Tim Harford The Undercover Economist

Articles published in March, 2018

How referendums break democracies

The Dutch parliament have just agreed to abolish advisory referendums. I don’t blame them. I did not much care for the result of the latest referendum that was held in the UK, so I confess to disliking referendums with the fervour of a sore loser.

The winners no doubt feel more cheerful about the idea but even they may agree with this: the campaigning process was corrosive, and the consequences for the health of British politics have been even worse.

This scepticism might be seen as kicking democracy when it is down. The Pew Research Center found last year that 17 per cent of Americans think military rule would be a good idea, while 22 per cent favoured a strong leader “without interference from parliament or the courts”. The numbers in the UK were fairly similar.

Most of us still believe in democracy, but even its staunchest supporters will admit that it has its flaws. The most obvious of these is that we voters pay little attention to the issues. Consider Jeremy Corbyn’s recent shift; his opposition Labour party now advocates the UK leaving the EU but remaining in the (or “a”) customs union — not to be confused with the single market. This has been roundly agreed to be a significant change in the political landscape. But the now-momentous-seeming distinction between the customs union, the EU and the European single market was obscure to all but the wonkiest of wonks until a couple of years ago (myself included). It surely remains obscure to most voters today.

I do not mean this as a criticism of the voters. Why should we pay attention? We have other things to do. A decade ago, economist Bryan Caplan’s book The Myth of the Rational Voter (UK) (US) argued that it made sense for us to express our misconceptions, prejudices and tribal loyalties at the ballot box, since doing so was almost costless.

A voter thinking of popping to the polls and then trying out a new pizzeria would be perfectly rational in checking out TripAdvisor, rather than the party manifestos. This is because her vote will almost certainly not make any difference to her life, but her choice of restaurant almost certainly will. We vote because we see it as a civic duty, or a way of being part of something bigger than ourselves. Few people go to the polls under the illusion that they will be casting the deciding vote.

If voters are not paying close attention, then what might we expect from a referendum? The psychologist and Nobel laureate Daniel Kahneman, in Thinking, Fast and Slow (UK) (US), writes, “When faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.”

The difficult question in a referendum might be, “Should the UK remain in the EU?”; the easier substitution is, “Do I like the way this country is going?”

Another simple heuristic is this: “If one of the options was awful, they wouldn’t be asking, would they?” Except that in the UK’s referendum on EU membership, for reasons of short-sighted political expediency, they did ask.

Of course, any democratic system is weakened by the fact that voters are not paying close attention. But representative democracy provides a line of defence against voter ignorance, by asking us to elect someone to make considered choices on our behalf.

I can’t fix a blocked drain, so I ask a plumber to do it for me. I am not sure whether that blotch on my cheekbone is malignant, so I ask a doctor. And I am, truth be told, a bit vague about the difference between the European Court of Justice and the European Court of Human Rights, which is why I elect an MP who can call on the advice of civil servants and the House of Commons library on my behalf.

I may make the same knee-jerk, tribal decision in an election as in a referendum, but at least I will be assisted by my recognition of longstanding party brands. Just as we recognise brands like Apple, Coke and HSBC, most voters know the difference between Conservative and Labour, or Republican and Democrat. We vote for people who seem to share our instincts and trust them to handle the details.

These brands have another advantage: they provide their owners some modest incentive to tell the truth and keep their promises. The shortlived campaigns that coalesce to fight referendums have no such constraints.

That points to one other disadvantage of a referendum: there is nobody to hold to account after the result. Theresa May campaigned for Remain. Three-quarters of MPs were for Remain. So if the result of the exit process goes badly, who can be blamed? Not them — and we’re certainly not going to blame ourselves. The buck stops nowhere.

No voter can master every issue, and few voters try. Any democratic system must cope with that. Referendums, instead, invite us to ignore the question, give the snake-oil peddlers an edge, concentrate our ignorance into a tightly focused beam, and hold nobody accountable for results. They magnify the vulnerabilities of our democracies and diminish their defences. The Dutch are wise to avoid them.

 

Written for and first published in the Financial Times on 2 March 2018.

My book “Messy: How To Be Creative and Resilient in a Tidy-Minded World” is now available in paperback both in the US and the UK – or through your local bookshop.

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“Basic income is about the freedom to say no” – Rutger Bregman goes bouldering

“You have the instinct for it,” says Rutger Bregman, as I haul myself up an indoor climbing wall, nestled under the arches at Vauxhall station in London. “Shit, this is some talent!” he bellows, as I reach the top. I am inwardly delighted, even though I realise the praise is absurd: I have climbed about four metres and it’s a beginner’s route.

Bregman has suggested that we go bouldering together. Bouldering is a variety of rock climbing, done over short distances without safety ropes. Coming from Bregman, it seems a curious choice. The young Dutch historian and author is most famous for advocating a universal basic income — a regular cash grant to every single person, given unconditionally, to support them and provide a minimum standard of living, no matter what might go wrong.

His book, Utopia for Realists (UK) (US), has been a surprise bestseller, finding an audience eager for radical yet plausible policy ideas. Yet this celebrated advocate of unconditional handouts has chosen a sport that is all about self-reliance, and the ultimate departure from the principle of the safety net.

“There is a safety net — look!” says Bregman, pointing at the crash mats. I am not totally convinced. It doesn’t take long before I fall off — a combination of lack of skill and lack of fitness. As I peel myself off the mat, I realise the skin of one elbow has not remained with me.

Bregman’s contention is that a basic income would be the logical and perfectly affordable next step for a human race that has already taken huge leaps forward since before the industrial revolution, when, he writes, “nearly everyone, everywhere was still poor, hungry, dirty, afraid, stupid, sick and ugly”.

Bregman himself looks the picture of health, possibly because, at 29, he’s 15 years younger than me, and possibly because he’s been practising. He climbs twice a week; his T-shirt says Sterk, the name of his local bouldering hall in Utrecht. The word means “strong” in Dutch. My limited experience of rock climbing with my daughters has taught me that the legs take the strain. Bouldering, however, requires more upper-body strength.

“It’s more explosive,” I am told. And within 15 minutes, I’m done: the tendons below my wrist have given up and I am close to doing the same. The first three routes were exhilarating but without a rope, even the short climbs under the arches of VauxWall are starting to feel vertiginous. I’m losing my nerve as well as my strength. Bregman, on the other hand, is just getting started.

“How long is a typical session?” I ask. “Fifteen minutes or an hour or . . . I can’t imagine anyone keeping this up for an hour.

“Two, two-and-a-half hours, if I have the time. Which I usually don’t,” he says. “If you warm up slowly, not like today, then you are at your peak after 45 minutes, and then you can keep that up for another 45 minutes.”

I spend much of the next hour watching Bregman solve one route after another. Sometimes he is dangling loosely off an overhang, as though resting in an invisible hammock. Sometimes he is moving laterally, his legs as high as his arms in a spiderlike scurry across the wall. Once, he hangs vertically as he works his way from left to right across a whimsical hold: a huge pair of pouting lips in one corner, just below the roof. He took up the sport three years ago. “I didn’t like to exercise at all. It’s so soul-destroying. But this is different.”

Bregman sees soul-destroying activity in much of modern life. Too many people, he says, are doing jobs they dislike or see as pointless, because they have no alternative. A basic income would liberate people: perhaps a minimum of €1,000 a month, given unconditionally as a cash grant, or through the tax system as a negative income tax.

Bregman has branded a basic income as “venture capital for the people”. A good line, I congratulate him. But what does it mean?

“OK, so basic income is all about the freedom to say no. That’s a privilege for the rich right now. With a basic income, you can say no to a job you don’t want to do. You can say no to a city in which you no longer want to live. You can say no to an employer who harasses you at work . . . that’s what real freedom looks like.”

Part of the impetus for a basic income has come from the sense that the robots are coming for our jobs — maybe not today, maybe not tomorrow, but soon. The venture capital firm Y Combinator is funding research into basic income, which seems to be a popular idea in Silicon Valley. But Bregman has no patience for the idea that technological change underpins the case for basic income.

“This is not about AI,” he insists. “You go back to the 1960s, and all the economists, all the philosophers, all the sociologists said we’re going to be working less and less and less and less and boredom is going to be the great challenge of the future. Didn’t happen . . . mostly because we have this ideological obsession with creating new jobs.”

Advocates of basic income have included two rather different Nobel laureates: the civil rights activist Martin Luther King Jr and the free-market evangelist Milton Friedman. The idea draws support from leftwingers who see an opportunity to redistribute and to give workers more bargaining power, and rightwingers who see an opportunity to dismantle paternalistic bureaucracies and empower ordinary people to make their own choices.

Bregman’s own sympathies seem to lie more with the left. At one point I tease him about the fact that he is in London on Valentine’s Day while his wife Maartje (a photographer and collaborator) is not. His response is spat out with a vehemence that might have been for comic effect, and might not: “You know that Valentine’s Day is just a capitalist scam to make you buy stuff you don’t need, to impress people you don’t like, right?”

But like Friedman, Bregman is clearly no fan of paternalistic bureaucracies. “Nowhere you’ll find as much support for something like basic income as [among] people who work for unemployment agencies,” he says. “In Holland I did a couple of lectures for those groups and they just give me a standing ovation when you say that we should abolish their jobs.”

It is the unconditional nature of the cash transfer that particularly appeals to him. With the transfer of money, no strings attached, there is a transfer of dignity, of bargaining power, and of responsibility. People have to make their own choices.

Again, I venture a connection between the basic income idea and bouldering: it’s a solo sport in which individuals need to find their own path, judging risks for themselves?

“If I would make this sport political, what I like about it is that it is competitive, but with yourself. So you’re not competing with anyone else, you’re just trying to do better yourself. And it’s a puzzle, every time it’s different. It’s a very creative sport, I guess.”

Utopia for Realists was itself a slowly assembled puzzle. The early drafts were articles in De Correspondent, an online crowdfunded news website founded by a Dutch pop-philosopher and columnist, Rob Wiijnberg. “It’s an anarchist-idealist collective of journalists who don’t follow the news,” Bregman explains.

This may explain why Utopia for Realists is such a curiously enjoyable read. The title sums up Bregman’s belief that evidence-based pragmatism should not rule out provocative, ambitious ideas. The book is lively, well researched and full of unlikely pieces of history, from the Speenhamland system of poor relief, developed in England in 1795, to US President Richard Nixon’s flirtation with the idea of a basic income in 1969. (Bregman studied history rather than economics or politics.) It is also perfectly orthogonal to anything one might read in a newspaper. The book was published in Dutch by De Correspondent, built a following slowly, then was self-published in English.

“I was my own PR employee at that point. I was emailing everyone — no interviews, no reviews. Nothing.” Yet when Bregman emailed me out of the blue with the English translation and a request for my support, I was sufficiently impressed to endorse the book. Steven Pinker also gave it a glowing cover quote. And as Bregman and his colleagues were pondering giving up, the project suddenly took off. While not quite Fifty Shades of Grey, in a short space of time Utopia for Realists went from brave failed experiment to international bestseller, due to be published in 28 languages.

“Ideas always start on the fringe and then they move towards the centre,” he says. “Then I was invited to come to Davos this year. Like, yeah, that’s pretty much it, right? My first lectures about basic income were for anarchists with long hair, and smelly.”

Did he go to Davos? “No, I had to go to a book fair in Colombia.” He did, however, give a talk at TED last year, and seems aware of the irony of advocating the dismantling of an entire class of do-gooders.

“You’re talking for an audience of 1,500 people, many of them involved in kinds of charities. The CEO of Toms, for example, was there.” Toms donates a pair of shoes to a poor family for every pair purchased; Bregman isn’t impressed. “Buy one shoe, give one shoe. That is just a horrible, horrible idea.”

He got a huge round of applause when he proposed scrapping aid bureaucracies and replacing them with direct cash transfers. The rapturous reception struck him as odd. “I was saying we should hand over the salaries of all these paternalistic bureaucrats and give them to the poor, who are the real experts on their own lives. And they were all clapping and laughing, and I was thinking on stage, ‘But I’m talking about you! It’s you!’”

It’s a good talk, I tell him. “I like to prepare for these things. I knew it off by heart three months before I went on stage.”

I press him on the details of the talk. He skips a little too lightly between the idea of replacing international development aid with direct cash transfers to poor people, and the idea of overhauling modern western welfare states to place unconditional cash payments at their heart. The two ideas are cousins, not identical twins, I suggest. Adding a dollar a day, no strings attached, to a non-existent social safety net might be transformative in rural India or Africa. A resident of London is going to want a little more than that before she willingly gives up her housing benefit. Bregman agrees: his focus now is on welfare reform.

Another question mark is over the evidence base for a basic income. Bregman mentions “dozens of experiments” but, arguably, there has never been a completely satisfactory randomised trial of a long-term basic income. (A literature review by the charity GiveDirectly counted six shorter-term randomised trials; policymakers should conduct many more.)

One promising episode — a four-year trial in Manitoba, Canada, in the 1970s — received little attention. When the economist Evelyn Forget managed to get hold of the mothballed archives in 2009, they were on the verge of being discarded. There is a new study in Kenya, funded by GiveDirectly. With 5,000 recipients getting a basic income for 12 years, that trial shows real ambition — but the income in question is just over $20 a month. This is unlikely to tell us much about reforming a European welfare state. Nor is a much-hyped but rather small trial in Finland, which will last just two years and is focused only on those already receiving unemployment benefits.

Other trials have been excitedly announced but have yet to begin, let alone conclude. We are still waiting for a study large and patient enough to tell us much about a basic income in a developed economy. So what are these “dozens of experiments”?

Bregman says that the experiments he has in mind are less evaluating a full basic income scheme, and more exploring the impact of cash transfers in development aid. That is indeed a well-studied area, although not quite the same thing. Those experiments provide encouragement for proponents of a basic income: households tend to put the money to good use, and reap long-term benefits.

By now, we’re talking over a coffee, my enfeebled hands thankfully strong enough to grip a mug. My final question is about one of his other ideas: dramatically liberalising immigration rules.

“Every utopian system is obviously grounded in the injustices of the present,” he says. “What’s the biggest injustice in the world right now? It’s pretty easy to see. It’s borders: apartheid on a global scale.”

But while basic income seems to be having a day in the sun, an end to passport control is hardly in tune with the Trumpian zeitgeist, is it? “Well that’s almost my problem with basic income right now. I get questions during lectures, people say, ‘Is this really a radical idea?’ So I’m like, I should move on. Because utopias are meant to make people angry.”

Fair enough: as in bouldering, so in utopian politics. Once you’ve solved one puzzle, it is time to move on to a new challenge.

 

 
Written for and first published in the Financial Times on 9 March 2018.

My book “Messy: How To Be Creative and Resilient in a Tidy-Minded World” is now available in paperback both in the US and the UK – or through your local bookshop.

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28th of March, 2018HighlightsOther WritingComments off

Zombie companies walk among us

For vampires, the weakness is garlic. For werewolves, it’s a silver bullet. And for zombies? Perhaps a rise in interest rates will do the trick. Economists have worried about “zombie companies” for decades. Timothy Taylor, editor of the Journal of Economic Perspectives, has followed a trail of references back to 1989, noting sightings of these zombies in Japan from the 1990s, and more recently in China.

The fundamental concern is that there are companies which should be dead, yet continue to lumber on, ruining things for everyone. It’s a vivid metaphor — perhaps a little too vivid — and it is likely to be tested over the months and years to come if, as almost everyone expects, central banks continue to raise interest rates back to what veterans might describe as “normal”.

Claudio Borio of the Bank for International Settlements recently gave a speech in which he worried about the tendency of low interest rates to sustain zombie companies. Mr Borio has consistently been concerned about the distorting effects of low interest rates, but the zombie element of his argument adds a new twist.

Researchers at both the BIS and the OECD, the club of wealthy nations, have found evidence that low interest rates seem conducive to the existence of zombies, which they define as older companies that don’t make enough money to service their debts. As interest rates have fallen around the world, such zombies have become more prevalent and have also shown more endurance.

On average, across the US, Japan, Australia and western Europe, the proportion of firms that are zombies has risen fivefold since 1987, from 2 to 10 per cent. The zombies walk among us.

Why should we worry? One obvious answer is that zombies absorb resources. If a zombie retailer occupies a space on the high street, that makes it harder and more expensive for a start-up or a successful competitor to move in. The same goes for any resource from advertising space to electricity, and of course it goes for staff, too.

We would usually expect a thriving company to be able to outbid the walking dead for anything necessary, from a finance director to a unit in an industrial estate. But the status quo always has a certain power, and in some cases, the zombie might be at an unfair advantage.

Consider a zombie bank, propped up by a government guarantee but basically insolvent. Gambling on resurrection, it tries to expand by offering high rates to depositors and cheap loans to creditors. In the late 1980s, Joseph Stiglitz — later to win a Nobel memorial prize in economics — proposed a “Gresham’s law” of savings-and-loan associations based on this tendency: bad associations crowd out good ones.

More recently, the collapse of Carillion, a large British outsourcing and construction firm, showed a similar dynamic. The more Carillion struggled, the more desperate it became to win new business — which meant aggressive bids in competitive auctions, dooming Carillion while starving competitors of business.

Having written an entire book about the importance of failure, I am naturally sympathetic to Mr Borio’s argument. Modern economies have a low failure rate — probably too low.

Still, one should not be too cavalier about this point. To ordinary ears, bankruptcy sounds unambiguously bad. If you spend too much time thinking about zombie firms and economic dynamism, bankruptcy starts to sound unambiguously good.

Cut down those zombies and let highly productive new firms grow in the rich soil, fertilised by those zombie corpses, sounds like — forgive the play on words — a no-brainer.

But should we really be so pleased that so many of the UK’s coal mines, or the auto suppliers of Detroit, have been successfully killed off? If nothing has replaced them, there is nothing to celebrate.

One of the lessons of recent economic research by economists David Autor, David Dorn and Gordon Hanson has been that productive new firms do not necessarily spring up as we might have hoped. Mr Autor and his colleagues have, in a series of influential papers, tracked local areas subject to the sudden shock of competition from imported Chinese products. Their conclusion: recovery is neither quick nor automatic.

Nor is it always easy for laid-off workers to stroll into fresh jobs: if you have worked for several years stitching soft toys, then the obvious next step when the toy factory lays you off is to start stitching shirts or trousers instead. Unfortunately, that is also the obvious next move for the importers, or the robots.

We can make a long list of policies that might help new productive firms to get started and expand: education, infrastructure, flexible regulations, small-business finance and so on. There is some evidence in favour of these policies, but no checklist can guarantee results.

Still, that is where to focus our attention as the zombies start to expire. The easier it is to start a new idea, the more hard-nosed we can be about killing off the old ones. It is necessary that the zombies must die, but that cannot be where the story ends.

Written for and first published in the Financial Times on 23 Feb 2018.

My book “Messy: How To Be Creative and Resilient in a Tidy-Minded World” is now available in paperback both in the US and the UK – or through your local bookshop.

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Messy – the joy of chaos

If you’ve been waiting for the UK publication of “Messy” in paperback, your patience has finally been rewarded! Sorry it’s taken so long; there was the small matter of an epic history of technology and economics to deal with along the way.

 

‘Utterly fascinating. Tim Harford shows that if you want to be creative and resilient, you need a little more disorder in your world. It’s a masterful case for the life-changing magic of cluttering up’ – Adam Grant

 

Messy is an exploration of not only of the joys of an untidy desk, but of improvisation, ambiguity, and perhaps most importantly, turning obstacles into ideas. It features Martin Luther King Jr, the jazz legends Keith Jarrett and Miles Davis, a group of near-murderous 11 year old boys, a host of malfunctioning sat-navs, Benjamin Franklin, a pugnacious chatbot, Le Corbusier, Stewart Brand, Brian Eno, and David Bowie. As you can imagine, I loved writing the book.

Take a look at my Messy-inspired reading list, and for a taste of  the ideas and the storytelling in the book, try my TED talk:

You can order Messy via Amazon here or a variety of other stores here. And please spread the word!

‘It’s a very very good book, full of wise counterintuitions and clever insights.’ – Brian Eno

In honour of Mr Eno, your Oblique Strategies card for the day is “Humanise something free of error“.

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21st of March, 2018MarginaliaComments off

Oxfam, #MeToo and the psychology of outrage

This week I overheard someone describing Oxfam as “all a bit Jimmy Savile”. When the UK’s most prominent development charity finds itself being compared to the UK’s most infamous sex offender, it’s safe to say that Oxfam has had a bad week.

The allegations are certainly disturbing: that senior Oxfam staff made liberal use of prostitutes in the wake of the catastrophic Haiti earthquake of 2010 — a crime, as well as an abuse of trust — and that Oxfam quietly showed them the door rather than take a blow to its reputation. The blow has landed now, and it is a heavy one. (Oxfam denies there was any cover-up.)

This is hardly the first wave of outrage to break. Before Oxfam there was the Presidents Club dinner — a men-only fundraiser at which waitresses were treated as sex objects. One FT investigation and the organisation was closed within hours.

There was Harvey Weinstein and the emergence of the #MeToo movement from niche to mainstream. There was the UK parliamentary expenses scandal. Then there are campaigns to take Cecil Rhodes’s statue off an Oxford college, and — from a different political direction — campaigns to ban transgender people from using the public bathroom they prefer.

Where does the outrage come from, and why does it seem to emerge so suddenly? Media reporting is often a trigger, but for every hard-hitting investigation that unleashes a sustained storm, a dozen squalls blow over swiftly.

One clue comes from a large research study of jury-style deliberations, conducted by psychologists Daniel Kahneman and David Schkade, along with Cass Sunstein, who has recently been exploring the dynamics of outrage. (Mr Sunstein was a senior official in the Obama administration, co-author with Richard Thaler of Nudge and is a legal scholar at Harvard Law School.)

This study looked at debates over punitive damage awards against corporations. When individual jurors felt a corporate crime was outrageous, the group displayed a “severity shift”. The group’s verdict could be more severe than any individual’s initial impression. The jurors egged each other on.

But juries could also display a “leniency shift”; if individuals thought the crime was trivial the jury as a whole would often feel even less worried. Sometimes we don’t know how to feel until we see how other people feel. We are, rightly, much more relaxed about gay cabinet ministers than we used to be, and this is partly because everyone sees that everyone else feels there is nothing shameful about it.

The severity shift and the leniency shift contribute to outrage being unpredictable. Our initial impressions are reinforced once we see what other people think.

But not all of these shifts are in favour of progressive causes. One experiment — conducted by economists Leonardo Bursztyn, Georgy Egorov, and Stefano Fiorin — examined people’s willingness to support an apparently xenophobic organisation. In 2016, people often wanted anonymity before they were willing to back the xenophobes.

US president Donald Trump changed that. When people were reminded that Mr Trump was leading in the polls in their state, anonymity no longer mattered. When the experiment was rerun after his election victory, the result was the same: some people were xenophobes and some were not, but in the Trump era, nobody kept their xenophobia in the closet.

The force of these jolts to public opinion is amplified by several other factors. Over the past year, it has become safer to speak out about sexual harassment, but it has also become riskier to make light of it. This reinforces the trend.

And the sudden salience of an issue may bring further problems to light. One woman tells her story of sexual assault at the hands of a famous man, and other women come forward to say that he’s done the same thing to them.

Or, since everyone is now concerned about sexual exploitation by Oxfam staff in Haiti, where else has this happened? How often? Journalists ask questions that could not have been asked a decade ago. Regulators open investigations. Other charities scramble to get ahead of the story.

The self-reinforcing dynamics mean that unpredictability is a feature of the outrage system. They also suggest that we need to learn two lessons.

The first is that we should ask ourselves, is there anything that happens in my profession, industry or community that is taken for granted, but that the wider world might view with sudden outrage? The in-crowd may lure each other into viewing transgressions with a leniency-shifted forgiveness. When everyone else pays attention, the leniency shift may flip to a severity shift.

The second is to beware tribalism. Outrage may be unpredictable, but once it has grown it is easy to manipulate for political ends, whether noble or reprehensible. Surrounded as we are with people who share our sense of outrage, it is easy to wonder why some other group just doesn’t seem to feel the same way.

Righteous outrage is a powerful weapon, and one that has smashed many barriers of injustice. We should pull the trigger of that weapon with care, not with abandon.

Written for and first published in the Financial Times on 16 February 2018.

My book “Messy: How To Be Creative and Resilient in a Tidy-Minded World” is now available in paperback both in the US and the UK – or through your local bookshop.

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How To Have Fun

When I’m not writing about economics or talking about numbers, I’m having fun – which means playing games.

 

Role-Playing

The standout at the moment is Amazing Tales by Martin Lloyd – a wonderful role-playing game for parents and young children. I have, from time to time, run role-playing games with simple systems (a favourite is the classic Dragon Warriors – currently available as a pay-what-you-want pdf). But somehow with young children the system always gets in the way; there are too many things to keep track of both for them and for me. Amazing Tales radically strips back the system (name four things that your character is good at doing, anything from “making friends” to “escaping”) and encourages gameplay that can easily be done in 15 minutes, snuggled up at bedtime instead of a story. My son (six) loves it. My daughter (11) enjoys the odd game too. Congratulations to Martin for figuring out how to make this work.

(And if you want a grown-up RPG, for me, it’s GURPS (UK) (US) every time, ideally in Dave Morris’s eerie world of Legend (UK) (US).)

Best role-playing podcast? Feel free to suggest a few; I enjoy Improvised Radio Theatre With Dice when I’m in the mood for a slow burn. I’m sure there’s much more out there.

 

Gamebooks

I endorsed – and absolutely loved – Dave Morris’s Can You Brexit Without Breaking Britain? (UK) (US) A Brexit gamebook sounds like satire, and there are certainly touches of satire here and there. But it is also an attempt to get to do something our politicians haven’t done, and get to grips with the details of Brexit. From the customs union to citizen’s rights, how do you manage the negotiations while keeping the voters happy? (Or are you secretly planning to reverse the decision? The choice is yours.) Deal with the aging leftist leader of the opposition, Barry Scraggle, and the Edwardian darling of Brexiters, Tobias Tode. It’s very funny, very well-researched, and very difficult to complete. Enjoy!

Speaking of Dave Morris gamebooks, his series with Oliver Johnson, Blood Sword (bad title, great books) is perhaps the most ambitious and best series of gamebooks ever written – and back in print. You can play solo or with a small group; the plot is excellent, the setting full of atmosphere, and there’s even a satisfying combat and magic system. (UK) (US)

I could recommend many more, but for another left-field recommendation, try Michael Stackpole’s City of Terrors (UK) (US), best enjoyed with the vintage Tunnels and Trolls system.

 

Boardgames

If you want to read about the time I interviewed Michael Lewis over a game of St Petersburg, here’s the piece; if you want to read about the time I went to the boardgames festival in Essen and spoke to the creator of Settlers, Klaus Teuber, I’ve got your back.

But if you just want my boardgame recommendations, then:

  • Agricola is the best boardgame ever made, although it takes time to chew over the rules and time to play. Works well for two as well as larger groups; my wife and I play and play and play. (UK) (US)
  • Puerto Rico is also the best boardgame ever made, and the same caveats apply. Quite similar to Agricola, tactically it is perhaps even more interesting. (UK) (US)
  • Carcassonne is a magnificent entry-level game; quick, easy to play, satisfying domino-style mechanic. Also, it has the original Meeples. (UK) (US)
  • Settlers of Catan is the modern classic – the game that Monopoly wishes it was. If you’ve never played a modern boardgame perhaps this should be the one. (UK) (US)
  • Dominion is a game I keep coming back to. My 11-year old particularly likes it; it’s quick; the expansions are actually good rather than distractions. And as a bonus, it is easy to handicap by tweaking the opening hands. (UK) (US)
  • For sheer Germanic atmosphere, Shadows in the Forest is your perfect family game. For a start, you need to play by candlelight in near total darkness. Also, adorable dwarves hide behind trees. Glorious. (UK) (US)

 

Craft

Viviane Schwarz’s “Welcome To Your Awesome Robot” (UK) (US) is fantastic, if you can get your hands on a copy. It’s a splendidly conceived book explaining how to turn a cardboard box into a robot. Every now and then – when a suitable box arrives – this book comes out, along with sticky tape and scissors and other accessories. An afternoon of fun is guaranteed.

 

 

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13th of March, 2018MarginaliaResourcesComments off

A sloth’s guide to surviving market volatility

This piece was published on 9 February 2018, about the rollercoaster ride of the stock market that week. The fact that it’s published with a month’s delay feels particularly appropriate, given the article’s argument. – TH

What happened in the markets this week? That depends on how often you were looking. It was a brutal Monday — the S&P 500 was down more than 4 per cent, the worst day on the market for more than six years.

Tuesday continued the rout — at least at first. But anyone who had paused for a leisurely coffee on the way to the office might have wondered what all the fuss was about: by 9.25am on Tuesday morning, New York time, the S&P 500 was up 2 per cent from the opening plunge. After various adventures, Tuesday ended up the best day in more than a year.

Twenty-five minutes for coffee is a very long time in the life of a high-frequency trading algorithm, with trades timestamped with an accuracy of one-ten-thousandth of a second. A casual investor, though, can blink and miss it.

A few months ago, my wife asked me for advice about where to invest some money on behalf of her family. I was concerned that stocks seemed rather expensive and advised caution. My words of warning rang true this week, when it has felt like a time to be cautious — but the truth is that over a six-month timescale my advice cost her money.

Most investors should operate closer to that six-month timescale than to the frenetic fast-twitch world in which a coffee break lasts an eternity. Given the choice between investing fast or slow, the slower the better.

This is partly for the sake of sanity. The concept of “loss aversion” was developed by two founding figures in behavioural economics, Daniel Kahneman and Amos Tversky. Their experiments showed that we tend to find a modest loss roughly twice as painful as an equivalent gain. (Ponder the annoyance of losing £10 against the pleasure of finding £10 and you may agree.)

If you check the market every day, you will find it is down very nearly as often as it is up, and the pain of the downs will tend to outweigh the joy of the ups. But if you check less frequently you will have more reason to smile: unlike good days, good years are almost three times more likely than bad ones. Slow investing feels better.

Slow investing may also be more lucrative, at least for those of us who lack the technology to compete at the microsecond level. One laboratory study — by Mr Kahneman, Tversky, Alan Schwartz and last year’s Nobel laureate economist Richard Thaler — invited participants to make investment allocation decisions over 200 “turns”, each meant to simulate a few weeks of real investment. Some were allowed to reallocate every turn after observing what had just happened. Others had to wait and decide whether to reallocate after seeing the accumulated return over either eight or 40 turns, simulating months or years without peeking at the portfolio.

Those who were forced to evaluate and decide at a slow pace were — like real investors — less likely to witness losses. As a result, they were not intimidated by short-term fluctuations. They chose less conservative investments and could expect bigger profits.

Research into the behaviour of real-world investors has reached similar conclusions. One study, by Brad Barber and Terrance Odean, looked at the investments of 65,000 ordinary retail investors in the early 1990s, a time of sharply rising markets. Messrs Barber and Odean found that the less retail investors traded, the better able they were to keep up with the market as a whole. Active traders underperformed by six percentage points a year because trading costs eroded their profits. Lazy investors made more money.

There may be a broader lesson in this. Sometimes we have a clearer view of the world when we stand back from it. In 1965, two Norwegian sociologists, Johan Galtung and Mari Holmboe Ruge, pointed out that the speed of the news cycle affects what we see as news: “To single out one murder during a battle where there is one person killed every minute would make little sense.”

A newspaper that was published once every 50 years — an idea proposed by Max Roser, an economist at Oxford university — might give us a much clearer perspective of what has gone right and wrong since 1968 than a stack of daily papers. The latest headlines: the world population growth rate has roughly halved and continues to fall. In 1968, nearly one in five children died before their fifth birthday; the rate is now lower than one in 20. Annual carbon-dioxide emissions have nearly tripled. Meanwhile the financial page reports that, over the past 50 years, the S&P 500 has delivered a total post-inflation return averaging almost 6 per cent per year — a 17-fold gain.

Perhaps we slow investors should adopt a mascot. I suggest the sloth. Hanging upside-down, moving at a few metres a minute, is much like trading infrequently: it saves the costs of doing things more quickly. Sloths take almost two months fully to digest each meal — which is handy, given that they eat mildly toxic leaves that would poison them if absorbed too quickly.

Investors are reminded, all too often, that the financial world is lush with toxic get-rich quick products. A slower approach to finance makes market movements a great deal more digestible.

 

 

Written for and first published in the Financial Times on 9 February 2018.

My recent book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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Your handy postcard-sized guide to statistics

Statistics on a postcard

 

“The best financial advice for most people would fit on an index card.” That’s the gist of an offhand comment in 2013 by Harold Pollack, a professor at the University of Chicago. Pollack’s bluff was duly called, and he quickly rushed off to find an index card and scribble some bullet points — with respectable results.

When I heard about Pollack’s notion — he elaborated upon it in a 2016 book — I asked myself: would this work for statistics, too? There are some obvious parallels. In each case, common sense goes a surprisingly long way; in each case, dizzying numbers and impenetrable jargon loom; in each case, there are stubborn technical details that matter; and, in each case, there are people with a sharp incentive to lead us astray.

The case for everyday practical numeracy has never been more urgent. Statistical claims fill our newspapers and social media feeds, unfiltered by expert judgment and often designed as a political weapon. We do not necessarily trust the experts — or more precisely, we may have our own distinctive view of who counts as an expert and who does not.  Nor are we passive consumers of statistical propaganda; we are the medium through which the propaganda spreads. We are arbiters of what others will see: what we retweet, like or share online determines whether a claim goes viral or vanishes. If we fall for lies, we become unwittingly complicit in deceiving others.

On the bright side, we have more tools than ever to help weigh up what we see before we share it — if we are able and willing to use them. In the hope that someone might use it, I set out to write my own postcard-sized citizens’ guide to statistics. Here’s what I learnt.

 

Professor Pollack’s index card includes advice such as “Save 20 per cent of your money” and “Pay your credit card in full every month”. The author Michael Pollan offers dietary advice in even pithier form: “Eat Food. Not Too Much. Mostly Plants.” Quite so, but I still want a cheeseburger.  However good the advice Pollack and Pollan offer, it’s not always easy to take. The problem is not necessarily ignorance. Few people think that Coca-Cola is a healthy drink, or believe that credit cards let you borrow cheaply. Yet many of us fall into some form of temptation or other. That is partly because slick marketers are focused on selling us high-fructose corn syrup and easy credit. And it is partly because we are human beings with human frailties.

With this in mind, my statistical postcard begins with advice about emotion rather than logic. When you encounter a new statistical claim, observe your feelings. Yes, it sounds like a line from Star Wars, but we rarely believe anything because we’re compelled to do so by pure deduction or irrefutable evidence. We have feelings about many of the claims we might read — anything from “inequality is rising” to “chocolate prevents dementia”. If we don’t notice and pay attention to those feelings, we’re off to a shaky start. What sort of feelings? Defensiveness. Triumphalism. Righteous anger. Evangelical fervour. Or, when it comes to chocolate and dementia, relief.

It’s fine to have an emotional response to a chart or shocking statistic — but we should not ignore that emotion, or be led astray by it. There are certain claims that we rush to tell the world, others that we use to rally like-minded people, still others we refuse to believe. Our belief or disbelief in these claims is part of who we feel we are.

“We all process information consistent with our tribe,” says Dan Kahan, professor of law and psychology at Yale University.

In 2005, Charles Taber and Milton Lodge, political scientists at Stony Brook University, New York, conducted experiments in which subjects were invited to study arguments around hot political issues. Subjects showed a clear confirmation bias: they sought out testimony from like-minded organisations. For example, subjects who opposed gun control would tend to start by reading the views of the National Rifle Association.

Subjects also showed a disconfirmation bias: when the researchers presented them with certain arguments and invited comment, the subjects would quickly accept arguments with which they agreed, but devote considerable effort to disparage opposing arguments.

Expertise is no defence against this emotional reaction; in fact, Taber and Lodge found that better-informed experimental subjects showed stronger biases. The more they knew, the more cognitive weapons they could aim at their opponents.

“So convenient a thing it is to be a reasonable creature,” commented Benjamin Franklin, “since it enables one to find or make a reason for everything one has a mind to do.”

This is why it’s important to face up to our feelings before we even begin to process a statistical claim. If we don’t at least acknowledge that we may be bringing some emotional baggage along with us, we have little chance of discerning what’s true. As the physicist Richard Feynman once commented, “You must not fool yourself — and you are the easiest person to fool.”

 

The second crucial piece of advice is to understand the claim. That seems obvious. But all too often we leap to disbelieve or believe (and repeat) a claim without pausing to ask whether we really understand what the claim is. To quote Douglas Adams’s philosophical supercomputer, Deep Thought, “Once you know what the question actually is, you’ll know what the answer means.”

For example, take the widely accepted claim that “inequality is rising”. It seems uncontroversial, and urgent. But what does it mean? Racial inequality? Gender inequality? Inequality of opportunity, of consumption, of education attainment, of wealth? Within countries or across the globe? Even given a narrower claim, “inequality of income before taxes is rising” (and you should be asking yourself, since when?), there are several different ways to measure this.

One approach is to compare the income of people at the 90th percentile and the 10th percentile, but that tells us nothing about the super-rich, nor the ordinary people in the middle. An alternative is to examine the income share of the top 1 per cent — but this approach has the opposite weakness, telling us nothing about how the poorest fare relative to the majority.  There is no single right answer — nor should we assume that all the measures tell a similar story. In fact, there are many true statements that one can make about inequality. It may be worth figuring out which one is being made before retweeting it.

Perhaps it is not surprising that a concept such as inequality turns out to have hidden depths. But the same holds true of more tangible subjects, such as “a nurse”. Are midwives nurses? Health visitors? Should two nurses working half-time count as one nurse? Claims over the staffing of the UK’s National Health Service have turned on such details.

All this can seem like pedantry — or worse, a cynical attempt to muddy the waters and suggest that you can prove anything with statistics. But there is little point in trying to evaluate whether a claim is true if one is unclear what the claim even means.

Imagine a study showing that kids who play violent video games are more likely to be violent in reality. Rebecca Goldin, a mathematician and director of the statistical literacy project STATS, points out that we should ask questions about concepts such as “play”, “violent video games” and “violent in reality”. Is Space Invaders a violent game? It involves shooting things, after all. And are we measuring a response to a questionnaire after 20 minutes’ play in a laboratory, or murderous tendencies in people who play 30 hours a week?

“Many studies won’t measure violence,” says Goldin. “They’ll measure something else such as aggressive behaviour.” Just like “inequality” or “nurse”, these seemingly common sense words hide a lot of wiggle room.

Two particular obstacles to our understanding are worth exploring in a little more detail. One is the question of causation. “Taller children have a higher reading age,” goes the headline. This may summarise the results of a careful study about nutrition and cognition. Or it may simply reflect the obvious point that eight-year-olds read better than four-year-olds — and are taller. Causation is philosophically and technically a knotty business but, for the casual consumer of statistics, the question is not so complicated: just ask whether a causal claim is being made, and whether it might be justified.

Returning to this study about violence and video games, we should ask: is this a causal relationship, tested in experimental conditions? Or is this a broad correlation, perhaps because the kind of thing that leads kids to violence also leads kids to violent video games? Without clarity on this point, we don’t really have anything but an empty headline.

We should never forget, either, that all statistics are a summary of a more complicated truth. For example, what’s happening to wages? With tens of millions of wage packets being paid every month, we can only ever summarise — but which summary? The average wage can be skewed by a small number of fat cats. The median wage tells us about the centre of the distribution but ignores everything else. Or we might look at the median increase in wages, which isn’t the same thing as the increase in the median wage — not at all. In a situation where the lowest and highest wages are increasing while the middle sags, it’s quite possible for the median pay rise to be healthy while median pay falls.

Sir Andrew Dilnot, former chair of the UK Statistics Authority, warns that an average can never convey the whole of a complex story. “It’s like trying to see what’s in a room by peering through the keyhole,” he tells me.

In short, “you need to ask yourself what’s being left out,” says Mona Chalabi, data editor for The Guardian US. That applies to the obvious tricks, such as a vertical axis that’s been truncated to make small changes look big. But it also applies to the less obvious stuff — for example, why does a graph comparing the wages of African-Americans with those of white people not also include data on Hispanic or Asian-Americans? There is no shame in leaving something out. No chart, table or tweet can contain everything. But what is missing can matter.

 

Channel the spirit of film noir: get the backstory. Of all the statistical claims in the world, this particular stat fatale appeared in your newspaper or social media feed, dressed to impress. Why? Where did it come from? Why are you seeing it?

Sometimes the answer is little short of a conspiracy: a PR company wanted to sell ice cream, so paid a penny-ante academic to put together the “equation for the perfect summer afternoon”, pushed out a press release on a quiet news day, and won attention in a media environment hungry for clicks. Or a political donor slung a couple of million dollars at an ideologically sympathetic think-tank in the hope of manufacturing some talking points.

Just as often, the answer is innocent but unedifying: publication bias. A study confirming what we already knew — smoking causes cancer — is unlikely to make news. But a study with a surprising result — maybe smoking doesn’t cause cancer after all — is worth a headline. The new study may have been rigorously conducted but is probably wrong: one must weigh it up against decades of contrary evidence.

Publication bias is a big problem in academia. The surprising results get published, the follow-up studies finding no effect tend to appear in lesser journals if they appear at all. It is an even bigger problem in the media — and perhaps bigger yet in social media. Increasingly, we see a statistical claim because people like us thought it was worth a Like on Facebook.

David Spiegelhalter, president of the Royal Statistical Society, proposes what he calls the “Groucho principle”. Groucho Marx famously resigned from a club — if they’d accept him as a member, he reasoned, it couldn’t be much of a club. Spiegelhalter feels the same about many statistical claims that reach the headlines or the social media feed. He explains, “If it’s surprising or counter-intuitive enough to have been drawn to my attention, it is probably wrong.”

 

OK. You’ve noted your own emotions, checked the backstory and understood the claim being made. Now you need to put things in perspective. A few months ago, a horrified citizen asked me on Twitter whether it could be true that in the UK, seven million disposable coffee cups were thrown away every day.  I didn’t have an answer. (A quick internet search reveals countless repetitions of the claim, but no obvious source.) But I did have an alternative question: is that a big number? The population of the UK is 65 million. If one person in 10 used a disposable cup each day, that would do the job.

Many numbers mean little until we can compare them with a more familiar quantity. It is much more informative to know how many coffee cups a typical person discards than to know how many are thrown away by an entire country. And more useful still to know whether the cups are recycled (usually not, alas) or what proportion of the country’s waste stream is disposable coffee cups (not much, is my guess, but I may be wrong).

So we should ask: how big is the number compared with other things I might intuitively understand? How big is it compared with last year, or five years ago, or 30? It’s worth a look at the historical trend, if the data are available.

Finally, beware “statistical significance”. There are various technical objections to the term, some of which are important. But the simplest point to appreciate is that a number can be “statistically significant” while being of no practical importance. Particularly in the age of big data, it’s possible for an effect to clear this technical hurdle of statistical significance while being tiny.  One study was able to demonstrate that unborn children exposed to a heatwave while in the womb went on to earn less as adults. The finding was statistically significant. But the impact was trivial: $30 in lost income per year. Just because a finding is statistically robust does not mean it matters; the word “significance” obscures that.

 

In an age of computer-generated images of data clouds, some of the most charming data visualisations are hand-drawn doodles by the likes of Mona Chalabi and the cartoonist Randall Munroe. But there is more to these pictures than charm: Chalabi uses the wobble of her pen to remind us that most statistics have a margin of error. A computer plot can confer the illusion of precision on what may be a highly uncertain situation.

“It is better to be vaguely right than exactly wrong,” wrote Carveth Read in Logic (1898), and excessive precision can lead people astray. On the eve of the US presidential election in 2016, the political forecasting website FiveThirtyEight gave Donald Trump a 28.6 per cent chance of winning. In some ways that is impressive, because other forecasting models gave Trump barely any chance at all. But how could anyone justify the decimal point on such a forecast? No wonder many people missed the basic message, which was that Trump had a decent shot. “One in four” would have been a much more intuitive guide to the vagaries of forecasting.

Exaggerated precision has another cost: it makes numbers needlessly cumbersome to remember and to handle. So, embrace imprecision. The budget of the NHS in the UK is about £10bn a month. The national income of the United States is about $20tn a year. One can be much more precise about these things, but carrying the approximate numbers around in my head lets me judge pretty quickly when — say — a £50m spending boost or a $20bn tax cut is noteworthy, or a rounding error.

My favourite rule of thumb is that since there are 65 million people in the UK and people tend to live a bit longer than 65, the size of a typical cohort — everyone retiring or leaving school in a given year — will be nearly a million people. Yes, it’s a rough estimate — but vaguely right is often good enough.

 

Be curious. Curiosity is bad for cats, but good for stats. Curiosity is a cardinal virtue because it encourages us to work a little harder to understand what we are being told, and to enjoy the surprises along the way.

This is partly because almost any statistical statement raises questions: who claims this? Why? What does this number mean? What’s missing? We have to be willing — in the words of UK statistical regulator Ed Humpherson — to “go another click”. If a statistic is worth sharing, isn’t it worth understanding first? The digital age is full of informational snares — but it also makes it easier to look a little deeper before our minds snap shut on an answer.

While curiosity gives us the motivation to ask another question or go another click, it gives us something else, too: a willingness to change our minds. For many of the statistical claims that matter, we have already reached a conclusion. We already know what our tribe of right-thinking people believe about Brexit, gun control, vaccinations, climate change, inequality or nationalisation — and so it is natural to interpret any statistical claim as either a banner to wave, or a threat to avoid.

Curiosity can put us into a better frame of mind to engage with statistical surprises. If we treat them as mysteries to be resolved, we are more likely to spot statistical foul play, but we are also more open-minded when faced with rigorous new evidence.

In research with Asheley Landrum, Katie Carpenter, Laura Helft and Kathleen Hall Jamieson, Dan Kahan has discovered that people who are intrinsically curious about science — they exist across the political spectrum — tend to be less polarised in their response to questions about politically sensitive topics. We need to treat surprises as a mystery rather than a threat.  Isaac Asimov is thought to have said, “The most exciting phrase in science isn’t ‘Eureka!’, but ‘That’s funny…’” The quip points to an important truth: if we treat the open question as more interesting than the neat answer, we’re on the road to becoming wiser.

 

In the end, my postcard has 50-ish words and six commandments. Simple enough, I hope, for someone who is willing to make an honest effort to evaluate — even briefly — the statistical claims that appear in front of them. That willingness, I fear, is what is most in question.

“Hey, Bill, Bill, am I gonna check every statistic?” said Donald Trump, then presidential candidate, when challenged by Bill O’Reilly about a grotesque lie that he had retweeted about African-Americans and homicides. And Trump had a point — sort of. He should, of course, have got someone to check a statistic before lending his megaphone to a false and racist claim. We all know by now that he simply does not care.

But Trump’s excuse will have struck a chord with many, even those who are aghast at his contempt for accuracy (and much else). He recognised that we are all human. We don’t check everything; we can’t. Even if we had all the technical expertise in the world, there is no way that we would have the time.

My aim is more modest. I want to encourage us all to make the effort a little more often: to be open-minded rather than defensive; to ask simple questions about what things mean, where they come from and whether they would matter if they were true. And, above all, to show enough curiosity about the world to want to know the answers to some of these questions — not to win arguments, but because the world is a fascinating place.
Written for and first published in the Financial Times on 8 February 2018.

My recent book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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8th of March, 2018HighlightsOther WritingComments off

Like great coffee, good ideas take time to percolate

Monmouth Coffee opened on Monmouth Street in London in 1978. It serves wonderful coffee and the queues often stretch out of the door. That is what makes what happened next so surprising.

What happened next was: nothing. Monmouth had few imitators, either upmarket or downmarket. Starbucks did not arrive in London for another 20 years. A handful of gourmet cafés serving New Zealand-style coffee only began to open in 2005. They’re very good, although I still prefer Monmouth. It’s now possible to get good coffee in several spots in London, but it is hardly ubiquitous. It is even more elusive outside the capital.

This is a puzzle. Monmouth may not be a global titan like Starbucks, but it appears to be a highly successful business: the coffee is priced confidently and it is popular. So why has such an obviously good idea been so slow to spread?

Even if you don’t much care about London’s coffee scene, this is an important question. William Gibson, science fiction author, observed that the future is already here — it’s just not evenly distributed. In that respect, it is much like good coffee. Economics agrees with Mr Gibson — which is fortunate, since he is little short of a prophet.

The data show that just because good ideas emerge does not mean that they spread quickly. Researchers at the OECD have concluded that within most sectors (for example, coal mining or food retail) there is a large and rising gap in productivity between the typical business and the 100 leading companies in the sector. The leading businesses are nearly 15 times more productive per worker, and almost five times more productive even after adjusting for their use of capital such as buildings, computers and machinery.

These are not small gaps. If there were some way to help good ideas to spread more quickly, more people would have good coffee and much else besides. One natural approach is for a laggard company to seek advice — perhaps from management consultants. A decade ago, economists at Berkeley, Stanford and the World Bank conducted a randomised trial in which the bank paid for some textile factories in Mumbai to receive consulting advice from a global company. These factories tended to have utterly chaotic systems, so help with modern inventory management made a big difference. The factories saw their productivity transformed.

More recently, those economists revisited the experiment. How much of the good advice had lasted? Had any of it spread? There was good news and bad news. The good news was that within companies that owned several factories, some of the good ideas first used in a single factory had been adopted across the company. But the bad news was that these proven management processes had not been copied by rival businesses.

This is a reminder of how slow good ideas can be to spread, even when they are straightforward to grasp. In his classic textbook, The Diffusion of Innovations (UK) (US), Everett Rogers points out that many inventions have to cross a cultural divide: the person preaching the good idea is often quite different to the person being preached to. Rogers would probably not have been surprised to see that “not invented here” was a barrier to good practice spreading in the Mumbai textile industry.

So good advice can work, but even good advice wears off. And we can all be resistant to new ideas. The status quo is comfortable, especially for the people who get to call the shots.

An extreme example of resistance to change lies behind the quip that “science advances one funeral at a time”, based on an observation from the physicist Max Planck. A team of economists has studied the evidence from data on academic citations, and found that Planck seems to have been right: the premature death of a star scientist opens up his or her field to productive contributions from outsiders in other domains. People can be so slow to change their minds that we literally have to wait for them to die.

There is an analogy in the marketplace: sometimes old businesses have to die before productivity improves, although that can mean desperate hardship for the workers involved. But sometimes bracing competition does not kill companies, but makes them stronger.

For example, when iron ore producers in the Great Lakes region found themselves exposed to cheap competition from Brazil in the 1980s, the century-old industry faced a crisis. The response — as tracked by economist James Schmitz Jr — was a dramatic surge in productivity, unleashed by changes in work practices. Other economists have found similar responses to trade shocks elsewhere.

And for all the talk of relentless change, there is evidence that US industry is becoming less dynamic: there are fewer shocks, and companies respond less to them. The OECD research, too, suggests that the productivity laggards tend to be further behind in markets that are over-regulated or otherwise shielded from competition.

All too often, we don’t pick up good ideas willingly. We grasp for them, in desperation, only when we have no choice.

Written for and first published in the Financial Times on 2 February 2018.

My recent book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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