Saturday, April 30, 2011

Relaxed Parenting

Bryan Caplan, one of my favorite bloggers and Economics Prof at George Mason has a new book out with some findings that may seem counterintuitive. He did a meta-analysis of parenting research – looking at all the research that investigated the effects of parents’ engagement with the kids, stress on education, discipline, and other variables. What he found is that when you put it all together, these things can have large short term effects but over the long term they had no impact on the future career success, financial success, or happiness of the kids. Genetics and the external environment were much more important. So he recommends just chilling out and enjoying your children. If we want to improve the world, we are better off encouraging parents with good genes to have more kids.

I know this will be controversial to many of you. But the book is based on solid research methods. And the good news is that being a parent should actually be less work than most of us put in.

Primed Placebo

Here is a variation of my favorite medical intervention – the placebo. There is a chemical that causes people to have violently ill and painful reactions to alcohol. It was discovered by accident in the rubber processing industry. The workers found themselves unable to drink any alcohol without feeling intense pain – like they were exploding. It stays in your body up to a couple of days if you are exposed.

So the variation on the placebo is to turn this into a cure for alcoholism. They told the patient that they were implanting under their skin a 3 year dose (which doesn’t really exist). Then they said to test it they put a drop of the drug and a drop of alcohol on their tongues. They felt this violent, extreme pain for a brief time (it was only a drop). They were told that the impland had 100 times that amount of the chemical, so if they drank any alcohol during those three years they would feel 100 times the pain. Fear of this pain was supposed to keep them on the wagon.

If the patient fell off the wagon within a day or two, they would still get sick because of the residual effects of the test dose. And most people who did fall off, did so within the first few days. Those who had enough fear to get through those first few days made it through the three years and went back for another placebo implant.

Wednesday, April 27, 2011

The value of Bubbles

Great article in Bloomberg BWeek this week (4/18-4/24 issue) by Peter Coy. The gist is that financial bubbles can be good or bad. I always that this was true depending on who you are. If you are employed in the sector, you take your money home with you. If you sell before the bubble bursts, then you get a good (although perhaps undeserved) return. But if you are stuck holding shares when the music stops, you lose your shirt.

But they divide it up another way also. It depends on part on what is being bought and sold. If it is something with durable value, then the bubble can be good for society. The tech bubble created a lot of dotcom crashes, but also a lot of bandwidth all over the world that was eventually exploited by Amazon, Google, YouTube, etc.

If it is something that keeps a constant value, then it just transfers money from bad investors to good investors. For example, trading in gold right now. If you buy it at $300, sell it to me at $1500, and then I have to sell it later for $300, there is still an ounce of gold sitting in a vault somewhere. No net net change on society except for the temporary stress on the economy if the bubble is a big one.

It's when the bubbling asset loses value that bubbles really hurt. All of the extra housing that was created in 2000-2006 is the wrong size, in the wrong place, and getting moldy. So in addition to the short term stress on the economy, there is also a loss of real value in the asset. These are the bubbles that we really have to watch out for, and that perhaps Central Banks around the world should prick early.

Monday, April 25, 2011

Govt Regs v Darwinist selection of business models

There was a fantastic debate on the Smirconish show last night (I think it was a repeat broadcast from Friday). Some concert venues/bands have created a new way of selling concert seats. In one sense, it is environmentally friendly. Instead of a ticket, you just swipe the credit card you used to pay for it at the venue entrance. No paper needed.

Scalpers hate this because they can’t resell tickets. Stubhub and Ticketbroker also hate it. The only way you can have someone else use your seat is if you trust them with your credit card for the evening. Kids yes, good friends yes, but EBay – probably not. So they are lobbying to get this made illegal.

The reason I found the debate so fascinating is that both sides claim the free market side. The concert venues and bands say that government has no business telling them how they can or can’t sell tickets. And it’s good for fans because without scalpers they can get tickets at regular price. So real fans show up at the concert. The scalpers say that once a customer purchases a ticket they should have the freedom to do whatever they want with it, including reselling it to a stranger.

My view on this would be familiar to anyone who reads my blogs. I am against government regulations that reduce freedom (unless there is a really good reason), but I am in favor of allowing companies to pursue whatever business models they want, even if it is a stupid one (with perhaps exceptions for anti-trust, safety, and truthfulness requirements). The free market will soon decide if they can be successful or not. If not, they will go out of business soon enough and the stupid behaviors will disappear. So I am on the side of the concert venues. Not because I think it’s a good idea, I think it is a bad idea actually. But I support their right to implement bad ideas between one private organization (the venue) and another (the customer).

I don’t think I know enough about peanut allergies to make a similar conclusion on whether peanuts should be banned from airplanes. I think it makes total sense for the airlines to switch to something less allergenic (pretzels or chips are fine). And they can have something during the ticketing process that asks whether anyone has a serious allergy so they can make an announcement before the plane leaves the gate asking people not to eat peanuts. This last thought is because I have heard that some people are so allergic that they can be four rows away from the peanut and still have a serious attack.

But while I think this is a smart business strategy, do I think the government should mandate it as a law? That’s tough. You can ban airlines from serving peanuts, but do you ban people from bringing peanut-containing products on the plane? If not, it doesn’t really help to ban airline peanuts. And what about international flights (and international passengers)?

I have heard of some public schools that are banning peanuts. They don’t serve any and tell the students not to bring anything with peanuts. This is a slightly different situation because you can find out about serious allergies ahead of time (when parents register their kids for school). Maybe there is a better solution than a ban. Especially since the kids attend the same school for years, so they would have to give up PB&J and Snickers bars for a long time.

Friday, April 22, 2011

Twitter Wars in Syria

Syria presents a great example of how controversies can be fought on Twitter. Although these are not solutions based on proving your ideas, they are more like denial of service attacks.

What is happening is that the protesters in Syria are using Twitter to communicate. They created a hashtag #Syriaprotest to send out notices about where they are going to demonstrate and other logistical coordination. The Syrian government wants to interfere with the protests, so what they are doing is spamming the hashtag. They have an automated system that sends thousands of messages containing pro-government propaganda to #Syriaprotest. No one believes the propaganda, but it makes it impossible to find the relevant tweets.

So the protesters have to create a new hashtag, communicate it to each other as secretly as possible, and then they have a few hours before the Syrian government figures it out and starts spamming that one too. Unfortunately, by the time a critical mass of protesters has learned the new hashtag, so has the government. And the cycle starts again.

Have you ever been wrong?

This Ted talk rocks!! Anyone interested in innovation, creativity, and complex decision making will get more out of these 17 minutes than any other I can think of.

The basic message is that if I asked you "what does it feel like to be wrong?" you would think of what it feels like when you REALIZE you're wrong. Not when you are wrong. When you ARE wrong, it actually feels like you are right. Except that there is some fool out there who disagrees with you.

Unless you are always right, please take a few minutes and watch this.

Monday, April 18, 2011

Human-like robots

Great article in the April Wired magazine. They report on a study (full PDF available) by some Stanford researchers who found that people who are operating human-like robots attribute the behavior to the robot a lot more than people who operate non-human-like robots, who see the robot as extensions of themselves.

This may sound esoteric, but it has lots of important implications. People remotely operating military robots that are human-like might become overly violent because they can attribute the behavior to the robot (rather than themselves). On the other hand, it might be useful to use human-like robots for search and rescue to minimize the amount of traumatic stress felt by the operator (because they can dissociate themselves from the work). Our brains are often fooling us by anthropomorphizing objects. It would be nice if we can learn from it and take advantage when appropriate.

Customers who self-identify with your business

Another great study, this one in the latest issue of the Journal of Consumer Research. They found that when people have a falling out with a company that they use regularly because it has good prices or good products, they get angry and take their business elsewhere (obviously).

BUT, when they have a falling out with a company with which they self-identify (which marketers usually love because it generates lots of loyalty), they don’t just get angry, they also feel shame and guilt and embarrassment. So they are much more likely to do something vengeful. Self-identifying brands are ones like Whole Foods, Patagonia, or some other brand that shares your “values.”

If you are lucky, they will just throw away or break the products they have of yours. But in some cases they can be much more public in their retaliation. With social networks, the scope of the bad publicity can be much bigger than it used to. (Former) customers might rant and rave about how bad you are to all their Facebook contacts.

They found that these falling outs don’t have to be based on some kind of incident like bad customer service. Even if they just slowly get tired of the company over time, they may retaliate. The authors recommend that in these cases, you may be better off promoting a smooth disengagement rather than trying to win them back, which could just be more emotional. Send them a coupon for a similar product by another company. Sounds counter-intuitive, but it may be a way to limit the damage.