Wednesday, July 31, 2013

Stories I should probably be writing about

Thoreau has a glowing review of this book on pedagogical fads. It looks interesting though given the cost and the quantity I assume they are writing them out by hand.

The Bennett scandal continues to reverberate both in Indiana and Florida.

 Democracy Prep and its founder and superintendent Seth Andrew have been media darlings but I'm seeing some things that trouble me, both about the school and the founder, particularly when you read between the lines.

Kevin Drum addresses our old friend, peer effects.

Take a look at this school designed largely to give master's degrees to people who came through Teach for America and similar programs. As you might expect, I see some connections between this and the previously mentioned issue of grooming TFAers for leadership positions.

Which segues nicely into lapsed TFAer Gary Rubinstein's blog and its informative series of posts on a recent visit to a KIPP school in New York. He also often addresses the previously mentioned TFA cultural issues that concern me and many of his other comments (like this one) track with my experience almost perfectly.

I'm a big fan of Kaiser Fung, but the Moneyball analogy strikes me as a bad framework for an analytic approach to education reform, bad enough to cause real damage. (I see from the queue that Joseph is planning to address some of these issues tomorrow)

And, to take a break from the education beat, there's this post from Naked Capitalism on  a shadow credit reporting system.

p.s. Should have included a link to this Washington Post interview with "the world’s most famous teacher." It nicely lays out the tension between some of our best veteran teachers (in this case one of the major models for KIPP) and the education reform movement.

General versus particular cases

Andrew Gelman did a very interesting article in Slate on how being overly reliant on statistical significance can lead to spurious findings.  The authors of the study that he was critiquing replied to his piece.  Andrew's thoughts on the response are here

The led to two thoughts.  One, I am completely unimpressed by claims that a paper being in a peer-reviewed journal -- that is a screen but even good test have false positives.  All this convinces me of is that the authors were thoughtful in the development of the article, not that they are immune to problems.  But this is true of all papers, including mine. 

Two, I think that this is a very tough area to take a single example from.  The reason is that any one paper could well have followed the highest possible level of rigor, as Jessica Tracy and Alec Beall claim they have done.  That doesn't necessarily mean that all studies in the class have followed these practices or that there were not filters that aided or impeded publication that might enhance the risk of a false positive.

For example, I have just finished publishing a paper where I had an unexpected finding that I wanted to replicate (that there was an association was a priori, the direction was reversed from the a priori hypothesis).  I found such a study, added additional authors, added additional analysis, rewrote the paper to be a careful combination of two different cohorts, and redid the discussion.  Guess what, the finding did not replicate.  So then I had  the special gift of publishing a null paper with a lot of authors and some potentially confusing associations.  If I had just given up at that point, the question might have been hanging around until somebody else found the same thing (I often used widely available data in my research) and published it. 

So I would be cautious about multiplying the p-values together for a probability of a false positive.  Jessica Tracy and Alec Beall:
The chance of obtaining the same significant effect across two independent consecutive studies is .0025 (Murayama, K., Pekrun, R., & Fiedler, K. (in press). Research practices that can prevent an inflation of false-positive rates. Personality and Social Psychology Review.)
I suspect that this would only hold if the testable hypothesis was clearly stated before either study was done.  It also presumes independence (it is not always obvious that this will hold as design elements of studies may influence each other) and that there isn't a confounding factor involved (that is causing both the exposure and the outcome).

Furthermore, I think as epidemiologists we need to make a decision about whether these studies are making strong causal claims or advancing a prospective association that may led to a better understanding of a disease state.  We often write articles speaking in the later mode but then lapse into the former when being quoted. 

So I guess I am writing a lot to say a couple of things in conclusion. 

One, it is very hard to pick a specific example of a general problem when it is possible that any one example might happen to meet the standards required for the depth of inference being made.  This is very hard to ascertain within the standards of the literature. 

Two, the decision of what to study and what to publish are also pretty important steps in the process.  These things can have a powerful influence on the direction of science in a very hard to detect manner. 

So I want to thank Andrew Gelman for starting this conversation and the authors of the paper in question for acting as an example in this tough dialogue. 

The other side of the ethical failures of the education reform movement

There's an old denominational joke that ends with the punchline "Just don't let them see you. They think they're the only ones up here."

As mentioned before, the culture of the education  reform movement is exceptionally strong and cultural identity plays a major role in the lives of movement reformers, particularly those associated with certain institutions like TFA and KIPP. This isn't necessarily a bad thing. There are a lot smart people out there working very hard to improve education because of those cultural forces. Unfortunately, these forces can also make the movement prone to blind spots, often including the belief that they're the only ones up here.

Here's a pertinent passage from Gary Rubinstein, himself a lapsed TFAer.
The KIPP high school has a large area in the middle with a lot of tables, almost like a coffee shop.  I went out to get lunch at the nearby Fairway and came back and sat at one of those tables to eat.  At the table next to me I overheard a discussion between a KIPP administrator and a teacher.  Most of the KIPP administrators, like this woman was, are young and white, as are most of the teachers.  This teacher was black and seemed to be in her late 40s.  The conference was related to some sort of recommendation letter, maybe for some academic program, that the older teacher was writing for one of her former students.  I’m not sure who initiated this discussion, but the administrator was explaining that the letter should be re-written.  The issue was that this teacher had been a bit too ‘honest’ in the letter and it would hurt the chances of this student getting into the program.  Now I’ve written many recommendation letters, and of course you want to put the student in the best possible light, so I’m not saying that the administrator was wrong in suggesting that this teacher change the letter.  I’m just writing about this since some of the things said in the discussion were revealing.

Apparently this student had a bad attitude and failed the course.  The teacher had written about this so the administrator explained to this teacher that, yes, the student had failed, but that a lot of students fail that course (I think it was Geometry).  Also, it was important that the teacher understand that getting a 60 in that course at the KIPP school was like getting a 90 in most other schools since, I guess she felt like she knew, the other neighborhood schools have extreme grade inflation.  The conference was resolved with the teacher agreeing to rewrite the letter keeping these things in mind.  I found it interesting that a lot of students fail this course since the media would have us believe that after being in KIPP from 5th grade to 11th grade, students there wouldn’t be failing that much.  Also, the assumption that the ‘other’ schools have such low expectations that a  90 there is like a 60 at KIPP, I don’t know if she how she can be so confident about that claim.
This anecdote is troubling on any number of levels, not the least of which is fact that KIPP 60  = Other school 90 is highly debatable (there are a lot of open questions about how to interpret KIPP's numbers but I doubt even the most favorable reading would support the assertion that a D- at KIPP was equivalent to an A- elsewhere), but even if we stipulate to that part, we are still left with all sorts of concerns.

This is, after all, a case of an administrator in a fairly public setting pressuring a teacher to give a student a more favorable evaluation. That's a dangerous line, particularly when you take into account the fact that getting more students accepted into prestigious programs generates good press for KIPP, helps the administrator's career track and may well figure into funding.

There's nothing new about incentives that encourage teachers to lower standards (or about having administrators play the devil on the shoulder), but the reform movement has greatly raised the stakes, More importantly, they've provided a belief system that make it easier to justify cutting corners and ignore conflicts of interest. Minor lies are OK in a recommendation letter because your students are held to higher standards; mass dumping of students is OK because the better your school does the more schools will adopt your superior model; cooking the books to make your flagship school look good is OK because there must be something wrong with a metric that makes the school look bad.

Tuesday, July 30, 2013

The looting phase of education reform and the other Tony Bennett

[In response to Joseph's prod]

I realize regular readers must be getting tired of these stories (new readers can see why by searching this blog for "looting"), but it looks like we have to go over this one more time. When it comes to metric-based education reform:

1. There are numerous easy and effective ways of gaming the system;

2. There are huge financial and political incentives for gaming the system;

3. There are powerful advocates across the political spectrum (from David Brooks to Jonathan Chait and Matthew Yglesias) who can be relied upon to provide ample cover for those who game the system.

Under these circumstances, it would be shocking if we weren't seeing extensive cooking and out-and-out fraud. Still, even by the standards we've come to expect, this is really something.

From a truly impressive piece of investigative journalism by Tom LoBianco:








Bennett estimated that 12 or 13 schools benefited, not just Christel House, but the emails show DeHaan’s charter was the catalyst for any changes.

“The fact that anyone would say I would try to cook the books for Christel House is so wrong. It’s frankly so off base,” Bennett said in a telephone interview Monday evening.




“This will be a HUGE problem for us,” Bennett wrote in a Sept. 12, 2012, email to [then-chief of staff Heather] Neal.









“We can revise the rule,” Bennett responded.

This is a big story for a number of reasons.

There's the scale of the thing.

There's the funding aspect; assuming something of a zero-sum arrangement, some schools had to be cheated out of some of the money that was coming to them.

There's the seemingly complete lack of integrity on the part of the Indiana Department of Education. Pressure to change a grading formula is one of the most common ethical challenges educators face. We all know the right thing to do in this situation, but it appears from the emails that no one in power seriously tried to hold the ethical line.

There's Bennett's position in the reform movement. Under his watch, Florida is pushing one of the most extreme reform agendas. Perhaps more troubling, even before the Indiana revelations came out, the Florida Department of Education had already been accused of cooking charter school results since he arrived.

Monday, July 29, 2013

Paging Mark P

Mark Thoma posted this today.

I think the whole idea of charter schools has some merit as a means of educational experimentation.  But if this sort of cheating occurs, it makes it impossible to trust the data and that removes most of the benefit of being able to "let a thousand flowers bloom in the hopes that one will be especially amazing".  It could be an isolated incident, but even a single case this egregious makes it much harder to trust that education reform is adhering to strict metrics. 

[My response is here -- Mark P]

The obliviousness to the insularity

David Weigel is an excellent journalist and I'm a great admirer of his political reporting, but he is also very much part of the culture of the journalistic elite and that means he is not immune to some of the issues we've been discussing:
Sure, we're divorced from the rest of America. Lots of Americans who don't live here manage to have opinions about Washington. You don't see us going into Beast Mode about it. But I see Payne's point, and wish he had more of an argument than this:

Romney’s native Bloomfield Hills is a long way from Detroit, though it may not look that way from the beltway.

Yeah, it's in the suburbs. I defer to Payne, of course, but is it so strange to hear people who live on the outskirts of a city, who root for its sports teams and fly out of its airport, to identify with the city? You won't find many people in Skokie, Illinois or Downey, California distancing themselves from Chicago and Los Angeles. Eminem has been the star of Chrysler ads, asking Americans to stand up for Detroit, but the guy lives in Rochester now, not far from Bloomfield Hills. Anyway, that wasn't my point—emergency managers and top bureaucrats often arrive in struggling cities from somewhere else entirely. Stephen Goldsmith's eventual reward for a successful career in Indianapolis was a job in Mike Bloomberg's city hall, though this ended poorly for reasons orthogonal to policy.

Weigel provides here one of those perfect passages where a writer disputes an argument then unintentionally proves it a few words later. Unless they are discussing something involving governance, even if they actually use the word 'city,' when people say "Los Angeles" they normally are referring to Los Angeles COUNTY.

It's worth noting that the LA section of the iconic "I Love LA" starts:

Rollin' down the Imperial Highway
With a big nasty redhead at my side
Santa Ana winds blowin' hot from the north
And we as born to ride

Imperial connects the east and west sides of the county but it only briefly crosses through the city proper.

LA County Incorporated Areas Los Angeles highlighted

LA is a weird patchwork of cities and towns that often confuse even natives ("Is that a town or a neighborhood?"). What the natives do keep track of is counties. If you live in Downey, you're an Angeleno. If you live in Fullerton,  you're behind the Orange Curtain.

As mentioned before, LA's distinctive type of sprawl is very different from the concentric urban, suburban, exurban dynamic of a city like Atlanta.  As far as I can tell, there is no LA analogue to Alpharetta. The result is that lessons learned in one city often don't generalize to this area. Of course, you can make a similar point about Atlanta and Chicago, a city of any number of unique historic and cultural attributes, or, while we're at it, Detroit. And this brings us back, inevitably, to the dangers of an insular political/journalistic class.

A greatly disproportionate amount of news and policy is shaped by a surprisingly small number of people with similar backgrounds and overlapping social circles living in relatively close vicinity. Under these circumstances, it is almost unavoidable that the natural tendency to see other people's lives as less complex will grow into a group-belief that people who live in the rest of the country have simpler lives with largely interchangeable problems.

And what about Weigel's charge that this cuts both ways? Aren't people in Little Rock, Arkansas as ill-informed and yet as opinionated about DC and NYC as people in those cities are about Little Rock? To put it bluntly, no and no. For the first point, since so much of the press is NYC and DC-centric, much of what what normally be classified as local interest there gets national coverage. Growing up in a small Southern town, I regularly read a number of publications from those cities including the NYT, the Washington Post, the New Yorker and New York Magazine (mainly for the critics -- I was a big fan of Denby and I found Simon generally but interestingly wrong -- but often cover to cover). Of course, this didn't make me all that knowledgeable about these cities but, and this brings me to the second point, it gave me some sense of what I did and didn't know.

The concern here is not just the insularity; it's the obliviousness to the insularity, not being aware of your own provincialism. When a group of high school seniors from a small Delta town sit around discussing what life might be like in a NYC or LA, they are acutely aware of how limited and inapplicable their experience is; they deal in known unknowns.

With the current journalistic and political establishment, though, we have seen accumulating evidence of unknown unknowns, of people like Weigel who are not only drawing conclusions too far outside of their expertise but who are entirely unaware of how thin the ice has gotten. This is a trivial example -- Weigel's grasp of LA's idiosyncrasies is not in and of itself that big of a deal -- but it is worth noting partially because Weigel is one of the best journalists working that beat but mainly because many examples of this phenomenon are not  trivial at all.

Weigel was, after all, using Downey to support the idea that cities (implicitly, I think, in "the rest of the country") are similar enough that a statement that holds for the others should hold for Detroit. Detroit, a unique and enormously complex city historically, economically, culturally and politically.

And we have more troubling cases. The New York Times published a major series on urban policy that  backed up one of its major arguments by treating Harris County in Texas as analogous to Westchester County in New York. When McDonald's issued a suggested budget for its workers, the criticism from largely upper middle class, Northeastern journalists (who live in a world of easy employment and costly housing) was mostly directed at a fairly realistic rent estimate while the almost impossible requirement that the worker find a second part time job was often ignored. And those are just a couple of examples that happened to wash up on this blog; you can easily find a dozen more in a typical day's papers.

As mentioned earlier, greatly disproportionate amount of news is shaped by a surprisingly small number of people. They decide what stories are important and how they should be framed. That has always been the case, but in many ways, this uniformity has gotten worse recently and it's lead to serious problems with group think and a dangerous arrogance. The less they know the more confident they become.

Term of the day -- "Macro Tourists"

I came across this pejorative in this very sharp Barry Ritholtz post then followed a link to get to this definition from a very funny piece by Joe Weisenthal:
"Macro Tourists" is a phrase that was coined by former policy economist and global macro trader Mark Dow to characterize investors who left their comfort zone to make big pronouncements about how macroeconomics really works.
It might be interesting to come up with analogues in other fields. Perhaps Joseph has some examples from epidemiology.


Greg Mankiw has a post on investing in gold.  I think I actually agree that gold investing has a bad name; it's the people who suggest putting all of your wealth into it that scare me the most.  Any single commodity as an asset class is a bad investment.  Gold tends to be volatile in price, which isn't ideal either. 

But I also think there can be one more good reason to hold gold -- you like collecting it.  As collectables go, I would be more confident in a gold coin collection holding value than a baseball card or comic book collection.  I could be wrong on this point, especially for specific items.  But it's not an insane hobby to have.  I am actually more sympathetic to it than I am to junk silver, where the collections tend to not have the aesthetic appeal of gold and the circumstances under which the silver would make a good store of wealth seem more limited. 

So it's not an insane idea to invest in gold as a collectable or as a part of a portfolio.  But it is an odd stance to take as a principal means of savings.  But that doesn't seem to make it ever go completely out of fashion.

Saturday, July 27, 2013

Weekend blogging -- an analytic approach to comedy

[The relevant gag occurs around 1:25 starting with "no scruples"]

Veteran show-runner Ken Levine discusses in depth one of the oldest but most durable classes of jokes, the Comedy Rule-of-Threes.Set up a pattern with two items in a list then deviate from the pattern with the third but not so sharply as to violate the premise.
Comedy writer Bob Ellison was in a late night rewrite once and pitched a joke. The showrunner said, “Too corny, too obvious” and Bob replied, tapping his wristwatch, “Two thirty.”
Comedy is a performance genre of instant feedback. It's also a field that attracts sharp minds. Therefore, it's not surprising that most performers have well-thought-out theories about why things are funny. For someone like me, who has watched waaaay too much TV, it's interesting seeing how the tricks are done.

Friday, July 26, 2013

When news stories (fail to) collide

A thought on Joseph's recent thought on Netflix and on the way journalists often fail to notice the implications of one part of a story on another.

Here's a statement from a press conference earlier this week (which apparently came with enough glitches of its own to cause a two hour delay):
“We’re fundamentally in the membership happiness business as opposed to the TV business,” is the way CEO Reed Hastings described his view in Netflix’s first video conference call for analysts. CNBC’s Julia Boorstin and BTIG analyst Rich Greenfield pitched the questions, on a Google Hangout, synthesizing contributions from analysts. And Chief Content Officer Ted Sarandos didn’t flinch when Greenfield specifically asked about movies, news, and talk shows. There’s “no reason” why Netflix wouldn’t expand into those areas, he says. Hastings added that “HBO and Showtime do sports.”
And here are some excerpts from the story Joseph cites which came out Monday.
LOS GATOS, Calif. (AP) — Netflix’s Internet video subscription service works around the clock, but it’s unusual for more than two dozen of the company’s engineers and top managers to be huddled in a conference room at 10:30 on a midsummer Wednesday evening.This is a special occasion. It’s near the end of a grueling day that will culminate in the premiere of “Orange Is The New Black,” the fourth exclusive Netflix series to be released in five months. The show’s first episode is called “I Wasn’t Ready,” and everyone in the room has been logging long hours to ensure that the title doesn’t apply to the debut.

Netflix Inc. invited The Associated Press to its Los Gatos, Calif., headquarters for an unprecedented glimpse at the technical preparations that go into the release of its original programming. The shows have become the foundation of Netflix’s push to build an Internet counterpart to HBO’s premium cable channel.
On this night, the setting has been transformed into Netflix’s version of a war room. The engineers are flanked by seven flat-screen televisions on one side of the room and two giant screens on the other. One big screen is scrolling through Twitter to highlight tweets mentioning “Orange Is The New Black,” an offbeat drama set in a women’s prison. The other screen is listing some of Netflix’s most closely guarded information — the rankings of videos that are attracting the most viewers on an hourly basis.
“This will be a successful night if we are here at midnight and it turns out that we really didn’t need to be because there were no problems,” says Yury Izrailevsky, Netflix’s vice president of cloud computing and platform engineering. The mission is to ensure each installment of “Orange Is The New Black” has been properly coded so the series can be watched on any of the 800 Internet-connected devices compatible with Netflix’s service. It’s a complex task because Netflix has to account for viewers who have different Internet connection speeds, various screen sizes and different technologies running the devices. About 120 variations of code have been programmed into “Orange Is The New Black” to prepare it to be streamed on Netflix throughout the U.S and 39 other countries. Another set of engineers had to ensure foreign-language subtitles and dubbing were in place and streaming properly.

Others are still checking to make certain that the English dialogue properly syncs with the video being shown at different Internet connection speeds. Just before another Netflix series, “House of Cards,” debuted in February, engineers detected two minutes of dialogue that was out of sync with video played on iPhones at certain speeds, prompting a mad scramble to fix the problem before the series was released to subscribers.
At the risk of belaboring the obvious, news and talk are highly topical and require quick turnaround. Sports is even worse, being live and requiring your system to handle huge spikes in traffic. It certainly sounds like these genres would require major upgrades for Netlflix.

In cases like this it's always useful to think about the McDonald's breakfast example and ask "is this a product that can be sold at a profit using existing resources?" For original series and movies, the answer is probably yes. I'm not sure Hastings and Sarandos are up to it, but I'm confident that it could be done (and I would love to see Netflix do it). For these other genres, the answer is probably no, which means that, unless you have exceptionally deep pockets (perhaps even Amazonian pockets) or an open field, you should proceed with caution.

Netflix thought of the day

Netflix is definitely suffering growing pains with the new content.  Generally speaking, my experience with the first two series is that they are quite well done, albeit with some definite weak points.  But it will take a lot of effort to step up this effort from "expensive advertising" to "serious content generation".  Approaches like the war room make it seem less likely that the approach is scalable. 

Down and Out in Beverly Hills

[I've been experimenting with composing using various voice recognition options on the laptop and smart phone with mixed results (more on that later). I'll spare you the standard amusing mistranslations but if you come across a weird homonym you can blame Apple.]

Joseph had a recent post on urban sprawl that raised the question does being poor in Atlanta differ from being poor in LA. I spent a couple of year in Atlanta before moving to LA. I was never poor in either city but I was on a fairly restricted budget from time to time so here are some thoughts on living in Atlant and particularly LA when money is tight.

When I first moved to LA I was expecting something similar to Atlanta style sprawl. what I got was something very different. in the roughly 2 years I lived in Atlanta with maybe 3 or 4 exceptions, when I left the city proper, I left the state. Atlanta had a relatively small dense core where I worked, lived and spent almost all of my time, surrounded by vast stretches of suburbs malls and exurbs into which I almost never ventured.

Los Angeles by comparison is decentralized in what I consider a good way. The places where I would like to work, live or spend my time are spread out surprisingly randomly over the almost five thousand square miles of LA County (unless they're specifically referring to governance, when people say "LA" they mean the county, not the city). I have always live within a 10 to 15 minute commute from work and I have found that wherever I got work in Los Angeles (ranging from one side of the county to the other) I was a reasonable distance from a nice neighborhood in my price range. So far the rents I have paid in Los Angeles have ranged from $850 to 950, all  for fairly nice one-bedroom apartments. If I had been more flexible on commute and neighborhood, I could have found something cheaper.

Recently some journalists based, I suspect, in New York or DC questioned whether or not it was possible to find apartments for $600 in most of the country. I know this is doable in Los Angeles, Atlanta and most other cities I've lived in.

As for other costs of living, Los Angeles is a very good town for cheap eats and bargain hunting. The large immigrant communities that more or less dominate the region tend to produce a wide range off extremely inexpensive food of excellent quality and tremendous diversity and  the extraordinarily rich agriculture of the area means that it is even possible to eat organic cheaply.  Being a major port produces a great number of odd lots and bargains. You can get a lot of stuff for very little money here.

of course Los Angeles is also the home of some of the most extravagant people in the world. it is possible to find places that charge truly obscene prices for the trendiest and most exclusive of products and services. There is however some question as to whether or not that $50 plate at that trendy fusion place is actually as good as the $5 lunch special at the Burmese dive around the corner.

In terms of educational opportunities, media, culture, and natural resources  available on a limited budget, LA is perhaps unequaled.   If money is tight, USC is probably out of your price range. With that exception aside, almost all of the remaining major schools are part of the California system which remains remarkable bargain. Not only do you have UCLA on the westside of LA, but on the east you are fairly close to UC Irvine, another excellent school, and a reasonable Drive to UC Riverside. Add to that the very good Cal State system and a huge number of community colleges which still offer courses at an exceptionally low price.

As for the now obligatory mention of over the air television, a set of rabbit ears in Los Angeles can get you somewhere in the neighborhood of 100 digital channels. These include more than a dozen public television stations. Public Radio is also very good in the area and highly innovative.

LA has a big and vibrant free art and music culture. Even in my fairly small social circle,  I can think of a number of musicians who routinely play Los Angeles in no cover bars and coffee houses  or literally busking on street corners but who sometimes head to the East Coast where they make real money touring and get sizable write ups in places like the Wall Street Journal or NPR.

(if you get a chance to see Mr Paxton, make sure to introduce yourself after the show and tell him he owes me a dinner)

As for nature, this is perhaps ironically one of the aspects of LA that really demands  a  car.  Los Angeles is a metropolitan area at the intersection of mountains, desert and ocean. Out of towners usually associate LA with beaches  while natives are much more likely to think of the town in terms of the first two. You can spend a great deal of time in Los Angeles without seeing the ocean. Not a day will go by when you don't see a mountain. More importantly, if you need to get around LA, you will frequently find one of those mountains in your way. In this town,  having the word Canyon in  the name of a road or a neighborhood is not just picturesque.

This unusual terrain creates a bizarre array of microclimates. You will often see parts of Los Angeles County, or even City, with a 20 to 30 degree temperatures for it. Not long ago when driving down the 405 my car's thermometer registered a ten degree drop in less than 3 miles. (which was, of course, one of the reasons I was headed that direction.)

There are loads of caveats here. My experiences in this town are hardly representative. Hell, I'm almost never representative and my current situation is the product of a string of unlikely events. My vantage is thoroughly middle class: I have a pretty good idea what it's like to live in LA for $25K a year but only a vague notion of what it might be like on $15K. And there are some worrisome trends, including a push to dismantle the finest public university system in the country.

Still, based on my narrow experience, the quality of life here is pretty good even if you aren't part of the one percent or even the forty-nine percent.

Chait versus Delong

Brad Delong has a very nice reply to Jon Chait's latest column.  I think that any reasonable analysis of tuition versus professorial salary in real terms is going to make it clear that the link between salaries and tuition is . . . weak.  After all, we live in the age of the adjunct professor/lecturer -- if just slashing salaries was the answer then adjuncts would have solved the problem.  Just ask anyone who has taught at those salaries. 

It is also the case that private schools (i.e. Harvard) give tenure and pay high salaries.  It cannot just be that the private sector has no ability to assess value.  Not have I missed the fact that summer camp seems to be increasing in price, making it also less accessible.  Nor is anybody suggesting that replacing summer camp with a television set is the way to improve educational outcomes. 

Yet we have had VHS tapes since the 1980's.  If taping and replaying lectures was so superior, why did it take the internet to make this a viable approach? 

The one place that I think Jon Chait is correct is when he draws the analogy with Health Care.  Some parts of health care have been real improvements and were worth the cost.  Conspiracy theories aside, comparing cardiovascular disease treatment between 1960 and today is sobering; expensive technologies and drugs really have helped.  What is challenging is the fine line between what is a real improvement in quality and what is an unnecessary expense.  Some degree of pressure on higher education may elucidate some of the fault lines and that could be quite useful to all of us. 

Thursday, July 25, 2013

The Ryan Reynolds Effect

Sometimes the potential of a product, strategy or market will become an idée fixe in a company or even an entire industry. In the case of movies and television, this often shows up as the conviction that a certain actor is going to be big, despite an apparent lack of interest from the audience. This is related to but not quite the same as the previously mentioned Paula Marshall effect where producers continue to cast actors who perfectly match a type even though casting against type may offer greater returns (that falls closer to the safe failures Pauline Kael described here).

This idée fixe is more of a collective belief that's resistant to evidence, specifically the belief that a given performer can convince people to watch or listen to something which they would otherwise ignore, a quality known as being bankable.

Though bankability can be difficult to measure, the belief in it can be evidence-based. I've heard that it was Sweet Home Alabama that made Hollywood take Reese Witherspoon seriously as a star. She had already been critically acclaimed for Election and had starred in the hit Legally Blonde, but the general feeling was that the success of Sweet Home ($180 million off of a $38 million budget) was almost entirely due to Witherspoon, theat she "carried" the movie. With all due caveats about counterfactuals, that was, by Hollywood standards, a remarkably reasonable conclusion.

You can make similar arguments for the bankabililty of any number of actors from Chaplin and Pickford to John Wayne to Adam Sandler. This isn't a comment on quality -- the only Sandler scene I really enjoyed was the one where Bob Barker beats him senseless -- but I think there's a very little question that he does bring people into see a certain kind of movie. As Burt Reynolds once said it takes a particular kind of talent to make chicken salad out of chicken shit.

It's one thing to say that certain stars are bankable;  it's quite another to say that this quality can be spotted in advance. Nonetheless, Hollywood often manages to convince itself that it has spotted the next big thing.

This phenomenon is easy to spot. it invariably involves a young actor, usually blandly attractive, sometimes at the center of some kind of buzz (buzz-generated next-big-things are often attractive, but non-attractive next-big-things are almost always buzz generated --see Jack Black) getting an inexplicable string of choice roles.  The 90's actor Farrah Forke is an excellent example. For a few years Forke was all over network television. She was a regular on Wings. She have a recurring role on Lois and Clark. and she starred in two short lived sitcoms in  rapid succession, all despite no apparent interest from the viewers. After this flurry of activity, her career dropped off sharply and she left acting all together.

That's a fairly standard career path for a next big thing. There are exceptions. I seem to recall reading that the executives at NBC insisted on Jane Leeves being cast in Frasier because they had high expectations for her so you might argue that she was a next big thing who panned out, but other than a very obscure syndicated sitcom, Frasier was Jane Leeves first real exposure and she was a hit from the very start.

You can also fine cases of stars who required many roles before they found one that clicked. George Clooney comes to mind. but Clooney was less next big thing and more lost cause,  toiling away in obscure roles until finally getting a hit with ER (believe it or not the second show by that name he has appeared in).

The classic next big thing career arc, where the actor is given better and better rolls despite a lack off audience response,  almost never ends well which brings us to Ryan Reynolds.
(And in case you're wondering $135 million is on the high end for a non-Pixar computer animated film. Despicable Me 2 had a budget of $76 million.)

We probably shouldn't put too much blame on Ryan Reynolds shoulders for the failure of Turbo. One of the lessons of Pixar is that animated films are not particularly star driven. It is reasonable to assume that the success of the Incredibles and Finding Nemo cannot be credited to the box office clout of Craig T Nelson and Albert Brooks. Still, it is also reasonable to assume that having Ryan Reynolds as the lead of the picture did not do a lot to drive ticket sales.

By the same token but to a lesser degree, there's a limit to Reynolds' role in the failure of RIPD. This was a badly reviewed, badly marketed movie that obviously had studio executives nervous well before its release. Part of that nervousness was due to the lack of interest Reynolds was inspiring, but it's not clear that a different actor could have made this a break-even project.

What we can conclude, again with the usual counterfactual caveats, is that there is no evidence that Reynolds can pull people into the theater. That is not to say he chases people out -- Safe House and Wolverine did good business while the Sandra Bullock romantic comedy The Proposal broke an astounding $300 million worldwide -- but when it comes to what we might call Reynolds' "Sweet Home" moments, films such as the Change-up that largely depend on the star's pull, he has consistently underperformed.

The point here is not that Reynold's career is hopeless partially because many would-be next-big-thing leading men (Robert Preston, Leslie Nielsen) have reinvented themselves after faltering careers but mainly because there's a bigger issue here. Despite their reputation for rationality, corporations and even entire industries are as vulnerable to extraordinary popular delusions as the rest of us are. These beliefs are usually fundamentally optimistic, revolving around the some promising development. It can be faith in the potential star power of an actor despite major box office disappointments or the conviction that a new business model can save an industry despite the fact that no one can explain how it can make any money.

Wednesday, July 24, 2013

Intellectual property and genes

More on intellectual property:

Advocates of tough intellectual property rights say that this is simply the price we have to pay to get the innovation that, in the long run, will save lives. It’s a trade-off: the lives of a relatively few poor women today, versus the lives of many more women sometime in the future. But this claim is wrong in many ways. In this particular case, it is especially wrong, because the two genes would likely have been isolated (“discovered,” in Myriad’s terminology) soon anyway, as part of the global Human Genome Project. But it is wrong on other counts, as well. Genetic researchers have argued that the patent actually prevented the development of better tests, and so interfered with the advancement of science. All knowledge is based on prior knowledge, and by making prior knowledge less available, innovation is impeded. Myriad’s own discovery — like any in science — used technologies and ideas that were developed by others. Had that prior knowledge not been publicly available, Myriad could not have done what it did.

I think that this is one of the themes of intellectual property arguments; the advocates claim that the huge positional benefits of these policies (in generating revenue for incumbents) are necessary to encourage progress.  But it makes all sorts of tough assumptions, like incumbents will deploy these resources to encourage social benefit. 

One thing that makes a lot of sense is to look at times and places that showed evidence for fast growth and innovation.  It seems that tight trade guild rules, for example, seem to be anti-correlated with fast progress on industrial or technological progress.  That should be a cautionary note.

And, as Mark has carefully noted before, there isn't a binary choice here between massive intellectual property protection and no intellectual property protection.  There are some pretty reasonable middle ground positions that are less extreme than the modern regime but still protect the rights of private discovery.  Nor should we entirely rule out government funded research programs -- these can be much less expensive than the private sector (see the NSF, for example) but still ensure that innovation is not under-supplied. 

Nate Silver didn't have a problem with old-style journalist values, but he may have had a problem with the new ones

New York Times pubic editor Margaret Sullivan speculates on the possible reasons for Nate Silver's decision to move 538 to Disney:





Conventional wisdom holds that traditional print journalism is in trouble because it has failed to adequately change with times, but if the reasons given by Ms Sullivan did have something to do with Nate Silver leaving the New York Times, very much a point open to debate, then you can  argue that in this case print journalism is in trouble because it has changed, just in an unfortunate direction.

Look at the aspects of the NYT culture which Sullivan lists as potential sources of conflict:

Fixated on polling and the horse race;


Narrative obsessed;


Hostile to criticism.

These represents decades-long trends in journalism. Each has gotten more pronounced with every election cycle. Polls have proliferated. Horse race speculation continues to creep forward. More and more "news" consists of pundits confidently stating opinions. Narratives enforce increasingly pervasive groupthink on the media. Clannish social dynamics overpower journalistic ethics and propriety. Press criticism has become the the domain of apologists like Jack Shafer and David Carr.

What's amazing here is just how much Sullivan has internalized this Twenty-First Century NYT culture. She describes an institution dominated by infantile trivialists and it never seems to occur to her that the rest of us we see this as anything other than 'there are two sides to every story.'

Tuesday, July 23, 2013

Personal finance

There is a very good post by a California tenured professor about the challenges of making ends meet in an expensive city.  It's true (and she admits it) that the student loan decisions were not ideal.  Bu it is also remarkable how many of the expenses of her position get shifted on to her.  In the private sector, I can't imagine being told to pay for a required conference yourself. 

Personal blogroll -- Rocco Pendola

I really shouldn't like this guy. For one thing he writes for the Street which puts him zero degrees of separation from Jim Cramer. He also sometimes appears as a talking head on CNBC, another huge black mark. But as I continue doing more research for various media posts, I keep coming across relevant Pendola articles that manage to cut directly to the central questions.

He has that increasingly rare facility of recognizing the obvious when the obvious does not match the official narrative. He questions the rather odd numbers coming out of Netflix. He realizes that any story about the business side of Hulu has got to revolve around the who owns the company. He understands the importance of not putting too much weight on absolute numbers when looking at the Internet and instead take things in context. He makes necessary distinctions between different types of royalty particularly the royalties paid to performers versus the royalties paid to songwriters.

I suspect this independence comes in large part because Pendola has a very different background then most of the people who write financial news. One of the big recurring themes at West Coast Stat Views is just how insular and inbred the journalistic community has become. This is if anything a bigger problem for financial journalists. A majority of the voices you read in Forbes or Business Insider or Bloomberg have basically the same background, were educated at the same very small set of schools, have had similar career tracks, live In the same region (and often in the same neighborhoods), read the same publications, and frequently have a common social circle.

The result is a monoculture and just as having fields upon fields of the same species of corn makes it prone to outbreaks of  blight, having a journalistic community made up of remarkably similar people makes it vulnerable to bad narratives and questionable memes.

Rocco Pendola Is a former radio producer, DJ, and sports talk show host, who went on to get an urban planning degree at San Francisco State and then settled in Southern California. The result of that unusual resume is a certain level of resistance to those journalistic blights. The following rant about the coverage of Pandora, though somewhat overheated, nicely illustrates his outsider perspective.

Credit where credit is due...

I don't know if I'll have time to give this the attention it deserves, but this long but worthwhile post by Noam Scheiber hits on at least a couple of our big recurring  threads: the ways that businesses and industries get into trouble; and the importance and difficulty of getting incentives properly aligned.

Here's an example:

Monday, July 22, 2013

Urban Sprawl

Mark Thoma's site has a link to Paul Krugman's discussion of the association between sprawl and low social mobility.  It appears that if you do a plot of urban density versus social mobility of the lowest quintile to the highest quintile you get a very surprising linear relation: as density drops it looks like persistent inequality rises.  Paul Krugman is appropriately skeptical that this is the whole story:
Is the relationship causal? You can easily think of reasons for spurious correlation: sprawl is associated with being in the sunbelt, with voting Republican, with having weak social safety net programs, etc.. Still, it’s striking.

Matt Yglesias adds additional data about what happens with kids who move into high density urban areas as well as a few other possible explanations:
So what drives this? The study does not really make a high-powered effort to draw strong causal inferences. But the study does show that kids who moved into a high-mobility area at a young age do about as well as the kids born in high-mobility areas, but kids who move as teenagers don't. So there seems to be a factor that isn't parent-driven. The authors report that tax policy, the existence and affordability of local colleges, and the level of extreme local wealth do not appear to be strong correlates of intergenerational mobility. Metro areas where the poor are geographically isolated from the middle class have less intergenerational mobility, while metro areas with more two-parents households, better elementary and high schools, and more "civic engagement" (measured through membership in religious and community groups) have more.
 So clearly it would be a mistake to over-interpret these data. But they do have one major policy piece embedded into them -- it makes absolutely no sense to subsidize sprawl as a positive good.  It may not be worth it to try and discourage it, but generally there are a lot of laws (think zoning laws and car centered transportation grids) that implicitly subsidize sub-urban communities.

There are still pieces to be considered -- like does the poorest quintile do objectively better or worse in the low social mobility environments (you can justify low mobility if everyone is better off as a result).  However, the two extremes in Paul Krugman's graph are Atlanta (low density and mobility) and Los Angeles (high density and mobility).  It's not 100% clear that it is better to be poor in California than Georgia, but it isn't like it is far worse in California so far as I can tell.  Maybe Mark can weigh in here? 

But this all points to a big picture that urban planning is actually a much bigger deal than I had previously realized. 

Not really movie people...

Signed up for Netflix recently and one of the things I've noticed is that their blurbs often do an extraordinarily bad job at pitching. Compared to the capsules you'll find from Maltin or TV Guide, they have a tendency to leave out the details that would make a person who would enjoy a movie actually go ahead and watch it.

This is a bigger deal than you might think. Consider the Netflix viewing model:

1. I watch a show;

2. Netflix recommends other shows;

3. Based on the information provided and what I know about the show, I decide whether or not to pay the the cost in time required to watch it.

It isimportant to note that this process adds the most value when it gets me to watch and enjoy a show that I was previously unaware of. Here's where a good blurb is vital. Even if the recommendation model works perfectly, the process is a failure when I don't watch the film it recommends.

With that in mind, check out this Netflix description:
Royal Deceit(Prince of Jutland)
1994R1hr 25m
Young Jute Amled avenges his father's murder at the hands of his dissembling uncle, only to be banished to Scotland for the deed. But Amled has other plans, and soon practices a little deception of his own.
Cast: Gabriel Byrne, Helen Mirren, Christian Bale
Genre: Action & Adventure, Dramas, Adventures, Crime Action & Adventure
This movie is: Dark
With the exception of some interesting names in the cast, there's nothing (at least nothing explicit) that would make me want to watch this. That would represent a significant failure for Netflix because the right blurb (from TV Guide) could and did make me watch Royal Deceit on ThisTV a few months ago.

That summary mentioned that the film was directed by Gabriel Axel (1987's BABETTE'S FEAST).

It included Brian Cox, Kate Beckinsale and Tom Wilkinson in the cast list.

And most importantly, it pointed to the aspect of the film most likely to interest the target audience. You may have guessed this part, but if not, here's a hint: in various retellings of the legendary story of this Danish prince,  Amled is often spelled Amleth.

I don't have the TV Guide blurb in front of me but I believe it read a great deal like the first paragraph of their review.
A reworking of Shakespeare's Hamlet, ROYAL DECEIT may lack the Bard's lyrical dialogue but it does boast some sensational action sequences and a truly top-notch cast.
I really do want to see Netflix succeed -- it's a good service for the price and significantly diversifies the media landscape -- but I can't get past the suspicion that the people behind Netflix are bored with the actual business of running the company. They like the part where people call them visionaries and give them a gazillion dollars for their stock, but the low glamour stuff makes their eyes glaze over.

This is one of the reasons I keep going back to Weigel as an example. They obviously love the details (Joe Dale has apparently memorized thousands of TV episodes). When Steve Jobs famously got upset because a headphone jack on an IPod didn't have a satisfying click, he was illustrating this same mentality. You saw similar attitudes in Sam Walton and Don Tyson.

I'm not suggesting that we should judge management based on one anecdote, but the more I look at the company the more it looks like they don't care about details like blurbs and audience demographics. and as someone who wants to see Netflix make it, that wories me.

Sunday, July 21, 2013

Safe failures from "Why Are Movies So Bad? Or, The Numbers"

I'd been meaning to spread out the Pauline Kael posts, but I realized that this 1980 essay about the relationship between corporate culture, misaligned incentives and cinema has an extraordinary number of salient points for some of our ongoing threads.

For example, Kael explains how, under a fairly common set of circumstances, it can be in an executive's best interests to opt for a project with higher costs and lower potential returns.

Why Are Movies So Bad? Or, The Numbers
There is an even grimmer side to all this: because the studios have discovered how to take the risk out of moviemaking, they don’t want to make any movies that they can’t protect themselves on. Production and advertising costs have gone so high that there is genuine nervous panic about risky projects. If an executive finances what looks like a perfectly safe, stale piece of material and packs it with stars, and the production costs skyrocket way beyond the guarantees, and the pictures loses many millions, he won’t be blamed for it—he was playing the game by the same rules as everybody else. If, however, he takes a gamble on a small project that can’t be sold in advance—something that a gifted director really wants to do, with a subtle, not easily summarized theme and no big names in the cast—and it loses just a little money, his neck is on the block. So to the executives a good script is a script that attracts a star, and they will make their deals and set the full machinery of a big production in motion and schedule the picture’s release dates, even though the script problems have never been worked out and everyone (even the director) secretly knows that the film will be a confused mess, an embarrassment.
It's worth noting that since Kael wrote this in 1980 (when she was describing a fairly new situation), budgets for major releases have far outpaced inflation. As far as I can tell, none of the top ten films of that year cost more than $90 million in 2013 dollars and only two broke $50 million (the major spectacle and proven property Empire Strikes Back and the notoriously bloated Blues Brothers). I suspect the dynamic Kael describes has a lot to do with that change.

Saturday, July 20, 2013

Weekend blogging -- Kael on Directors

From Trash, Art, and the Movies by Pauline Kael
The craftsmanship that Hollywood has always used as a selling point not only doesn’t have much to do with art—the expressive use of techniques—it probably doesn’t have very much to do with actual box-office appeal, either. A dull movie like Sidney Furie’s “The Naked Runner” is technically competent. The appalling “Half a Sixpence” is technically astonishing. Though the large popular audience has generally been respectful of expenditure (so much so that a critic who wasn’t impressed by the money and effort that went into a “Dr. Zhivago” might be sharply reprimanded by readers), people who like “The President’s Analyst” or “The Producers” or “The Odd Couple” don’t seem to be bothered by their technical ineptitude and visual ugliness. And on the other hand, the expensive slick techniques of ornately empty movies like “A Dandy in Aspic” can actually work against one’s enjoyment, because such extravagance and waste are morally ugly. If one compares movies one likes to movies one doesn’t like, craftsmanship of the big-studio variety is hardly a decisive factor. And if one compares a movie one likes by a competent director such as John Sturges or Franklin Schaffner or John Frankenheimer to a movie one doesn’t much like by the same director, his technique is probably not the decisive factor. After directing “The Manchurian Candidate” Frankenheimer directed another political thriller, “Seven Days in May,” which, considered just as a piece of direction, was considerably more confident. While seeing it, one could take pleasure in Frankenheimer’s smooth showmanship. But the material (Rod Serling out of Fletcher Knebel and Charles W. Bailey II) was like a straight (i.e., square) version of “The Manchurian Candidate.” I have to chase around the corridors of memory to summon up images from “Seven Days in May”; despite the brilliant technique, all that is clear to mind is the touchingly, desperately anxious face of Ava Gardner—how when she smiled you couldn’t be sure if you were seeing dimples or tics. But “The Manchurian Candidate,” despite Frankenheimer’s uneven, often barely adequate, staging, is still vivid because of the script. It took off from a political double entendre that everybody had been thinking of (“Why, if Joe McCarthy were working for the Communists, he couldn’t be doing them more good!”) and carried it to startling absurdity, and the extravagances and conceits and conversational non sequiturs (by George Axelrod out of Richard Condon) were ambivalent and funny in a way that was trashy yet liberating.
On a related note, I read The Manchurian Candidate not that long ago and I was struck how faithful the movie was (the original, not the incredibly pointless remake), but also how much more restrained it was. The book was a full bore, pitch black, satiric farce. There is simply no way you could have gotten the sexual content (including an explicit incest subplot and a wartime incident that plays like something conceived by the Farrelly brothers) under even a fading Hays Code. More importantly, in 1962 the red scare was still fresh enough that no major studio film would have had the nerve to take the central joke as far as the book did and leave no doubt about who these murderous, sexually deviant communists agents were supposed to be.

Friday, July 19, 2013


One issue that is brought up by Mark's recent post but not explicitly discussed is the issue of "living wages".  It is popular to argue that wages are set but fundamental market forces and thus are deserved.  But that view isn't universal and Justin Fox claims it may be seeing some pushback:
That's because it's becoming clear that pay levels aren't entirely set by the market. They are also affected by custom, by the balance of power between workers and employers, and by government regulation. Early economists understood that wage setting was "fundamentally a social decision," Jonathan Schlefer wrote on last year, but their 20th century successors became fixated on the idea of a "natural law" that kept pay in line with productivity. And this idea that wages are set by inexorable economic forces came to dominate popular discourse as well.
One of the better pieces of evidence he brings up is the difference between the experiences of the American and German auto-workers:

Now it is hard to build a theory around an anecdote.  But science demands that we look for places that the theory does not fit with the facts, and facts like this are inconvenient.  Not because I can't try and explain why there may be confounding factors, but because maintaining high wages and high market share seems paradoxical in the current world. 

But really it should be making us question the market as a law of nature as opposed to a social construct.  Because once you accept that wage decisions are socially negotiated, it makes issues like inequality of wages much more salient. 

First assume a fairy godmother...

This is one of those stories illustrates just how bad journalists have gotten at covering life in the bottom quartile. Here, from Marketplace, is the set-up:
The fast food chain teamed up with Visa to create an online budget guide for its employees. And most of the criticism is directed at the fact that the company's budget doesn't list 'food' or 'heat' as monthly budget items. 
"Helping you succeed financially is one of the many ways McDonald's is creating a satisfying and rewarding work environment," the McDonald's site's about page states. "So you can take the next step towards financial freedom." 
To do that, the guide suggests journaling daily expenses, setting up a budget and outling a savings goal. Sound reasonable? 
One problem: the sample budget offered by McDonald's (below) doesn't mention money for basic necessities like food, heat, gas and clothing. 
The budget also assumes a worker will need to maintain two jobs in order to make roughly $24,500 a year.

Here's the actual document:

A heated debate has broken out over whether it's possible to live on $24,500 a year. This is not a question that would perplex a group pulled at random from the general populace. People do it all the time. I've done it myself (and yes, I'm adjusting for inflation). I even have a musician friend in New York City who's doing it now.

You eat lots of beans and potatoes. You get a prepaid phone. You buy a set of rabbit ears (which, as mentioned before, would actually give you more channels and better picture than the basic cable the WP article suggests). You live day-to-day. You constantly worry about money. You're one one bad break away from disaster but with exception of the health insurance and heating items, nothing in expenses, including rent, is that unreasonable.

There is, in fact, only one completely unrealistic item here:

Second job: $955

Angry Bear, which does get it, explains just how much work we're talking about.
Besides skipping certain expenses and skimping on others; to meet the income levels portrayed in the budget, McDonalds suggests associates to work not one but two jobs. A full time job at McDonalds and a part time job elsewhere totally 62 hours per week (if the worker resides in Illinois where the minimum wage is $8.25/hour). If perchance, the worker resides in one of the other 48 states; the total hours needed to hit the suggested income level jumps to 74 hours/week due to a lower minimum wage (the equivalent of a second full time job). 
And Marketplace explains how unlikely that 74 is:
At the same time, there’s been a sharp drop in the number of people who are holding down multiple jobs, and most of those are likely to be part-time, since there are only so many hours in a day. The number of multiple job-holders is down by more than 500,000 since 2007.  So, there are more people in part-time jobs, but fewer people able to cobble together two or more of those jobs to make ends meet.
This trend to more part-time work could be permanent. Employers like the flexibility, and the low cost. Benefits in many part-time jobs -- health care, retirement -- are slim to none.

But there’s a complication. For job-seekers, it’s now harder to find and keep multiple part-time jobs. “Among low-wage employers -- retail, hospitality, food service -- employers are requiring their employees to say they’re available for a full-time schedule, even when they know they’re never going to schedule them for full-time,” says Stephanie Luce at the City University of New York’s Murphy Institute.

Luce is a labor sociologist who studies union movements around the world. She co-authored, with the Retail Action Network, a study based on surveys of retail workers in New York, Discounted Jobs: How Retailers Sell Workers Short. “Managers are asked to schedule based on customer-flow, on weather, on trends in the economy, and to change the schedule day-to-day,” says Luce. “They don’t want employees that are going to say ‘I can’t come in, I have another job.’ They want employees that’ll say, ‘OK, I’ll come in if you need me. I won’t come in if you don’t need me.’”  

Thursday, July 18, 2013

If we just look at climate change, we should do these things. If we take climate change out of the picture we should still do these things

Massoud Amin, chair of the Institute of Electrical and Electronics Engineers Control Systems Society’s Technical Committee on Smart Grids, has a must-read opinion piece up at Nature (unfortunately behind a pay wall though you can get most of the same information from this interview). He lays out a highly persuasive case based on both economic benefits like greatly reducing the number and duration of power outages (which are currently estimated to cost the US economy between US$80 billion and $188 billion each year) and environmental benefits like reducing carbon dioxide emissions by 12–18% by 2030.

Two things in particular struck me as I read this. The first was that Amin could make his argument strictly on economic terms and strictly on environmental ones. There's an obvious parallel here with fixing choke points in our freight rail system, an infrastructure improvement that would pay for itself two or three-fold in areas like transportation costs, highway congestion and wear-and-tear on roads and bridges. Our inability to take action is so entrenched that we can't take significant steps to address climate change even when there's a overwhelming non-environmental case for moving forward.

The second thing that hit me was the cost Amin gives: around $400 billion, or $21 billion to $24 billion a year for 20 years. That is a great deal of money in absolute terms but when you start looking at the various costs associated with climate change-- sea level, ocean acidification, droughts, extreme weather -- you get into the trillions fairly quickly (you might well hit a trillion in Florida alone).

What follows is very back-of-the-envelope, but based on the US share of carbon emissions, it looks like, if you make all sorts of simplifying assumptions, the smart grid impact would be around 2.5% of global totals. In gross terms, ignoring all other economic benefits, smart grids are not a particularly cheap way of reducing carbon emissions (in net terms they actually pay for themselves, but put that aside) but $400 billion for a two and a half percent reduction doesn't seem that high.

The climate change debate is often framed as a choice between saving the planet and saving the economy, but when you look at the proposed solutions, they either don't seem to put that much of a drag on the economy (carbon taxes, moving away from coal) or they actually pay for themselves (infrastructure improvements) while the potential economic damage of climate change dwarfs the combined costs of all of the proposed solutions.

Wednesday, July 17, 2013

Intellectual property and Marvel

(I told you I'd connect Stan Lee to this)

For about the past fifty years the company which is now Marvel entertainment, has made a spectacular amount of money and has done it in virtually every medium from comics to television to film to video games to  novels to even, Heaven help us, the stage.

This is all the more remarkable when you consider that shortly before its period of dominance the company was a third rate imprint that was, by some accounts, on its last legs.

The rise was a remarkable achievement both in American publishing and pop culture. In economic terms alone, it shows how a small company with almost no resources or structural advantages can come to dominate an industry and generate billions of dollars.

One aspect of that story which is particularly relevant given our recent posts on the subject is the way Stan Lee used public domain (and in some cases, not-quite-public domain) intellectual properties as an important part of his business model.

First a quick and hopefully painless bit of comic book history.

Superheroes were the first big original content hit of the medium. Starting with Superman in 1938, they dominated that side of the industry for almost a decade. Licensed titles (like Dell's Disney line) were, by some sources, bigger sellers but if you were creating characters specifically for comics in the early Forties, superheroes were where the money was. By the end of the decade, though, the boom was largely over and other fads such as crime, horror, Western, funny animals, funny teenagers and (with a very unlikely origin) romance took turns as the next big thing.

Of course, comic book publishers kept trying to bring back the genre that had started it all. Lots of companies tried to introduce new superheroes or dust off old ones but without real success. Among others, the company that would become Marvel was particularly badly burned by a superhero push in the mid-Fifties). The big exception here is Magazine Enterprise's Ghost Rider in 1949 but as Don Markstein pointed out, that character blended the faded superhero genre with the up-and-coming genres western and horror.

It was not until 1956 that a team working under DC editor Julius Schwartz came up with a workable formula: take a dormant mid-tier character from the Forties; completely rework the character (sometimes keeping only the name) with a science fiction origin, streamlined jump-suit inspired costumes and a heavy emphasis on space age themes.

In rapid succession and generally with great success,  Schwartz applied this rebooting approach to a number of properties and soon other companies were trying their hand. As early as 1959, Archie Comics (which had been known for a relatively successful and very violent collection of superhero titles in the Forties) had hired Joe Simon and Jack Kirby to rework their character the Shield. As the Sixties got going almost everyone was in on the act.

In 1961, Marvel Comics joined in. Marvel was a small part of Martin Goodman's middling publishing company but it did have a couple of significant assets: a few well-remembered Golden Age characters (the Human Torch, Namor and Captain America) and comics auteur Jack Kirby. Given the market conditions of the time, Kirby's brand was extremely valuable. There was a tremendous demand for all things associated with the previous era of superheroes and Kirby had been a major player with an exceptional level of prominence. In an era when most stories went unsigned, his name was a big enough selling point to be featured prominently on the covers.

Much myth has accumulated around the creation of the Fantastic Four, partially because of the impact the title would go on to have and partially because none of the people involved (Goodman, Lee, Kirby) can be considered reliable narrators, but if you simply look at the book itself and what had been going on in the industry at the time, FF #1 is about what you would expect, combining Schwartz's formula with the group dynamics of Kirby's team comics and elements of the monster comics Marvel had been producing (the two most unusual aspects, the lack of costumes and secret identity were completely dropped when Marvel introduced Spider-man less than a year later).

I don't mean any disrespect for Marvel here. This is usually how companies really work. You find an existing business model, modify it slightly, then use it to establish a revenue stream and a loyal customer base. That's what Lee did. That's what Sam Walton did with Ben Franklin stores. The big ideas and innovation tend to come only after you have a successful stable operation (which was certainly the case with Marvel). That leads to a much bigger point.

We have seen over the past few years a tendency to grant intellectual property protection to ideas that would previously have been considered general parts of a business plan (for example, offering free wi-fi to customers). What if the ability to borrow and recombine elements of business plans in kind of a de facto genetic algorithm is an important part of a creative economy? What if being derivative is the first step for coming up with something original?

There are also some interesting IP questions involving the creation of Spider-man (Wikipedia has a good summary), but that's a discussion for another time. The part of the story that's most relevant comes a couple of years later.

As mentioned previously, from approximately 1956 to 1966, the big thing in comics was to modernize and reboot Golden age characters. This left Marvel with a problem: With the exception of Captain America, the Human Torch and Namor, the company had a very thin bench. You very soon got down to really obscure characters. The whole purpose of the reboot model is to cash in on name recognition so rebooting the virtually forgotten is of limited value. (You have to wonder how many readers in the Sixties had ever heard of the Thirties Tarzan knock-off Ka-Zar.)

Lee's solution was to launch characters using at least the names of three of the biggest sellers of the Golden Age: Daredevil; Ghost Rider; and Captain Marvel, none of which actually belonged to Marvel, but were instead arguably in the public domain. It is the third one that required considerable nerve.

Captain Marvel had been, by some standards, the most successful character to come out of the Golden Age, outselling even Superman (nuisance suits from DC were a big factor in the decision to eventually cancel the series in 1953). What's more, the publisher, Fawcett was big and, though out of the comics business, still very active, publishing title including Family Circle, Woman's Day, Mechanix Illustrated and Gold Medal paperbacks.

Lee was betting (correctly as it turns out) that Fawcett either wouldn't notice or wouldn't bother to sue an obvious copyright infringement. It was a bold but not a reckless move. Attitudes toward copyrights have changed greatly and many of those changes involve the earlier emphasis on active properties and going concerns. Up until recently, the primary reason you acquired and held copyrights was because you wanted to do something with those properties. As a result, if someone went out of the comics business and no one had an immediate interest in their properties, the copyrights were often allowed to lapse or (in the case of Fawcett) go unenforced.

There's a lesson here about creative destruction. Companies, particularly those in the creation business, often start out by borrowing business plans and skirting copyright and patent laws. You can certainly argue that this lowers the value of the intellectual property they are making use of, but I think you can also argue, as or more persuasively, that the returns on tolerating this behavior from small, young companies far outweigh the cost.

For more on the IP beat, click here, here, and here.