What&#8217;s knowable and actionable: lessons from medicine

Posted on February 13, 2019

Finding what matters

The U.S. Preventive Services Task Force is a group of scientists and physicians given the formidable responsibility of sorting through the wide array of tests available for major diseases and deciding which should be part of the national standard of care. These are weighty decisions, because in the world’s most expensive health system insurers are required to pay for those tests the group deems beneficial.1 Fine-tuning when to recommend diagnostic screenings is especially fraught, as getting these decisions wrong leads to unnecessary, costly, and painful medical interventions. Conversely getting them right can help catch disease earlier when treatment is more effective, giving patients greater quality of life.

This group’s decisions often hinge on what is known as clinical significance: if knowing something makes zero difference for a therapeutic approach or is as likely to cause harm as benefit, then it is not worth investing resources to get that data. For instance DNA tests can fall into this category, as the impact of certain genes is currently unknown. For those possessing some unusual variant, finding that out would engender agita but not much else. Read more…

When it comes to cost it’s not even close, with the U.S. spending over $10,000 per person on healthcare, about 18% of GDP, with runner-up Switzerland around $8,000 and a steep dropoff in the numbers after that. ↩
And/or potentially undermining society and the fabric of democracy, depending on your point of view. Also the term unicorn technically only applies to non-public companies but we’ll relax the definition. ↩
In the process drastically weakening the positions of real estate agents and brokers, which was a bonus or drawback depending on which side of the table you sat on. ↩
Yes that’s the actual term, and it pretty much means what you expect. Who knew doctors were so whimsical? ↩

No safety net, fewer options, and the value of constraints

Less is more

Posted on February 6, 2019

Only one shot

The magazine National Geographic was a pioneer in the use of photographs as a way of capturing and presenting the essence of a subject to new audiences. Its contributors would spread out to obscure locations equipped with an array of cameras and related equipment, carrying hundreds of rolls of film.1 When shooting was done the exposed film would be carefully transported home, developed, and reviewed in detail at editorial meetings at headquarters. Only a select few photos would make it into an article, and every month just one would merit the cover, framed by the iconic yellow border. A photographer could literally take thousands of frames to produce the dozen or two that would ultimately make it into print.

But for a 1997 cover article on Minnesota’s northern wilderness, veteran photographer Jim Brandenburg upended this entire paradigm. His concept was typical save for one critical, self-imposed constraint: he could only take one picture per day, for 90 days straight. All of them were to be printed in a complete series. This raised the stakes considerably, given the vagaries of an outdoor environment where little was controllable. There would be no do-overs, no opportunity to retake a poorly-lit or out-of-focus shot, no chance to switch lenses or fix an equipment failure, no backup if wildlife behaved unpredictably. This being the pre-digital era, there wasn’t even a way to check the outcome of a shutter press until the film was processed back in the darkroom. Read more…

Nowadays a few postage stamp-sized memory cards will suffice to hold even more images, which has presumably shrunk the luggage requirements of photographers. ↩
The replication crisis that is roiling the social sciences has reached this study, with reports that these jam findings cannot be validated. The nuances of the concept may not be fully developed, but the idea that having lots of options doesn’t necessarily improve things seems robust, and borne out by personal experience. #anecdata ↩
100 years ago you pretty much knew you’d marry the person from one farm over and that settled it until death did you part, but the modern world of endless swiping and matching apps seems to be bringing on the aptly-named dating apocalypse. ↩
Mash this up with the more recent YOLO phenomenon we have a perfect storm of acronyms. As the ancient teacher writes in Ecclesiastes, a chasing after the wind indeed. ↩
This need for self-reliance in navigation was in fact the default condition of travelers from the beginning of human history up until about 10 years ago. ↩

Coupons, tax laws, and valuing your time

Sometimes it is money

Posted on January 30, 2019

Rise and shine

At the turn of the twentieth century the new category of ready-to-eat breakfast cereals was blossoming. One of the newer entrants was a product named Grape-Nuts, created by an entrepreneur named C. W. Post and still available on shelves today. It was notable then and now for containing neither grapes nor nuts, but also for being the first target of an innovation that has gone on to influence industries around the world: the coupon. Bearers of these incentives issued by Post would receive 1 cent off the price when purchasing a box.1

This is a roundabout way of providing a discount; instead of requiring shoppers to keep and produce a slip of paper at the store, why not simply reduce the price and make life easier for both buyer and seller? The answer is fairly straightforward, especially for anyone who has spent significant time hunting through junk mail or the internet in search of minor savings. Coupons are designed to identify those people who value the potential discount more than the time they spend acquiring it. The effort they demonstrate through this process means they can ultimately pay less than others who make a different calculation.

This is known as price discrimination, and it’s an effective way of sorting customers according to their ability to afford your product.2 Read more…

In a strange alignment of history, Post’s only daughter would use part of her staggering fortune as inheritor of the company to build Mar-a-Lago, Donald Trump’s current vacation retreat. So when Xi Jinping has a tête-à-tête in Palm Beach with the President, just remember Grape-Nuts made it happen. ↩
To be more specific, this works due to something called marginal cost. If a sandwich costs me $5 to make and for one John is willing to pay $10 and Priya $8, I make the most if I sell to each of them at their maximum price. Because it’s hard to know exactly how much someone will pay, and probably illegal to charge different prices, I price it at $10 and get Priya a $2 coupon that John won’t bother redeeming. Problem solved. ↩
At the peak of the frenzy tickets were selling for thousands of dollars on the secondary market but nobody seemed to regret going, so okay I guess. ↩
This isn’t purely altruistic, because having hordes of young theater-lovers creating a public spectacle only adds to the hype of the show, and these tastemakers are far more likely to tweet about it afterwards than the distracted hedge funder sitting in the dress circle. ↩
Actually, since the back of the airplane always touches down first, you could argue that those up front arrive last. ↩

Credible commitments and work-life balance

Don't burn your ships

Posted on January 23, 2019

Costly signals

In 1519 explorer Hernando Cortés landed on the eastern coast of present-day Mexico with the mission of continuing the Spanish conquest of the empires covering Central America. The task was daunting given his small crew, the unfamiliar terrain, and natives who understandably weren’t so keen on being colonized. Discontent and thoughts of outright mutiny brewed among his soldiers. In response he ordered that the ships on which they arrived be scuttled, ensuring that retreat to safety would be impossible for anyone harboring second thoughts.

Now all else being equal, coming out of battle with a victory while keeping your fleet of expensive boats afloat is preferable to the alternative of contemplating how to sail back across the Gulf of Mexico once you’re done conquering. Yet this wasteful act was actually productive, because it sent the unmistakable signal to Cortés’s men that retreat would not be an option. They had to fight and win or else be destroyed. Read more…

Pretty much no one is good at multitasking. And yes, that includes you. Instead of doing one thing well you do two or three things poorly, an observation that research is increasingly bearing out. In some unexplored level of irony, these footnotes themselves have the effect of distracting you from the flow of the narrative, making reading this a form of multitasking. ↩
It’s not likely that an investment banking analyst spending 350 days per year in the office generating redundant Excel models and superfluous slides at the whim of a VP is making some grand contribution to the human condition, but he (and in the world of finance it is disproportionately “he”) is showing to the highers-up how much pain he will endure on behalf of the company (of course in hopes of sharing in the jackpot a few years hence). ↩
Another reason why this cycle continues is to make sense of the sacrifices that were already made, as with the fraternity brothers who haze pledges not because they want to, but because they were hazed themselves. It would all be for naught unless you could at least inflict the same on someone else. ↩
This need to look busy is well understood, as shown by the “boss button” on the NCAA college basketball tournament web player, which instantly replaces the game with a fake but convincing-looking spreadsheet that can be quickly toggled if one senses a manager about to glance at the screen. Such a feature would have been helpful for the hapless yet grandly named Edward Greenwood IX, a New York City employee who was summarily fired when Mayor Michael Bloomberg happened to catch him playing solitaire.↩
This quantification has been taken to its extreme endpoint by the hedge fund Bridgewater Associates, which is publicly known to record all meetings and rate employees on individual metrics with an assiduousness that puts the fantasy football players scouring NFL stat sheets to shame. ↩
For instance if you’re an astronaut crewing missions on the International Space Station then bravo for you, but you probably won’t be making it to junior’s soccer game on Saturday morning. ↩

Dashboard lights, soccer jerseys, and the value of details

Sweat the small stuff

Posted on November 7, 2018

Buckle up

By 1974 the U.S. National Highway Traffic Safety Administration had long known that seat belts were one of the best tools to reduce injuries in automobile accidents, yet many Americans still failed to consistently buckle up when they drove. To nudge these drivers to be more conscientious the agency mandated that all new cars provide both audible and visual warnings to anyone with the temerity to drive off with an unfastened seat belt.1 Automobile manufacturers were given some latitude as to how to implement these alerts, leading to a profusion of buzzers, beeps, and chimes, until most settled on an intermittent tone, accompanied by the now-standard red icon of a belted human blinking on the dashboard.

The majority of companies designed these two indicators to run independently and left it at that, having satisfied the letter of the regulation. But a select few realized that aligning the reminders could help reinforce the message while adding a bit of polish to a prosaic feature. They made the effort to ensure that the warning light flashed in perfect synchronization with the tone. Although seemingly trivial, beneath the surface this signified a great deal. Read more…

This feature is still too paternalistic for many drivers, leading to a cottage industry of tinkerers figuring out ways to disable it. ↩
And you, dear reader, are probably one of them. Validate this for yourself the next time you start your car. More likely than not you’ll find the tone and warning light aren’t aligned with each other. ↩
For the privilege of doing so Nike also paid the club £20 million. That could be considered a steal, considering that Adidas is now paying £75 million annually. ↩
It seems to have worked out well enough, with Man U winning the Premier League and coming in runner-up in the Champions League in the 2010-11 season, its first with the new uniform. Future iterations of the jersey replaced “believe” with “relentless” and later printed the entire phrase “Forged in Industry, Striving for Glory” inside the neckline, which is a mouthful but calls back to Manchester’s industrial heritage. ↩
As an investment thesis, these details could also be a way to identify outperformers, if you have the stomach for it. For what it’s worth Nike stock has trounced the broader market since 2010, though beware of anecdata. ↩
The reverse is unfortunately also true, where shoddy details are signs of deeper issues within. See: Sears, Post Office, U.S., et al. ↩

Slow down less

Usain Bolt and the rat race

Posted on October 15, 2018

On your marks

In the final of the men’s 100-meter dash at the 2008 Beijing Olympics the prohibitive favorite got off to a middling start, with most competitors managing to stay with him through the first half of the race. However by meter 50 Usain Bolt was starting to break free, and in the final stretch he pulled further away until at the finish he was almost two strides clear of the runner in second place—a huge gap in a track event at this level. While the seven other athletes gave everything they had, Bolt appeared to just accelerate away from them.

Or did he? Fans of track and field know that what looks like increasing speed in competitive sprints is actually an illusion. In Beijing, Bolt hit his top speed of 44 km/h (27 mph) around meter 60 but was actually about 4 km/h slower when he crossed the finish line. Yet by that point he was so far clear of the others that he had time to showboat, costing him a few hundredths of a second on what was still a new world record time.

In a 100-meter race runners are moving their fastest about halfway through, but everyone slows down towards the end; not even top athletes can maintain their pace. So what accounts for the growing gap between winners and the rest?

As it turns out, the best runners slow down less. Even though maintaining peak performance can’t be done for very long, they fight to lose as little as possible.Read more…

Or more accurately, this 6-year old’s very enterprising parents ↩
It’s a safe bet that the last time Donald Trump fired up a budget spreadsheet was, well, never. But that’s not a partisan observation – it’s doubtful that Barack Obama was running VLOOKUPs from the Resolute desk in the Oval Office either. ↩
And no, sticking on a wig while you slum it with the rank-and-file to drum up publicity on an episode of Undercover Boss doesn’t count. ↩
Snapchat makes little sense to those over 30 and is incomprehensible to those over 40. I would never want to overlay my face with that of an animated raccoon spewing rainbows from its mouth, would I? The very thought is absurd, no? Millions of users, and a commensurate amount of venture capital provided by salivating Silicon Valley types, beg to differ. ↩
Even the great Usain Bolt knows when to hang up his track spikes, and move on to a career of massive endorsement contracts, plus a professional soccer career that’s not as quixotic as it sounds, all punctuated with his trademark lightning bolt pose. Very few top athletes maintain their careers into their late 30s, Tom Brady and his notoriously ascetic diet excepted. ↩

How bad experiences can make customers love you

Exploring the Franklin effect