Pursuit of Truthiness

my gut tells me I know economics

Shoe Dog: Founding Nike

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Many people recommended Phil Knight’s memoir about starting Nike; I found it entertaining and surprising. At first it seemed more like a cross between The Graduate and Zen and the Art of Motorcycle Maintenance than a business book.

It turns out that Knight didn’t set out to make Nikes, but rather to import existing shoe brands from Japan back in the 1960’s when Japan was a low-wage country. He had that idea in an entrepreneurship class at Stanford; his class project on it got an A, unlike every other business I’ve heard of that started in a classroom.

Knight says that he wasn’t a natural entrepreneur or CEO, and was terrible at sales and negotiating. So many of the key moves on the way to Nike becoming a multi-billion dollar company seem like blind luck. They only started making their own shoes 7 years into the business, then called Blue Ribbon Sports, after their Japanese supplier threatened to cut them off. A lot of key steps were taken by the first full-time employee, Johnson, without Knight’s knowledge or only after Johnson spent weeks persuading Knight- running their first ad, opening their first retail store, the very name Nike (Knight wanted to call the new shoes “Dimension 6”).

While I always saw Nike as driven by marketing and branding, the early executive team was made up almost entirely of accountants and lawyers; Knight actually worked elsewhere full time as an accountant and accounting professor through the early years of the company. Nike also seems to have driven a lot of true innovation in the shoes, much of it coming from co-founder Bill Bowerman (Knight’s college track coach).

I read this immediately after The Hard Thing About Hard Things, Ben Horowitz’ book about founding a tech company that sold for a billion dollars, and saw a lot of commonalities. Both founders thought they weren’t natural CEO’s, made lots of mistakes, and spent much of their time under extreme stress, convinced the business was within weeks of failure. To some people this might seem like encouragement to start a business (if they succeeded without knowing what they were doing, maybe you could too) but to me it was another indication that I’d never want to run a large business even if I were good at it (which I wouldn’t be). I always thought that the initial startup would be the most precarious time, but once you had millions in revenue and dozens of employees you’d feel more secure, like the business had made it and would be sticking around. In fact the existential crises seem to keep coming- key partners pulling away, new competitors emerging, a lawsuit, a threatening letter from the government, financiers cutting you off or making demands.

Another commonality was the importance of personal relationships within the company and with key customers and suppliers. Knight makes it sound like his executive team were his closest friends, drinking together every night. Any time one big company is doing a deal with another big company, there is usually one person on each side who is the key decision-maker, so it makes sense that they spend time together face-to-face. In Nike’s case, this meant lots of travel between Japan and the US. In Horowitz’ case, this meant spending $6 million while in a cash crunch to buy another company so that they could give away its software free to make that one guy (who from the outside was only a mid-level executive and not the obvious person to deal with) happy.

Both thought vulgarity and management not taking themselves seriously were important. “How many multimillion dollar companies can you yell out “Hey, Buttface” and the entire management team turns around?”

For Knight, a key to success was finding a cause he believed in, so that work didn’t feel like work:

Driving back to Portland I’d puzzle over my sudden success at selling. I’d been unable to sell encyclopedias, and I’d despised it to boot. I’d been slightly better at selling mutual funds, but I’d felt dead inside. So why was selling shoes so different? Because, I realized, it wasn’t selling. I believed in running. I believed that if people got out and ran a few miles every day, the world would be a better place, and I believed these shoes were better to run in. People, sensing my belief, wanted some of that belief for themselves.

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Written by James Bailey

September 11, 2018 at 2:40 pm

Productivity Notes to Past-Me

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I’m not the most productive academic out there, but my improvement from the start of graduate school 9 years ago is huge. I used to chronically procrastinate, saving problem sets and studying for the last minute and so not spending enough time on them to do well. I spent most of graduate school stressed about how I should be working more and worrying about failing out (which I almost did 3 times).

Now I’m able to publish several papers per year while teaching 3 classes and chasing a toddler, all with much less stress and anxiety. What happened?

Honestly, part of it is likely just a few more years of brain development together with a kind of work that I find more enjoyable. But think another part is the discovery of some tricks that would have been helpful all along.

1. The idea that you should be working 80 hour weeks is actually harmful. 30-40 hours is plenty if it is quality time. Rather than thinking you should be working all the time and feeling bad when you don’t, set specific realistic goals (solve these problems, or write this section, or work for 3 hours) and be happy when you accomplish them and ready for more the next day, setting up a virtuous circle. The classic “work smart, not hard” advice applies.

2. A lot of “working smart” is finding ways to avoid or minimize non-crucial work. You want to have clear medium-term goals (like pass this class, or get this paper to a journal) and figure what the most important proximate step is to accomplish it. This sounds obvious but it is amazing how much work does not proceed in this manner. For coursework, the most important proximate step is usually doing problem sets; if you are spending your time doing something else like reading the notes/textbook this should be because you think it is actually the best way to solve a specific problem. Reading blogs is definitely not work.

Right now, I have a paper I want to get published. If that’s going to happen, it must be submitted to a journal; for that to happen, I absolutely need to update the background/theory section to indicate how I expect the variable of interest to affect the dependent variables. There are all kind of other things I could do that I could call “working on the paper”, like reading more of the literature or running more regressions. Doing those things might improve the paper 10% but only the background/theory section is going to bump it from unpublishable-at-a-legitimate-journal to publishable, so that’s what I’m going to start with (and possibly, end with; I have other things to get to).

3. Related to this, the Pareto Principle is everywhere- there are just so, so many situations where putting in 20% of the effort gets you 80% of the way there. A big part of what “working smart” means is to figure out what that 20% is and always do it, and do it first; then to figure out what is the 80% of the work that gets the last 20% and do it second or possibly not at all.

4. This is probably a good time to talk about exercise. You think you are “too busy”, but you’re wrong. For one, in the long-run exercise up to at least 1hr/day is a free lunch because it puts you in a mental state that improves your productivity that much (the same thing applies to 8hrs/night of sleep). And yes, you should be thinking about the long-run and not just the next deadline; there is always a next deadline and you’ll be at this for a lifetime. Also, the Pareto principle goes even further with exercise than it does with most of the rest of life. You don’t bother lifting weights because you imagine you need to spend 1hr/day in the gym to make a difference, but actually 0.5hrs/WEEK is enough to make huge improvements if you’re doing it right and consistently.

5. You’re reading a lot less than you used to, with non-fiction books going almost to zero, because it feels like reading is using the same mental muscles that work/school does. I’m reading more non-fiction than ever, largely because I’m not reading but listening (audiobooks). You have this vague prejudice against them, thinking that you don’t absorb the material as well this way. This might actually be true, but think Pareto- better to absorb 80% of all the books I’m listening to than 100% of the zero books you are reading. Lots of free audiobooks at the library, now downloadable to your phone. E-books on the phone also provide a higher quality of distraction than e.g. social media.

6. I know you want to hear about software, since that seems like the easiest thing to change, and in some way’s you’re right. The combination of Google Calendar and Workflowy has made me much less likely to totally forget about things while also reducing stress somewhat (I’m not worrying about what I’m forgetting to do). The challenge is to remember to enter events and deadlines into the calendar as soon as you hear about them, and to remember to check it every day for what’s happening; this is hard at first but soon becomes second nature. The same applies for to-do lists in Workflowy, which is also a great way to take notes or keep things like paper ideas (I now have 11k words worth of paper ideas stored in there; coming up with ideas might sound hard now but once you start reading the recent literature and going to conferences you’ll get plenty). Workflowy is free to use, but charges $5/month for a pro version, which you’ll only need if you actually find it super useful. Which makes this a good time to talk about money…

7. You’re super-cheap, which isn’t a bad thing generally but is pretty dumb when it comes to anything likely to enhance productivity. Think what better productivity means for your expected lifetime income and happiness. Anything that could detectably improve it is likely to be quite valuable, whether that is software or coffee or books or proper climate control. Think- if it were logistically and ethically possible to buy outputs like higher grades or more papers, wouldn’t your willingness to be huge? Now, there are all these inputs that are easily and ethically available that will probabilistically raise those outputs, so shouldn’t your willingness to be be an appreciable fraction of that huge number? Also, if you’re such a fan of Milton Friedman, maybe you could at least 10% act like the Permanent Income Hypothesis is true.

8. Some things just work differently for different people or different types of work. I feel like there has to be a lot you can learn from how Eleanor does what she does, but 2018 me still hasn’t figured that one out.

Overall though, it does get much better, keep at it.

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Network Externalities Can Be Negative

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Economists often explain tech monopolies by reference to (positive) “network externalities”- basically the idea that the more people that use a service, the more valuable it is to each person. So, I want to use Windows not because it has the best features of any operating system in principle, but because most people use it and so lots of programs are made for it, there will be few compatibility issues working with others, et c.

Social media is often said to have the same network externality feature- I want to be on Facebook and Twitter because thats where everyone else is, so I’ll stay there even if some other site has some better features. If everyone else thinks the same way, Facebook and Twitter will maintain durable monopolies.

Network externalities are very important in social media, in that other consumers have a huge influence on how much I enjoy a site. But the externality isn’t always positive; often other users make the experience much worse by saying things that are mean, stupid, or boring, not to mention deliberately trolling.

In a way I’m just saying what’s blindingly obvious to everyone on social media: hell is other people. But I haven’t heard anyone put it this way before, in particular during the recent flurry of conversations about breaking up or regulating “tech monopolies“.

To me this actually seems like a great time to be starting a new, more selective/restrictive/smaller social network (think “the Facebook” starting out only available at Harvard- great filter). In the sea of information that is the modern internet, so much value comes from filtering and curation, and the biggest networks aren’t doing a great job here. Reddit is a great example of both the pitfalls of scale and virtues of being small and well curated- the default front page is a classic reference for what “lowest common denominator” looks like, but the site makes it easy to form small, strongly curated sub-Reddits and many of them are wonderful. It seems like someone figuring out how to implement a new, small Facebook or Twitter competitor would at least have a fighting chance if they can attract the right people and not simply try to grow as quickly as possible.

The Long Tail of Criticism

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One of the many bizarre features of our current political and cultural moment is that every side feels like they’re losing.

One of the generally wonderful features of the internet is the Long Tail– lower costs of search distribution have made it easier to find things that were previously obscure, or didn’t exist at all in mediums like TV, radio, and print publishing that had relatively high fixed costs and strict gatekeepers.

But I’m realizing there is a dark side to this Long Tail feature of the internet- the Long Tail of Criticism. No matter how small or obscure a group is, they have been criticized somewhere on the internet. A group like economists, psychologists, or English professors, who number at most in the low hundreds of thousands, have now been the subject of literally hundreds of critical articles. In politics, people can branch out beyond criticizing Democrats and Republicans to complain about ever-smaller groups like libertarians, Bernie Sanders supporters, “the alt-right”, or fans of whatever public intellectual you don’t like.

Unlike with the classic Long Tail phenomenon where the growth in niche products comes at the expense of mainstream ones, the growth in niche criticism seems to coincide with a near-constant barrage of criticism at large/mainstream groups (genders, races, religions, nationalities, major political parties). Social media seems to ensure that critical pieces reach those they target, if nothing else because members of targeted groups fell the need to denounce them; Twitter is a spectacular engine for making sure people let you know the dumbest or most offensive thing anyone said today so that they can tell you how dumb or offensive it was.

Because people tend to identify more strongly with the smaller groups they are a part of, this Long Tail criticism may be felt more strongly. Sometimes it starts to seem like the internet is bent on attacking the specific groups I identify with, but probably people in every group feel the same way.

I’d love to hear from anyone who thinks “actually, my group is winning and people on the internet love us”. You must be a cat.

Cats heart

Written by James Bailey

May 21, 2018 at 10:05 am

The US Spends 3x the OECD average on Outpatient Care

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You’ve probably heard that the US spends twice what other rich countries do on health care, and this is true. But we actually spend a normal amount on inpatient and long-term care, while spending more than three times as much as other rich countries do on outpatient care: 7.5% of GDP for the US vs 2.5% for the average OECD country. In fact, we spend more than twice as much as the next-highest-spending countries, Portugal and Switzerland, which each spend 3.5% of GDP on outpatient care.

I’m working on a book that will explore why we spend so much.

OECDoutpatientSpending

Source: OECD Health Statistics 2015

 

What Time Travel tells us about Doing Good

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If you were transported back in time a few years with all of your current knowledge, what would you do?

You probably have a lot of ideas about things you could do differently in your personal life. But, say your goal is to make the world a better place. How could you best use your knowledge from the future to accomplish this?

The first idea that comes to my mind is to think of the biggest disasters of the past few years and how they might be stopped or mitigated. But most of these would be near-impossible for one person prevent even knowing that they would happen. How could I, as a grad student in the US, have prevented the Syrian Civil War? Or prevented various countries from sliding toward illiberalism or dictatorship? Credibly warned people about earthquakes or tsunamis? About the best you could realistically hope for is tipping off authorities about a terrorist attack, and even there you would to remember more about the exact times, places, or perpetrators than most people do and find a way to communicate this credibly (“Hi, 9-1-1? I’m a time traveller and I have some information that you’ll really want to…. hello?”).

The second idea that comes to mind is to accelerate progress by bringing back knowledge of future inventions and discoveries. But again, the problem here is that most people don’t have enough detailed knowledge in their heads to make a difference. CRISPR sounds cool but not only could I not reinvent it myself, I probably couldn’t explain it well enough to speed real biologists along the path to discovery. Even in my own field of economics its hard to think of any real breakthroughs I could bring back.

So, would anything really work? The only thing I’m confident in is the Biff Tannen strategy of turning knowledge into money, and money into influence. Biff’s book of future sports scores would be a great way to cash in. But even barring that, a basic memory of the most successful teams to bet on, companies to invest in (e.g. early Facebook), and out-of-the-blue alternatives like BitCoin would be helpful. A few successful investments give you a bigger capital base for the next ones. Then, you can use the money to try to do good in the world, for instance by giving it to effective charities.

What is the lesson from all this? First, that Dustin Moskovitz is a time traveller. It also makes me wonder about my current strategy of trying to improve the world mainly through research, rather than “earning to give“. The most general lesson, though: we usually think that decision-making is hard because we lack information about the future, and we spend lots of time trying to guess at what the future might look like. But this concern could be overrated. Even having a pretty good idea of what the future looks like doesn’t necessarily mean making decisions or having a big impact will be easy.

What makes popular academics popular?

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While most academics work in obscurity, we still show up in the media more than most professions, and a few of us approach genuine celebrity status. What makes these outliers so popular?

An article in the latest New Yorker on the Jordan Peterson phenomenon makes for an interesting case study, particularly as he suddenly became internet-famous in his mid-’50’s following relative obscurity in his field and with the public.

Popularity outside the field often stems from success within it; winning a Nobel, for instance, guarantees a lot of coverage. But some academics succeed wildly with the public following an indifferent reception by their peers, as Peterson shows. He has other features common to popular academics- working on topics that a lot of people find accessible and interesting, and speaking with confidence that borders on hyperbole (most of us might as well be in a competition for ‘most nuanced’).

Another important example, especially for people who aren’t already at the top of their fields, seems to be focusing on a new communication technology that the more established players aren’t using yet. A lot of current public intellectuals are those who jumped into blogging, podcasting or Twitter early and put a lot of time and effort into it. In economics, Tyler Cowen has succeeded best at converting this internet popularity into the trappings of more traditional public-intellectual success: best-selling books and New York Times columns.

Of course, now blogging, podcasting and Twitter are relatively saturated, and no longer present such an opportunity for those that aren’t already well-known. Oddly for a platform that most Americans use, Facebook still seems underused as a platform for reaching people you don’t already know; in economics, Robert Reich seems to have gained popularity by realizing this, along with a good dose of hyperbole. For Peterson, the underused platform was Youtube- again, hugely popular but not really used by academics to popularize their work.

The most under-appreciated reason for why most academics aren’t popular is probably that most simply don’t want to be. Either they don’t see fame as a positive, or they recognize that if they get lots of attention, much of it is likely to be negative. At a minimum, anyone with much internet presence is guaranteed to get criticized in the comments, and often in the main articles. Perhaps more importantly for academics, while a few media mentions increase your standing in the field, getting too popular with the public and the press is a near-universal recipe for having your own field turn on you. This can be from jealously, envy, disappointment that you are taking time away from “real work”, or the perception that you are using too much dumbing-down and hyperbole. For instance, economists often express disappointment in Paul Krugman’s journey from great economist in the 1980’s, to good economist and good public intellectual in the 1990’s, to not-an-economist and famous-but-mediocre pundit after turning up the hyperbole in the 2000’s.

Paul Krugman, Slavoj Zizek, Neil Degrasse Tyson, Jared Diamond, Niall Ferguson, Stephen Pinker…. you can debate how much the hate is deserved vs misplaced but it is always there. For Peterson it has come with unusual speed and intensity. Is it that his hyperbole and dumbing-down is really worse than other celebrity psychologists or self-help types? Is it his “anti-radical-left” political stances? Much of it seems to stem from his audience being primarily young men. Focusing on an audience largely ignored by other academics is part of how he succeeded in the first place; most of us are targeting middle-aged NYT-reading, NPR-listening types, without explicitly realizing it of course.

The easiest way to win is always to be playing a different game than everyone else.

Personally, I hope to do work that people will find interesting enough to read and discuss, but this level of fame does not seem appealing.

Written by James Bailey

March 11, 2018 at 11:08 am