played this one safe with a big star in the lead and familiar thematic territory. It is probably the least adventurous film from the studio since, well, Toy Story 2.

Given all this and the significant traditional media marketing, there is no evidence here that targeting college students brought in anyone who wouldn't have seen the film anyway. This type of alternative, targeted marketing can be highly effective for movies and other products you might not have otherwise heard of (Kick-Ass, Defendor, OSS 117 would all be reasonable choices). The techniques are much less effective for well-publicized films and they aren't scalable; a good twitter/viral video campaign can push a small film into wider release which can take you from a gross of five million to ten or twenty million, but when you're talking about opening in thousands of theatres and having to gross two hundred million just to break even, this kind of non-traditional marketing is usually a waste of time.

But the entertainment industry loves to tell itself these stories: marketing to twenty-somethings helped make Toy Story 3 a hit; the Hangover shows that people want gross out gags and Apatow-style humor; Electra, Catwoman and Charlie's Angels II all bombed because they were female superhero movies with dark themes. None of these stories stand up to any scrutiny. All can be replaced by more credible explanations (usually starting with the quality of the script). But the industry still embraces these unbelievable accounts because of what they say about replication and risk.

William Goldman famously observed that when it comes to how well a movie is going to do "Nobody knows anything." That's not quite true. There is an optimal strategy: start with a strong script; keep people (particularly studio executives) away from it as much as possible; hire a competent director and a cast of good actors who fit their roles; provide an adequate marketing campaign that gives the potential audience an accurate impression of the film.

As straightforward as this may seem, this strategy gives little comfort to people in the industry for two reasons.

First, this is difficult to replicate on a large scale. There are writers who can turn out strong scripts (Goldman being the most obvious example) but they are hard to find and can take a long time to cultivate. To put together a team comparable to what Pixar has is a monumental task.

Second (and this is where Goldman's observation really kicks in), there is a great deal of unpredictability in the system. Sometimes film-makers will do everything right and the film will just fail to gel artistically. Other times a film will come out perfect but for some reason won't get the reception it deserves.

This need to find a comforting explanation for success and failure is not limited to Hollywood. Many if not most companies spend a great deal of time retroactively assigning causes to major successes and failures. There is usually little empirical evidence at work and quite a bit of politics and score settling, but even the most dubious of explanations have a way of making it into the official unofficial history.

For years (perhaps even to this very day), executives at McDonald's would tell you with absolute certainly that the deluxe line failed not because it was based on over-hyped, under-impressive menu items but because the ads showed Ronald playing golf.

Credit Hours

Dead Dad has an intersting take on congress trying to make the credit hour a standard measure to qualify for student aid. The real issue here is not the productivity paradox that he defines but, rather, the issue of creating clear metrics in higher education. The original impetus for the move was a poor decision on the part of an accrediting body; but the truth is that, so long as there is so much money at stake, there will be entities that try and exploit the rules.

Switching to an outcomes based approach is a tempting idea until you realize how hard it is to measure outcomes in education clearly. Do we want to create perverse incentives to select only strong students because they are the most profitable group?

It's a really tough problem!

Sunday, June 20, 2010

Co-authored work

This is a major tangent from the post that inspired it, but going radically off topic is on of the tropes of the internet. In the post plus comments, a post-doctoral fellow expresses some frustrations about troubles getting a co-authored piece of work to publication.

One of the hardest things in academia is having the discipline to let the leaders of co-authored work (first and senior) author focus on the process of moving a paper to final publication. It's hard to stand back when you are excited by a piece of work and it is easy to be frustrated. But it is also the only way I can stay sane is to trust my co-authors and to be available to provide help as needed.

But I admit to preferring to be in the thick of things . . . :-)

Friday, June 18, 2010

Dying is easy; comedy is hard -- journalism edition

"When they see us coming, the birdies all try an' hide,
But they still go for peanuts when coated with cyanide."

It started with poisoning pigeons in the park.

Maybe I should be more specific.

It started a few weeks ago when I heard the song "Poisoning Pigeons in the Park" as part of a Tom Lehrer* tribute on Prairie Home Companion. Impressed by the wit of the lyrics (the man rhymed cyanide, for God's sake) I decided to see what a professional song writer would think about Lehrer.

My go-to guy in these matters is Brad Kay, songwriter, music historian and former mystic knight. Brad can be a tough critic, particularly if your name isn't something like Gershwin, Waller or Ellington, but if I was expecting him to be dismissive of someone who was just a comic songwriter I was in for a surprise.

Brad had literally nothing but praise for Tom Lehrer. He talked about how graceful and apt Lehrer's choice of words was and about profoundly he understood each of the genres he worked on. This led to discussions of Spike Jones (who was an accomplished and successful percussionist before he started using gunshots and noisemakers in his music) and P.D.Q. Bach (who as Peter Schickele has composed a large number of well-regarded symphonies, musicals, and film scores). All of this suggested that the first requirement for creating comic music of more than passing interest was being a good musician.

It's probably not surprising that the general public has trouble taking the creators of comedy seriously, but their peers have no such difficulty. P.G. Wodehouse counted George Orwell among his fans. Any number of dancers and acrobats have commented on the grace and athleticism of Charlie Chaplin and Buster Keaton (Keaton was particularly remarkable having mastered that most difficult of athletic feats, the controlled fall, by age three). As for acting, it's almost a truism that comic actors can easily do drama while dramatic actors often struggle with comedy.

So if the best musicians, writers, dancers and actors can be found doing great comedy, how about journalists?

The following clip is a thoroughly typical segment of the Daily Show. Take a look and consider it from a journalistic standpoint. Look at how clear and concise Stewart is. Check out how important but underreported facts are introduced and how everything is placed in a relevant context. I wonder how many hours of cable news you'd have to watch to meet the standards of just another Daily Show?

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Indecision 2010 - Primary Victory for Women
Daily Show Full EpisodesPolitical HumorTea Party

*Arguably the world's coolest mathematics professor.

More on impacts of Research

From FemaleScienceProfessor comes a really nice comment on publishing in important journals:

I have absolutely no problem publishing in a disciplinary journal with impact factor of 2-4. These are excellent journals, read by all active researchers in my field. It is bizarre to compare them unfavorably with Nature and Science, as if papers in a journal with an impact factor of 3 are hardly worth reading, much less writing.

This is entirely correct. Several of the key journals that I real all of the time are in this category: Pharmacoepidemiology and Drug Safety and Statistics in Medicine, to name a couple of obvious ones.

I think, to some extent, this is the dark side of a focus on impact. A finding that is of interest to a broad audience may not necessarily be a good measure of the importance of a finding to a sub-field. There are a lot of papers, to use an example, that say "further work in this direction looks challenging". This is important information to let other researchers know but it's likely to be heavily cited.

Now, there is a case to be made for the volume of research publications that are made being harder and harder to follow with time. But this can also be a benefit -- many clusters of researchers working in different directions may be able to better find optimal solutions that would otherwise be overlooked.

It is a complex issue but I'm definitely in favor of discipline specific publications and some of my favorite papers are in this type of niche.

No subtle and profound scientific insights from Olivia Judson this week

Just a sad and straightforward account of people contemplating an act of tragic stupidity.

Thursday, June 17, 2010

Socio-economic Models

Mark has a great comment on issues with interpreting what a dollar is worth. This idea is worth considering in Epidemiological studies as well. When trying to model socio-economic status, it can be tempting to treat income as a linear variable. Even worse, it can be tempting not to account for differences in costs of living. This reluctance to try and account for cost of living is an understandable temptation as the data on cost of living is extremely hard to generate and very context specific. How do you handle Manhattan (where a large house is unlikely to be even available, let alone affordable) when you compare it Duluth, Minnesota. Economics have some clever tricks, but they replace one source of error (incorrect standardization) with another one (modeling errors in the cost of living models).

But it is worth remembering that just because it is a clean number doesn't mean that you should just introduce it into the model "as is". Think long then model!

I'm not asking for money...

I'm just casually mentioning that much of the best reporting on the financial crisis has come from the good people at This American Life and that same crisis has hit TAL really hard.

It's not like I'm trying to guilt you into send a buck or two to their website.

Wednesday, June 16, 2010

When is a dollar not worth a dollar?

Joseph and I have been putting up a number of post on compensation recently (many inspired directly or indirectly by Felix Salmon), but there is something important that's been left out of the discussion both here and on the other blogs I've been reading on the subject:

Some dollars are worth more than others.

Having bounced back and forth from statistician to teacher to entrepreneur over the years, I've seen plenty of large fluctuations in income and I've developed a pretty good idea of what it costs to live comfortably as a single person in various cities.

In LA the cutoff is somewhere around thirty thousand. For that money you can get a decent apartment in pleasant neighborhood and still have enough income left over both to meet your basic needs and to get out and have some fun. (LA is one of the world's great cheap-eats towns)

If you go from mid-thirties to mid-nineties (which I did at one point), you will see a significant change in your lifestyle but it is nothing compared to the change you'll feel if you go from the mid thirties to the low twenties. Below thirty you start facing some ugly compromises. You may have to move to a rough part of town, Food becomes a larger part of your budget. Costs associated with work (wardrobe, transportation) remain annoyingly constant. Going out with friends becomes a great luxury (it's hard to convince the bartender to sell you two-thirds of a beer)

This discrepancy in lifestyle suggests the need for a different metric. Here's an example. To make the numbers come out even, let's talk about three incomes: 21K, 30K, 90K with our hypothetical Angeleno starting in the middle. In both absolute (60K) and relative terms (200%) the jump to the top tier dwarfs the jump to the bottom (9K/30%) but in impact on quality of life, the exact opposite holds.

What does all this mean? For one thing, it means that expected value and marginal changes are not the right tools to look at compensation, at least not in the way we normally use them. It means that the problem requires more of a piecewise approach.

Reputational Capital and Operational Definitions

The following obviously demands a longer post (or series of posts or articles or maybe a book or two) but I'll throw this out in the hope that someone else will do the work for me.

Rajiv Sethi has a characteristically strong piece on "Reputational Capital and Incentives in Organizations" which includes the following:
How, then, might a firm accomplish the subordination of short term goals to long term objectives in practice? There are two possibilities: one could hire individuals who are predisposed to behave in a principled manner even in the face of incentives not to do so, or one could design compensation schemes that adequately reward actions that preserve or enhance reputation. Economists, being fervent believers in the power of incentives, usually tend to favor the latter approach. But in this particular context, there are two possible problems with this. First, the contribution of any given transaction to the reputation of the firm is generally much more difficult to ascertain and quantify than any contribution to the firm's balance sheet. This makes it difficult to assign reward appropriately. Second, in order to serve as credible commitments to clients and customers, compensation schemes must be easily observable and not subject to renegotiation after the fact. This is seldom the case.
Which leads to today's essay question:

20 points

Are organizations biased toward properties that come with operational definitions? If so, can this bias lead to economically irrational behavior? (if you need extra space you can continue your answer on the back of the blog)

Delta -- "We love to fly; we just hate the passengers"

The airlines seem to be conducting an industry-wide experiment to determine just how badly you can treat customers and still sucker them into coming back.

From The Consumerist (h/t to Felix Salmon):
On Sunday, Andy emailed us from his seat on Delta Flight 2744 from Minneapolis to Washington, D.C., to let us know that he had no idea where his flight was going to land. The ticket he purchased said he was flying to Ronald Reagan National Airport, but Delta said it would all depend on whether they could beat their scheduled 10:19 arrival time and get there before the ten o'clock airport curfew--otherwise they'd have to land at Dulles. Strangely, they didn't mention this 10 p.m. curfew to Andy before he bought the ticket.

Pick a number, any number -- American Public Media edition

Marketplace host Kai Ryssdal closed with the following important point yesterday:
A very touchy way to look at the oil leak in the Gulf courtesy of a research report out of JPMorgan Chase.

Their analysis shows that for all the damage along the Gulf coast, the leak won't really hurt gross domestic product much. Might even increase it slightly in the short term.

Here's another take on what that report really tells you: That for all the attention paid to it by the economic press -- present company included -- GDP's a really blunt and unsubtle way to look at something as complicated as the American economy.
Journalists (particularly financial journalists) are by necessity in the oversimplification business. The good ones (and the people at American Public Radio and NPR are very good) frequently remind themselves of this and that awareness brings an essential caution and humility to their work.

The bad ones get shows on CNBC.

Tuesday, June 15, 2010

Thoughts on defined contribution retirement plans

Via Felix Salmon comes this interesting tidbit on hidden fees in 401(k) plans. As long time readers know, I have passing interest in the idea of retirement plans and the differences between defined benefit and defined contribution plans. However, this sort of penalty really makes the plan less attractive.

From moneychimp we have an estimate of the real rate of return of the stock market:

Over the very long run, the stock market has had an inflation-adjusted annualized return rate of between six and seven percent.

So if the 401(k) has administrative costs in the 1-2% range and forces you to invest in mutual funds (a realistic option) which also have a 1-2% range before administrative costs then it is perfectly plausible that 50% of the returns are eaten up in administration costs. Now if the plan allowed a client to invest directly inin TIPS then real rates of return are in the 4.25% range (call it 4% after Vanguard levels of administrative costs).

But TIPS are debts owed by the US Treasury. Do you know what else has been lending money to the US government and has extremely low administrative costs (at least compared to these)? Social Security. Sure, the government could default on it but they could also default on treasury bonds, too.

The worst part of all of this is that, insofar as administrative costs are invisible and borne by employees, companies have no clear incentive to bargain for low plan administrative costs. Since employees are locked into the plan (as it is attached to employment), you have lack of liquidity (you need to change your job to change your 401(k) plan) and asymmetry of information. I was always under the impression that these were not ideal free market conditions.

None of this is to say that these plans are necessarily bad nor that any particular company has a questionable plan in place. But it is a call to think carefully about what the incentive and information structure look like. After all, if we get this wrong it has a fairly major impact on the future.


Janet Stemwedel has a very well balanced post on the minefield that is work-life balance. It is an issue that I have grappled with as well and I have decided that there really is no optimal solution. I've had maid service before and would like to have it again. But I'd never thought through to the next step of who is liekly to be a amid and what the implications of that are.

But I suspect that the biggest insight that she has is how quick we are to judge the decisions of others.

My experience paying for skilled and loving childcare while I worked was that philosophers and career advisers do not lurk when it comes to such choices. They butt right in and tell you all the ways you are doing it wrong.

The whole article is a very good read and quite thought provoking. Definitely a blog worth checking out!

Monday, June 14, 2010

What I wish I knew before

I was reading a post from Andrew Gelman. Every now and again he gives statistical advice to reader who write in with questions. Today he had a question about a rare drug exposure in a large population.

This reminds me of one idea that I wish I'd known when I was first doing statistical in the financial world (before deciding to get a PhD). It was the idea of "off support inference" or of trying to extend inference beyond the bounds of the data given. This can happen when the few exposed participants are in a portion of the data where there are few controls and there is effect measure modification. Some fairly severe errors can result.

Which makes me think about to all of my risk modeling and makes me wonder if I worried enough about these issues at the time?

"Better a Krabby Patty than a damn"

OK, the jump from SpongeBob to Brave, New World may be a bit much, but the good people at Worthwhile Canadian Initiative certainly know their way around Bikini Bottom.

p.s. You can find an excellent radio adaptation narrated by Huxley himself here.

Saturday, June 12, 2010

More on compensation -- compensation and pyramid schemes

As Joseph mentioned before, Ph.D.s don't take post-docs because they like being overworked and underpaid; they take the positions because they believe that the post-doc will lead to better things. This kind of implicit compensation isn't uncommon nor is it necessarily a bad thing. (I'm trying to think of how you would go about making future opportunities part of an explicit compensation package even if you wanted to).

Implicit compensation is, however, particularly prone to problems with asymmetry of information and fraud. Let's say you're recruiting garbage collectors and you start your pitch with a story about collector who found a fifty dollar bill in a trash can by the side of the road. You don't mention that in the past twenty years, this was the only case of cash in trash that you knew of. This would be asymmetry of information. Now let's say you changed the story and made the fifty into a thousand dollar bill. This would be fraud.

At least some of the post-docs in Joseph's post probably took those positions because of asymmetry of information. If they had known the actual odds of getting the careers they were hoping for many of them would have picked other jobs (usually ones with higher explicit compensation).

There's a common private sector version of this that occurs in companies that recently experienced rapid growth in size and or stock price. When you go to work for one of these companies, you will find yourself bombarded by stories of skyrocketing careers. You'll hear about salaries doubling and vice-presidents who started as interns five or six years earlier.

Some of these stories are probably apocryphal but even if every single one were true they would still be tremendously misleading because career advancement at a growth company is basically a pyramid scheme. The first generation of employees experience huge gains (though they also faced a high risk of having a company collapse under them). The second generation experiences large gains. After that things quickly level off, partially because growth inevitably levels off and partly because the company gets better at recruiting and particularly at luring in higher-level people.

But the stories of amazing career paths become part of the corporate mythology and take years to fade. In the case of Wal-Mart, new employees were still hearing about millionaire cashiers more than a decade after the jump in stock prices that created them.

More on compensation -- tenure edition

[for Joseph's earlier posts on compensation see here and here.]

We often hear that the labor market will be fine if we just let market forces fix the problem. The assumption is that workers will consider the available jobs, weigh the requirements of each job against the compensation and rationally choose the optimal position. But the assumption behind that assumption is that employers will honor contracts, particularly regarding compensation.

This compensation can take a number of forms (salary, bonuses, pensions, benefits, stock options, etc.) and can be paid out over a variety of schedules. The only thing that matters is that the agreed-upon compensation is paid if the employee completes the agreed-upon duties.

Guarantees of job security are often part of compensation. Think of football coaches and CEOs. Failing to honor these guarantees is no different in either principle or practice from taking a delivery then failing to pay the agreed-upon price.

With that in mind, check out the latest from Colorado:
While other states have tried to modify tenure, Colorado's law was the boldest education reform in recent memory, according to Kate Walsh, the president of the Washington-based National Council on Teacher Quality, which promotes changing the way teachers are recruited and retained, including holding tenured teachers accountable with annual reviews.

Walsh thinks Colorado is now at the head of the pack in the second round of the Obama administration's Race to the Top competition, a $4.35 billion pot of stimulus money designed to prod just such changes.

"If I was a betting woman, I would absolutely put Colorado in first place," she said.

The new law requires teachers to be evaluated annually, with at least half of their rating based on whether their students progressed during the school year. Beginning teachers will have to show they've boosted student achievement for three straight years to earn tenure.

Teachers could lose tenure if their students don't show progress for two consecutive years. That won't be a possibility until 2015, however, because lawmakers slowed down the process under political pressure from the teachers' union. Teachers can appeal dismissal all the way to the state Supreme Court, and school districts have the burden of proving why they should be terminated.
Just a friendly reminder, if you are going to do business with Colorado, insist on being paid first and make sure to count the money. The state isn't that big on honoring its contracts.


This is a huge topic and I am an amateur. But Mark's comment on implied compensation got me thinking that this topic is worth pursuing further. In a lot of the academy, you are investing effort now in the hope of future rewards. As a general strategy, I suspect that this approach is likely more successful than a purely short term strategy.

However, post-doctoral fellowships are an example of a job with a lot of inherent variablity. Now, I was fortunate enough to have had an exceptionally good post-doctoral experience with strong mentors that I highly respect. But I recognize that not all experiences are equal.

In a sense, the strongest anaology to this that I see in general society is that of pensions. it may seem to be an odd link, but bear with me. Pensions also promise a positive improvement in future welfare in future for sacrifices now (in terms of lower compensation, for example). Even the defined contribution form of pension (the 401(k), for example, or the RRSP in Canada) requires that the contributor have trust that these funds will be available in the future. Outside of market risk, you have issues like political risk or people who steal from pension funds (which are often hard to detect as the moeny is supposed to be inaccesible for 40 years and constantly watcing it isn't an ideal strategy insofar as it drives future behavior).

So how do you handle this level of uncertainty about future rewards? Part of it is the social constract that ensures that all parties do their best to keep these sorts of obligations. But it is unclear what you do when the implied compensation is difficult for the employer to fulfill. For example, if the academic job market is rendered flat due to fundign cuts, even the best mentor may have trouble placing a mentee in a good positions. Similiarly, Megan McArdle has opined on the lack of decent choices with under-funded public pensions.

I lack good ideas about ways to handle these sorts of problems but would be open to suggestions!

Friday, June 11, 2010

Funding Post-Docs

There was a neat post over at Prof-like Substance's blog about NSF funding. He wonders if the Canadian system is all that it is cracked up to be -- awards of $30,000 per year for 5 years. At these rates, a post-doc needs to come with their own funding or else one isn't possible.

I have two reactions.

One, salary support in Canada tends to be more robust. Putting the grant with the post-doctoral fellow gives them flexibility and more power in the relationship (the supervisor needs to give positive benefits to the post-doc to get them to come to a specific lab).

Two, why does every new lab need a post-doc? If the career of a professor spans 30 years and the average post-doc serves for 5 years then we are either expecing a robust growth in the number of scientific positions or we expect most post-docs not to become professors.

Now there could be good reasons to be a post-doctoral fellow that do not involve a career in academia afterwards. But the most common reason is a desire to be mentored towards a career. If the post-doc is a requirment then they are really poorly paid technicians.

Is this a good thing?

Thursday, June 10, 2010

Journal Boycotts

I'm not going to wade in and argue if one side is correct or not but the boycott of Nature Publishing Group by the University of California seems like it will ahve a tough time working as planned. The NIH open access initiative will help but the costs to getting papers by inter-library loan isn't going to be pretty. And, for some fields, NPG has a bunch of key journals. You can't know all of the literature but it won't be a pleasant experience to have trouble tracking down key papers.

Heck, jsut ask me about finding the original paper on pooled logistic regression. It was seriously not fun!

Wednesday, June 9, 2010

Thank you

Speaking of Andrew Gelman, he had a very nice post about this site in which he pointed out the really thought provoking posts that Mark has been doing.

Thank you for the kind words!

Multiple Languages

Andrew Gelamn has a nice post on the advantages of knowing more than one statistical programming language.

It's a good point and, at the risk of beating a dead horse, one that I increasingly have taken to heart. I am actually thinking about exposihng my students to R this fall. It's not an ideal choice because I am a mediocre programmer (at best) and I know SAS way better than R. But there is a real push to have our students at least understand Bayesian statistics and I am simply not a fan of the Bayesian approaches in SAS (at least the last time that I looked).

The other reason for teaching R is that it is open source. A corporate license for SAS appears to cost $7000/year. While cheap compared the analyst, it can happen that students will end up in environments where access to SAS isn't easy to obtain and it is nice to have a back-up option.

On the other hand, we often forget the very nice log files and complete outputs that SAS produces. There are environments where a paper trail is essential and SAS is an ideal tool for those cases.

So we'll see how I think about it after this fall but wish me luck!

Tuesday, June 8, 2010

Papers and Industry

In an interesting post, Exponential Book discusses the potential impact of papers on jobs. Now (s)he appears to be in physics, and things vary by field. But I do know that when I interviewed (and worked) as a statistician in financial services we did not consider papers as part of the hiring package. We were much more focused on job skills such as facility with key software packages (at that time it was SAS -- explaining my over-use of the software a decade later) and communication skills.

Now sure, a paper could be used to show that one was a good scientific writer. But it was a very minor consideration (at best).

Far better to show that you liked to assemble data sets. Being good at pulling your own data and developing data sets seemed to be one of the strongest predictors of success at this particular company (not least because you did not have to compete for programmer resources with other parts of the company).


From Off the Charts:
States and localities cut 22,000 jobs in the past month, wiping out half the month’s gain in private-sector jobs (Matthew Yglesias highlights this issue as well). In total, state and local governments have cut 231,000 jobs, including 100,000 local education jobs, since the summer of 2008.

Years ago, I recall hearing an economist say that one of the reasons that we couldn't have another Great Depression was because a higher percentage of workers were in the public sector and, of course, those job wouldn't go away in an economic downturn.

I really wish I could remember that economist's name.

Monday, June 7, 2010

Seyward Darby does not understand economics

There are so many things wrong with Seyward Darby's New Republic piece and I have so much to do this week (finishing off big posts, lining up some more work, getting the bugs out of a text-mining tool), that I'm going to limit myself to just one for now.

The story here is not which teachers get laid off; the story is the utter insanity of mass firings by the government during the worst economic meltdown of the Postwar Era. As previously shown, this negates all of our stimulus efforts and comes disturbingly close to replicating Herbert Hoover's response to the Great Depression.

Even if Darby's arguments were sound (and they're not), the article would still be little more than a distraction. We find ourselves in a burning building; Darby wants to stop and talk about radon levels.

Saturday, June 5, 2010

Innovationary spiral

(I suspect economists have a nice, concise term for all of this. Perhaps one of our better informed readers could supply it)

The scary thing about deflation is the way it takes stalled economies and slows them down even further by encouraging people to wait to make purchases under the assumption that prices will go down further.

Though we don't often discuss it in these terms, technological innovation can create something like a deflationary spiral. Technological advances tend to make things cheaper and people often put off purchases assuming that prices will go lower, particularly with products like personal electronics.

This deflationary effect can cause serious problems. Most technological advances come burdened with steep development costs and depend on economies of scale to manage a competitive price. The situation is even worse for technologies that are dependent on a large network of other users (i.e. telephones) or a large number of outside vendors (i.e. DVD players).

The saviour of many new technologies is that most benevolent of creatures, the early adopter. (Q: Who buys the first telephone?; A: Someone who wants to say he had the first telephone.) Early adopters buy the new technologies while they are still overpriced and often useless. The rest of us reap the benefits.

There is a more dangerous form of the innovationary spiral that shows up when the the technology has an unpleasant cost or consequence. Under these circumstance, the spiral can be the mother of all excuses for procrastination. Serious problems can be allowed to fester for years even though practical solutions are available because a cheaper, less painful solution may emerge in the future.

Consider obesity. We have seen and continue to see significant advances in the field -- it's fair to say that for the vast majority of people this is a treatable condition -- but all of the treatments (including bariatric surgery) use some combination or exercise and portion control. Hundreds of thousands if not millions of people put off doing anything about a life-threatening condition in part out of the belief that something around the corner will allow them to lose weight without limiting their consumption or increasing their activity level.

Possibly worse yet is the way the promise of new technology is often held up as a reason not to take action on climate change despite the fact that:

1. We already have more than enough mature, cost-effective technology to cut carbon emission and its effects beneath any of the proposed goals. Dozens of solutions ranging from plug-in hybrids, ground-source heating and painting black roofs white to building nuclear plants. Even if you take a handful of the most controversial items off of the table, we still have more than enough left to solve the problem.

2. (and here's the real kicker, folks) The implementation costs/consequences of many of the just-around-the-corner technologies are actually greater than those that come with what we already have sitting on the shelf. Consider hydrogen fuel cells. Contrary to popular opinion, hydrogen is not particularly dangerous to work with. It is, however, a bitch to handle. Forget turning over the fleet. The time and expense required to set up just the infrastructure to produce, transport, store and transfer the hydrogen would be enough to make us energy independent using nothing but the technology on hand.

Don't get me wrong. I'm a huge fan of research, but when it's being used as an excuse not to take action, it's not such a good investment.

Pick a number, any number -- stimulus edition

It may be the most fundamental question in in statistics: what number (or set of numbers) do we use to measure some property. It is usually the first thing we have to ask ourselves and we often struggle with the question.

One of the simplest examples of this is "do we use net or gross?" It's hard to imagine a more obvious question and yet I have seen cases in the business world that used gross when net was called for and the results were disastrous.

Today's related case comes from this worthwhile post by Stephen Gordon who argues that the number we generally use to discuss stimulus isn't just wrong; it doesn't even get the sign right.

Stimulus? What stimulus?

Robert Reich on the risks of a 'double-dip' recession in the US:
The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories).

Emphasis added.

There has been much talk of the size of the US federal stimulus, and much debate about whether or not it has been an effective counter-cyclical policy instrument.

But it's important to remember that the proper measure for fiscal stimulus is not spending by the federal government; it is spending by all levels of government. And when you look at the contributions to US GDP growth (Table 1.1.2 at the BEA site), total government spending has been a drag on growth over the past two quarters. The increases at the federal level have not been enough to compensate for the spending cuts at the local and state levels.

Friday, June 4, 2010

How is war like comedy?

In both, if you screw up you generally find out really quickly. Education, on the other hand, is one of those fields where you can make a string of terrible decisions that can go for years, even decades without anyone noticing (and longer still before people care). For that reason alone, we can probably dismiss David Warsh's suggestion that education might become Obama's Vietnam.

That's the only thing in the post you can dismiss. The rest of it is sharp, on-target and pretty much essential reading if you're following the education debate.

Thursday, June 3, 2010

"It's all about re-branding in this economy"

Really not that damned funny

Whenever earmark season comes along opportunistic politicians and their hand-puppet journalists have a grand old time making jokes about the silly things these trivial amounts of money go to. The ones that get the biggest laughs are agricultural earmarks. Here are some comedy stylings of McCain and Dowd. Over half of the earmarks they have fun with involve agriculture and land management.

Today's New York Times has a reminder of what the cost of blights and pests can be:

Lynet Nalugo dug a cassava tuber out of her field and sliced it open.

Inside its tan skin, the white flesh was riddled with necrotic brown lumps, as obviously diseased as any tuberculosis lung or cancerous breast.

“Even the pigs refuse this,” she said.

The plant was what she called a “2961,” meaning it was Variant No. 2961, the only local strain bred to resist cassava mosaic virus, a disease that caused a major African famine in the 1920s.

But this was not mosaic disease, which only stunts the plants. Her field had been attacked by a new and more damaging virus named brown streak, for the marks it leaves on stems.

That newcomer, brown streak, is now ravaging cassava crops in a great swath around Lake Victoria, threatening millions of East Africans who grow the tuber as their staple food.

Although it has been seen on coastal farms for 70 years, a mutant version emerged in Africa’s interior in 2004, “and there has been explosive, pandemic-style spread since then,” said Claude M. Fauquet, director of cassava research at the Donald Danforth Plant Science Center in St. Louis. “The speed is just unprecedented, and the farmers are really desperate.”

Two years ago, the Bill and Melinda Gates Foundation convened cassava experts and realized that brown streak “was alarming quite a few people,” said Lawrence Kent, an agriculture program officer at the foundation. It has given $27 million in grants to aid agencies and plant scientists fighting the disease.

The threat could become global. After rice and wheat, cassava is the world’s third-largest source of calories. Under many names, including manioc, tapioca and yuca, it is eaten by 800 million people in Africa, South America and Asia.

Maybe it's just me but I really don't see what's so funny about agricultural research. Perhaps Maureen can explain it to me.

Wednesday, June 2, 2010

"The upside of mortgage default"

I normally distrust this kind of wildly counter-intuitive statement, but then again it normally isn't presented this convincingly and it normally doesn't come from someone as trustworthy as Felix Salmon.

"Poll: Only Campbell Can Beat Boxer"

From David Frum's site:
The poll by the Los Angeles Times and University of Southern California clearly shows that U.S. Sen. Barbara Boxer is unpopular with voters, but in a theoretical matchup, only one of the three GOP primary candidates can beat her: former Silicon Valley congressman Tom Campbell.

But the poll also indicates that Campbell might not have the chance to face Boxer: Former Hewlett-Packard CEO Carly Fiorina has a huge lead in the three-way primary contest to decide which Republican will run against Boxer in the fall.

As mentioned before, the GOP primary process is broken.

Resisting the urge to make a bad pun here

Olivia Judson discusses cuckoos and other brood parasites in today's thought provoking column.

Perils of Cross-sectional Studies

I am reading Jean Chatzky's book "The Difference"; in in she attempts to look at what traits are associated with good economic outcomes. Some of her examples are very good and a lot of it is thought provoking. But there were a few cases where she seems to run into trouble.

For example, risk taking behavior is u-shaped (highest for the wealthy and the permanently indebted). I can't tell if this relationship in her data is statistically significant (as the variance is not presented) but that doesn't get at the main point, anyway.

The main point is that you would expect people who take risks to break into the highly successful and the impoverished. Looking at the final outcome and saying "what is the expected value of taking risks" is more informative than noting risk takers have more money. If somebody offered to double your wealth if you could roll a 1 or a 2 on a 6 sided die, would this be a good idea? Yet, if we offered this choice to a room of people and then ranked them by net worth, it's likely that the wealthiest people would have rolled the die. So would the least wealthy, as well.

What if you doubled your income on a 1 to 4; the expected value of the roll is positive but losing everything you own might be worse than doubling what you currently have. It's a very complicated inference and it probably requires a posterior distribution to properly express what the choices look like.

Now, I suspect that prospective data would support intelligent risk taking and the book has a lot of good data in it (so don;t take this as a slam of the book as a whole; actually gathering and interpreting data adds a lot to the conversation even if the interpretation isn't always trivial). But it does highlight the complexity of drawing any inferences from cross-sectional retrospective studies. It's not just an issue with Epidemiology data but can occur anywhere else.

[note: some typos were corrected after the initial posting]

Tuesday, June 1, 2010

Journal Selection Strategy

FemaleScienceProfessor, who always blogs about cool things, has a question about journal choice. Namely, what do you with an article that could be published in a major journal but might not be?

Is this worse if you are an early career scientist who needs to get their work out their to establish productivity?

I have actually had this happen where a paper got mostly positive reviews, a major revision and then an ultimate rejection. The process took a very long time and the final dismissal was a single sentance. It's was a nasty enough experience that it actually makes me reluctant to return to that journal again.

Would I do it again? Maybe . . . After that, I dramatically undershot the next choice of journal for a potentially controversial paper. This was also a major mistake. The hardest cases are alwasy going to be the borderline ones. Long review times and ambiguous options to resubmit are always a bad outcome, no matter how I look at it.

But I wish I had a better feel for what the risk/benefit trade-off really was . . .