Things that a data-driven company ought to know

This is the first of a couple of Netflix stories I'd like to get to this week. Just to review, the price of the stock is very high relative to earnings and since Netflix isn't acquiring significant assets such as large content libraries and has no plans for (or apparent interest in) radically cutting costs, the only reason to buy the stock is a belief that the company's subscriber base is on the verge of explosive growth.

Under those circumstances, it's not surprising that the leadership of Netflix was scrambling to explain its failure to meet growth estimates recently; it was the explanation itself that caught analysts off-guard.

From Wired:

Netflix is blaming its lower-than-expected US subscriber growth to changes to Americans’ credit cards.

In a letter to shareholders, the company said its over-optimisitic estimates for its third-quarter results were “driven in part by the ongoing transition to chip-based credit and debit cards.” In other words, the company is claiming that the number of US subscribers to Netflix didn’t meet what the company had expected for the third quarter in part because, well, fewer people than expected paid up.

“I read this Netflix quote and I scratched my head and thought, ‘What?'” says Ken Oros, a senior associate at The Strawhecker Group, which focuses on the electronics payments industry.

In the past few months, credit card issuers have been transitioning from cards without chips to ones with them, known as EMV technology, to help curtail credit card fraud, which you may have noticed. Card users have been receiving these new cards in the mail as banks rushed to meet the October 1 deadline. Since then, new liability rules have taken effect that now hold merchants who don’t switch over to the new technology liable for credit card fraud.

To industry experts watching the country’s shift to EMV, Netflix’s statement is somewhat surprising. After all, while brick-and-mortar businesses have had to update their processing systems to account for the new cards, the way we pay at digital businesses remains pretty much unchanged.

“It sounds like a bunch of customers received new cards at once and their old cards on file were inactive,” says Forrester analyst Sucharita Mupuru-Kodali. “Most people may not even realize all the things they need to change for autobilling and they forget until the next time they use Netflix.”

Regular users, however, would likely soon realize if they weren’t able to sign into their accounts because they hadn’t paid their bill or if their cards were no longer active. “I can’t imagine it’s meaningful and, even if it is sizable for one quarter, I’m sure people will realize soon enough,” she says. “Anyone who churns out probably wasn’t using the service much in the first place.”


...

When pressed on the issue during the earnings call, Netflix chief financial officer David Wells clarified the statement from its letter about why US subscriber growth may not have met expectations. “We think it’s a contributor,” Wells said of the chip-card transition. “It’s likely multi-factored, there may be other things going on here, but certainly the transition to the chip cards is not helping and that has to be a factor.”

From the Wall Street Journal:

But those in the payments industry say their systems in place should prevent any such billing disruptions.

Henry Helgeson, who runs a company that processes transactions for small businesses, described the Netflix explanation as “curious” because other merchants haven’t complained about such a problem.

“I would be surprised if this was an issue in the industry right now and we’re only hearing about it from Netflix,” said Mr. Helgeson, chief executive of Boston-based Cayan, which was formerly called Merchant Warehouse.

Other payment industry experts also expressed doubt that the new cards were the root of Netflix’s disappointing subscriber numbers.

“If this was an issue, it would be affecting every subscription-based business and it isn’t,” said one card-industry executive at a large financial institution.

For subscriber based companies with automatic billing, the issue of churn based on credit card disruptions is a familiar problem, and, in those companies I worked for, it was very much a known quantity. Executives closely tracked these numbers on a weekly, and in some cases daily, basis. The thought of a C level executive from one of these corporations standing up and saying "we lost a bunch of customers last quarter. We think it might be because of credit cards." would be unthinkable. What's worse is that, not only do they not have solid data on this problem, their informal estimates appear to be wildly off-base.

For Netflix, this is particularly embarrassing. At the end of the day, the value of business data and statistics relies almost entirely on your ability to tie them to drivers of profitability such as acquisition, retention, pricing and cost. Netflix has aggressively and successfully pushed the narrative of being a heavily, even uniquely data-driven company, but, by the management's own account, they seem to be failing to collect the data required to take advantage of all of those online behavior metrics. Knowing how often a show is paused or viewed to completion is only useful if those metrics tell us something about retention and reactions to upcoming price increases.

As with most posts in the Netflix thread, the main significance here is not in the story itself, but in what its coverage says about larger trends. In the Twenty-first Century, journalists have become enamored with data, but their understanding of statistics has not significantly improved and the results are, in practical terms, worse since common sense is increasingly pushed aside to make way for misinterpreted numbers and badly understood technical terms.

In addition to this lack of analytic understanding, the Netflix story also plays on other longstanding weaknesses of the press: an appetite for simplistic narratives (especially ddulite narratives); an infatuation with visionary CEOs; a tendency to defer to authority. Fortunately, with Netflix, the stakes are fairly low and gullible journalists can't cause that much damage. Unfortunately, these same weaknesses apply to journalists covering segments of the economy like financial services, and there the stakes are not low at all.

In case this sounds familiar.

As cracked.com observed, the fact that Apple chose this guy to represent the competition tells us loads about the way the company looks at its customers.

John Hodgman has some characteristically smart things to say about Rush Limbaugh:

I said traffic counting [was the worst job] because it was very boring and cold to sit out on the streets of New Haven in five pairs of pants—well, that’s an exaggeration; it was three pairs of pants—in November for hours and hours clicking buttons counting which cars go left, right, and forward. That was torturous, but I had the pleasure of listening to Rickie Lee Jones’ Flying Cowboys album on audio cassette, which had just come out at that time because I am an elderly man. I was just remembering how much I loved that record the other day, so that’s good.

When the double-A batteries from the Walkman that I stole from my college roommate—or borrowed without his permission—wore out after about seven minutes, I could then switch over and get a couple of hours of AM radio and that was the first time I ever listened to Rush Limbaugh, which was a fascinating experience. You don’t understand Rush Limbaugh’s appeal to listeners until you are standing alone on a street corner, freezing and angry. Then, even though he might be saying things that are completely anathema to your social and political point of view, when you are that angry, his voice comes upon you like a bomb. You just want to keep listening to him being angry, because it reflects how angry you are. So for people who feel alienated in the world because of changing cultural demographics or because they lose their jobs or whatever, I could understand why you want to listen to this monster because it’s a comfort and a solace to you.

Not that it's relevant, but this has always been my favorite Rickie Lee Jones song.

"But the world is turning faster than it did when I was young"

With any luck, the last we'll hear from these two

I've been arguing for a while that the make-up and culture and truly bizarre politics of the education reform movement (which is overwhelmingly made up of honest, well-meaning people) leave it exceptionally, perhaps uniquely vulnerable to grifters who can master the rhetoric. When you combine this vulnerability with plans that put billions upon billions of tax payer dollars up for grabs, things get ugly quickly.

Recently in Sacramento, they got downright hideous.

Charles Pierce points us to a remarkable series by Deadspin's Dave McKenna exploring the various scandals of Mayor Kevin Johnson. Along with wife Michelle Rhee, Johnson formed the ultimate ed reform power couple. Johnson was a former NBA star and up-and-coming politician. Rhee was, of course, the face of the movement. The press loved them, they had extensive lobbying connections and they were great at fund-raising. Johnson even started his own charter school system. They also created a political machine that defies brief description, but some excerpts will give you some idea.

Who's Funding Kevin Johnson's Secret Government?

For example: Stephanie Mash identified herself as “Stephanie Mash, Director of Governmental Affairs for African Americans for Mayor Kevin Johnson” and “Stephanie Mash, Esq., Office of Mayor Kevin M. Johnson City of Sacramento.” But Ballard Spahr’s filing indicates that she was never actually an employee for the city; instead, while helping plan and execute the NCBM coup [National Conference of Black Mayors -- MP], Mash was employed by Stand Up, a non-profit charter school advocacy firm founded by Johnson. Mash’s online resume makes no mention that she ever worked for Stand Up.

Fellow coup team member Mariah Sheriff used the title “Director of Governmental Affairs in Education, City of Sacramento, Office of Mayor Kevin M. Johnson” for years while serving the mayor. Her LinkedIn page identifies her as “Deputy Chief of Staff, Office of Mayor Kevin Johnson,” and says while there she focused on “education initiatives.” Ballard Spahr’s filing, however, says that Sheriff was with Stand Up, not the mayor’s office. Sheriff’s online resume makes no mention of Stand Up. Aisha Lowe used the title “interim director of African-American affairs” for the mayor’s office during the NCBM debacle. Ballard Spahr says Lowe was another Stand Up employee, never a civil servant.

The Sacramento city payroll office says there’s no record that Sheriff, Mash, or Lowe ever worked for the city.

...

With private operatives working out of City Hall and masquerading as public employees, the question is who’s bankrolling them—and the rest of the mayor’s off-the-reservation missions. It’s not hard to answer. Consider that since his 2008 election, Johnson has requested and received millions of dollars for Stand Up, the group that employed the fake civil servants, from the Walton Family Foundation, a conservative grant-giver backed by the founders of Wal-Mart and known for being hell-bent on spreading its pro-charter school gospel. Between 2012 and 2014, while he was planning and executing his NCBM coup, Johnson reported at least six grants from that foundation totaling $1.625 million.

And that’s just the Wal-Mart money the public knows about; Johnson has a history of not abiding by disclosure rules. In 2012, the California Fair Political Practices Commission (CFPPC), a panel charged with enforcing state financial disclosure laws, found that Johnson had failed to report at least 25 donations totaling $3.1 million made at his direction to his non-profits, including a $500,000 payment to Stand Up made by the Walton Family Foundation. State law requires that every gift over $5,000 must be reported. (The commission also found that Johnson hid a $200,000 donation to Stand Up he’d requested from the Eli and Edythe Broad Foundation. The Los Angeles Times reported last month that the Broad Foundation was planning to fund “a major expansion of charter schools in Los Angeles.”)


...


The Walton Family Foundation is also a massive financial supporter of Students First, another financially flush group. Founded by Michelle Rhee, it houses its headquarters in the same office building in downtown Sacramento as Johnson’s Stand Up. In 2013 alone, the Walton Family Foundation gave $8 million to Rhee’s non-profit.



...

Johnson’s bewildering gaggle of foundations—Stand Up is just one of at least seven 503-C organizations he controls—have long lent an aura of shadiness to his administration. Since taking office, he’s directed big corporations to donate gobs of money to his non-profits and to St. HOPE, his chain of public charter schools. And his behest filings indicate that the groups regularly share money with each other, meaning it’s effectively one really deep pool of money for Johnson to swim in. These gifts can have the impact of campaign donations, but aren’t subject to campaign-finance regulations.

“It’s almost like a parallel government structure has been created,” Common Cause’s Derek Cressman told the News & Review in 2012 of Johnson’s multi-coffered set-up. “But one that doesn’t have the same transparency and accountability.”


...

NCBM brass understand why Johnson would cover up how Stand Up funded his presidential run. NCBM has a long, close relationship with the National Education Association, a massive teachers union with deep anti-charter school leanings. The NEA website lists NCBM as a partner, and NEA president Reg Weaver was a featured speaker at the 2008 NCBM convention in New Orleans, alongside Barack Obama and Hillary Clinton. Having a charter school zealot in charge of NCBM wouldn’t sit well with the group’s old guard.

“The black mayors are not buying the charter schools, period,” former NCBM president Robert Bowser told me last year.

As we know now, Johnson’s takeover mission went horribly, so he never got to exploit the pipeline into the black community for charter schools that he tried to get from NCBM. But while the Waltons didn’t get much ideological bang for their bucks, they didn’t walk away with nothing to show for the millions of dollars they threw at Johnson. In 2013, Johnson successfully lobbied the city council to repeal Sacramento zoning regulations that had kept Wal-Mart out of the city.

The good news is that Johnson won't be running for a third term, but that may be due to an entirely different set of scandals.

Martian Climate Truthers

It is very easy to hit the point of diminishing returns with Rush Limbaugh, particularly with the drip-drip-drip pace of a blog. I think there is value in the exhaustive Franken's Big Fat Idiot approach. If you're going to attack a despicable figure, there is something to be said for not stopping until you've left no stone upon stone and salted the ground so that nothing there will grow again.

Playing outrage of the week with someone like Limbaugh quickly degenerates into morbid repetition that ceases to inform and may perversely end up increasing the relevance and respectability of the subject. If you're going to quote Limbaugh, you need a better reason than simple offensiveness.

That said, it is worth checking in from time to time. Lots of people regularly listen to these shows. Not all of audience is in full agreement, but these rants are striking some kind of chord and some of them are definitely worth analyzing.

Take, for instance, the following passage noted by John Holbo at Crooked Timber.

Pay close attention to the underlying attitudes, the paranoia, the conspiracy mindset, the resentment and distrust of the scientific establishment.  A substantial part of the conservative coalition feels this way, probably not a majority, but a large enough block to have an effective veto in the Republican primaries.

RUSH LIMBAUGH: There’s so much fraud. Snerdly came in today ‘what’s this NASA news, this NASA news is all exciting.’ I said yeah they found flowing water up there. ‘No kidding! Wow! Wow!’ Snerdly said ‘flowing water!?’ I said ‘why does that excited you? What, are you going there next week? What’s the big deal about flowing water on Mars?’ ‘I don’t know man but it’s just it’s just wow!’ I said ‘you know what, when they start selling iPhones on Mars, that’s when it’ll matter to me.’ I said ‘what do you think they’re gonna do with this news?’ I said ‘look at the temperature data, that has been reported by NASA, has been made up, it’s fraudulent for however many years, there isn’t any warming, there hasn’t been for 18.5 years. And yet, they’re lying about it. They’re just making up the amount of ice in the North and South Poles, they’re making up the temperatures, they’re lying and making up false charts and so forth. So what’s to stop them from making up something that happened on Mars that will help advance their left-wing agenda on this planet?’ And Snerdly paused ‘oh oh yeah you’re right.’ You know, when I play golf with excellent golfers, I ask them ‘does it ever get boring playing well? Does it ever get boring hitting shot after shot where you want to hit it?’ And they all look at me and smile and say ‘never.’ Well folks, it never gets boring being right either. Like I am. But it doesn’t mean it is any less frustrating. Being right and being alone is a challenging existence. OK so there’s flowing water on Mars. Yip yip yip yahoo. You know me, I’m science 101, big time guy, tech advance it, you know it, I’m all in. But, NASA has been corrupted by the current regime. I want to find out what they’re going to tell us. OK, flowing water on Mars. If we’re even to believe that, what are they going to tell us that means? That’s what I’m going to wait for. Because I guarantee, let’s just wait and see, this is September 28, let’s just wait and see. Don’t know how long it’s going to take, but this news that there is flowing water on Mars is somehow going to find its way into a technique to advance the leftist agenda. I don’t know what it is, I would assume it would be something to do with global warming and you can—maybe there was once an advanced civilization. If they say they found flowing water, next they’re going to find a graveyard.

Meta-perception and plausible deniability

Given the readership of this blog, I may be starting a fight I can't win by criticizing social science research in fairly general terms, but I have long had the suspicion that researchers in fields like political science aren't paying enough attention to certain aspects of the data, both in terms of what they gather and what they focus upon. Specifically, I would like to see more time spent studying and discussing what I'm calling meta-perception. The use of the term appears to vary somewhat from user to user. My definition is perceptions of perceptions. We spend a great deal of time asking people "what do you think?" when the operative question might be "what do you think other people think?"

This question is particularly relevant when trying to figure out what is going on in primaries. I previously argued that a great deal of the violent fluctuations we saw in the 2012 Republican race could be explained by voters who were unhappy with Romney trying to decide behind whom the other voters who were unhappy with Romney would coalesce. Of course, those other voters were also engaged in the same activity. Opinions of candidates shouldn't change all that rapidly, but opinions of opinions of opinions certainly might.

One of the reasons that meta-perceptions get pushed to the side may be because they very often track with plain old perceptions. The causality behind this relationship goes both ways. Because of social norming, we instinctively tend to align our views with what we perceive as being the consensus view and we also tends to project our views on to other people. Both of these factors mean that the questions "what do you think?" and "what do you think they think?" will tend to get similar answers, but as with so many situations, it is when variables that normally correlate veer away from each other that things get interesting.

Check out this excerpt from a recent Paul Krugman post:

But the odd thing about these revelations is that they weren’t at all revelatory. We shouldn’t have needed McCarthy blurting out the obvious for the press to acknowledge that the Benghazi investigations have utterly failed to find any wrongdoing; and Clinton has been in public life a long time, so that her strengths were or should have been well known.

Let's phrase this in a different way. We would expect a strong correlation between new information and changes in perceptions. The more information, the bigger the changes in my worldview. That's not at all the case here. At the risk of belaboring the obvious, McCarthy's comments were in no way informative to anyone who has closely followed the story, let alone to members of the Washington press corps or editors of national newspapers, and yet the statements had a powerful and immediate effect on the narrative. That's the odd part.

Why should the conversation change so radically just because a senator refers to something that everyone knows, something that everyone has always known? Because the change came, not in perception but in meta-perception. When McCarthy forgot not to use his outdoor voice, he created an I-know-you-know-I-know situation. The journalists covering the story and the pundits discussing it lost their plausible deniability.

Papering the house -- Twentieth Century style

As a follow-up to our previous post on "crowd-casting," this excerpt from a 1996 column by Mark Evanier gives you some idea of the harsh economics of "papering the house" and of the always questionable ethics of show business. Also note the role asymmetry of information plays.

The members of The Rock Group were in the green room, finalizing some details when the Entertainment Director sauntered in. This was the gent who'd hired them and was in charge of keeping the casino's showroom filled with the top acts. I will call this man Mr. Beef and if you'd seen him, you'd understand the name. Just trust me on this: The man was Mr. Beef.

"Sad, sad," Mr. Beef was muttering. Everyone asked him what was so sad.

"I just checked some of the other hotels," he said. "Johnny Mathis is sold out over at Caesar's. Don Rickles is sold out down at the Sahara. The Everly Brothers are just about sold out over at Bally's. Everyone in town is selling out tonight…

"…except you guys. I just checked and it looks like we're only gonna be at about half-capacity for both shows tonight…and on a Friday. Looks like you guys ain't a draw no more."

The group's manager immediately jumped in and complained that the hotel had done insufficient publicity. They always say that. In show business, from a performer's standpoint, there is no such thing as sufficient publicity.

"We did the same amount we did last week for Lou Rawls," said Mr. Beef. "The same amount we do for everyone."

The leader of the group spoke up. "When we played here last January, we sold out every night."

Mr. Beef grunted. "That don't prove anything. That was during the Consumer Electronics Show. With a convention that size in town, my Aunt Tillie could stand on-stage and knit for two hours and sell out. No, this week proves if your act has any drawing power and you ain't close to sold out. If you were sold out, it would be a different story. But as it is, I don't think we can ever book you again. And when word gets around of how badly you did, I wouldn't count on you ever playing Vegas again."

By now, the manager was turning the color of Ovaltine. "What do you expect us to do?" he demanded.

"Do whatever you have to," said Mr. Beef as he walked out of the room, having maintained his casual demeanor throughout the entire verbal assault and battery. He had just pulled the pin on a grenade and he knew it.

It was 7:00 — one hour until the first of their two shows that night. The Rock Group had just been put on notice that if they didn't sell-out this week (or come darn close), they would never play The Big Hotel again and might never get a booking in Vegas. The Small Crisis on stage was put on hold for a moment while all the principals in the operation huddled there in the green room, considering what to do about The Big Crisis.

They talked for no more than five minutes. There weren't a lot of options to consider: They could hope for the best…or they could buy their way out of this.
Let's do the math on that second option together, shall we? The showroom could house 1,200 people for a performance. They were about half-sold for each show tonight so that's 600 empty seats to fill each performance.

But maybe 100 seats each show are reserved for guests of the hotel, guests of the performers, reviewers, etc. So that left 500 per show to fill.

The tickets were twenty-five bucks (today, they're probably forty). So we're talking about $12,500 worth of admissions.

That's per show.

There were two performances that evening so double it. To  buy out their own house, The Rock Group had to pay $25,000.

That's just for one night.

They were in for a week, remember. They'd probably sell a little better Saturday night and the hotel wouldn't expect them to go absolutely clean on the mid-week nights. But packing the place for the week could easily run from $100,000 to $150,000. So to keep the Vegas door open would be expensive.

They debated quickly. The consensus was that this week was not indicative of their true drawing power. Several conventions were in the city, their themes unlikely to attract the kind of audience that would flock to see The Rock Group. "It's just a bad week," the manager said. "Next time we come back, we'll be more careful about checking what's in town…and we'll spend a few bucks of our own on advertising."

They decided to buy their way out of it. The manager sat down and wrote out a check for that night's tickets. An assistant ran to the box office and completed the transaction.

But that was only a partial solution to The Big Crisis. The hotel, being a Vegas hotel, was less interested in selling those seats than they were in having people sit in them — especially people who would gamble on their way in or out.

Instantly, every spare member of The Rock Group's entourage was summoned and the tickets were divided up. "Give them out to anyone who promises to use them," the manager shouted. "And make sure you give out the eight o'clock tickets first!" They all scattered in different directions.

Some headed out into The Big Hotel Casino. Others ran to nearby hotels to pass out their freebies. Still others approached tourists out on the Strip, out on Las Vegas Boulevard. "Would you like to see The Rock Group tonight? Absolutely free?" they'd ask passers-by. Inevitably, some thought it was a scam of some type…but lots of folks go to Las Vegas for the freebies, few and far-between though they may be.

...

On my way out of the hotel the next day, I ran into the manager of The Rock Group and he told me that Mr. Beef was quite pleased with how they'd filled the room the night before. He also told me that they were contracting with one of the bus-tour companies to distribute some of the tickets they'd likely be giving out for the rest of their run. "What you're doing here is kind of expensive," I said.

"True," he replied. "But if it buys us a contract renewal here, it will have been worth it." (It didn't. In fact, I think that week was the last time The Rock Group ever played Las Vegas.)

 Ten days later, The Stand-Up Comic sent me an article that had run in one of the Vegas papers. Headlined, "Seasonal Slump Socks Showrooms," it discussed how poorly all of the shows in Vegas had fared the previous week. It noted that, of Johnny Mathis, Don Rickles, the Everly Brothers and The Rock Group, only The Rock Group had filled its seats and that they had only accomplished this by "papering the house" (i.e., giving out free tickets). The other showrooms, they said, were all at half-capacity every night.

"What does this mean?" I asked my friend.

"It means," he said, "that Mr. Beef found a way to get his showroom filled and to get The Rock Group to pay for it."

The Big Hotel didn't get to be The Big Hotel by being dumb.

Education reform

Go and read Atrios' useful perspective on education reform.  A broad movement can have many goals and it can be helpful to acknowledge all of them. 

Well, this looks interesting

I want to be careful not to get ahead of myself on this -- still waiting for some good, solid reporting before I get too confident -- but, assuming things are as they appear, here are a few quick thoughts, some or all of which may have to be retracted as I learn more.



The story of SpaceX has always been as much or more innovation through disruption than innovation through technological advances. (And yes, this is one case where I actually do buy the beneficial disruption narrative.) They took tech that had been sitting on the shelves of a sclerotic industry for years and literally got it off the ground. I'd argue that the auto industry is relatively responsive and fast moving compared to aerospace, but Musk still seems to have managed to do something similar here, partially I suspect by requiring less testing than companies like Volvo, GM, Mercedes-Benz.

Still, this is a very cool development, particularly in terms of data. Tesla has always had a progressive approach with intellectual property. If this liberal attitude extends to sharing data...

This should (but won't) cut the head off of the myth of the regulatory monster holding back all progress on autonomous vehicles. We can all ignore the obvious fig leaf of "advising drivers to keep their hands on the wheel." There will be hands-free driving (check out the video) and there will be accidents (though probably fewer than there would have been without the technology). If Tesla didn't feel they had a handle on the regulatory and liability issues, they wouldn't have rolled out the system.

This should also make people rethink Google's role in the narrative. Tesla's approach appears to be entirely different (Musk doesn't even have plans to use LIDAR for his cars in the future). Even the companies that are using a more similar approach appear to be advancing on their own faster than Google.

Of course, Mountain View is filled smart people and a tremendous amount of great innovation and research flow from the company, but its "leadership" in the field of autonomous vehicles has always had as much to do with PR as with engineering.

Dean Dad on assessments

Of interest to our discussion on education reform:

Instead, I’m a fan of the “few, big, dumb questions” approach. At the end of a program, can students do what they’re supposed to be able to do? How do you know? Where they’re falling short, what are you planning to do about it? Notice that the unit of analysis is the program. For assessment to work, it can’t be another way of doing personnel evaluations. And it can’t rely on faculty self-reporting. The temptation to game the system is too powerful; over time, those who cheat would be rewarded and those who tell the truth would be punished. That’s a recipe for entropy.

I very much agree with this point of view.  It is hard enough to measure on thing well -- when you try to do both personal evaluation and program evaluation using a single measure then you have problems.  If you make the tests "high stakes" for one party and "low stakes" for the other then interests are misaligned.

Everybody has an interest in how many students from a particular program pass the actuarial exams, because both the students and the faculty want the same thing (people to pass).  This has made these tests look good as tools for evaluating both students and programs (similar value can be found in any licensing exam). 

But to pull apart "the course is poor" and "the instructor is poor" is a very hard thing to do, like with all correlated variables.  And it presumes that the largest effect size is the teacher, which may be true if the teacher is extremely poor.  But like a lot of tasks that improve with practice, I suspect teaching ability will end up being a second order effect for experienced teachers. 

Teach For America's aspect dominance*

From a pretty good Slate article by Jessica Huseman [emphasis added]:

In the current parlance of Vegas schools, teachers are now “superheroes.” Beginning in January of this year, the city embarked on a rambunctious teacher-recruitment campaign titled “Calling All Heroes” that aimed to bring about 2,600 new teachers to the district. The effort—which could be considered creative, desperate, or desperately creative, depending on your point of view—featured the superintendent of the Clark County School District, the nation’s fifth-largest, zip-lining down Vegas’ famous Fremont Street. Last winter, Vegas school officials enlisted volunteers in Boston to spell out the district’s website address into a Boston snow bank. And in a district-created Web video, two elementary school–aged news anchors announced: “Breaking news! Turns out that we are in crisis, as we have a severe hero teacher shortage!”

...

As baby boomers retire and applications drop to both traditional education schools and alternative programs like Teach for America, a growing number of school districts are expected to face teacher shortages comparable to Vegas’. But Sin City’s attempted remedies might be most instructive in teaching us what not to do when scrambling to fill teacher vacancies nationally. The emphasis has been on using glitzy, if mostly inexpensive, strategies to get teachers in the door with far less focus on holding onto veterans who are already there.

This is followed by quotes from two new teachers: Jayne Gray, a veteran from Los Angeles and Jessica Recarey a first-year Teach for America recruit. You might assume that TFA supplied a significant share of the applicants. You'd be wrong.

I don't want to single out Huseman on this. Most stories that mention the program give the impression that it's fairly large and many suggest that it's cost effective. Neither is the case.

From Wikipedia:

Year	# of Applicants	# of Incoming Corps Members	# of Regions	Operating Budget
2003	15,708	1,646	20	$29.8M
2004	13,378	1,626	22	$34.0M
2005	17,348	2,181	22	$38.4M
2006	18,968	2,464	25	$55.6M
2007	18,172	2,895	26	$77.9M
2008	24,718	3,614	29	$122.3M
2009	35,178	4,065	35	$153.4M
2010	46,359	4,493	40	$176.0M
2011	47,911	5,066	43	$229M
2012	48,442	5,800[21]	46	$244M
2013	57,000	6,000[22]	48

TFA is a big deal in terms of influence and fund-raising but, in terms of boots on the ground, it is a fairly minor player. It is widely perceived as being much larger than it is partly because the people behind the organization are so good at managing the media (you can be almost certain that Huseman didn't just happen on a TFA recruit when looking for new teachers to interview).

We can go back and forth on the role of TFA in education reform in general, but if we're talking about ways to address a teacher shortage, the table above makes it difficult to treat the program as more than a footnote.


* "Aspect dominance in forest ecology typically refers to the plant life embedded within an ecosystem community that is most apparent or obvious. This generally will be the plant life that is tallest and most readily observed. However, this approach ignores the life existing on ground level, which may have a greater biomass. This is illustrated in biology by the “Daisy Field” metaphor. Imagine that you are walking through a meadow and you come upon an area covered in daisies in full bloom. Because the daisies rise above the groundcover to form a canopy, it is human nature to assume that daisies are the dominant species and to refer to the area as a daisy field. However, the reality is that grass may in fact be the dominant species, it just may be the eye is drawn to the daisies.


From What You See is not Always What You Get:Aspect Dominance as a Confounding Factor in the Determination of Fishing Dependent Communities
Steve Jacob, Michael Jepson, and Frank L. Farmer

Two anecdotes on command economies

This is Joseph

Mark Evanier:

When I was a kid, one of the reasons we were taught that Communism was bad was that since there was no competition, there was no choice. The markets all sold the same kind of bread and the same kind of canned beans and the same kind of salad dressing…and if you didn't like it, too bad. You couldn't go to another store and find an alternative. For some reasons, people who think Communism is the greatest evil on the planet cheer on big companies getting bigger even though it leads us in the same direction.

A quote from an article by Gary Leff (via Marginal Revolutions):

It would have made more sense for United Airlines staff to offer a larger incentive for passengers (who did not have to be at their destination that evening) to agree to take a later flight, she adds. Virginia Shiller says the staff were only permitted to offer volunteer an amount totaling several hundred dollars, but it may not have been enough of an incentive to persuade volunteers to take a later flight. “It was totally irrational. They probably could have gotten a volunteer to take $2,700. They have these formulas. It’s like something they do in socialist countries.” 

 One of the interesting features of modern economies is that we still have command economies but they are corporations and not government bureaus.  I suspect part of the reason is transaction costs -- you cannot make everything open to constant bidding without gross inefficiency.  The other is that people like to have power. 

However, the United States seems to be an outlier on the degree of focus on corporate command economies.  I am starting to wonder if this is because the country is so large.  The smaller the country, both in geography and population, the easier it is to create effective mixed economies.  Canada has managed it by being under-populated and very decentralized.  England is geographically small, isolated from hostile neighbors and, even today, has fewer people (63 million) than the United States (325 million). 

It seems worth thinking about. 

Andrew Gelman: Hoisted from the Comments

This is Joseph

This comment from Andrew Gelamn showed up on an earlier post:

Joseph:

A related issue came up a few years ago regarding Mankiw's views on taxes: he seemed to think that the state should only tax things that are “unjustly wrestled from someone else.”

This seemed a bit odd to me, given that when you consider sales taxes, income taxes, import taxes, etc.: presumably almost none of these are taxing things that are unjustly wrested.

I think the usual view is that taxation is, from the government's perspective, a way to raise revenue; and, from the taxpayer's perspective, a cost of doing business. But Mankiw seems to view taxes as a sort of punishment or fine.

I actually don't think Mankiw has fully thought these ideas through, which seems strange given that his field is economics and his specialty is public communication.

Or maybe he just hasn't communicated well enough. Here's what I wrote in that earlier discussion:

"I realize that [Mankiw and his collaborator] are trying to be provocative, but I think they're being provocative in the context of an argument among economists that I don't fully understand. It's sort of an academic version of those all-black paintings in the Museum of Modern Art that can only be understood as responses to earlier paintings (as described, for example, in Tom Wolfe's book, The Painted Word)."

I rather liked this comment because it made me think that it was possible that I was missing the major thrust of the argument.  I am quite familiar with the "taxes are theft" line of thinking and I'd rather assumed that this was just a dressed up version of that argument.

But maybe there is a big piece that I am missing.  Given that, what I think would be the most useful thing would be for the defenders of this orthodoxy to insert some context.  Even if it is hard to grasp, saying something like "It's hard to grasp if you don't have a sense of the arguments that this is in response to" would be very useful (maybe with a couple of these arguments.

Immanuel Kant wrote the almost unintelligible (at least in English translations at the time I was in graduate school) critique of pure reason and followed it up with the (far more understandable)  Prolegomena to Any Future Metaphysics, that I had not trouble following.  I still never quite managed to connect it to what was in the critique, but at least I had an idea of what the whole thing was about.

Does nobody read primary sources?

This is Joseph.

I get confused about whether people read sources or just rely on summaries of them a lot in modern discourse.

For example, Niccolo Machiavelli is famous for saying that it is better to be feared than loved (with the codicil "if you cannot be both").  But nobody keeps reading and notices that he then puts several paragraphs (and then Chapter 19) pointing out that it would be even worse to be despised and hated.

So being tough only works (in his formulation) if it generates fear but does not give rise to hate.  That suggests a rather different balance of strategy, that looks like:

• Feared and Loved
• Feared
• Loved
• Hated or Despised

Yet I often see that quote used to justify tough actions and to avoid appeasement.  But being both feared and loved is the best possible outcome, and being hated is definitely worse than being loved.  So, in an odd sort of way, he is actually pushing moderation in action (not too soft, not too nasty) which I would never of picked up on without actually reading the book again.  Even the Wikapedia page doesn't really make this hierarchy clear.  

[The discourses, where he talks about how to make a republic work, are also of great interest and likely a lot more topical than how to be a tyrant]

The welfare state

This is Joseph

Matt Yglesias talks about the issues regarding opposition to the welfare state:

This is why thoughtful opponents of the welfare state have generally avoided making the argument that capitalism is good because it promotes human well-being. Since capitalism does promote human well-being, "capitalism promotes human well-being" sounds like a good argument in its favor. But it turns out that capitalism plus a large welfare state promotes human well-being even more. So you either need to embrace the welfare state (the correct answer) or come up with another justification of capitalism. One that frequently arises is what Greg Mankiw has referred to as the "just deserts" perspective in which "people should receive compensation congruent with their contributions" and we should aim for a society in which public policy ought to ensure that "every individual would earn the value of his or her own marginal product."

So if, for example, you are blind and inability to see makes it hard for you to earn a living in an unregulated market that's too bad for you. Your vision impairment means your ability to contribute to market production is limited, and therefore it is morally appropriate that your living standards be limited as well. By the same token, if a combination of genetics and childhood living conditions have left you with an IQ that is 2 standard deviations below average (this is about five percent of people) then, again, it's just the case that you deserve to have a much lower standard of living than society could provide for you if it were willing to do more redistribution.

Mankiw's moralized capitalism seems bone-chilling to me but I don't really think I can prove him wrong. It is, however, pretty trivial to see that Mankiwism isn't a Christian worldview.

This is really the major challenge of neo-conservative or libertarian thought.  You can argue that government is inefficient, but that is an argument for good government and not an argument for trying to create a self-fulfilling prophecy.  Proponents of the welfare state can easily argue that the focus should be on improving the role of government -- improving both efficiency and accountability. 

The only argument for the just desserts argument that I can think of (as absolute adherence to economic efficiency as the main determinant of human value seems like a dead end) is that it produces more economic efficiency on the long run.  The problem is that areas of very low levels of government do not create vast periods of economic growth.  You can have growth flourishing despite great conflict (see the American Civil War or the War of the Roses).  But when the state actually collapses (see the English Civil War or recent events in Syria), you end up with people like Hobbes arguing for more government. 

Nor have experiments with lesser versions of this worked out well.  The data is inconclusive with respect to tax cuts for the wealthy, but the trend is not supporting this mechanism. This makes it hard to figure out why this viewpoint is so generally popular.  After all, nobody is arguing that we should have a French Revolution or even massive taxes.  Instead, the current argument is whether we should redistribute wealth to look a little bit more like other industrialized nations.

Are we all missing an argument? 

"So long and thanks for all the fish"

I've fallen into this trap before.

I'm driving down the road channel surfing the radio and I come across a snippet of something that sounds interesting on one of the NPR stations. I stop and listen long enough to start to get into the topic before I realize that this is RadioLab.

Now I am faced with a difficult choice:

I can change the station despite having become curious about what's going to happen;

Or I can continue to listen until the inevitable annoyance and disappointment kicks in.

I have been in this situation often enough to know that these are the only two possibilities. No matter how promising the opening or how intriguing the subject, I will regret it if I listen to the whole thing.

RadioLab beautifully illustrates the somewhat counterintuitive principle that if you're going to imitate someone, you are often better off imitating the mediocre than the great. The show is clearly trying to be the next This American Life. All of the cute touches and distinctive mannerisms are aped, but without any sense of taste, proportion, style, or restraint. The result is an overproduced, painfully self-satisfied show narrated by two grown men who can't get enough of each other.

All of this might be forgiven if the people behind the show were anywhere near as smart as the TAL crew and had something of interest to say.

One of the reasons that This American Life works is because what might otherwise tip over into excessive production on another show is supported by a foundation of extraordinarily solid journalism. No one is better at bringing clarity and insight to a big story like patent abuse or the financial meltdown of 2008. The chatty tone, the sound montage and all of the other potential distractions only serve to enhance the story because the reporting is so good.

RadioLab specializes in even bigger topics like the nature of language. Unfortunately, this added ambition only highlights the producers' limitations. Instead of clarity we get oversimplification; instead of insight we get lots of TED talk style geewhiz pseudo-profundities.

Which brings me to today's show ("today" being a relative term but anyway...).


When I tuned in, a researcher was discussing her work with dolphins in the sixties. I stuck with it through the discussion of giving the animals LSD, but then they got to the weird part...

When I turned the radio back on, the story featured a different researcher had moved to the present day. The methodology was more conventional but the annoyance factor was just as high.

Putting aside an enthusiasm level that would have been slightly excessive had the reporter been the first astronaut to land on Mars, the approach to the underlying scientific questions was awful.Even Malcolm Gladwell would've thrown up.

The big payoff also contained the most unintentionally telling part of the program, but first a little bit of background: according to the program (and I have no reason to doubt this), each individual dolphin has a distinct signature whistle. The reporter (who was also the producer of the segment) and the hosts consistently discussed this in anthropomorphic terms as the dolphins' names.

As an experiment, the researchers had come up with something like a voice recognition system for dolphins that categorized certain sounds as "words" and would also "speak" certain new words that represent, among other things, individual divers.

The big climactic moment came when one of the divers "spoke" her name, at which point one of the dolphins turned and "spoke" his signature whistle. This is where we hit the unintentionally revealing part. One of the hosts asked if this represents a major linguistic breakthrough, at which point the reporter suddenly switches to conscientious mode and tells us how rigorous the researcher is. We are told this would have to happen 35 times before... Then we literally get the sound cue from Close Encounters of the Third Kind and a discussion of all of the deep philosophical conversations we might have with dolphins in the future.


This is what thirty plus years of TED Talks leads to, an entire generation of journalists and writers who think this is what science is about: take some isolated study or statistic, ignore the context and previous body of research, and instead start drawing sweeping inferences and telling elaborate narratives.

Preferably with lots of cute banter.