The Chicken and the Egg – Influence and Motivation

A couple of days ago I wrote an entry called Consider Your Influence . The idea being that we are influenced by not only people, but by other sources such as art. In the piece I mentioned Tim O’Reilly and Steve Jobs as two prominent thinkers in the technology world. Each of them is very wealthy, but neither of them does it for the money. They are motivated by something beyond a pay check. Dan Pink in his book Drive: The Surprising Truth Behind What Motivates Us , which I reviewed expands on why people behave a certain way. What influences behavior? This PBS video helps:

 

Consider Your Influence

Early this month I wrote a short post called Knowledge and Stories. I hit on how people come to have influence – through correct analysis of some pertinent facts. I was reminded of that post as I read a story about Tim O’Reilly in Inc. magazine. The skinny on O’Reilly is that he is able to see beyond the horizon. He has predicted, and profited, from several movements in technology over the course of his career. He credits his foresight on his thirst for knowledge; he wants his work to be interesting.

Today Apple surpassed Microsoft as the most valuable technology company. It’s higher than Google, IBM, and HP as well. This is a direct reflection of another man with influence, Steve Jobs. Apple as a company isn’t more valuable than IBM or HP. Their intellectual property catalogs are just as thorough as Apple’s and their hardware divisions are staples as well. However, Apple as a brand is beyond comparison right now. Their products are eloquent, but I don’t need them. I can’t as confidently say that about Microsoft, IBM, and HP. There is one question I’d ask Apple: Is being on top a blessing or a curse?

While reading the O’Reilly article I was drawn in by a few segments, but one that made me think was a comment he made about how the big ideas really come from hobbyists and not corporations, R&D, or government. For the most part I agree, hobbyists crystalize the ah ha moment, but what influences them? Part of it is curiosity, part of it is proving to oneself you can achieve something, and part of it is the art of it. We as humans have an affinity for art. We all want to write a great song, a moving poem, or coin a new philosophy. But our creative instincts sometimes flow out through crochet socks, a ham radio or a blog about work.

I’m influenced by people like Tim O’Reilly, songs like Little Faith by The National , and a search for wisdom.

New Graduates Entering the Workforce: What to Expect

Steven Greenhouse wrote up a timely piece for the NY Times today. It’s called ‘Glimmers of Hope’ for Grads. Right around this time of year you can expect this type of story. The premise of the story is that are a cadre of college graduates about to enter the workforce. Should they be optimistic? Is the US economy producing jobs for their talent level. There are theories about entering in a down economy versus a good one and lasting impact it has. Thankfully, Mr. Greenhouse added a whole bunch of stats I think are worthwhile. Here is my run down:

Summary (data from the National Association of Colleges and Employers and the Bureau of Labor Statistics :

  • 2010 is slightly better than 2009 as there is a 5% increase in hiring from a year ago
  • 2009 was down 20% from 2008 levels so the hiring rate is still lagging from earlier this decade
  • 24.4% of college graduates who applied for a job have one waiting post graduation. It was 19.7% last year
  • $47,673 is the average starting salary. Down 1.7% from last year. Average by area of study:
    • Computer Related = $58,746 (up 5.8%)
    • Finance Majors – $50,546 (up 1.6%)
    • Liberal Arts – $33,540 (down 8.9%)
  • Jobless rate for college graduates under age 25:
    • 8.0% in April 2010
    • 6.8% in April 2009
    • 3.7% in April 2007
  • The overall unemployment rate is 9.9%
  • Jobless rate for high school graduates under age 25 who did not enroll in college:
    • 24.5% in April 2010
    • 11.4% in April 2007
  • Deloitte, the consulting and accounting firm is hiring college graduates:
    • 5,300 in 2010
    • 4,800 in 2009
    • 5,400 in 2008

At Penn, university officials said, nearly 22 percent of this year’s graduates planned to attend graduate school, law school or medical school, up from 18 percent two years ago.

Many college graduates are finding jobs that do not require bachelor’s degrees, like retail clerk, office assistant or barista, he said. Using federal labor statistics, he has found that only 51 percent of college graduates under age 25 were working in jobs that require college educations, down from 59 percent in 2000.

“If you work in a job that doesn’t require a college degree, you’ll make 30 or 40 percent less,” he said. “One reason a lot of high school grads are having such a hard time is you have college grads willing to take jobs that high school grads used to get.”

A National Review of Education – Start Evolving Now

The video below is a great end result of several ideas I have running throughout this blog. To sum up: Education needs to evolve:

  • We haven’t changed the educational structure of this country in 100 years (primary school to secondary school to college).
    • That in itself isn’t a bad thing, but it relies heavily on a culture that is stable. SAT format and score adjustments reflect kids are getting better, that’s right better, at that type of thinking and test taking.
  • We need parallel paths that generate alternative skills, especially in local markets. I’m not just talking about vocational skills, but those have been de-emphasized because of flawed policies
    • We need more University of Phoenix ideas. A sort of distributed education system where the curriculum is expert oriented and can be accessed as needed and paid for not by supply and demand but rather the cable system style of subscription. This allows for more popular courses to somewhat subsidize the less popular and a tiered cost model would offer more benefits. It also gives autonomy to the entrepreneur-educator that operates the specific curriculum pod.
  • State and Local governments are pressed currently by budget constraints and good educators and methods for teaching are being abandoned. And those that do remain are hamstrung by a lack of teaching resources or in some cases faulty facilities
    • We have two business models we can leverage to alleviate this situation with creative adjustments. An organization like Donor’s Choose could expand on their version of micro-funding with tapping into the growing number of retired teachers. Time is currency and I bet someone that loves kids wouldn’t mind sharing ideas about lesson plans with fellow teachers. Here’s how I see it, a teacher could be interested in trying a new way to get kids excited about math, but has run out of ideas. So they post a “lesson plan request” instead of a project. This “lesson plan request” spells out the situation and educational goals. Teachers with free time could donate their successful lesson plans and on a limited basis work with the teacher to implement it.

http://video.ted.com/assets/player/swf/EmbedPlayer.swf

 

Why We Make Mistakes – A Book Review

You can’t go wrong with a story involving Burt Reynolds and Joseph Hallinan , in his book Why We Make Mistakes, includes a doozy. Anecdotes, tidbits and fun facts are very prevalent throughout this book making it a quick and insightful read. I recommend this book as an entry into the world of why decisions are made. It’s easy to turn on the news and think the people in charge of whatever the catastrophe of the moment is are dolts, but that isn’t always the case and you could just as well be in their shoes.

Let’s begin this review with aesthetics. I’m the type of person who likes to see a book shelf full of finished books. It’s a trophy case of sorts, so how a book looks among it’s peers is important to me. And Hallinan must have considered this because the cover is quite unique. First of all, he takes the theme of mistakes seriously as the sleeve purposefully doesn’t symmetrically align with the hardcover. The title and author aren’t centered on the spine either. Little images of a delete key and white out blot the blaze orange cover. The font is large, but not childish and there are call outs on the pages to highlight different passages. All in all I like the appearance of the book.

I know what you’re thinking, lets get to the Burt Reynolds story. Here is an excerpt taken from the book and originally orated by Mr. Reynolds to Playboy in an October 1979 interview:

A man walks into a bar. The man’s name is Burt Reynolds. Yes, that Burt Reynolds. Except this is early in his career, and nobody knows him yet—including a guy at the end of the bar with huge shoulders.

Reynolds sits down two stools away and begins sipping a beer and tomato juice. Suddenly, the man starts yelling obscenities at a couple seated at a table nearby. Reynolds tells him to watch his language. That’s when the guy with the huge shoulders turns on Reynolds. And rather than spoil what happens next I’ll let you hear it from Reynolds, who recounted the story years ago in an interview with Playboy magazine:

“I remember looking down and planting my right foot on this brass rail for leverage, and then I came around and caught him with a tremendous right to the side of the head. The punch made a ghastly sound and he just flew off the stool and landed on his back in the doorway, about 15 feet away. And it was while he was in mid-air that I saw…that he had no legs.”

Only later, as Reynolds left the bar, did he notice the man’s wheelchair, which had been folded up and tucked next to the doorway.

This story is about how people see. The human eye has a wide span of range in it’s field of view, but we really only can focus on two degrees in front of us. Burt Reynolds, even with several clues in plain sight, didn’t see that the man had no legs.

Here are a few other insights I thought would exemplify the contents of this book:

We are abstract thinkers. Suppose you are on a busy city street. There is a general hum of cars coming and going, a coffee shop, some offices off the sidewalk and several people walking toward you. Their names are Jim, a six foot tall with brown hair man, Phil, a short thin guy, and Jose, a stocky Latino. The tall guy and the stocky guy are dressed in construction worker clothes and the other one has a suit and tie on. As they approach you, you will discern their height and their build, but you’ll remember that two of them are construction workers and the third is a business man. Can you remember their names without looking back? Probably not, and if you do you are decomposing their job to their physical appearance to their names. Names aren’t memorable, abstraction associations are. Jim, the construction worker.

There is a section on something called hindsight bias. When we look at the past we have the benefit of knowing how things turn out. Because of this we can quickly weed out the important facts and the irrelevant ones. The outcome will almost appear inevitable; the facts are obvious. However, as the events occur the people involved don’t have that luxury. All the facts must be considered relevant and decisions are made based on unaligned information. Something that is meaningless can appear to be valuable and vice versa. Humans have a bounded rationality – time and situations affect outcomes. We need to consider the environment. Was there too much information? Too many distractions? Temptations? Norms in behavior? or What? The person who made the decision is ultimately accountable, but hindsight bias can make them better or usually worse than they really are.

“Almost everyone is overconfident – except the people who are depressed, and they tend to be realist.”  says Stefano DellaVigna. This sense is actually a realm of business as well. Millions of people buy gym memberships expecting to shed 20 pounds and look marvelous. What really happens is a few visits and a recurring billing statement on the 15th of every month. Or take Nutrisystem, they don’t sell meal replacements for those wanting to diet. They sell hope. They sell an improved body image and many people buy thinking it’s the answer to their health and attractiveness.

Its rare when someone is well calibrated, meaning there is a small difference between their actual and perceived abilities. 

There is an emerging consensus among some psychologists that human decision making operates on two levels – one more rational, one more visceral – and that these two constantly trade off… Many of our mistakes appear to happen while we are operating in one condition but think we are operating in the other.

Finally, I recommend this book to anyone interested in the behavior side of decision making and why logic and reason don’t carry the day. It’s a fun and quick read with many enlightening segments that makes you view certain situations differently.

Here’s my breakdown of notes taken while reading this book.

 

Lulled Into a False Sense that the System Knows Better than You Do

Back in October of last year I was on a kick about thin value and thick value. I used High Frequency as an example of Thin Value because it only cared about the spread between the bid and the ask. Comedy Central did a bit on it that I reposted in my creatively titled entry A Funny Bit about High Frequency Trading .

The stock market, as you’ve probably heard, had one of the oddest days in it’s history a week ago. At one point the Dow dropped almost 1000 points and recovered in mere minutes. I’ve been waiting to write about it to see what happened. I knew it wasn’t a fat finger as was suspected. But I thought it could be cyberterrorism. Someone decided it was time to make a lot of money (make the markets drop, buy $40 stocks at a penny and then sell when they rebound to $40). But nothing has surfaced about that either. What appears to have happened is a classic example isolated engineering. What I mean is that one part of a system expects the other parts to only vary so much and builds that into the business rules, or in this case, the algorithms.

It used to happen a lot at intersections that had car traffic and train traffic. The light controlling car traffic has to know when train traffic is coming and circulate the cars through the correct passage; basically red light those that are perpendicular to the train rails. It seems obvious now, but people have died because the rail and car traffic partners didn’t consider each other in their safety approaches. Each independently worked fine, but together they didn’t.

There are two follow up writings I’ve enjoyed today about the high frequency situation. The first is a blog entry by James Surowiecki called The Flaky Stock Market and the other is an article by Floyd Norris called Time for Regulators to Impose Order in the Markets .

I like the Surowiecki post because he agrees with my opinion that the markets, although flawed, worked as intended. The computers don’t consider context. You build rules for them to follow and those rules are based on certain probabilities. But no one can predict the future, so when things get out of whack there must be some sort of reasonableness associated with it. And that is the topic of my thin and thick value posts – high frequency trading doesn’t care about the equity in question, it only cares about price. Fundalments are ignored. And it’s intentionally ignoring the purpose of capital markets in the first place – to fund money to efficient uses, usually succeeding businesses. New information and interpretation of the information isn’t happening, so the herding of ideas occurs and that leads to pooled risk.

I liked the Norris article because it lays out how having competition for markets is good, but they need to be coordinated. Creating a vacuum in one can unintentional set off a panic in another. Here is where establishing business rules makes perfect sense. For instance, if the NYSE puts in a delay, the other markets should flip a switch and delay as well.

Ultimately high frequency trading is good because it lowers transaction costs, but it encourages lazy management; the speed is so fast that you hardly notice. It lulls you into a false sense that the system knows better than you do.

Looking at the Scoreboard Only Takes a Second – It’s Worth It

Every time I write a blog entry I’m sidetracked for about five minutes before I begin. These five minutes are spent looking at my page views and occasionally my other stats like the survey and articles printed. These numbers are very modest and they are not why I do this. But it’s nice to see when a post is popular or someone has actually printed a post off (that means they paid for it – its a stretch, I know). The best, of course, is comments. In the land of the internet comments are gold.

I’m driven intrinsically to improve my writing and my analysis of ideas, but seeing some sort of score is motivating as well. Which brings me to the prompt for this post. HBR.org has a blog post by Michael Schrage called Why Keeping Score Is the Best Way To Get Ahead . He uses a story about a steel executive named Charles Schwab (not the same guy). To get a plant to produce more heats he pits the day shift against the night shift in a good natured competition. He does this by simply writing a big 6 on the chalk board. That one number was symbolic of what the day shift could produce that day. Not to be out done the night shift produces seven and documents it on the chalk board – 7. The friendly rivalry is born and the mill becomes a peak performer.

Schrage then goes into how leaderboards can have negative impacts as well. It’s worth thinking about, but when the measures become part of the everyday job, they lose their fun and motivation drops again. I’d introduce these competitions periodically and make the count about something that is easy to improve but has a cascading impact. I’d focus it on behaviors that I want to become habits.

With all that said, I’d try to inspire my team to find little personal counts they make their own. No one would have to know about them except for themselves. They can keep their own score. It’s like the five minutes I spent before I wrote this entry.