Wolf Work

In the last post I raised a general set of observations about the different types of human personality, but to me they seem even more applicable and relevant when applied to daily interactions in the office.

Whenever a problem arises, there are three ways to approach it:

1. It's part of my job to sort these things, all I can do is to try to fix it and put process in place to reduce future recurrence
2. It's a disaster, this is currently the most important issue in the whole organisation, stop everything and get it sorted
3. There is no such thing as a problem, only an opportunity.

Category 2 obviously belongs to those who may lose their nerve, their poise, their rationality and often their temper when put under pressure. And there may appear to be significant overlap between categories 1 and 3, but 1 acknowledges that there are things outside their control, 3 does not accept that.

Are You Lucky?

This is not a reference to last night's Apprentice, not about trucks having fun, not a reference to an old BBC study that showed how you can make your own luck anyway.

But is your glass half-full or half-empty?

First rule out one exception - clearly anyone born with a serious genetic defect or into war-ravaged famine-festering slums is less "lucky" than a broadly healthy person in the developed world. But let us just look at the different ways that people here deal with misfortune …

The usual distinction into optimists and pessimists is too obvious, there are at least three different ways that people tend to deal with the same unfortunate incident:

1. It's no big deal, we understand that it is human nature to remember the occasional disruption more than the usual smooth journey, but these things even out
2. I'm so unlucky, the breaks never go my way, my queue is the slowest, moan moan moan
3. I love the taste of defeat because it only makes me stronger. It's all of part of an almighty master plan.

There is overlap, people behave differently in different situations. Funnily enough, although category 2 (the traditional pessimists) are the pariahs of society, it is category 3 that can sometimes be the most annoying.

The Economic Ape

Like a minuscule version of Scott Adams' blog, I try to find new ways of looking at old issues, merging economics with psychology with statistics - and consequently there is a fair overlap with Freakonomics. However although that is an excellent site, I think they usually don't do enough to look at the fundamental causes of human behaviour, the basic science. But yesterday they did ... as there was an interview with Frans de Waal. One of his key observations was that it is part of our inescapable nature to be concerned not so much with absolute wealth as with relative wealth and perceived notions of fairness, something I constantly echo at this site.

It's also worth directly quoting his views on a particular Oxford-based scientist: [He] is the most underrated behavioral biologist (ethologist) of his generation. His books have shaped the view of many, because he openly discussed, with great humor and flair, the human-animal connection before we had sociobiology, evolutionary psychology, and the like.

I admire the guy, because it took guts to write what he wrote. As a student, I learned about his book because my professors kept warning us not to read Desmond Morris.

That is almost exactly what I said here just a few months ago.

Economics Semiotics Idiotics

Tim Harford in the FT today pondered an eternal enigma: why do prices so rarely rise in the face of a shortage. For example, if there are more UK fuel disruptions, then it would be logical for petrol stations to increase prices instead of allowing huge queues to build up for tiny rations of fuel.

He does not give a complete answer, hence the use of the word "enigma" in his title. But he offers: The intuitive explanation, of course, is that we irrationally object to high prices even when the alternative is rationing, long queues, and uncertainty over whether we can buy what we really want.

I agree, but the "irrational objection" is just the part of human nature that would prefer to see "everyone" suffer equally instead of distributing critical products by financial capability. It appears that the son of the noted monetarist Milton Friedman also suggests evolutionary psychology could explain this sub-optimal behaviour.

But the whole article talked only of price rises. Remember that a previous price is only a signal, I still think consumer reaction to price cuts is equally idiotic.

Measurement, Control and Negative Feedback

A few days ago I mentioned a problem of measurement, and I was delighted to get a bit of feedback in the comments there.

The "observer effect" is a term for when the act of measurement causes a change to the variable being measured. For example, using different examples to Wikipedia: a speed camera emits radar that strikes the object being measured, thus changing its speed, a flowmeter in a water pipe causes a restriction that impedes the flow.

But the effect is perhaps most significant in infinitesimal physics experiments, which do not concern me, and in behavioural economics, which does.

In sociology, in society generally, the knowledge that people are being observed causes those people to change their behaviour. Hence the need for double-blind studies and libraries of other control techniques. And when the actual thing that you want to measure cannot be measured directly, or if you want to predict future change, then you need to find a proxy measure.

It's amusing that Tim Harford in the FT has asked a very similar question today. Sometimes historical performance of the same variable will be the best measure, but for the "big economic measures" (interest rates, stock indexes, inflation, etc) we must constantly evaluate underlying variables looking for causal ones. There is much potential for statistical correlation techniques here.

Despite the practical difficulties with its implementation, the idea of an expenses-based evaluation of office need had theoretical appeal because the incentive works in the opposite direction to the benefit. This is what you would want from a measure designed to control anything, you want there to be "negative feedback". That phrase has new meanings in the user rated world of eBay and customer surveys, but I refer to it in the Engineering sense of Control Theory - negative feedback is an essential component of almost all systems to keep them operating within desired parameters. Ideally, the greater the force pushing something from the ideal, the greater the force of the automatic counterbalance. I've mentioned this before but my college tutors would kill me for the oversimplification and overgeneralisation.

I am conscious that I am combining two separate problems - how best to measure and how best to control. One day I'll try to elaborate on the fundamental differences, but I'll leave you with another quote from the same Financial Times article mentioned above: My guess is that it is just a matter of time before economists embrace methods from other disciplines in an effort to understand dynamic processes better than we do.

Productivity, Sex, Kids

OK, time to get accusations of sexism and anti-family bias. Yesterday's headline from the British Psychology Digest had the simple headline:

Childless Women Are The Most Productive

While you pause on that headline, also take into account that there were broadly four groups being compared:
- Women with school-age children
- Women without school-age children
- Men with school-age children
- Men without school-age children

The article was peer-reviewed research in the Journal of Vocational Behaviour. Abstract here.

The study seems quite explicit that women without school-age children are more productive than those with them. The BPS summary suggests this is due to "domestic responsibilities" though of course it presents this as explanation not as endorsement.

The study also seems explicit that men without school-age children are less productive than those with them. It suggests that this result is explained by the stereotype of "breadwinners", where increased family responsibilities required the men to work longer hours to earn more.

But that last line hints at the misleading nature of the headline. By productivity, the study measured it simply by counting billable hours. More hours worked equals more productivity. Perhaps true for lawyers in Canada, but is that generally true in the workplace?

And another implicit message in the headline. Free of childcare responsibility, women are more "productive" than men?

Rewarding Mediocrity

Tim Harford, the undercover FT economist, recently wrote an article for Forbes with the same title as this post. Forbes magazine is a collection of glossy advertisements interspersed with the odd article defending the lifestyles of those who look at the glossy ads.

The article has some very good points. The basic argument is a Forbes-friendly line that government handouts are bad. That is what you would expect him to say. The main reason is because the handouts tend to go to the most mature, bloated, consolidated industries, not to the developing emergent industries that need the most encouragement. But this was not a simple regression-to-the-mean argument.

The subtle point is that because the most bloated industries are the most mature, they are already the most consolidated and have already built up the highest barriers to entry. However, whereas small startups in biotechnology may be the ones with the most potential for government kickstarts, there is less incentive for the individual entrepreneur to lobby for industry assistance. By contrast, in mature markets, industry assistance is almost inevitably targeted to those who organise the lobby.

All that does not necessarily justify the catastrophic destruction of "uneconomic" communities, as seemed to be deliberate policy in Thatcherite times. Neither does it necessarily eliminate the possibility of supporting key strategic interests to reduce unmanaged risk, for example to maintain basic self-sufficiency in basic foods to avoid being "held-hostage" by monopoly suppliers. Tim should have noted these mitigations. But the basic point remains, those who shout loudest for handouts may be those who least deserve them.

How many people will select the same option as you?

The slashdots site had a recent "survey" that prompted a lot of discussion. I won't try to collect your response here, that would count as one of those reading "interruptions" that I try to avoid, but it had just one simple question in it:

How many people will select the same option as you?

• 0%
• 1-25%
  
• 26-50%
• 51-75%
• 76-99%
• 100%

It looks very obvious. Cognitive Daily summed up the basic proposition:

At first pass, you might figure that there are 6 possible responses, so if people respond randomly then about 16 percent will choose each answer, so the correct response would be 1-25 percent. But of course, if everyone used that same logic, then many more than 25 percent of respondents would choose that answer. The next logical response would be to move on to 26-50 percent. But once again, if everyone used that logic, the correct response would be higher still.

Very sensible analysis. If over-analysed then it might seem paradoxical. But basically common sense. I do have one further point, for as with my dislike of interruptive multimedia, another blog rule is that I do not just post stuff without adding an original thought. Incidentally, I guessed correctly. Even more incidentally, I work in marketing.

In marketing, we cannot stock every alternative, so we regularly have to predict the "most popular option". Of course that is not necessarily the option that we personally would choose, despite overblown arguments for "you must have personal experience of what you are selling".

For we try to predict the option that the consumer will choose, but that is not necessarily the option that the consumer should choose. We also need to account for the influence of other people's selections upon that choice. We need to guess the proportion of people who will behave rationally, the proportions who will act in isolation or in collusion. We should determine the evolving Nash equilibria. We should resolve the prisoner's dilemma.

Animal Magic

For anyone who read yesterday's post who was a kid in England in the 1970s, it might be possible to think that I was referring to the guy who presented animal behaviour from Bristol Zoo every week on children's television. There are many similarities, but one fundamental difference.

Both characters had an infectious love of wildlife in all its forms. Both had long and varied careers across the mass media of the twentieth century. Both presented television programmes that showed nature at its most basic level - great popularisation to some, dumbing down to others.

However, the fundamental thesis presented by Desmond Morris was that people behave like other animals. The fundamental thesis presented by Johnny Morris was that other animals behave like people. Both arguments have elements of truth. But anthropomorphism of other animals has less relevance to economic policy than zoomorphism of other humans.

Or to put it another way, dubbing an elephant with a silly voice may be very funny but it is not very educational.

Hmmm hmmm hmmm

Following the brief diversion around my ankle, now the third and last in this little series. A very simple summary.

Based not only on the personal experience of many years of management, but also the evidence of independent controlled studies:

Statistical Fact 1: After positive rewards for good results, subsequent performance tends to deteriorate.

Statistical Fact 2: After admonishment for poor results, subsequent performance tends to improve.

Statistical Fact 3: Positive rewards tend to work better than admonishment to improve performance.

I imagine that two days ago, for some people, those three may have seemed contradictory. Perhaps now, for some people, they may be common sense.

A pat on the back or a kick up the backside

Relating the note from yesterday.

As an office worker, in fact as any worker, you perform tasks every day as requested by managers and clients. Sometimes the same request is directed to you in many different guises. You will do some of those tasks well and some of them poorly.

There are broadly only two influences on the success of those tasks. One is the set of factors that you control and the second is "everything else". You would hope that a manager should only reward or punish for the effect of the first set. But in any one specific task, the infinite possibility of "everything else" means it will probably be the more significant influence. However if given enough time and enough tasks, then your own abilities become statistically valid.

So if you have done exceedingly well in one task, you are likely to also do well in the next one, but statistically not quite as well - even if you are praised. Whereas if you have done exceptionally badly, then, regardless of your punishment, you are still likely to do better next time.

That does not mean a manager has no effect, it means a manager must be aware of his own effect.

Your Annual Review

Last week I started about the interactions of psychology and statistics to mass human behaviour, and hence to economic policy and organisational management.

Whether as an officer in the army or as a captain of a sports team or as a manager in a corporation, when reviewing the performance of others, you need to decide whether to concentrate on the positives or on areas for improvement.

Think of the likely effect on future performance. As a famous economist has stated:
I understood an important truth about the world: because we tend to reward others when they do well and punish them when they do badly, and because there is regression to the mean, it is part of the human condition that we are statistically punished for rewarding others and rewarded for punishing them.

That was not obvious. But that was common sense.